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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
(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 December 31, 1995; 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 0-6106
UNITED LEISURE CORPORATION
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(Exact Name of Small Business Issuer in its Charter)
Delaware 13-2652243
- ------------------------------- ------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
8800 Irvine Center Drive
Irvin California 92718
- ------------------------------- ------------------------------------
(Address of Principal Executive (Zip Code)
Offices)
Issuer's Telephone Number, Including Area Code: (714) 837-1200
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Securities Registered Pursuant to Section 12(b) of the Act:
NONE
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Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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(Title of Class)
Class A Common Stock Purchase Warrants
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(Title of Class)
Check whether the Issuer (1) has filed all Reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B in this form and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year: $3,196,869
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant as of March 29, 1996:
Common Stock, par value $.01 per share -- $19,473,183
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding at March 29, 1996
- -------------------------------------- ------------------------------
Common Stock, par value $.01
per share 12,452,849 shares
DOCUMENTS INCORPORATED BY REFERENCE
No documents are incorporated by reference into this
Annual Report on Form 10-KSB.
Transitional Small Business Issuer Format: Yes [ ] No |X|
Exhibit Index on Page 48
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PART I
Item 1. Description of Business.
General
The primary business of United Leisure Corporation (the "Company") for
a number of years has been to develop its major asset, a Ground Lease covering
approximately 300 acres of real estate in Irvine, California, through sub-lease,
so as to convert the leased asset into a revenue producing property. Pursuant to
its terms, the Ground Lease terminates on Feburary 28, 1997, thus leaving the
Company less than one year of operations remaining on the leased property. The
basic terms and provisions of the Ground Lease are described in more detail
under "Properties" in Item 2 of this Annual Report on Form 10-KSB. In carrying
out its historical business, the Company has preferred to act primarily as a
developer and manager of the property, rather than as an operator. In the past
several years, the Company's ability to operate its business has been severely
hampered by the actions of, and continuing litigation with, its landlord, The
Irvine Company ("Irvine"). In addition to its subleasing activities, the Company
carries out day camp operations on a portion of its leased property. See this
Item, "Description of Business -- Property Development" and "Description of
Business -- Frasier Day Camp" in this Item 1 of this Annual Report on Form
10-KSB. See also "Management's Discussion and Analysis or Plan of Operation" and
"Legal Proceedings" in Items 6 and 3, respectively.
The Company has been engaged in protracted and expensive litigation
("The Irvine Company Litigation") with its landlord, Irvine. The initial trial
of The Irvine Company litigation described herein resulted in a jury verdict of
approximately $42,000,000 in favor of the Company's subsidiary, however, on
post-trial motion by Irvine, the Court ordered a new trial. The Company has
appealed this Order. The Company hopes that the appeal will be heard and a
decision rendered sometime before the end of 1996. See Item 3, "Legal
Proceedings" and Item 6, "Management's Discussion and Analysis or Plan of
Operation".
In view of the short-term remaining on the Ground Lease and the
uncertainties created by the order of the Court for a new trial in The Irvine
Company Litigation, the Board of Directors of the Company determined that the
Company prepare itself for the future by the development of its business into
new fields of endeavor so as to enable the Company to continue its operations
after the completion of The Irvine Company Litigation, regardless of its
ultimate outcome, and also to enable the Company to prosecute The Irvine Company
Litigation to conclusion. Accordingly, in 1994, the Board of Directors initiated
several new programs for the expansion of the Company's business. Utilizing its
experience in the children's entertainment and education fields, the Company has
engaged in the creation, development and operation of children's play-learning
centers and has embarked on an expansion of its successful Camp Frasier
operation. The Company has also developed certain proprietary interactive
multimedia products which it has conceived and is actively searching for
complementary acquisitions and/or mergers. In order to finance these activities,
the Company carried out an underwritten public offering in 1994, raising net
proceeds of approximately $14,855,187.
The Company was originally organized for the primary purpose of
developing and operating a chain of African wildlife preserve and theme
amusement parks known as LION COUNTRY SAFARI. The Company's last park operation,
located in Irvine, California, was closed in November, 1984. United Leisure
Corporation is the successor by change of name to Lion Country Safari, Inc., a
Delaware
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corporation which was originally organized in May 1969. United Leisure
Corporation has operated and plans to continue to operate primarily as a holding
company for its operating subsidiaries. The term "the Company", as used in this
Annual Report on Form 10-KSB, includes United Leisure Corporation, its
predecessor companies and its subsidiaries, unless the context otherwise
requires.
1995 Developments
1995 was a transition year for the Company, during which management
took such action as it deemed necessary and appropriate in order to prepare for
the continuation of the Company's operations after the termination of the Irvine
Ground Lease. In that connection, the Company is developing, through an
independent software developer, certain proprietary software. See this Item,
"Description of Business--United Leisure Interactive". In addition, the Company
acquired and commenced operation during the summer season of two new sites for
its Camp Frasier operations, one located in San Diego and one located in Yorba
Linda, California. See this Item, "Description of Business--Camp Frasier". In
addition, the Company bought out its Planet Kids joint venture partner, Master
Glazier's Karate International, Inc. ("MGK"), in exchange for the return of
MGK's money plus interest and the grant of options to acquire up to 150,000
shares of the Company's Common Stock and has two children's play learning
centers in operation, one in Laguna Hills, California and one in Orange,
California. A third center is under construction. See this Item, "Description of
Business--Planet Kids, Inc.".
Property Development
General
After closing the operation of the Company's African wildlife preserve
and theme amusement park in 1984, Management of the Company turned its attention
to the development of the Company's most valuable asset, the Ground Lease
covering the 300-acre tract located in Irvine, California. It had been the
Company's desire to develop this property, with emphasis on leisure-time use and
attractions, primarily through subleases, although joint ventures and direct
development by the Company as its resources permit, were also considered.
Management's concept was that the Company not act as an operator of any of the
attractions at the property, but would act solely as a developer and sublessor
of the property. In view of the difficulties presented by Irvine, the Company's
landlord, as discussed in Item 3, "Legal Proceedings", however, these efforts
were not successful.
The Company has subleased certain portions of its California park
property as described briefly below in the next three Sections of this Item 1 of
this Annual Report on Form 10-KSB.
Amphitheater Sublease
The Company, through its primary operating subsidiary, Lion Country
Safari, Inc.--California (the "Subsidiary"), is a party to a Sublease Agreement,
entered into in 1980 (the "Amphitheater Sublease"), with Irvine Meadows
Amphitheater, a partnership ("Irvine Meadows") pursuant to which the Subsidiary
subleases approximately 20 acres of the park property, plus the right to use the
4,000-vehicle parking lot on the park property to Irvine Meadows for a term
which was co-extensive with the Ground Lease with Irvine described under
"Description of Property" in Item 2 (approximately 10 months). Irvine
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Meadows operates a 15,000-seat amphitheater, where concerts and other
entertainment and cultural events are presented, with attractions such as Jimmy
Buffett, Reba McIntyre, Alabama, Clint Black, the Eagles, Janet Jackson, Bette
Midler and Elton John, among others. Under the Amphitheater Sublease, Irvine
Meadows pays the Subsidiary a basic annual rental of $150,000, against a
percentage rental equal to 10% of all gross receipts from ticket sales. In
addition, rental equal to the sum of 2% of all gross receipts from food sales,
5% of all gross receipts from the sale of beverages, and any additional rental
obligation that may be incurred by the Subsidiary as a result of any activities
of the Sublessee or others on the subleased premises other than those set forth
above is paid. All revenues received under the categories described in the
preceding sentence are paid over directly to Irvine under the Ground Lease
covering the Company's property. One-half of all the Company's revenues received
from ticket sales is paid to Irvine as rent and the other half is paid directly
to the Subsidiary.
During the 1994 season, when it held 37 concerts, the Amphitheater
Sublease generated revenues of $441,773 for the Company's account and during
1995, it generated revenues of $355,119 for the Company's account. Irvine
Meadows booked 35 concerts for the 1995 season. During the three years preceding
1994, the revenues for the Company's account generated by the Amphitheater
Sublease had decreased each year because the Irvine Meadows Amphitheater had
less concerts during that period and experienced significant competition from a
competing concert location in nearby Costa Mesa, California. This competitive
facility was closed in 1994. See "Description of Business -- Competition" in
this Item 1 of this Annual Report on Form 10-KSB, "Description of Property" in
Item 2, Item 3, "Legal Proceedings -- The Irvine Company Litigation" and Notes 4
and 9 of "Notes to Consolidated Financial Statements" in Item 7.
For the complete terms of the Amphitheater Sublease, reference is
hereby made to Exhibit 10-2 attached to and made a part of this Annual Report on
Form 10-KSB. See also "Management's Discussion and Analysis of Financial
Condition or Plan of Operation" in Item 6 and Note 9 of "Notes to Consolidated
Financial Statements" in Item 7.
Wild Rivers Water Park
The Company is a party to a Water Park Sublease between the Subsidiary
and The Splash, a California limited partnership ("The Splash"), pursuant to
which the Subsidiary subleases approximately 15 acres of its leased California
property on which The Splash operates a theme family Water Park (the "Water
Park"). The term of the Water Park Sublease is co-extensive with the Company's
Ground Lease (approximately 10 months). The Water Park Sublease also grants The
Splash the right to use the parking area, subject to certain rights previously
granted Irvine Meadows. The Water Park is known as Wild Rivers, offering a
tropical setting with an African theme. There are four main activity areas on
the 15- acre parcel which comprises the Water Park, featuring a 50-foot tall
mountain which provides 18 different water rides. The Company has a 3.12%
limited partnership interest in The Splash. See Note 5 of "Notes to Consolidated
Financial Statements" in Item 7.
Under the terms of the Water Park Sublease, The Splash pays a minimum
annual rent of $475,000, payable $39,583 per month, against a percentage rent
equal to 10% of annual Gross Revenues (as defined). In addition, The Splash has
agreed to pay additional rent to cover various increased expenses with respect
to the subleased property during the term of the Water Park Sublease, as well as
all taxes related to such property. The basis on which rental under this
sublease is calculated is part of the rent dispute with Irvine in The Irvine
Company Litigation. In 1994, The Splash paid the Company
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rentals of $597,089 and a limited partner distribution of $584,011 and in 1995,
The Splash paid the Company rentals of $50,000 and a limited partner
distribution of $45,000.
For the complete terms of the Water Park Sublease and related
documents, see Exhibit 10-17 attached to and made a part of this Annual Report
on Form 10-KSB.
From the original opening of its California park, the Company had an
exclusive concession arrangement with Africa Arts of California, Inc. ("Africa
Arts") related to the sale of souvenirs, gifts and similar merchandise on the
California park property. In order to terminate this arrangement by reason of
the closing of the animal park operations in 1984, the parties entered into a
new arrangement pursuant to which Africa Arts receives 10% of the gross revenues
received by The Splash or any other party from the sale of such merchandise at
the Water Park, plus 15% of all gross revenues received by the Company from the
sale of such merchandise on the remainder of the California property. In
connection with this agreement, the Company granted Africa Arts an option to
purchase up to 35,000 shares of the Company's Common Stock at an exercise of
$1.00 per share. This option expires on February 28, 1997. See Exhibits 10-18
and 10-19 attached to and made a part of this Annual Report on Form 10-KSB for
the terms of this arrangement.
Picnics and Other Subleases
In 1982, the Company converted a portion of its park property formerly
used as part of the African wildlife preserve into a large park area which
provides two exclusive-use picnic areas for use by companies for their company
picnics and by other groups and organizations. These areas include a softball
field, volleyball courts, basketball courts, large open spaces, picnic tables, a
snack bar and other usual park amenities. The Company ran picnics for a number
of large companies. Since 1990, the Subsidiary has had a sublease arrangement
with James Productions, Inc. ("James"), pursuant to which James has the right to
conduct picnics and other Special Events (as defined) on the picnic areas of the
Company's California park. The Agreement provides a minimum rental for 1990 of
$150,000, increasing by 5% for each additional year during the term of the
sublease, against 15% of gross revenues from the Special Events, payable on a
monthly basis each year commencing in March and ending in October. The monthly
payments are in differing amounts to correspond to the timing of the corporate
picnic season in Southern California. The Company received revenues of $182,326
during 1994 and $191,442 during 1995 under this arrangement.
For the complete terms of the above sublease arrangement, reference is
hereby made to Exhibit 10-27 attached to and made a part of this Annual Report
on Form 10-KSB.
In 1986, the Company entered into a sublease with the Orange County
Transit District, an agency of Orange County, California, of the garage and
vehicle maintenance facility located on the Company's property for an initial
term of three years which has been extended to the expiration of the Company's
Ground Lease at a current monthly rental of $5,850. The tenant pays for all
tenant improvements required for its operations and is responsible for its own
utility expenses. The tenant no longer operates the facility on the property,
but still utilizes a portion of it for storage. For the complete terms of the
lease, see Exhibit 10-24 attached to and made a part of this Annual Report on
Form 10-KSB. From time-to-time the Company enters into other short-term sublease
or utilization arrangements related to its leased property in order to enhance
revenues.
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United Leisure Interactive
Management of the Company, in exploring new avenues for the expansion
of the Company's business as described above, has conceived several ideas for
proprietary interactive multimedia products. Some of these ideas relate to games
and interactive educational products that could be utilized at the children's
play-learning centers, by other users, or marketed to specific end users and/or
to the general public. The Company received prototypes of the first conceptual
products in 1995.
In pursuing these new products, the Company has utilized a portion of
the proceeds received from the public offering completed in 1994, developing new
products for the World Wide Web (WWW) via the Internet. The first such product,
now on-line, is called Netcruise and allows for booking cruises through the
Internet. The service allows viewing video clips from CD-ROM with the proper
hardware. Other services currently offered include WWW site development oriented
toward product marketing, specialized database connectivity to the Internet and
custom software development. Additionally, the Company is hosting WWW pages for
a number of United Leisure divisions as well as clients outside the firm.
Planet Kids, Inc.
