<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.20549
FORM 1O-QSB/A-1
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended: March 31, 1996
Commission File No. 0-27160
CALL NOW, INC.
--------------
(Exact name of small business issuer in its charter)
Florida 65-0337175
---------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
P.O.Box 531399, Miami Shores, FL 33153
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(Address of principal executive offices)
(305) 751-5115
--------------
(Issuer's telephone number)
Check whether the issuer (1) 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
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 7,233,700 shares as of
September 10, 1996.
Transitional Small Business Format: No
---
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Registrant's Financial Statements filed herewith begin on page 5.
Item 2. Management's Discussion and Analysis of Results of Operations and
Liquidity and Capital Resources
Results of Operations
Three Months Ended March 31
1996 compared to 1995
Long distance service revenue for the three months ended March 31, 1996
were $113,359 compared to $423,259 for the three months ended March 31, 1995.
Revenues fell due to loss of accounts to competitors, without corresponding
acquisition of new accounts. Line costs in 1996 were $82,753, representing 73%
of long distance revenue compared to $338,930 or 80% of revenue in 1995. In
1996 the Company was able to receive better rates from its long distance
providers, resulting in lower line costs.
This is a key element determining profitability which is governed by
competition in rates the Company can charge for its services and the line costs
it incurs in providing its services. Selling and general and administrative
expense reflected not only the direct costs of its ARN long distance operations
but the considerable overhead of the parent corporation, including legal,
accounting and consulting expenses. The provision for doubtful accounts
decreased from $21,031 in 1995 to $6,302 due to decreased sales. The Company is
seeking to reduce credit risks by dealing with customers with monthly billings
in the $250 to $2,500 range so that no one customer can unduly affect the
Company's business. Additionally, slow paying customers are terminated sooner.
Depreciation and amortization relates primarily to amortization of customer
list and is based upon higher turnover of customers.
Interest expended in 1995 was primarily related to a margin loan. This was
paid off in the first quarter of 1996. Interest income was primarily from a
loan to a securities firm and money market accounts.
There was a loss from the Company's investment in an unconsolidated entity
(Cable-Sat) in 1996. There was no comparable item in 1995. See Note 5 to
financial statements herein for discussion on dividend declared covering 723,438
shares of Cable-Sat common stock.
2
<PAGE> 3
Liquidity and Capital Resources
As of December 31, 1995, the Company borrowed $1,304,265 from Merrill Lynch
using ICI stock as collateral. In 1996 the Company sold 280,000 shares of ICI
stock for $5,261,317. The Merrill Lynch loan was paid off in March 1996.
During 1996, the Company's operating activities used cash of approximately
$175,353 ompared to $185,849 in 1995. The Company's long distance telephone
business is currently operating at a loss.
Net cash was provided primarily from sale of ICI stock. with net proceeds
of $5,261,317.
Cash flow from operations reflects cash used in 1996 of $175,353 versus net
income of $989,306. The difference represents the result of adjustments for
various non-cash entries as reflected in the Consolidated Statements of Cash
Flows.
Cash flow from investing activities in 1996 primarily reflected proceeds of
sale of ICI common stock reduced by investment in Cable-Sat. Net cash provided
was $4,165,608
Cash used in financing activities in 1996 was $1,306,575 and primarily
resulted from payment of a margin loan. In 1995 $201,211 was provided from
financing activities reflecting borrowing activities.
The Company has investments in common stock of Intermedia Communications of
Florida, Inc. and Cable-Sat Compression, Inc. Such investments do not generate
revenues for the Company directly. However, the Company has been meeting its
working capital requirements through sale from time-to-time of ICI stock. In
addition, the Company has borrowed money utilizing shares of ICI as collateral
for such loan. In addition the Company has entered into an agreement with
Barron Chase Securities, Inc. under which it has lent 175,000 shares of its ICI
stock to such firm for which such firm has agreed to pay the Company $11,550
interest per month which the Company utilizes as working capital. The Company
is required to provide additional shares of ICI in the event the market price of
ICI stock falls below a certain level. Such arrangement terminates on March 31,
1997 at which time the Company receives back its ICI shares. The Company
entered into this agreement in order to generate revenue from its holdings of
ICI common stock which does not currently pay any dividend.