In June 1994, the Company entered into a joint venture with MGK, a
publicly traded company engaged in the operation of karate centers in New Jersey
and Pennsylvania. The parties formed a new company, Planet Kids, Inc., which
initially was equally owned, to create and operate state-of-the-art children's
play-learning centers. Planet Kids, Inc.'s new centers will operate out of
leased premises and target children ages 1 through 13. Each center provides
children with interactive multimedia educational games, exercise playgrounds,
educational computers, party facilities and other indoor activities. Management
believes that the development of children's play-learning centers, a relatively
new industry, is a good vehicle to exploit the Company's experience.
As of June 20, 1995, the Company bought out MGK's interest in the joint
venture, thus becoming the sole stockholder in exchange for the return of MGK's
initial investment of $500,000, plus accrued interest of approximately $40,500.
In addition, for the risk undertaken by MGK, the Board of the Directors granted
to MGK an option to acquire up to 150,000 shares of the Common Stock of United
Leisure Corporation at an exercise price of $.01 per share. This option has been
exercised.
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Planet Kids opened its first play-learning center in Laguna Hills,
California in July 1995 and its second in Orange, California in December 1995. A
third center is currently under construction in Fountain Valley, California and
is expected to be operational within the next six months. In addition, Planet
Kids has granted a license to PT Planet Kidsindo, Jakarta, Indonesia, to
construct and operate a Planet Kids center in the Orient in return for a
development fee in the amount of $100,000, $10,000 of which has been paid. See
Exhibit 10-35 for the full terms of this Territory Rights Agreement. See also,
Item 7, "Management's Discussion and Analysis or Plan of Operation".
Frasier Day Camp
The Company opened Camp Frasier at the California park during the
summer of 1982, when the Company had on its property all of the facilities
described above for utilization in connection with picnics, which were also
available for use in connection with a day camp. During its twelve years of
operation, Camp Frasier has experienced steadily increasing camper census and
revenues and has operated at a capacity level for the last several years. The
Company has gradually improved its program, which enjoys popular parental
approval in the area. The camp program is offered to area children between the
ages of 3 and 13 and is designed to provide significant flexibility in
attendance requirements, with a minimum of ten days per camper during the
summer. Campers are provided with planned activity programs which include
educational activities, horseback riding, swimming, arts and crafts, fishing,
four-wheeled Hondas and other standard day camp fare. In recent years, the
Company has added a rope challenge course, go- carts and karate to the
curriculum. Campers at Frasier Day Camp utilize the facilities of the Water Park
described above under "Description of Business -- Water Park" in this Item 1 of
this Annual Report on Form 10-KSB.
During 1994, the Company served approximately 725 campers daily and
realized revenues of $860,426 and during 1995 the Company served approximately
850 campers daily and realized revenues of $999,047. In 1994 and 1995, the
Company operated for nine weeks to correspond with the area school schedules.
The Irvine facility is operating at capacity and the Company has
believed that the opening of new Camp Frasier facilities within a 100 mile
radius of the current facility will not only provide the Company with a new
facility or facilities once the Irvine Ground Lease has been terminated, but
will also capitalize on the Company's reputation in the area. During 1995, the
Company acquired an amusement park located in San Diego, California and obtained
the rights to operate a day camp on an Orange County park located in Yorba
Linda, California. In April 1995, the Company acquired real and personal
property relating to Marshall Scotty's Amusement Park located in San Diego
County, California, for a total purchase price of $1,650,000. The Company paid
$800,000 in cash, assumed an existing note payable secured by the property in
the amount of $120,000 and executed a purchase money note in the amount of
$730,000. The Amusement Park was subsequently renovated and reopened as
"Frasier's Frontier", operating as a day camp, in mid-summer. In Yorba Linda,
the Company has obtained the right to operate a portion of Featherly Regional
Park as a day camp. The park is located in Yorba Linda in Orange County,
California. Under this agreement, which has a term of 30 years, the Company is
to pay a daily rate per campter which starts out at $.50 per day for each
campter for the first five years of the agreement and escalates to the greater
of $1.50 per campter per day of 5% of the Company's gross receipts, commencing
in the eleventh year of the agreement. In addition, the Company has agreed to
pay certain percentage rentals based on gross receipts. See Notes ___ and ___ of
"Notes to Consolidated Financial Statements" and Item 6, "Management's
Discussion and Analysis or Plan of Operations". See also Exhibits 10-30 and
10-31. These transactions occurred late in the season and the two new camps only
operated for the latter portion of the season. Results indicated, however, that
the Company can look to successful camp seasons at these locations in 1996, when
the Company expects to have four Camp Frasier locations. The Company expects to
operate five Camp Frasier locations in Southern California in the 1997 season.
Expansion to other areas across the United States is also contemplated. See this
Item, "Description of Business -- Camp Frasier" and "Management's Discussion and
Analysis of Financial Condition or Plan of Operation".
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Business Segment Information
The Company's current operations consist of two business segments,
facility rentals, pursuant to which the Company subleases or otherwise allows
others to use its California property as so to cause its property to be a
revenue producing property, and children's recreation activities, which include
the operation of Camp Frasier, a day camp which it operates on the property
during the summer months and Planet Kids, the Company's play-learning center
operations. See Note 16 of "Notes to Consolidated Financial Statements" in Item
7 for a summary of selected consolidated information for such business segments
for the years ended December 31, 1995 and 1994.
Competition
Southern California is an area of the country which emphasizes tourism
and is a major leisure time center. The leisure time attractions carried out on
the Company's property are subject to competition from other leisure time,
entertainment and recreation attractions, including theme and other amusement
parks and spectator sports events, many of which are located near the California
property. Pacific Amphitheater in Costa Mesa, California, was located
approximately 15 miles from the Company's park and competed with the Irvine
Meadows Amphitheater until 1994 when it closed. However, the Arrowhead Pond in
Anaheim is actively conducting concerts. There is also another water park,
"Raging Waters", located approximately 30 miles from the Company's park
property. The Water Park also competes directly with area Southern California
beaches.
In its efforts to develop the California park property, the Company has
in the past been in direct competition with real estate developers of all kinds
in its efforts to develop, including Irvine, its lessor. For all of the reasons
discussed elsewhere in this Annual Report on 10-KSB, management of the Company
believes that it will not be possible to carry out any viable development of its
property during the remaining term (10 months) of the Ground Lease.
The Company also expects to encounter significant competition in
connection with the expansion of the Camp Frasier operations and in the
development of the business of Planet Kids. While Camp Frasier is the single
largest day camp in Southern California, there are a number of day camp
operations throughout the Southern California area. The most important
competitive factors are location and the reputation of the particular camp
operation. In the children's play-center business, there are already several
large companies participating, including Discovery Zone, an affiliate of
Blockbuster Video, as well as many small, local entrants. Planet Kids'
management believes that the most important competitive elements are location
and the imagination applied to the activities provided for the centers'
customers. The Company believes that its emphasis on high-tech interactive
activities will allow it to compete effectively in this market. See this Item,
"Business--Planet Kids, Inc.".
See "Management's Discussion and Analysis of Financial Condition or
Plan of Operation" in Item 6 of this Annual Report on Form 10-KSB.
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Employees
At March 1, 1996, the Company had 33 full-time employees. Of these,
three were management employees and the remainder were administrative and
maintenance employees of the park property. The Company also hires a significant
number of part-time employees during the summer months. In addition, Harry
Shuster, Chairman of the Board, President and Chief Executive Officer, is
employed by the Company as an independent consultant. See Item 9, Directors,
Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange Act" and Item 10,
"Executive Compensation--Consulting and Employment Agreements".
Item 2. Description of Property.
The Company holds a 300-acre tract of real estate located near the
intersection of the San Diego and Laguna Freeways south of Los Angeles,
California under a Ground Lease with Irvine. This Lease expires on February 28,
1997. Until November 11, 1984, the Company operated an African wildlife preserve
and theme amusement park on a portion of the property. At that date, these park
operations were closed.
The Ground Lease provides for a percentage rental of 5% of gross
admissions (with a minimum set at the $292,500 basic rental plus a percentage of
the gross receipts to the Company from all new concessions and subleases on the
property of 15%, plus 2% to 5% of gross receipts of any food and beverage served
on the property, all of which amounts are part of the disputed rental issues in
The Irvine Company Litigation. The Company also remains responsible for certain
other expenses with respect to the property, including taxes, maintenance and
insurance, which are generally assumed on a pro rata basis by the Company's
sublessees. See Note 9 of "Notes to Consolidated Financial Statements" in Item
7. For the complete terms and provisions of the Ground Lease, reference is made
to Exhibit 10-1 attached to and made a part of this Annual Report on Form
10-KSB.
In The Irvine Company Litigation, it is Irvine's position that the rent
was not paid for a period prior to and through 1990, while the Company's
position is that it owes no rent at all because of Irvine's many unexcused
material breaches of the Ground Lease. The Company also contends that, if the
proper formulas are applied, the Company has overpaid the rent and is due a
refund of several hundred thousand dollars. This dispute will be decided as part
of The Irvine Company Litigation with other lease and rental issues. In its
financial statements the Company has treated this rent issue on a conservative
basis, showing a liability "Provision For Disputed Contingent Claim" on its
Consolidated Balance Sheet in the amount of $1,128,973. This is the amount the
Company believes it would owe if all its arguments in the litigation are
rejected. However, as anticipated by the Company, the jury found for the
Subsidiary on all rent issues in the initial trial of The Irvine Company
Litigation and, if the same result is obtained by the Company in the second
trial, this liability will be extinguished and the Company could possibly have a
rent credit in an amount in excess of $1,000,000. There can be no assurance,
however, that the Subsidiary will be successful on these same rent issues in a
second trial, if the Company's appeal of the Court's Order is not granted and a
second trial is required. See "Legal Proceedings" in Item 3 of this Annual
Report on Form 10-KSB for a description of the pending lawsuits between the
Company and Irvine.
The Company believes that the office space and other facilities
provided at the California park location are adequate for the Company's
operations through the end of the term of the Company's
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Ground Lease. Additional facilities will be required for the development of its
expansion plans described in this Annual Report on Form 10-KSB.
Item 3. Legal Proceedings.
At March 31, 1996, except as set forth below, the Company was not
involved in any material pending legal proceedings to which the Company is a
party or of which any of its property is the subject, which were not covered by
insurance.
The Irvine Company Litigation
In June, 1986, The Splash, the sublessee of the Company on the
Company's leased premises which operates a Water Park on the subleased premises,
filed a Complaint against 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.
The lawsuit initially involved Irvine's imposition of an unreasonably high
liability insurance requirement on The Splash in an effort to keep the water
park from operating. In its Complaint, The Splash sued Irvine for declaratory
relief, interference with contract, intentional misrepresentation, negligent
misrepresentation, bad faith repudiation of contract, breach of the implied
covenant of good faith and fair dealing and breach of third-party beneficiary
contract. The portion of the lawsuit between The Splash and The Irvine Company
and Marsh & McLennan has been settled. The Company has been informed by the
parties to the settlement that its terms are subject to a confidentiality
agreement among them so that the Company has no knowledge of such terms.
In January, 1987, Irvine filed a Cross-Complaint (amended on April,
1987) against The Splash and also against the Subsidiary, which Cross-Complaint
was subsequently amended several times. In its Third Amended Cross-Complaint,
Irvine sued The Splash for breach of contract, intentional misrepresentation,
negligent misrepresentation, declaratory relief, indemnity and bad faith denial
of contract, and the Subsidiary for breach of lease, indemnity, declaratory
relief. and bad faith denial of contract. The Subsidiary answered Irvine's
Cross-Complaint (also amended several times) and filed a Cross-Complaint against
Irvine for a range of wrongful conduct against the Subsidiary over the past
years. In general, the Subsidiary alleges that Irvine has wrongfully attempted
to frustrate the Company in its efforts over the years to establish new uses on
its leasehold and to derive profit from its Ground Lease. The Subsidiary's
Cross-Complaint includes causes of action for breach of lease, interference with
prospective economic advantage, declaratory relief and restitution after
rescission.
During the pendency of this proceeding, Irvine has made every effort to
utilize its superior financial resources in an effort to force the Company out
of business and thus off of the leased premises, and to destroy the Company's
ability to carry on this litigation effectively. Such actions included
unnecessary and lengthy depositions, unnecessary technical and dilatory motions
and ancillary proceedings and attachments of substantially all of the Company's
revenues and the delivery of a Notice of Default under the Ground Lease,
apparently in a final effort to force the Company off of its leased property.
These actions have forced the Company to expend substantial funds to carry out
The Irvine Company Litigation.
A trial of The Irvine Company Litigation was commenced in early October
1993, and in November 1993, the Company was awarded a jury verdict in the total
approximate amount of $42 million.
10
<PAGE>
The jury found that Irvine had breached the covenant of good faith and fair
dealing in the Ground Lease and awarded the Subsidiary approximately $37 million
in compensatory damages for those breaches. The jury also found that Irvine
acted with "fraud and malice" in interfering with the Subsidiary's relationship
with the Water Park and therefore awarded an additional $5 million to the
Subsidiary in punitive damages. In the rent dispute between Irvine and the
Subsidiary, the jury found that the Subsidiary owed no rent whatsoever because
of Irvine's own unexcused material breaches of the lease. The jury also found
that Amendment No. 9 to the Ground lease had been entered into by the Subsidiary
under duress and without consideration.
On April 15, 1994, after a hearing on post-verdict motions brought by
Irvine for a new trial and/or judgment notwithstanding the verdict, the court
granted a new trial on all issues and denied Irvine's motion for a judgment
notwithstanding the verdict on the basis that the evidence was not sufficient to
justify the verdict reached by the jury. 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 near the end of
1996. In The Irvine Company Litigation, the primary claim against the Subsidiary
is a claim for rent due in the approximate amount of $1,128,973. In addition,
Irvine raised certain other issues as to the calculation of rent and claims
legal costs. These claims are disputed by the Company and the Company's
Management believes that if all these issues were decided against the Company,
probably the most unfavorable result which might be incurred by the Company from
The Irvine Company Litigation would be a judgment against the Subsidiary of
approximately $2,000,000. There can be no assurance as to the ultimate outcome
of The Irvine Company Litigation.
On March 3, 1995, the Subsidiary filed a Complaint in the Superior
Court of the State of California against The Irvine Company praying for
declaratory relief and damages and for unjust enrichment. The case is styled
Lion Country Safari, Inc.--California v. The Irvine Company, (Case No. 743669).
The Irvine Ground Lease contains a provision which gives the Subsidiary the
right to remove all improvements at the termination of the Lease on February 28,
1997, and return the property to its original unimproved condition; however,
Irvine has unilaterally granted extensions to the Subsidiary's sublessees,
Irvine Meadows Amphitheater and Wild Rivers, without any participation or
obtaining the consent to such extensions by the Subsidiary. The Subsidiary has
requested from the Court a declaration that it has the right to remove all
improvements on the premises at the termination of the Ground Lease in
accordance with its terms or, in the alternative, that the Subsidiary be
compensated for the value of these improvements. The Subsidiary also contends
that Irvine has been unjustly enriched by its actions, including the unilateral
extensions in derogation of the Subsidiary's rights, and requests that the Court
order the disgorgement of Irvine's unjust enrichment.
On October 31, 1995, the Court dismissed the Subsidiary's cause of
action for unjust enrichment on the grounds that the cause of action was
premature. As for the cause of action for declaratory relief, on March 5, 1996,
the Court ruled that the Subsidiary had the right to remove all improvements
from the leasehold at the termination of the Ground Lease if the Subsidiary was
not in default at that time. The Court stated that it would issue no further
declarations. It is expected that a formal judgment embodying the rulings made
on March 5, 1995 will soon be issued by the Court.
11
<PAGE>
Subsidiary Bankruptcy
In August 1989 and June, 1990, respectively, Irvine obtained the right
to attach the Company's revenues in the total amount of $1,097,786, giving it
the legal ability to cut off virtually all sources of revenues available to the
Company so that it would be unable to continue its operations during its 1990
summer season. In response to this move by Irvine, the Company's Board of
Directors determined that it would be necessary for the Subsidiary to seek
protection under Chapter 11 of the United States Bankruptcy Code. On July 23,
1990, the Subsidiary filed a Petition for Reorganization under Chapter 11 in the
United States Bankruptcy Court (Case No. SA 90-04968JB) in Santa Ana,
California, in order to preserve the assets of the Subsidiary for the benefit of
the stockholders and creditors of the Company, to enable the Company to continue
its operations and to enable the Company to proceed with the effective
prosecution of The Irvine Company Litigation. The Subsidiary operated under the
aegis of the Bankruptcy Court for almost four years. As a result of the jury
verdict obtained by the Company in the initial trial of The Irvine Company
Litigation, the parties, by stipulation, agreed that the Subsidiary's petition
under Chapter 11 be dismissed on December 9, 1993.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the fiscal year
ended December 31, 1995, to a vote of security holders of United Leisure
Corporation, through the solicitation of proxies, or otherwise.
12
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Common Stock, par value $.01 per share, of the Company has been
traded on The Nasdaq Stock Market's Small Cap Market ("Nasdaq") under the symbol
UDTL since November 10, 1994. Prior to that date, the Company's Common Stock was
thinly traded in the over-the-counter market. In its 1994 public offering, the
Company sold a total of 4,945,000 Units, each Unit consisting of one share of
Common Stock and one Class A Warrant. Each of the Class A Warrants entitles the
holder thereof to purchase one share of the Company's Common Stock at an
exercise price of $4.00 per share. In addition to the market for the Company's
Common Stock, as to which certain information is provided below, the Company's
Class A Warrants are also traded on Nasdaq. See Item 11, "Security Ownership of
Certain Beneficial Owners and Management".
The table below sets forth, for the periods indicated, the high and low
bid prices of the Common Stock, for the period November 10, 1994, and
subsequent, through December 31, 1995, on Nasdaq, as reported to the Company in
monthly reports from Nasdaq, and for the period prior to November 10, 1994, as
reported to the Company by a market maker in the Company's Common Stock.
<TABLE>
<CAPTION>
1995 1994
-------------------------- ---------------------------
High Low High Low
Bid Bid Bid Bid
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter $ 5-7/8 $ 2-5/16 $ 3-3/4 $ 2
2nd Quarter 2-11/16 7/8 3-3/4 1-1/2
3rd Quarter 3-1/4 2 3-7/8 2-3/8
4th Quarter 3-7/8 2-1/16 5 1-1/8
</TABLE>
On March 29, 1996, the closing bid price of the Common Stock on Nasdaq was
$2-3/4.
The above quotations represent prices between market makers, do not
include retail mark-up, mark-down or commission and do not necessarily represent
actual transactions.
There were approximately 2,433 record holders of the Common Stock, par
value $.01 per share, of United Leisure Corporation as of March 1, 1996.
The Company has never declared or paid any cash dividends and does not
intend to pay cash dividends in the foreseeable future on the shares of Common
Stock. Cash dividends, if any, that may be paid in the future to holders of
Common Stock will be payable when, as and if declared by the Board of Directors
of the Company, based upon the Board's assessment of the financial condition of
the Company, its earnings, need for funds, capital requirements, and prior
claims, if any, of Preferred Stock to the extent issued, and other factors,
including any applicable laws. The Company is not currently a party to any
agreement restricting the payment of dividends.
13
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
Development Activities
The Company's Ground Lease terminates on February 28, 1997, thus
limiting any material developmental uses that may be made of the property during
the remaining 10-month period. The Company's efforts to develop its leasehold
interest have encountered significant and difficult obstacles. Over the past
several years, the Company has received proposals for a number of different
projects and/or subleases for the development of its property. Irvine, as the
Company's landlord, has taken the position that its consent is required for
these additional projects and in connection with discussions related thereto has
consistently presented the Company with significant obstacles to the development
of new projects and/or unreasonable financial demands related thereto. As a
result, the Company is unable to proceed with any projects or subleases. Thus,
the Company's ability to realize the full value of its major asset has been and
is materially limited. See this Item 6 and Item 3, "Legal Proceedings" for
descriptions of the continuing litigation with Irvine.
Current Projects
Set forth below is a summary of each of the current projects which the
Company is carrying out on its leased property.
The Company is a party to an Amphitheater Sublease, pursuant to which
the Company subleases approximately 20 acres of its 300-acre property to Irvine
Meadows Amphitheater. In 1995 and 1994, the Company has received towards its
account rentals of $355,119 and $438,920, respectively, from this Sublease
Agreement. In 1994, Irvine Meadows booked over 37 concerts for the 1994 season
and 35 for the 1995 season.
Since 1990, the Subsidiary has had a sublease arrangement with James
Productions, Inc. ("James"), pursuant to which James has the right to conduct
picnics and other Special Events (as defined) on the 27-acre picnic areas of the
Company's California park. The Agreement had an initial term of four years with
the right to renew it for an additional three years, which renewal right has
been exercised. The Agreement provides a minimum rental for 1990 of $150,000,
increasing by 5% for each additional year during the term of the sublease,
against 15% of gross revenues from the Special Events, payable on a monthly
basis each year commencing in March and ending in October. The monthly payments
are in differing amounts to fit the timing of the corporate picnic season in
Southern California. The Company received rentals under this arrangement of
$191,442 in 1995 and $182,326 in 1994.
14
<PAGE>
The Company offers a summer day camp for a nine-week period during the
summer for children ages 3-13. Campers are provided with a planned program of
activities, including softball, swimming, horseback riding, arts and crafts and
other usual day camp fare. Camp Frasier had an average daily camper count of 850
in 1995 and 725 in 1994. The day camp generated revenues of $999,047 in 1995 and
$860,426 in 1994. Campers are able to use the Water Park facility during the
camp season. Due to the success of Camp Frasier and the fine reputation enjoyed
by it in the area where the Company operates, the Company has embarked on an
expansion plan. In April 1995, the Company acquired real and personal property
relating to Marshall Scotty's Amusement Park located in San Diego County,
California, for a total purcahse price of $1,650,000. The Company paid $800,000
in cash, assumed an existing note payable secured by the property in the amount
of $120,000 and executed a purchase money note in the amount of $730,000. The
Amusement Park was subsequently renovated and reopened as "Frasier's Frontier,"
operating as a day camp, in mid-summer. In Yorba Linda, the Company has obtained
the right to operate a portion of Featherly Regional Park as a day camp. The
park is located in Yorba Linda in Orange County, California. Under the
agreement, which has a term of 30 years, the Company is to pay a daily rate per
camper which starts our at $.50 per day for each camper for the first five years
of the agreement and escalates to the greater of $1.50 per campter per day or 5%
of the Company's gross receipts, commencing in the eleventh year of the
agreement. In addition, the Company has agreed to pay certain percentage rentals
based on gross receipts.
The Company is a party to a sublease entered into in 1984 with American
Sportsworld, Inc. covering The Splash, a water park on 15 acres of the Company's
property opened to the public in July, 1986. The Water Park is known as Wild
Rivers, offering a tropical setting with an African theme. The Company has a
3.12% limited partnership interest in The Splash. Under the terms of the Water
Park Sublease, The Splash pays a minimum annual rent of $475,000, payable
$39,583 per month, against a percentage rent equal to 10% of annual Gross
Revenues (as defined). In addition, The Splash has agreed to pay additional rent
to cover various increased expenses with respect to the subleased property
during the term of the Water Park Sublease, as well as all taxes related to such
property. In 1995 and 1994, American Sportsworld, Inc. paid the Company $584,011
and $597,089, respectively, in rentals. In addition, in 1995 and 1994, the
Company received capital distributions in the respective amounts of $45,000 and
$50,000 from the Water Park.
Since 1987, the Company has from time-to-time entered into several
subleases for portions of its park property and certain of the vacant space in
the Company's Administrative Building. The leases presently in effect generate
approximately $10,000 per month in rental revenues for the Company.
It is the Company's present intention to continue all of the above
leases and programs during its 1996 season. In addition, the Company is
currently reviewing proposals for short-term subleases of portions of its
property for various uses since there will be only one more season on the Irvine
Park property.
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.
In the action, Irvine sued the Subsidiary for breach of lease, indemnity,
declaratory relief and bad faith denial of contract. The Subsidiary answered
Irvine's Cross-Complaint (amended several times) and filed a Cross-Complaint
against Irvine for a range of wrongful conduct against the Subsidiary over the
past years. In general, the Subsidiary alleges that
15
<PAGE>
Irvine has wrongfully attempted to frustrate the Company in its efforts over the
years to establish new uses on its leasehold and to derive profit from its
Ground Lease. The Subsidiary's Cross-Complaint includes causes of action for
breach of lease, interference with prospective economic advantage, declaratory
relief and restitution after rescission.
A trial of The Irvine Company Litigation was commenced in early October
1993, and in November 1993, the Company was awarded a jury verdict in the total
approximate amount of $42 million. The jury found that Irvine had breached the
covenant of good faith and fair dealing in the Ground Lease and awarded the
Subsidiary approximately $37 million in compensatory damages for those breaches.
The jury also found that Irvine acted with "fraud and malice" in interfering
with the Subsidiary's relationship with the Water Park and therefore awarded an
additional $5 million to the Subsidiary in punitive damages. In the rent dispute
between Irvine and the Subsidiary, the jury found that the Subsidiary owed no
rent whatsoever because of Irvine's own unexcused material breaches of the
lease. The jury also found that Amendment No. 9 to the Ground Lease had been
entered into by the Subsidiary under duress and without consideration.
On April 15, 1994, after a hearing on post-verdict motions brought by
Irvine for a new trial and/or judgment notwithstanding the verdict, the court
granted a new trial on all issues and denied Irvine's motion for a judgment
notwithstanding the verdict on the basis that the evidence was not sufficient to
justify the verdict reached by the jury. 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 near the end of
1996. In The Irvine Company Litigation, the primary claim against the Subsidiary
is a claim for rent due in the approximate amount of $1,128,973. In addition,
Irvine raised certain other issues as to the calculation of rent and claims
legal costs. These claims are disputed by the Company and the Company's
Management believes that if all these issues were decided against the Company,
probably the most unfavorable result which might be incurred by the Company from
The Irvine Company Litigation would be a judgment against the Subsidiary of
approximately $2,000,000. In March 1995, the Subsidiary filed a Complaint in the
California courts of equity praying for declaratory relief and damages for
unjust enrichment. The Court has dismissed the Subsidiary's cause of action for
unjust enrichment on the grounds that the cause of action was premature, but has
ruled that the Subsidiary has the right to remove all improvements from the
Irvine leasehold at the termination of the Ground Lease if the Subsidiary is not
in default at that time. There can be no assurance as to the ultimate outcome of
The Irvine Company Litigation. See Item 3, "Legal Proceedings".
[Declaratory judgment?]
Business Segment Information
The Company's current operations consist of two business segments,
facility rentals, pursuant to which the Company subleases or otherwise allows
others to use its California property so as to cause its property to be a
revenue producing property, and children's recreational activities, which
includes the operation of Camp Frasier, a day camp which it operates on the
property during the summer months and the management of the children's
play-learning center joint venture, Planet Kids. See Note 16 of "Notes to
Consolidated Financial Statements" in Item 7 for a summary of selected
consolidated information for such business segments for the years ended December
31, 1995 and 1994.
16
<PAGE>
Results of Operations
1995 Compared to 1994
The Company had total revenues during the year ended December 31, 1995,
in the amount of $3,176,867 as compared to $2,527,972 for 1994. The increase
resulted from increased revenues from the children's recreational activities
segment of the Company's business constituting increased revenues from the
Company's Camp Frasier operations, from three locations for at least a portion
of the summer season compared to only one location in 1994, and revenues from
the Company's initial two play-learning centers. At the same time, rentals from
the Irvine Meadows Amphitheater and the Wild Rivers Water Park, were decreased
by approximately $175,534.
In view of the expanded operations of Camp Frasier and the new play
learning centers, the Company's occupancy and all other expenses increased
significantly, generating total operating expenses of $4,235,066 for 1995, as
compared to $1,861,653 for 1994. Legal expenses incurred in connection with The
Irvine Company litigation remained approximately the same, while interest income
on the invested net proceeds of the 1994 public offering produced interest
income of $699,204, as compared to $115,721 in 1994 when the funds were only
invested for approximately six weeks.