Since the sale of Phone One in December 1994, the Company has been
borrowing against and selling the ICI stock for working capital and other cash
needs and has considerable equity in such stock available to meet future cash
needs.
3
<PAGE> 4
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Financial Data Schedule - Restated - (for SEC use only)
(b) Reports on Form 8-K
Registrant filed no reports on Form 8-K during the quarter ended March 31, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CALL NOW, INC.
By: s/William M. Allen
-------------------------------
William M. Allen
President
September 12, 1996 By: s/James D. Grainger
------------------------------
Chief Financial Officer
4
<PAGE> 5
CALL NOW, INC AND SUBSIDIARIES
Consolidated Balance Sheet as of March 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash $ 2,924,936
Short term securities - restricted 100,000
Accounts receivable (less $51,615 allowance for doubtful accounts) 78,798
Marketable securities, at market value - unrestricted 3,737,750
Marketable securities, at market value - pledged 3,307,500
Notes receivable 1,305,000
Other 30,888
-----------
Total current assets 11,484,872
Furniture and equipment (less accumulated depr 72,963
Customer list (less accumulated amortization of $250,209) 57,232
Investments - Cable-Sat, Inc. common stock (less amortization &
equity loss of $152,056) - restricted 399,975
Investments - Cable-Sat, Inc. common stock (less amortization &
equity loss of $6,211) - unrestricted 37,758
Investments - Cable-Sat, Inc. , preferred stock, $3 par value, 7% 450,000
Other 64,554
-----------
Total Assets $12,567,354
===========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of capital lease obligations 23,868
Accounts payable 847,237
Note payable 1,155,000
Dividends payable 399,975
Accrued expenses 69,660
Income taxes payable 961,685
Deferred income taxes 2,081,645
-----------
Total current liabilities 5,539,070
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Contingencies and commitments
Stockholders' equity:
Preferred stock, no par, 800,000 shares authorized , none
outstanding -
Common stock, no par, 50,000,000 shares authorized, 7,233,700
issued and outstanding 3,122,477
Retained earnings 2,619,487
Less subscription notes receivable for 250,000 of common stock (200,000)
Unrealized holding gain on marketable securities (net of
$1,296,000 income taxes) 1,486,320
-----------
Total stockholders' equity 7,028,284
-----------
Total Liabilities and Stockholders' Equity $12,567,354
===========
</TABLE>
See notes to Consolidated Financial Statements
<PAGE> 6
CALL NOW, INC AND SUBSIDIARIES
Consolidated Statements of Operations
For Three Months ended March 31, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
REVENUES:
Long distance services $ 113,359 $ 423,259
Gain on sale of marketable securities 1,780,814 -
Interest 43,485 8,889
---------- ----------
1,937,658 432,148
---------- ----------
COST AND EXPENSES:
Line costs 82,753 338,930
Selling, general, and administrative 147,447 126,052
Provision for doubtful accounts 6,302 21,031
Depreciation and amortization 21,165 31,790
Interest 25,746 30,593
Loss from unconsolidated entity 68,128 -
---------- ----------
351,541 548,396
---------- ----------
Income (loss) from continuing operations before
income taxes 1,586,117 (116,248)
Income tax (expense) benefit (596,811) 43,500
---------- ----------
Net income (loss) $ 989,306 ($72,748)
========== ==========
EARNINGS (LOSS) PER SHARE: $ 0.14 ($0.01)
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - PRIMARY AND FULLY DILUTED 7,233,700 7,243,700
========== ==========
</TABLE>
See notes to Consolidated Financial Statements
<PAGE> 7
CALL NOW, INC AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
For the Three-Months ended March 31,1996
(UNAUDITED)
<TABLE>
<CAPTION>
SUBSCRIPTION
COMMON STOCK NOTES RECEIVABLE
--------------------- --------------------- UNREALIZED
NUMBER OF NUMBER OF HOLDING RETAINED
SHARES AMOUNT SHARES AMOUNT GAIN EARNINGS TOTAL
--------------------- --------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31,1995 7,243,700 $3,130,477 250,000 ($200,000) $2,250,000 $2,030,156 $7,210,633
Cancellation of shares (10,000) (8,000) (8,000)
Unrealized holding (loss) net of
income taxes (763,680) ($763,680)
Dividend declared (723,438 shares of
Cable-Sat Systems, Inc. common stock) (399,975) (399,975)
Net income 989,306 989,306
--------------------- -------------------- ---------- ---------- ----------
BALANCE, JUNE 30,1996 7,233,700 $3,122,477 250,000 ($200,000) $1,486,320 $2,619,487 $7,028,284
===================== ==================== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 8
CALL NOW, INC.