The above results of operations resulted in a net loss for the year of
$(644,183) as compared to net income for 1994 of $533,080.
The Company's management views 1995 as a transition year during which
the Company concentrated on expanding its operations so that it could continue
its operations following the termination of The Irvine Company Gound Lease in
February 1997. During the year, it opened two additional Camp Frasier day camp
sites, two children's play-learning centers commenced operations, construction
of a third center and worked on the developing of certain other proprietary
software. No revenues were derived from United Leisure Interactive during 1995.
While the new play-learning centers and Camp Frasier locations operated for only
a portion of the year, indications are that these operations will contribute
significant revenues in future years.
Most of the activities carried out on the Company's property are
seasonal in nature, thus likely to cause most of the Company's revenues to be
received during the period April through September. Inflation in recent years
has not been an important factor in the Company's operations.
Liquidity and Financial Condition
As a result of continued operating losses experienced by the Company
over a number of years prior to 1994, and as a result of the significant
expenses incurred by the Company in carrying on the pending litigation with its
landlord, Irvine, described below, the Company operated for a number of years
with a severe cash flow deficit. For the most part, the Company was unable to
borrow on its own credit during this period. Accordingly, in addition to cash
flow received from operations, the Company's cash needs were provided by loans
and other credit accommodations made to the Company by Harry Shuster, Chairman
of the Board, President and Chief Executive Officer, and from certain other out
of the ordinary course of business transactions. At December 31, 1995, the
Company owed Mr. Shuster a total of $1,003,265. See Note 11 of "Notes to
Consolidated Financial Statements" in Item 7 and Item 12, "Certain Relationships
and Related Transactions".
In June 1994, the Company's outstanding Series A Preferred Stock held
by Harry Shuster was converted into 3,200,000 shares of Common Stock. The
Company's balance sheet was cleaned up by the improvement of the position of the
Company's common stockholders by the removal of the Series A Preferred Stock.
The Company paid Mr. Shuster a $75,000 financing fee in connection with this
transaction. Three other 1994 transactions strengthened the Company's balance
sheet. First, the Company entered into an agreement with Bank of America
(formerly Security Pacific National Bank)
17
<PAGE>
pursuant to which the Company purchased, for $145,000, the $225,000 Promissory
Note owed to such Bank. As part of the purchase, Bank of America returned to the
Company a total of 37,500 shares of Common Stock and Common Stock Purchase
Warrants to purchase a total of 334,825 shares of the Company's Common Stock at
exercise prices ranging from $.25 to $.75 issued to it in connection with the
issuance of the Promissory Note. See Notes 10 and 15 of "Notes to Consolidated
Financial Statements". Additionally, on June 9, 1994, Harry Shuster, Chairman of
the Board, President and Chief Executive Officer of the Company, utilized
$649,800 of the indebtedness owed him by the Company to exercise outstanding
non-qualified stock options to purchase 755,550 shares of Common Stock of the
Company at exercise prices ranging from $.30 to $1.00. In connection with the
establishment of the Company's children's play-learning centers business
described in Item 1, "Description of Business--Planet Kids, Inc.", in order to
raise its initial $500,000 capital contribution, the Company privately placed a
total of 571,430 shares of its Common Stock with Plus One Finance, Ltd., which
is unaffiliated with the Company, at a purchase price of $.875 per share. At
June 1, 1994, the time such transaction was agreed upon, the closing bid and
asked prices for the Common Stock on the over-the-counter market were $1-1/8 and
$1-3/4, respectively. The effect of these three transactions was to reduce the
Company stockholders' deficit by approximately $1,250,000. See Note 15 of "Notes
to Consolidated Financial Statements" in Item 7 and Item 12, "Certain
Relationships and Related Transactions".
In view of the short term remaining under the Ground Lease covering its
California property and the uncertainties created by the Court's actions in
ordering a new trial in The Irvine Company Litigation, the Board of Directors
determined that the Company should explore new avenues for the future
development of its business. In this connection, the Company entered into a
joint venture for the creation of a 50%-owned company to construct and operate
children's play-learning centers, made plans for the expansion of its Camp
Frasier operations, the creation of an interactive multimedia division and
fashioned a complementary merger and acquisition program.
In order to be able to carry out the above plans, in November 1994, the
Company completed a public offering of 4,945,000 Units, each Unit consisting of
one share of Common Stock, par value $.01 per share, of the Company and one
redeemable Class A Common Stock Purchase Warrants ("Class A Warrant") to
purchase one share of Common Stock of the Company at an exercise price of $4.00
per share (subject to adjustment in certain events). The Class A Warrants are
exercisable during the period November 10, 1996 through November 10, 1999,
unless previously redeemed. The Class A Warrants are subject to redemption by
the Company in certain events. After payment of the expenses of the offering,
the Company received net proceeds of approximately $14,855,187, all of which
were credited to the Common Stock and Paid-In Capital Accounts of the Company.
Such proceeds are being used in developing the Company's business as described
in this Annual Report on Form 10-KSB. See Item 7, Note 15 of "Notes of
Consolidated Financial Statements" and this Item, "Management's Discussion and
Analysis or Plan of Operation".
The Company has enjoyed a fairly stable operating revenue base from its
sublease rentals in recent years, Camp Frasier operations and other
miscellaneous sources of revenues from the operation of its leased property.
These operations have generally produced a small positive cash flow from
operating activities, generating gains of $286,728 for 1994, after giving effect
to the payment approximately $900,000 of accrued liabilities related to prior
periods in 1994. In 1995, however, the Company experienced negative cash flow in
the amount of
18
<PAGE>
In 1993, the Company received the release of $945,044 of restricted
cash and another $407,055 in 1994, all of which funds were immediately utilized
to extinguish various obligations. Thus, none of these activities improved the
Company's liquidity.
During the first six months of 1994, the Company made certain necessary
repairs to its park property. Apart from these repairs, the Company made no
significant commitments for expenditures until the completion of the
above-described public offering. With the proceeds of the public offering, the
Company made an initial loan of $500,000 to Planet Kids, commenced the expansion
of its Camp Frasier operations and the development of certain interactive
multimedia concepts. During 1995, the Company made a number of investments,
including the expenditure of $545,500 in buying out MGK, its original partner in
the children's play-learning centers venture, and a total of $4,140,189 in
acquiring an amusement park in San Diego, California, certain computer equipment
for United Leisure Interactive and in connection with the development of its two
new Camp Frasier locations and its three initial children's play-learnding
centers. There is no assurance that any of these new activities will be
successful. See Note 2 of "Notes to Consolidated Financial Statements" in Item
7.
Given the stability of the revenues from its current operations, the
Company expects that its 1996 operations will 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 -- $500,000,
interactive multimedia development -- $1,000,000, and mergers and acquisitions
program -- $3,500,000. See "Management's Discussion and Analysis or Plan of
Operation" in this Item.
Item 7. Financial Statements.
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
<S> <C>
Report of Independent Auditors............................................................................ 20
Consolidated Balance Sheets at December 31, 1995 and 1994................................................. 21
For the years ended December 31, 1995 and 1994:
Consolidated Statements of Operations.................................................................. 22
Consolidated Statement of Changes in Stockholders' Equity (Deficiency)................................. 23
Consolidated Statements of Cash Flows.................................................................. 24
Notes to Consolidated Financial Statements................................................................ 26
</TABLE>
19
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
United Leisure Corporation
We have audited the accompanying consolidated balance sheets of United Leisure
Corporation and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity (deficiency) and
cash flows for the years 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United Leisure
Corporation and Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of operations, stockholders' equity (deficiency) and cash
flows for the years then ended in conformity with generally accepted accounting
principles.
HOLLANDER, GILBERT & CO.
Los Angeles, California
March 8, 1996
20
<PAGE>
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 and 1994
ASSETS
1995 1994
--------------- ---------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 9,929,785 $ 15,955,140
Receivables 417,368 299,628
Inventory 80,301
Prepaid expenses 178,009 29,423
--------------- ---------------
TOTAL CURRENT ASSETS 10,605,463 16,284,191
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization (Notes 2 and 6) 4,845,406 56,246
OTHER ASSETS
Due from related parties (Note 11) 110,000 10,000
Investment in limited partnership (Note 5) 15,000 60,000
Pre-opening costs 405 66,931
Intangible assets, net of accumulated
amortization (Note 7) 68,440 97,461
Deposits 237,538 249,726
--------------- ---------------
$ 15,882,252 $ 16,824,555
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses (Note 8) $ 509,259 $ 499,381
Provision for disputed contingent claim (Note 9) 1,128,973 1,128,973
Due to related party (Note 11) 1,003,265 1,246,571
Deferred revenue 31,320 23,810
Deposits and other 124,275 124,275
--------------- ---------------
TOTAL CURRENT LIABILITIES 2,797,092 3,023,010
LONG-TERM DEBT (Note 10) 842,000 500,000
--------------- ---------------
TOTAL LIABILITIES 3,639,092 3,523,010
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 2 and 13)
MINORITY INTEREST (Note 14) 500,017
---------------
STOCKHOLDERS' EQUITY (Notes 10 and 15)
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
in 1995 and 12,203,428 shares in 1994 123,688 122,034
Capital in excess of par value 24,326,458 24,242,297
Accumulated deficit (12,206,986) (11,562,803)
--------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 12,243,160 12,801,528
--------------- ---------------
$ 15,882,252 $ 16,824,555
=============== ===============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
21
<PAGE>
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 and 1994
1995 1994
------------------ ------------------
<S> <C> <C>
REVENUES
Rentals $ 1,494,012 $ 1,669,546
Children's recreational activities 1,702,857 860,426
----------------- -----------------
TOTAL REVENUES 3,196,869 2,529,972
----------------- -----------------
OPERATING EXPENSES
Occupancy (Notes 4 and 9) 3,144,238 1,560,457
Selling, general and administrative 862,678 189,212
Depreciation and amortization 228,150 111,984
----------------- -----------------
TOTAL OPERATING EXPENSES 4,235,066 1,861,653
----------------- -----------------
OPERATING INCOME (LOSS) (1,038,197) 668,319
----------------- -----------------
OTHER INCOME (EXPENSE)
Interest income 699,204 115,721
Interest expense (84,237) (52,094)
Legal costs (Notes 3 and 4) (365,207) (340,679)
Adjustment for over-provided liabilities 154,759
Other, net 8,495
-----------------
TOTAL OTHER INCOME (EXPENSE) 413,014 (277,052)
----------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (625,183) 391,267
INCOME TAXES (BENEFIT) (NOTE 12) 19,000 (43,200)
----------------- ------------------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM (644,183) 434,467
EXTRAORDINARY ITEM--Gain from
settlement of debt, net of income
tax effect of $66,200 (Note 10) 98,613
----------------- -----------------
NET INCOME (LOSS) $ (644,183) $ 533,080
================= =================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 12,224,708 6,355,207
================= =================
EARNINGS (LOSS) PER COMMON SHARE Primary and assuming full dilution:
Income (loss) before extraordinary item $ (.05) $ .07
Extraordinary item .01
----------------- -----------------
Net income (loss) $ (.05) $ .08
================= =================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
22
<PAGE>
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1995 and 1994
Preferred Stock Common Stock
Capital in
Excess of Accumulated
Shares Par Value Shares Par Value Par Value Deficit Total
---------- ----------- ---------- ----------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE-- DECEMBER 31, 1993 16,000 $ 1,600,000 2,768,948 $ 27,689 $ 6,806,600 $ (12,095,883) $ (3,661,594)
Shares issued in private
placement 571,430 5,714 494,286 500,000
Preferred shares converted
into common shares (16,000) (1,600,000) 3,200,000 32,000 1,493,000 (75,000)
Exercise of stock options
(Note 11) 755,550 7,556 642,244 649,800
Shares retired (Note 10) (37,500) (375) (375)
Shares issued in public
offering 4,945,000 49,450 14,805,737 14,855,187
Underwriter's purchase
option 430 430
Net income for the year 533,080 533,080
------- ------------ ----------- --------- ------------ ------------- ------------
BALANCE-- DECEMBER 31, 1994 12,203,428 122,034 24,242,297 (11,562,803) 12,801,528
Exercise of stock options 156,421 1,564 6,001 7,565
Options granted for services
(Note 14) 67,500 67,500
Exercise of warrants 9,000 90 15,660 15,750
Options redeemed (5,000) (5,000)
Net loss for the year (644,183) (644,183)
------- ------------ ----------- --------- ------------ ------------- ------------
BALANCE-- DECEMBER 31, 1995 12,368,849 $ 123,688 $ 24,326,458 $ (12,206,986) $ 12,243,160
======= ============ =========== ========= ============ ============= ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
23
<PAGE>
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 and 1994
1995 1994
----------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) before extraordinary item $ (644,183) $ 434,467
Adjustments to reconcile net income (loss) before
extraordinary item to net cash provided (used)
by operating activities:
Depreciation and amortization of property and equipment 193,029 68,569
Amortization of intangibles 35,043 43,415
Options granted for services 67,500
Adjustment for over-provided liabilities (154,759)
Other (17) 818
Changes in operating assets and liabilities:
Receivables (117,740) (75,114)
Inventory (80,301)
Prepaid expenses (148,586) (22,042)
Pre-opening costs 66,526 (66,931)
Deposits 12,188 (248,245)
Amounts payable and accrued expenses 164,637 (1,115,148)
Accrued expenses due to related party (243,306) 50,221
Deferred revenue and other 7,510 (21,848)
-------------- -------------
NET CASH USED BY OPERATING ACTIVITIES (842,459) (951,838)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (4,140,189) (5,100)
Payment of organization costs (494) (17,252)
Purchase of minority interest (500,000)
Payment of lease acquisition costs (5,528) (15,603)
Release of restricted cash 407,055
Capital distribution from limited partnership 45,000 50,000
-------------- -------------
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES (4,601,211) 419,100
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from private placement 500,000
Advances to related parties (100,000) (10,000)
Proceeds from public offering 14,855,187
Exercise of stock options and warrants 23,315 430
Capital invested by minority interest 1,000,000
Preferred stock conversion fee (75,000)
Repayments of related party advances (200,000)
Options redeemed (5,000)
Principal payments under short-term and long-term obligations (500,000) (265,000)
-------------- -------------
NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES (581,685) 15,805,617
-------------- -------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (6,025,355) 15,272,879
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 15,955,140 682,261
-------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,929,785 $ 15,955,140
============== =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 97,219 $ 251,097
Income taxes paid $ 48,419 $ 3,200
Interest received $ 749,953 $ 64,972
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Property and equipment acquired for
long-term debt $ 842,000
Preferred stock converted into common stock $ 1,600,000
Related party advances converted into equity
by the exercise of common stock options $ 649,800
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
25
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Description of Business -- The primary business of the Company has been
to develop its major asset, a ground lease and related improvements and
equipment, covering approximately 300 acres of real estate in Irvine,
California, through sublease, so as to convert the leased asset into a
revenue producing property. In carrying out its business, the Company
prefers to act primarily as a developer and manager at the property,
rather than as an operator. The Company's ground lease interest expires
February 28, 1997. The Company also operates a summer day camp on its
leased property, an amusement park in San Diego County, California, two
state-of-the-art children's play-learning centers in Southern
California and is in the process of developing additional summer day
camps and children's play-learning centers.
Principles of Consolidation -- The consolidated financial statements
include the accounts of United Leisure Corporation (the Company) and
its subsidiary companies, all of which are wholly-owned except for
Planet Kids Learning Centers, Inc. (Note 14). All significant
intercompany transactions and balances have been eliminated.
Use of Estimate -- The preparation of financial statements in
conformity with generally accepted accounting principles management to
make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
Cash and Cash Equivalents -- The Company considers all highly liquid
investments purchased with an original maturity of three months or less
to be cash equivalents.
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.
Property and Equipment -- Property and equipment is recorded at cost
and depreciation is computed on the straight-line method based upon the
estimated useful life of the related asset as follows:
Buildings and improvements 3-27 years
Machinery, equipment and vehicles 4-10 years
Furniture, fixtures and office equipment 5-10 years
Computers 6 years
Signs 10 years
Investment in Limited Partnership -- Investment in limited partnership
is carried at initial cost less capital distributions.
26
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Pre-Opening Costs -- Pre-opening costs represent direct costs of a
non-capital nature incurred prior to commencement of operations at a
new play-learning center. Such costs are deferred and expensed upon
commencement of operations at the center. If plans to open a new center
are abandoned, any deferred costs related to such location are expended
during the year.
Intangible Assets -- Intangible assets are recorded at cost and are
amortized on a straight-line basis over their estimated useful lives as
follows:
Repurchased income stream Term of sublease
Organization costs 5 years
Lease acquisition costs Term of lease
Earnings (Loss) per Common Share -- Earnings (loss) per common share is
based upon the weighted average number of common shares, including
common share equivalents, outstanding during the periods. Common share
equivalents, when anti-dilutive, are excluded from weighted average
number of shares outstanding for all periods presented.
Reclassifications -- Certain 1994 balances have been reclassified to
conform with current years presentation.
2. DISCLOSURE OF CERTAIN SIGNIFICANT 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
(Note 4).
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 (Note 13).
Merger/Acquisition Plans -- The Company plans to engage in a mergers
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.
Segment Information -- During the year ended December 31, 1995, two
subleases, Wild Rivers Water Park and Irvine Meadows Amphitheater
accounted for 18% and 11%, respectively, of total operating revenue.
During the year ended December 31, 1994, Wild Rivers Water Park and
27
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Irvine Meadows Amphitheater accounted for 22% and 17%, respectively, of
total operating revenue.
3. ACQUISITIONS
------------
On April 5, 1995, the Company acquired real and personal property
relating to an amusement park in San Diego County, California for a
total purchase price of $1,650,000. The Company paid $800,000 in cash,
assumed an existing note payable secured by the property in the amount
of $120,000 and executed a purchase money note in the amount of
$730,000 (Note 10). The amusement park was subsequently renovated and
re-opened as Frasier's Frontier later in the year.
4. 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.
5. INVESTMENT IN LIMITED PARTNERSHIP
---------------------------------
Investment in limited partnership consists of a 3.12% interest in The
Splash, a California limited partnership organized for the purpose of
developing and operating a water park on a parcel of property subleased
from the Company. The Company acquired its interest in The Splash in
1985 through a transaction wherein the Company conveyed to the limited
partnership leasehold
28
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
improvements to a certain portion of the Company's amusement area,
comprising approximately one-third of the Company's total amusement
area, for $150,000 cash and the partnership interest then valued at
$200,000. In 1995 and 1994, the Company received capital distributions
of $45,000 and $50,000, respectively.
6. PROPERTY AND EQUIPMENT
-----------------------
Property and equipment consisted of the following at December 31, 1995
and 1994:
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Land $ 1,247,003 $
Buildings and improvements 5,635,401 3,308,916
Machinery, equipment and vehicles 1,004,348 250,316
Furniture, fixtures and office equipment 324,034 68,144
Computers 288,104
Signs and other 60,220
Construction in progress 50,456
-------------
8,609,566 3,627,376
Less accumulated depreciation and amortization (3,764,160) (3,571,130)
------------- -------------
$ 4,845,406 $ 56,246
============= =============
</TABLE>
7. INTANGIBLE ASSETS
-----------------
Intangible assets consisted of the following at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
------------- ------------
<S> <C> <C>
Repurchased income stream (Note 9) $ 294,802 $ 294,802
Organization costs 17,746 17,252
Lease acquisition costs 21,132 15,603
---------- -----------
333,680 327,657
Less accumulated amortization (265,240) (230,196)
---------- -----------
$ 68,440 $ 97,461
========== ===========
</TABLE>
29
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
-------------------------------------
Accounts payable and accrued expenses consisted of the following at
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------- ------------
<S> <C> <C>
Trade accounts payable $ 302,713 $ 7,188
Accrued legal fees (Note 4) 120,418 63,597
Accrued royalties 222,792
Accrued interest 7,018 54,759
Accrued interest due former joint venture
partner (Note 14) 20,000
Income taxes payable (Note 12) 19,000 19,800
Other accrued liabilities 60,110 111,245
---------- -----------
$ 509,259 $ 499,381
========== ===========
</TABLE>
9. LEASE AND SUBLEASE ARRANGEMENTS
-------------------------------
Lease Arrangements -- At December 31, 1995, minimum annual rentals
under noncancellable leases relating to the Company's leased
facilities, including the initial Planet Kids play-learning center,
were as follows:
Year Ending
December 31,
1996 $ 345,223
1997 372,321
1998 372,321
1999 372,321
2000 372,321
Thereafter 1,776,598
-------------
Total $ 3,611,105
=============
The agreement relating to the Company's Irvine ground lease provides
for rent based on a percentage of gross receipts with a $292,500
minimum. Rent paid directly to the Company's lessor by a sublessee
pursuant to a sublease for the amphitheater on the Company's leased
property is such that it covers the minimum rent called for in the
master lease. Consequently, the only rent required to be paid by the
Company is computed on a percentage of gross receipts or what the
Company actually received basis. This latter rent provision is in
dispute (Note 4).
The Company is also responsible for all property taxes.
30
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
During the years ended December 31, 1995 and 1994, rent expense was
$170,807 and $21,151, respectively (Note 4). Included in rent expense
for the year ended December 31, 1995 is $32,100 paid to the Company's
President and Chief Executive Officer, Mr. Harry Shuster (Note 11).
The provision for disputed contingent claim on the accompanying
financial statements is the subject of litigation between the Company
and its landlord (Note 4). 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.
In 1983, the Company entered in to an unconditional agreement with its
lessor whereby the Company sold $1,100,000 of the future revenues due
it from a sublease for the amphitheater located on its leased property
for an amount equal to certain accrued obligations due its lessor in
the approximate amount of $735,000. Pursuant to the agreement, sublease
proceeds were to revert to the Company when and if the lessor received
$1,100,000 plus any sums expended by the lessor to maintain its
position in the income stream. In 1987, the Company repurchased the
balance then still outstanding pursuant to the agreement for $294,802.
Sublease Arrangements -- The Company is the sublessor of certain
portions of its above described ground lease under sublease
arrangements expiring in various years through 1997.
Minimum future rentals to be received on non-cancelable subleases as of
December 31, 1995 are:
Year Ending
December 31,
------------
1996 $ 923,514
1997 155,595
-------------
Total $ 1,079,109
=============
Minimum future rentals do not include contingent rentals that may be
received because of percentage rentals in excess of minimum rental
amounts.
31
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
10. NOTES PAYABLE AND LONG-TERM DEBT
--------------------------------
Long-term debt consisted of the following at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
----------- --------
<S> <C> <C>
Notepayable secured by first deed of trust, payable interest only at
12%, principal due April 1, 2000, secured by real property located
in San Diego
County, California $ 120,000 $
Purchase money loan, payable interest only at 9.67%, principal due
March 1, 2000, secured by a second deed of trust on real property
located in
San Diego County, California 722,000
Notepayable to former joint venture partner, interest payable annually
at 8%, secured by substantially all of the assets of Planet Kids,
principal due January 1,
1998 (Note 14) 500,000
----------- ----------
$ 842,000 $ 500,000
=========== ==========
</TABLE>
In June 1994, the Company entered into an agreement relative to a
$225,000 note payable to bank wherein the Company purchased the
$225,000 principal amount promissory note, 37,500 shares of the
Company's common stock and common stock purchase warrants to purchase
334,825 shares of the Company's common stock at exercise prices ranging
from $.25 to $.75 for $150,000. The agreement reached and the
subsequent early payoff of $145,000 resulted in a gain of $164,813.
Such extraordinary gain, net of income tax effect of $66,200, is
reflected on the accompanying Consolidated Statement of Operations for
1994.
11. RELATED PARTY TRANSACTIONS
--------------------------
Due From Related Parties -- Due from related parties at December 31,
1994 consists of a note receivable from a Company director. The note,
in the amount of $10,000, is dated November 29, 1994 and bears interest
at the prime rate. The note is secured by 23,000 shares of the
Company's common stock which the maker may purchase pursuant to stock
option agreements with the Company. The note is due and payable on
November 30, 1995; however, it requires reduction in the amount
outstanding should any of the shares referred to above be sold by the
maker.
Due from related parties at December 31, 1995 consists of the above
described $10,000 note receivable which was extended to June 30, 1996,
plus a $100,000 advance made by the Company to the Company's President
and Chief Executive Officer, Mr. Harry Shuster.
32
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Due to Related Party -- In prior years, the Company's President and
Chief Executive Officer, Mr. Harry Shuster, advanced working capital to
the Company at the prime rate plus 3%. Such advances were secured by
the Company's rights under its sublease arrangements. In June 1994,
advances of $649,800 were converted into equity by the exercise of
options to purchase 755,550 shares of the Company's common stock.
At December 31, 1995 and 1994, due to related party consists of the
following amounts owed to Mr. Shuster:
1995 1994
------------- -----------
Accrued interest $ 789,649 $ 789,649
Accrued consulting fee (Note 12) 213,616 456,922
------------- -----------
$ 1,003,265 $ 1,246,571
============= ===========
Leased Facilities -- The Company leases certain of its office space
from a partnership of which the Company's President and Executive
Officer, Mr. Harry Shuster, is a partner on a month-to-month basis. The
Company also pays Mr. Shuster for the use of overnight accommodations
on the East Coast. The Company is advised that the rental and other
terms of the agreed-upon arrangements are no more favorable to Mr.
Shuster than could have been obtained in a similar location from an
independent, unrelated provider.
12. INCOME TAXES
------------
The components of income tax expense, all of which is current, are as
follows for the years ended December 31, 1995 and 1994:
1995 1994
--------- ---------
Federal $ $ 5,000
State 19,000 18,000
--------- ---------
$ 19,000 $ 23,000
========= =========
33
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
At December 31, 1995, the Company had net operating loss (NOL)
carryforwards for federal tax purposes expiring as follows:
Year
Expires Amount
------- ------
1996 $ 2,589.795
1997 379,960
1998 135,776
1999 1,738,569
2000 1,434,703
2001 781,145
2002 140,196
2008 523,345
2009 946,127
--------------
TOTAL $ 8,669,616
==============
The components of deferred taxes were as follows at December 31, 1995
and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 2,989,764 $ 2,637,300
Accrued expenses to a related party 434,414 539,800
State income taxes 6,460 6,000
Partnership interest 29,684
Depreciation 3,100
Valuation allowance (3,431,770) (3,186,200)
-------------- -------------
Total deferred tax assets 28,552 -0-
Deferred tax liability:
Depreciation 28,552
Net deferred taxes $ -0- $ -0-
============== =============
</TABLE>
34
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Income tax expense amounted to $19,000 and $23,000 in 1995 and 1994,
respectively. The actual tax expense differs from the expected tax
expense (computed by applying the federal corporate tax rate of 34%
earnings before income taxes) as follows:
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Expected statutory tax $ (212,562) $ 189,067
State income tax, net of federal tax benefit 12,540 11,633
Loss producing no current tax benefit 219,022
Alternative minimum tax 4,866
Benefit of operating loss carry forwards (183,075)
Other 509
-------------- -------------
Actual tax $ 19,000 $ 23,000
============== =============
</TABLE>
13. COMMITMENTS AND CONTINGENCIES
-----------------------------
Royalty Agreement -- Pursuant to a termination agreement with a former
concessionaire dated February 1, 1986, the Company is obligated to pay
the former concessionaire a percentage of the gross revenues, ranging
from 5% to 15%, from the sale of gifts and souvenirs sold within the
boundaries of the water park located on the Company's leased land.
Contingent Financing Fees -- The Company is obligated to the payment of
a contingent financing fee based on any recovery obtained from the
litigation described in Note 4 relating to notes payable in the amount
of $900,000 and $120,000 repaid in December 1993 and April 1994,
respectively. The contingent financing fee is determined as an amount
equal to 10% of the gross proceeds received by the Company, either as a
settlement of, or as damages from, The Irvine Company Litigation not to
exceed the amount of the loans made to the Company by such lenders.
Such amount is to be prorated among the lenders based on the amount of
their loans and thus the total liability of the Company for this
contingent financing fee is the total amount of the loans ($1,020,000)
made to the Company pursuant to these transactions. Such contingent
financing fee is only payable in the event that the Company receives
payments in settlement or, or damages from, The Irvine Company
Litigation and is not payable unless the Company is successful.
Consulting Agreement -- As of June 1, 1994, the Company and Mr. Shuster
entered into an amended and restated consulting agreement updating an
arrangement originally effective as of September 1, 1984. The
consulting agreement provides that Mr. Shuster will act as the
President and Chief Executive Officer and a Director of the Company
throughout the rolling five-year term of the agreement for annual
compensation set at $208,984 per annum for 1994, to be increased 10%
during each successive year of the agreement. Mr. Shuster is also to be
provided with either the use of a company car in carrying out his
duties for the Company or $300 per month car allowance. The consulting
agreement provides for certain disability benefits for a period of up
to three years. The consulting agreement provides that, so long as Mr.
Shuster spends as much
35
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
time as is necessary to properly carry out his duties as President and
Chief Executive Officer of the Company, he will be otherwise permitted
to spend a reasonable amount of time pursuing his own outside
interests. The consulting agreement provides for automatic one year
renewals for each contract year that ends without termination of the
consulting agreement by either party. During 1995 and 1994, $221,171
and $202,446, respectively, were accrued and partially paid pursuant to
this agreement (Note 11).
Employment Agreement -- The Company and Renate Graf are parties to a
rolling three-year amended and restated consulting agreement, dated as
of June 1, 1994, updating an arrangement that originally became
effective September 1, 1984. The employment agreement provides that
Mrs. Graf shall be employed as Vice President-Controller and a Director
of the Company for the term of the employment agreement at an annual
base salary of $110,664 for 1994, which increases by 10% each year of
the employment agreement. The employment agreement provides for
automatic one-year renewals for each contract year that ends without
termination of the employment agreement by either party.
14. JOINT VENTURE
In June, 1994, the Company entered into a joint venture with Master
Glazier's Karate International, Inc. ("MGK"), a publicly traded company
engaged in the operation of karate centers in New Jersey and
Pennsylvania. The parties formed a new company, Planet Kids Learning
Centers, Inc. ("Planet Kids"), which is equally owned, to create and
operate state-of-the-art children's play-learning centers. The new
centers will operate out of leased premises and will service children
ages 3 through 13. Each center will provide children with interactive
multimedia educational games, exercise playgrounds, educational
computers, party facilities and other activities.
The terms and provisions of the joint venture are contained in a
Subscription and Stockholders' Agreement, dated as of June 20, 1994,
among the Company, MGK and Planet Kids (the "S&S Agreement"). The joint
venture is to have an initial term of ten years. Each of the parties
has contributed $500,000 to the joint venture as equity and has loaned
Planet Kids an additional $500,000 (Note 10).
Minority interest at December 31, 1994 represents MGK's proportionate
share of the equity of the Company's Planet Kids Learning Centers, Inc.
subsidiary, which was 50% owned at December 31, 1994.
As of June 20, 1995, the Company bought out MGK's interest in the joint
venture, thus becoming the sole stockholder in exchange for the return
of MGK's initial equity investment of $500,000, plus repaid MGK's loan
in the amount of $500,000 with accrued interest of $40,500. In
addition, for the risk undertaken by MGK, the Board of Directors
granted to MGK an option to acquire up to 150,000 shares of the Common
Stock of United Leisure Corporation at an exercise price of $.01 per
share. This option has been exercised.
36
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
15. CAPITAL STOCK
--------------
Preferred and Common Stock -- In 1984, the Company converted cash
advances of $1,600,000 for 16,000 shares of Series A Preferred Stock.
In January 1989, Mr. Harry Shuster, the Company's President and Chief
Executive Officer, entered into an agreement to acquire 100% of the
issued and outstanding preferred stock of the Company. The terms of the
agreement were as follows: Purchase price $250,000, payable $25,000 in
cash and a promissory note of $225,000. Issuance by the Company of
37,500 shares of common stock, par value $.01 per share, and
non-qualified stock options to purchase up to an aggregate of 75,000
shares of such common stock at an initial exercise price of $.75 per
share. In consideration for the Company granting the common stock
options and issuance of common stock, Mr. Shuster waived certain
substantial rights granted the holders of preferred stock. On June 1,
1994, by agreement with the Company, Mr. Shuster converted all of the
issued and outstanding shares of preferred stock into a total of
3,200,000 shares of the Company's common stock.
On June 1, 1994, the Company issued a total of 571,430 shares of its
common stock in a private placement for an aggregate purchase price of
$500,000. The purpose of the placement was to provide the Company with
the required funds for its initial investment in the children's play-
learning center venture.
In order to carry out the Company's expansion plans, the Company
completed a public offering in November 1994, receiving net proceeds
from the offering of $14,855,187. The offering consisted of the sale of
4,945,000 units. Each unit consisted of one share of the Company's
common stock and one Class A warrant exercisable for one share of the
Company's common stock at $4.00 per share. The Class A warrants are
each redeemable by the Company for $.05, per warrant at any time after
two years, upon 30 days' prior written notice, if the average closing
price or bid price of the common stock, as reported by the principal
exchange on which the common stock is traded, Nasdaq or the National
Quotation Bureau Incorporation, as the case may be, equals or exceeds
$9.00 per share for 20 consecutive trading days ending within 10 days
prior to the date of the notice of redemption.
In connection with the public offering, the underwriter purchased an
option to purchase up to 430,000 units being offered to the public at
an exercise price equal to 165% of the public offering price for $430.
The Class A warrants included in these units will be exercisable at
$6.60 per share of common stock. These options will be exercisable for
a term of four years commencing one year from the effective date of the
registration statement utilized in the public offering, November 10,
1994, and provide certain registration rights to the underwriter.
37
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Stock Options -- The following non-qualified stock options granted by
the Company were outstanding at December 31, 1995:
<TABLE>
<CAPTION>
Exercise
Number of Price Per Date of Date of
Shares Share Grant Expiration
------ ----- ----- ----------
<S> <C> <C> <C> <C>
35,000 $ 1.00 February 1, 1986 February 28, 1997
15,000 .68 January 20, 1987 December 31, 1997
356,950 1.00 July 24, 1987 December 31, 1997
95,000 .30 April 22, 1988 December 31, 1997
37,500 1.33 October 7, 1988 December 31, 1997
75,000 1.25 November 17, 1988 December 31, 1997
37,500 1.38 December 5, 1988 December 31, 1997
75,000 .75 February 22, 1989 February 28, 1997
70,000 .75 December 7, 1990 December 31, 1997
55,000 1.00 September 23, 1993 December 31, 1997
---------
851,950
=========
</TABLE>
The Board of Directors have adopted a resolution extending all of the
options listed above to December 31, 1997 as of their respective
expiration dates.
The following table summarizes the activity of common shares under
stock options for the years ended December 31, 1995 and 1994:
1995 1994
---- ----
Balance--beginning of year 864,950 1,620,500
Options granted 150,000
Options exercised (156,421) (755,550)
Option redeemed (6,579)
-----------
Balance--end of year 851,950 864,950
=========== ===========
38
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Warrants -- At December 31, 1995, the following warrants were
outstanding:
<TABLE>
<CAPTION>
Exercise
Number of Price Per Date of Date of
Shares Share Grant Expiration
------ ----- ----- ----------
<S> <C> <C> <C> <C>
4,945,000 $ 4.00 November 10, 1994 November 10, 1995
430,000 6.60 November 10, 1994 November 10, 1996
81,000 1.75 May 20, 1992 May 20, 1992
13,200 1.75 November 20, 1992 November 20, 1992
-----------
5,469,200
===========
</TABLE>
The above-described warrants issued on November 10, 1994 expire on
November 10, 1999. The warrants issued on May 20, 1992, and November
20, 1992, expire on the first to occur of December 31, 1996, or within
90 days after the final and unconditional receipt by the Company of any
settlement amount or damages resulting from the litigation referred to
in Note 4.
16. SEGMENT INFORMATION
The Company's two business segments are facility rentals and children's
recreational activities. The following is a summary of selected
consolidated information for the industry segments for the years ended
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Operating revenues:
Facility rentals......................................................$ 1,494,012 $ 1,669,546
Children's recreational activities.................................... 1,702,857 860,246
------------- -------------
Total...............................................................$ 3,196,869 $ 2,529,972
============= =============
Operating income (loss):
Facility rentals......................................................$ 1,111,653 $ 1,036,464
Children's recreational activities.................................... (1,253,232) 139,173
Unallocated corporate overhead:
Compensation........................................................ (408,690) (374,333)
General legal fees.................................................. (116,503) (57,288)
Other............................................................... (371,425) (75,697)
------------- -------------
Total operating income (loss)..................................... (1,038,197) 668,319
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
<S> <C> <C>
Other income (expense):
Interest income....................................................... 699,204 115,721
Interest expense...................................................... (84,237) (52,094)
Legal costs (Notes 3 and 4)........................................... (365,207) (340,679)
Adjustment for over-provided liabilities.............................. 154,759
Other, net............................................................ 8,495
-------------
Income (loss) before income taxes and extraordinary item............$ (625,183) $ 391,267
============= =============
Depreciation and amortization:
Facility rentals......................................................$ 53,847 $ 90,900
Children's recreational activities.................................... 168,246 6,639
General corporate..................................................... 6,057 14,445
------------- -------------
Total...............................................................$ 228,150 $ 111,984
============= =============
Capital expenditures:
Facility rentals......................................................$ $
Children's recreational activities.................................... 4,940,322
General Corporate..................................................... 41,867 5,100
------------- -------------
Total...............................................................$ 4,982,189 $ 5,100
============= =============
Identifiable assets:
Facility rentals......................................................$ 381,042 $ 408,085
Children's recreational activities.................................... 5,330,440 346,365
General Corporate..................................................... 10,170,770 16,070,105
------------- -------------
Total...............................................................$ 15,882,252 $ 16,824,555
============= =============
</TABLE>
40
<PAGE>
Item 8. Disagreements on Accounting and Financial Disclosure.
The Company has not changed accountants within the two fiscal years
ended December 31, 1995.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Directors and Executive Officers
The following table sets forth certain information concerning the
Directors and executive officers of the Company:
<TABLE>
<CAPTION>
Principal Occupation
and All Positions A Director
Name Age With the Company Since
---- --- ---------------- -----
<S> <C> <C> <C>
Harry Shuster 61 Chairman of the Board, President 1969
and Chief Executive Officer
and a Director of the Company;
Chairman of the Board, President and
Chief Executive Officer of
United Restaurants, Inc.
Alvin Cassel 82 Of Counsel to law firm of 1969
Broad and Cassel, Miami, Florida;
Secretary-Treasurer and a
Director of the Company
Alvin Alexander 68 President, 1975
Skip Alexander Productions;
Director of the Company
Renate Graf 55 Vice President-- Controller and a 1978
Director of the Company
</TABLE>
Harry Shuster has been engaged in managing the affairs of the Company
since 1967, serving in the capacity of Chairman of the Board, President and
Chief Executive Officer since April, 1975. Mr. Shuster also acts as an
independent consultant, as chairman of the board, president and chief executive
officer of United Restaurants, Inc., a publicly-traded restaurant owner-operator
company whose offices are located in Los Angeles, California. Under his
agreement with that company, Mr. Shuster has agreed to devote at least 30 hours
per week carrying out his duties in connection with that company's business. Mr.
Shuster also devotes a portion of his time pursuing various other personal
matters unrelated to the Company's business. Mr. Shuster devotes approximately
30 hours per week working on the Com-
41
<PAGE>
pany's business. Mr. Shuster is a "control" person of the Company. See Item 3,
"Legal Proceedings" for a discussion of bankruptcy proceedings involving the
Company's primary operating subsidiary, of which Mr. Shuster is an officer and
director.
Alvin Cassel is of counsel to the law firm of Broad and Cassel, Miami,
Florida. He has been engaged in a general civil law practice for more than 50
years. Mr. Cassel is also Managing Director of Koorn N.V. See "Security
Ownership of Certain Beneficial Owners and Management" in Item 11 of this Annual
Report on Form 10-KSB. See Item 3, "Legal Proceedings" for a discussion of
bankruptcy proceedings involving the Company's primary operating subsidiary, of
which Mr. Cassel is an officer and director.
Mr. Alexander is and has been for more than five years President of
Skip Alexander Productions, a game show development company located in Los
Angeles, California.
Renate Graf has been with the Company for over ten years in various
capacities. She was elected Vice President-Controller in July, 1975 and a
Director in July, 1978. See Item 3, "Legal Proceedings" for a discussion of
bankruptcy proceedings involving the Company's primary operating subsidiary.
The above persons are also all of the executive officers of United
Leisure Corporation, as indicated. The present term of each Director will expire
at the time of the next Annual Meeting of Stockholders of United Leisure
Corporation. Executive officers are elected at the Annual Meeting of the Board
of Directors held immediately following the Annual Meeting of Stockholders and
hold office until the next Annual Meeting of the Board of Directors or until
their successors are duly elected and qualified.
There are no arrangements or understandings known to the Company
between any of the Directors or executive officers of the Company and any other
person, pursuant to which any of such persons was or is to be selected as a
Director or an executive officer, except (a) the Amended and Restated Consulting
Agreement between the Company and Harry Shuster and the Amended and Restated
Employment Agreement between the Company and Renate Graf, which agreements are
described below under "Executive Compensation -- Consulting and Employment
Agreements" in Item 10 of this Annual Report on Form 10-KSB, and (b) the
Underwriting Agreement executed and delivered by the Company in connection with
the public offering of the Company's securities completed in November 1994,
which provides that the underwriter of such offering, Stratton Oakmont, Inc.,
has the right to appoint one member of the Company's Board of Directors for a
three-year period. Stratton Oakmont, Inc. has not exercised its right to elect a
Director of the Company, and the Company understands that it does not intend to
exercise such right in 1996. There are no family relationships between any
Director or executive officer of the Company.
Compliance With Section 16(a) of the
Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and Directors, and persons who beneficially own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, Directors and beneficial owners of more than 10% of the Company's
Common Stock are required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms that they file. Based solely on review of the
copies of such forms furnished to the Company, or
42
<PAGE>
written representations that no reports on Form 5 were required, the Company
believes that for the period from January 1, 1995 through December 31, 1995, all
officers, Directors and greater-than-10% beneficial owners complied with all
Section 16(a) filing requirements applicable to them, except that Alvin
Alexander, a Director of the Company, filed two Form 4's late, due to the
company's counsel not being able to contact him on a timely basis because of
address changes.
Item 10. Executive Compensation.
Cash Compensation
The following table sets forth compensation paid or awarded to the
Chief Executive Officer and the only other executive officer of the Company
whose compensation exceeded $100,000 for all services rendered to the Company in
1995, 1994 and 1993:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
----------------------------- -------------------------
Securities Long-Term All
Underlying Incentive Other Com-
Name and Principal Position Year Salary Bonus Options Payouts pensation (2)
- --------------------------- ---- ------ ----- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harry Shuster 1995 $196,790(1)(3) $ --- --- --- $ 3,600
Chairman of the Board, 1994 202,446(1)(3) --- --- --- 3,600
President and Chief 1993 184,040(1)(3) --- --- --- 3,600
Executive Officer
Renate Graf 1995 $117,049(2)(3) 30,000 --- --- ---
Vice President 1994 107,207(2)(3) --- --- --- ---
Controller 1993 96,495(2)(3) --- 50,000 --- ---
- ------------------------------
<FN>
(1) The consulting fee due Harry Shuster, Chairman of the Board, President
and Chief Executive Officer of the Company under the Amended and
Restated Consulting Agreement described below for each of the years in
the above table was not paid in full. $24,521, and $19,426 of the
amount was accrued on the books of the Company for later payment in
1995, 1994 and 1993, respectively. See Note 11 of "Notes to
Consolidated Financial Statements" in Item 7.
(2) Includes $300 per month car allowance paid Mr. Shuster.
(3) See this Item, "Executive Compensation -- Consulting and Employment
Agreements".
</FN>
</TABLE>
-----------------------------------
The Company has no employee bonus or benefit plans, profit sharing plans,
retirement plans or deferred compensation plans. No fees are paid Directors for
attendance at meetings of the Board of Directors, although out-of-pocket
expenses incurred in connection therewith are reimbursed.
Stock Option Grants in 1995
No stock option grants to the executive officers named in the Summary
Compensation Table above were made in 1995.
43
<PAGE>
Stock Option Exercises in 1995 and Option Values at December 31, 1995
<TABLE>
<CAPTION>
Shares Value of Unexercised
Acquired Number of Unexercised Options In-the-Money Options
on Value at December 31, 1995 at December 31, 1995(1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Harry Shuster............ --- --- 506,950 --- 506,950/$896,232 $ --
Renate Graf.............. --- --- 100,000 --- 100,000/$196,050 --
- --------------------
<FN>
(1) Represents difference between market price of the Company's Common Stock
and the respective exercise prices of the options at December 31, 1995.
Such amounts may not necessarily be realized. Actual values which may be
realized, if any, upon any exercise of such options will be based on the
market price of the Common Stock at the time of any such exercise and
thus are dependent upon future performance of the Common Stock.
</FN>
</TABLE>
Consulting and Employment Agreements
As of June 1, 1994, the Company and Mr. Shuster entered into an Amended
and Restated Consulting Agreement (the "Consulting Agreement"), updating an
arrangement originally effective as of September 1, 1984. The Consulting
Agreement provides that Mr. Shuster will act as the President and Chief
Executive Officer and a Director of the Company throughout the rolling five-year
term of the Agreement for annual compensation set at $208,984 per annum for
1994, to be increased 10% during each successive year of the Agreement. Mr.
Shuster is also to be provided with either the use of a Company car in carrying
out his duties for the Company or $300 per month car allowance. During 1994, Mr.
Shuster received a consulting fee of $202,446 under the Consulting Agreement,
$52,245 of which was accrued on the books of the Company for later payment.
During 1995, Mr. Shuster received a consulting fee of $196,790 under the
Consulting Agreement, and an additional $24,521 was accrued on the books of the
Company for late payment. The Consulting Agreement provides for certain
disability benefits for a period of up to three years. The Consulting Agreement
provides that, so long as Mr. Shuster spends as much time as is necessary to
properly carry out his duties as President and Chief Executive Officer of the
Company, he will be otherwise permitted to spend a reasonable amount of time
pursuing his own outside interests. It is estimated that Mr. Shuster devoted
approximately 30 hours per week to the affairs of the Company during 1994 and
1995. See Item 9, "Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act -- Directors and Executive
Officers". The Consulting Agreement provides for automatic one year renewals for
each contract year that ends without termination of the Consulting Agreement by
either party. The Consulting Agreement terminates upon Mr. Shuster's death or in
the event of a breach of the Consulting Agreement by Mr. Shuster.
The Company and Renate Graf are parties to a rolling three-year Amended
and Restated Employment Agreement, dated as of June 1, 1994 (the "Employment
Agreement"), updating an arrangement that originally became effective September
1, 1984. The Employment Agreement provides that Mrs. Graf shall be employed as
Vice President-Controller and a Director of the Company for the term of the
Employment Agreement at an annual base salary of $110,664 for 1994, which
increases by 10% each year of the Employment Agreement. Mrs. Graf received
$110,664 under the Agreement in 1994 and $117,049 in 1995. The Employment
Agreement provides for automatic one-year renewals for each contract year that
ends without termination of the Employment Agreement by either party. The
Employment
44
<PAGE>
Agreement terminates upon Mrs. Graf's death or in the event of a breach of the
Employment Agreement by Mrs. Graf.
See Exhibits 10-3 and 10-4 attached to and made a part of this Annual
Report on Form 10-KSB for the complete terms and provisions on the
above-described Consulting Agreement and Employment Agreement.
Stock Options
At March 1, 1996, there were outstanding presently exercisable
non-qualified stock options to purchase an aggregate of 631,950 shares of the
Common Stock of the Company held by the Company's officers and Directors. Of
these, 506,950 were held by Harry Shuster, Chairman of the Board, President and
Chief Executive Officer of the Company, 100,000 were held by Renate Graf, Vice
President- Controller and a Director of the Company, and 125,000 were held by
the other Directors of the Company, at option prices ranging from $.30 to $1.38
per share. See Item 11, "Security Ownership of Certain Beneficial Owners and
Management".
All non-qualified stock options issued by the Company to its executive
officers and Directors are in substantially the same form, except as set forth
below. All options issued have a term which expires on December 31, 1997, and
are immediately exercisable as to all of the shares of Common Stock covered
thereby. The option price is the fair market value of the Common Stock of the
Company as of the date of grant. Each option terminates at the end of 90 days
following termination of association with or employment by the Company for any
reason other than death or at the end of one year in the event such terminated
is caused by death, except for the Stock Options held by Renate Graf, which do
not provide for termination of the option in the event of termination of
employment. All options are non-transferable and contain standard anti-dilution
protection for the optionholders. Options are granted to Directors and executive
officers from time-to-time by the Board of Directors in consideration of
extraordinary benefits provided the Company by the optionees.
In addition to the non-qualified stock options held by executive
officers and Directors of the Company, at March 1, 1995, there were outstanding
non-qualified options to purchase an aggregate of 210,000 shares of the Common
Stock of the Company held by third parties. All of these non-qualified options
are in substantially in the same form as those issued to executive officers and
Directors of the Company, except that generally they are not terminable until
they expire, as they are contractual obligations. These options have exercise
prices ranging from $.30 to $1.00 and expire at either February 28, 1997, or
December 31, 1997.
Reference is made to Exhibits 10-5 through 10-15, 10-19, 10-24, 10-25,
10-27 and 10-29 attached to and made a part of this Annual Report on Form 10-KSB
for the complete terms and provisions of the above outstanding stock options.
See also Note 15 of "Notes to Consolidated Financial Statements" in Item 7.
45
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
General
The following table sets forth certain information with respect to all
persons, or groups of persons, known by the Company to own beneficially more
than five percent of the Common Stock of the Company, and as to the beneficial
ownership thereof of the officers and Directors of the Company, individually and
as a group, all as at March 29, 1996:
<TABLE>
<CAPTION>
Name and Address Shares Percentage
of Beneficial Owner (a) Beneficially Owned Ownership (g)
----------------------- ------------------ -------------
<S> <C> <C>
Harry Shuster 5,606,132(b) 49.10% (b)
8800 Irvine Center Drive
Irvine, California 92718
Walton N.B. Imrie 737,430(c) 5.90% (c)
c/o Kestral S.A.
Pausilippe Ch.
Des Trois-Portes 11
2006 Neuchatel, Switzerland
Alvin Cassel 167,600(d)(e) 1.35% (d)(e)
Alvin Alexander 8,021 *
Renate Graf 101,400(e)(f) *
All Officers and Directors as a
Group (4 persons) 5,740,553(b)(d)(e)(f) 43.86% (b)(d)(e)(f)
- ------------------------------
<FN>
(a) Addresses are shown only for the beneficial owners of at least five
percent of the class of security shown.
(b) At March 29, 1996, Koorn N.V., a Netherlands Antilles corporation, all of
whose capital shares are owned by Harry Shuster, was the record owner of
142,600 shares of Common Stock of the Company. Mr. Shuster also owns
directly 201,032 shares of Common Stock which he has held for a number of
years, and 3,755,550 shares of Common Stock which he acquired in June,
1994 pursuant to the conversion of the Preferred Stock owned by him. See
Item 12, "Certain Relationships and Related Transactions". In addition,
Mr. Shuster also holds presently exercisable non-qualified stock options
to purchase an aggregate of 506,950 shares of the Common Stock of the
Company at exercise prices ranging from $1.00 per share to $1.38 per
share. All such shares are attributed to Mr. Shuster in the above table.
See Item 10, "Executive Compensation-- Stock Options", Item 12, "Certain
Relationships and Related Transactions" and Note 15 of "Notes to
Consolidated Financial Statements" in Item 7.
46
<PAGE>
All shares held of record by Koorn N.V. are owned with sole investment
power by Mr. Shuster, the beneficial owner thereof, but with shared
voting power. Alvin Cassel, a Director and Secretary- Treasurer of the
Company, acts as Managing Director of Koorn N.V.
(c) These shares are owned by Plus One Finance, Ltd., a British Virgin
Islands corporation, which is wholly-owned by Walton N.B. Imrie, a
resident of Switzerland. Consists of 654,430 shares of Common Stock and
presently exercisable Warrants to Purchase Common Stock covering 83,000
shares. The Common Stock Purchase Warrants were acquired in connection
with a $900,000 deposit made with the United States Bankruptcy Court in
connection with The Irvine Company Litigation, and the balance of 571,430
were purchased in a private placement in June, 1994. See Item 1,
"Business-- Children's Play-Learning Centers" and Item 3, "Legal
Proceedings-- Subsidiary Bankruptcy".
(d) Includes 142,600 shares held by Koorn N.V., as to which Mr. Cassel has
shared voting power.
(e) Includes shares which may be acquired upon exercise of presently
exercisable non-qualified stock options held by executive officers other
than Mr. Shuster, 100,000 for Mrs. Graf, 25,000 and for Mr. Cassel. See
Item 10, "Executive Compensation -- Stock Options". All of these shares
and options, except those owned by Koorn N.V., are owned with sole
investment and voting power.
(f) Includes 600 shares of Common Stock owned by Mrs. Graf's husband, as to
which she disclaims beneficial ownership.
(g) Assumes no exercise or conversion of Unit Purchase Option held by
Stratton Oakmont, Inc., the Underwriter in the public offering completed
in 1994, or the Class A Warrants issued in such offering.
* Less than 1%.
</FN>
</TABLE>
-----------------------------------
Item 12. Certain Relationships and Related Transactions.
From time-to-time since 1980, because the Company was unable to borrow
based on its own credit, Harry Shuster, Chairman of the Board, President and
Chief Executive Officer of the Company, personally provided, or otherwise
arranged for, the Company, loans, personal guarantees and other credit
accommodations. These loans and accommodations were necessary to provide the
Company with much- needed working capital to enable the Company to continue its
operations at an adequate level and to enable it to carry out certain
transactions considered by Management to be important to the Company's business.
On June 1, 1985, all of the previous loan transactions were consolidated into
one loan in connection with the provision by Mr. Shuster of $563,000 in
additional funds to the Company. At such date, the indebtedness owed Mr. Shuster
aggregated $973,927 and was represented by a Demand Promissory Note bearing
interest at 3% above the prime rate of City National Bank, Los Angeles,
California. As security for the payment of this Note, the Company granted Mr.
Shuster a security interest in the Irvine Ground Lease and all contract rights
of the Company and the proceeds thereof. In addition, since the date of this
loan transaction, Mr. Shuster has deferred payment of certain of the interest
due him under the loan arrangement and certain of the amounts due him under his
Consulting Agreement with the
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Company. See Note 10 of "Notes to Consolidated Financial Statements" in Item 7
for a description of the total of $1,003,265 owed Mr. Shuster by the Company at
December 31, 1995. From time-to-time since 1985, the amount of indebtedness owed
Mr. Shuster by the Company has fluctuated. See "Management's Discussion and
Analysis of Financial Condition or Plan of Operation" in Item 6.
On July 29, 1995, the Company made an advance in the amount of $100,000
to Harry Shuster, Chairman of the Board, President and Chief Executive Officer
of the Company, for personal expenses. The advance bears interest at 10% per
annum and is anticipated to be repaid on or about July 20, 1996.
See also Note 11 of "Notes to Consolidated Financial Statements".
PART IV
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements.
The audited consolidated financial statements of United Leisure
Corporation and Subsidiaries filed as a part of this Annual Report on Form
10-KSB are listed in the "Index to Consolidated Financial Statements" preceding
the Company's Consolidated Financial Statements contained in Item 7 of this
Annual Report on Form 10-KSB, which "Index to Consolidated Financial Statements"
is hereby incorporated herein by reference.
2. Exhibits.
3-1. Restated Certificate of Incorporation of the
Company, as filed in the office of the Secretary
of State of the State of Delaware on June 27,
1988, filed as Exhibit 3-1 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
3-2. Bylaws of the Company, filed as Exhibit 3-2 to the
Company's Registration Statement on Form SB-2
(Registration No. 33-81074), are hereby
incorporated herein by reference.
4-1. Warrant Agreement, dated November 18, 1994,
between the Company and OTR, Inc., filed as
Exhibit 4-1 to the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31,
1994.
4-2. Form of Warrant to Purchase Common Stock used in
connection with 12% Promissory Note unit private
placement and Bankruptcy Court deposit, filed as
Exhibit 4-3 to the Company's Registration
Statement on Form SB-2 (Registration No.
33-81074), is hereby incorporated herein by
reference.
4-3. Underwriter's Unit Purchase Option, dated November
18, 1994, issued to Stratton Oakmont, Inc., filed
as Exhibit 4-3 to the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31,
1994.
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10-1. Ground Lease, dated February 11, 1968, between The
Irvine Company and National Leisure, Inc., a
Florida corporation, Amendment No. 1 dated July
13, 1970; Amendment No. 2 dated March 8, 1971;
Amendment No. 3 to Ground Lease, dated May 8,
1972, between The Irvine Company and Lion Country
Safari, Inc.-California; Amendment No. 4 to Ground
Lease, dated January 12, 1976, between The Irvine
Company and Lion Country Safari, Inc.-California;
Amendment No. 5 to Ground Lease, dated April 1,
1976, between The Irvine Company and Lion Country
Safari, Inc.-California; Amendment No. 6 to Ground
Lease, dated August 11, 1976, between The Irvine
Company and Lion Country Safari, Inc.-California;
Amendment No. 7 to Ground Lease, dated March 7,
1977, between The Irvine Company and Lion Country
Safari, Inc.- California; Amendment No. 8 to
Ground Lease, dated April 22, 1977, between The
Irvine Company and Lion Country Safari,
Inc.-California; Amendment No. 9 to Ground Lease,
dated March 23, 1983, between The Irvine Company
and Lion Country Safari, Inc.-California; Letter,
dated June 4, 1984, from The Irvine Company
addressed to Lion Country Safari, Inc.; Amendment
to Ground Lease (unnumbered), dated November 15,
1984, between The Irvine Company and Lion Country
Safari, Inc.-California; Amendment No. 10 to
Ground Lease, dated January 20, 1986, between The
Irvine Company and Lion Country Safari,
Inc.-California; Consent to Sublease;
Nondisturbance Agreement: Amendment to Sublease,
dated as of December 26, 1985, among The Irvine
Company, Lion Country Safari, Inc.-California and
The Splash; Consent to and Agreement Concerning
Encumbrance of Sublease, dated January 22, 1986
among The Irvine Company and Lion Country Safari,
Inc.- California; Assignment and Purchase
Agreement, dated March 23, 1983, between The
Irvine Company and Lion Country Safari,
Inc.-California; Partial Assignment of Sublessor's
Interest in Sublease, dated March 23, 1983, by
Lion Country Safari, Inc. to The Irvine Company,
filed as Exhibit 10-1 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
10-2. Sublease Agreement, dated August 7, 1980, between
Lion Country Safari, Inc.-California and Feyline
Presents, Inc.; Assignment of Sublease Agreement,
dated August 19, 1980, between Feyline Presents,
Inc. and Irvine Meadows Amphitheater; Amendment to
Sublease, dated September 16, 1980, between Lion
Country Safari, Inc.-California and Irvine Meadows
Amphitheater; Agreement, dated September 12, 1980,
among The Irvine Company, Lion Country Safari,
Inc. and Lion Country Safari, Inc.-California;
Letter Agreement, between The Irvine Company and
Lion Country Safari, Inc.- California; Amendment
to Sublease, dated January 1, 1981, between Lion
Country Safari, Inc. and Irvine Meadows
Amphitheater; Letter, dated July 28, 1981, of
Irvine Meadows Amphitheater addressed to the
Company, filed as Exhibit 10-2 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
10-3. Amended and Restated Consulting Agreement, dated
as of June 1, 1994, between the Company and Harry
Shuster, filed as Exhibit 10-3 to the
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Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-4. Amended and Restated Employment Agreement, dated
as of June 1, 1994, between the Company and Renate
Graf, filed as Exhibit 10-4 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
10-5. Stock Option Agreement, dated December 7, 1990,
between the Company and Haskell Slaughter Young &
Johnston, Professional Association, covering
50,000 shares of Common Stock, par value $.01 per
share, of the Company, filed as Exhibit 10-5 to
the Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-6. Stock Option Agreement, dated December 7, 1990,
between the Company and Alvin Cassel covering
10,000 shares of Common Stock, par value $.01 per
share, of the Company, filed as Exhibit 10-6 to
the Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-7. Stock Option Agreement, dated December 7, 1990,
between the Company and Renate Graf covering
10,000 shares of Common Stock, par value $.01 per
share, of the Company, filed as Exhibit 10-7 to
the Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-8. Stock Option Agreement, dated April 22, 1988,
between the Company and Renate Graf covering
25,000 shares of Common Stock, par value $.01 per
share, of the Company; Extension of Option
Agreement, dated April 20, 1993, between the
Company and Renate Graf, filed as Exhibit 10-9 to
the Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-9. Stock Option Agreement, dated April 22, 1988,
between the Company and Alvin Cassel covering
10,000 shares of Common Stock, par value $.01 per
share, of United Leisure Corporation; Extension of
Option Agreement, dated April 20, 1993, between
the Company and Alvin Cassel, filed as Exhibit
10-10 to the Company's Registration Statement on
Form SB-2 (Registration No. 33- 81074), is hereby
incorporated herein by reference.
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10-10. Stock Option Agreement, dated October 7, 1988,
between the Company and Harry Shuster covering
37,500 shares of Common Stock, par value $.01 per
share, of the Company; Extension of Option
Agreement, dated April 20, 1993, between the
Company and Harry Shuster, filed as Exhibit 10-12
to the Company's Registration Statement on Form
SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
10-11. Stock Option Agreement, dated November 17, 1988,
between the Company and Harry Shuster covering
75,000 shares of Common Stock, par value $.01 per
share, of the Company; Extension of Option
Agreement, dated April 20, 1993, between the
Company and Harry Shuster, filed as Exhibit 10-13
to the Company's Registration Statement on Form
SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
10-12. Stock Option Agreement, dated December 5, 1988,
between the Company and Harry Shuster covering
37,500 shares of Common Stock, par value $.01 per
share, of the Company; Extension of Option
Agreement, dated April 20, 1993, between the
Company and Harry Shuster, filed as Exhibit 10-14
to the Company's Registration Statement on Form
SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
10-13. Option Agreement, dated January 20, 1987, between
the Company and Renate Graf covering 15,000 shares
of Common Stock, par value $.01 per share, of the
Company; Extension of Option Agreement, dated May
5, 1992, between the Company and Renate Graf,
filed as Exhibit 10-15 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
10-14. Stock Option Agreement, dated July 24, 1987,
between the Company and Harry Shuster; Extension
of Option Agreement, dated April 20, 1993, between
the Company and Harry Shuster, covering 750,000
shares of Common Stock, par value $.01 per share,
of the Company, filed as Exhibit 10-16 to the
Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-15. Option Agreement dated as of April 22, 1988,
between the Company and Haskell Slaughter Young &
Johnston, Professional Association, covering
50,000 shares of Common Stock, par value $.01 per
share, of the Company; Extension of Option
Agreement, dated April 20, 1993, between the
Company and Haskell Slaughter Young & Johnston,
Professional Association, filed as Exhibit 10-17
to the Company's Registration Statement on Form
SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
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<PAGE>
10-16. Option to Sublease, dated as of September 25,
1984, between Lion Country Safari, Inc.-California
and American Sportsworld, Inc., including the
proposed Lease and Agreement to be entered into
upon exercise thereof, filed as Exhibit 10-19 to
the Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-17. Letter, dated February 22, 1985, from Lion Country
Safari, Inc.-California addressed to American
Sportsworld, Inc.; Lease, dated as of May 14,
1985, between Lion Country Safari, Inc.-California
and American Sportsworld, Inc.; Amendment to
Lease, dated December 2, 1985, between Lion
Country Safari, Inc. and American Sportsworld,
Inc.; Letter Contract, dated June 27, 1985,
between the Company and The Splash; Assignment of
Sublease, dated as of December 26, 1985, between
Lion Country Safari, Inc.-California, American
Sportsworld, Inc. and The Splash; Bill of Sale,
dated January 10, 1986, between Lion Country
Safari, Inc.-California and The Splash; Agreement
of Limited Partnership (undated) of The Splash;
Letter Agreement, dated October 16, 1986, between
Lion Country Safari, Inc.-California and The
Splash; Letter Agreement, dated November 21, 1986,
between Lion Country Safari, Inc.-California and
The Splash; Letter Agreement, dated November 25,
1986, between Lion Country Safari, Inc.-California
and The Splash, filed as Exhibit 10-20 to the
Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-18. Letter Agreement, dated January 31, 1986, between
Africa Arts of California, Inc. and the Company,
filed as Exhibit 10-21 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
10-19. Option Agreement, dated as of February 1, 1986,
between the Company and Africa Arts of California,
Inc. covering 35,000 shares of Common Stock, par
value $.01 per share, of the Company, filed as
Exhibit 10-22 to the Company's Registration
Statement on Form SB-2 (Registration No.
33-81074), is hereby incorporated herein by
reference.
10-20. Promissory Note, dated June 1, 1985, of Lion
Country Safari, Inc.-California in the principal
amount of $973,927 drawn to the order of Harry
Shuster, filed as Exhibit 10-23 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
10-21. Deed of Trust, Assignment of Rents and Security
Agreement, dated June 1, 1985, between Lion
Country Safari, Inc.-California, Brian H. Kay,
Trustee,
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<PAGE>
and Harry Shuster, filed as Exhibit 10-24 to the
Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-22. Collateral Assignment of Leases and Rents, dated
June 1, 1985, between Lion Country Safari,
Inc.-California and Harry Shuster, filed as
Exhibit 10-25 to the Company's Registration
Statement on Form SB-2 (Registration No.
33-81074), is hereby incorporated herein by
reference.
10-23. Commercial Lease (General Form), dated July 21,
1986, between Lion Country Safari, Inc.-California
and Orange County Transit District; Amendment No.
3 to Lease Agreement, dated April 17, 1989,
between Lion Country Safari, Inc.-California and
Orange County Transit District filed as Exhibit
10-26 to the Company's Registration Statement on
Form SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
10-24. Stock Option Agreement, dated as of February 22,
1989, covering 67,500 shares of the Common Stock,
par value $.01 per share, of the Company in favor
of Tactron Liquidating Trust, filed as Exhibit
10-27 to the Company's Registration Statement on
Form SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
10-25. Stock Option Agreement, dated as of February 22,
1989, covering 7,500 shares of the Common Sock,
par value $.01 per share, of the Company in favor
of Lindsey & Associates, Inc., filed as Exhibit
10-28 to the Company's Registration Statement on
Form SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
10-26. Memorandum of Agreement, dated March 7, 1990,
between Lion Country Safari, Inc., - California
and James Productions, Inc., filed as Exhibit
10-34 to the Company's Registration Statement on
Form SB-2 (Registration No. 33- 81074), is hereby
incorporated herein by reference.
10-27. Form of Indemnity Agreement entered into by the
Company with each of its Directors, filed as
Exhibit 10-35 to the Company's Registration
Statement on Form SB-2 (Registration No.
33-81074), is hereby incorporated herein by
reference.
10-28. Stock Option Agreement, dated September 23, 1993,
between the Company and Renate Graf, covering
50,000 shares of Common Stock, par value $.01 per
share, of the Company, filed as Exhibit 10-40 to
the Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-29. Stock Option Agreement, dated September 23, 1993,
between the Company and Alvin Cassel, covering
5,000 shares of Common Stock, par value $.01 per
share, of the Company, filed as Exhibit 10-41 to
the Company's Registration
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<PAGE>
Statement on Form SB-2 (Registration No.
33-81074), is hereby incorporated herein by
reference.
10-30. Agreement for Purchase and Sale and Joint Escrow
Instructions, dated April 5, 1995, between PLC
Properties, Inc. and United Leisure Corporation
(to be filed by Amendment).
10-31. Sub-Operating Agreement, dated April 11, 1995,
between Canyon R.V. Park and Camp Frasier, Inc.,
together with related Operating Agreements (to be
filed by Amendment).
10-32. Standard Retail/Office Complex Lease, dated
October 12, 1994, between PSA Properties and
Planet Kids, Inc. (to be filed by Amendment).
10-33. Commercial Lease, between Eastrich Multiple
Investor Fund L.P., Midland Loan Services, L.P et
al., and Planet Kids, Inc. and Rider thereto (to
be filed by Amendment).
10-34. Lease, dated June 29, 1995, between Magnolia
Square and Planet Kids, Inc. and Addendum thereto
(to be filed by Amendment).
10-35. Territory Rights Agreement, between Planet Kids,
Inc. and PT Planet Kidsndo (to be filed by
Amendment).
21. Subsidiaries of the Company (to be filed by
Amendment).
27. Financial Data Schedule
(b) Reports on Form 8-K. United Leisure Corporation filed no Current
Report on Form 8-K during or with respect to the last quarter of 1995.
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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.
UNITED LEISURE CORPORATION
By /s/HARRY SHUSTER
------------------------------------------
Harry Shuster, Chairman of the Board,
President and Chief Executive Officer
Date: April 15, 1996
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.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
HARRY SHUSTER
- -------------------------------------- Chairman of the Board, April 15, 1996
(Harry Shuster) President and Chief Executive Officer
(Principal Financial Officer)
and Director
ALVIN CASSEL Director April 15, 1996
- --------------------------------------
(Alvin Cassel)
RENATE GRAF
- -------------------------------------- Vice President and Controller April 15, 1996
(Renate Graf) (Principal Accounting Officer)
and Director)
ALVIN ALEXANDER Director April 15, 1996
- ---------------------------------------
(Alvin Alexander)
</TABLE>
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