and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1996
1. Marketable Marketable securities which are primarily Intermedia
Securities Communications of Florida, Inc. (ICI), representing
approximately 1.6% of its equity, are treated as
available for sale and reported at fair value. Unrealized
gains and losses are reported in stockholders' equity. The
carrying value and approximate market value at June 30,
1996 are as follows:
<TABLE>
<S> <C>
Marketable securities, at cost $ 2,179,646
Gross unrealized holding gain 3,443,966
------------
Market and carrying value $ 5,623,612
============
</TABLE>
During the three months ended June 30, 1996 securities
were sold for gross proceeds of $4,403,378 resulting in
gross realized gains of $1,921,079. The cost basis of the
securities sold was by specific identification and were all
ICI securities. The net unrealized holding gain increased
by $661,645 for the three months ended June 30, 1996.
2. Note On March 24, 1996 the Company renewed an agreement with a
Receivable broker-dealer whereby the Company executed a secured
demand note payable to the broker-dealer in the amount of
$1,155,000, without interest, payable on demand,
collateralized by the pledge of 150,000 shares of ICI stock
which is owned by the Company; simultaneously, the
broker-dealer signed a note payable to the Company in a
like amount bearing interest at 12% per annum, maturing
March 31,1997. During April 1996 the broker-dealer sold
the shares of ICI stock and purchased a treasury bill in
the amount of $1,199,441 to be used for collateral against
the demand note of $1,155,000. The treasury bill was
increased to $1,213,575 on June 28, 1996 and is included in
short term securities-restricted.
3. Investment in On February 22, 1996, the Company exercised its purchase
Unconsolidated warrants to acquire 320,000 shares of Cable-Sat Systems'
Entity common stock at the reduced price of $.30 per share.
On March 5, 1996, a dividend of Cable-Sat common stock
was declared and will aggregate 723,438 shares and is
more fully described in note 5. After such
<PAGE> 9
distribution, the Company's equity interest in
Cable-Sat will be less than 20% and will continue to be
accounted for by the equity method due to the significant
influence maintained by Call Now, Inc.
On March 22, 1996 the Company purchased 150,000 shares
of Cable-Sat Systems' Class A 7% preferred stock for $3.00
per share. The shares are redeemable out of the proceeds
of an initial public offering or private placement of
Cable-Sat Systems' securities at $3.00 per share plus one
share of Cable-Sat Systems common stock. The 7% interest
is payable annually and due one-year from date of purchase
unless redeemed prior to the due date.
4. Income Taxes The components for the provision for federal income taxes
are as follows:
<TABLE>
<S> <C> <C>
Current $ 2,210,810
Deferred (1,015,509)
-----------
Net income tax expense $ 1,195,301
===========
</TABLE>
5. Stockholder's On March 5, 1996, the board of directors of Call Now, Inc.
Equity declared a stock dividend from the Company's holdings of
Cable-Sat Systems, Inc.'s common stock. The dividend
is payable to shareholders of record on March 12, 1996
("the record date") on the basis of one share of Cable-Sat
Systems, Inc. common stock for each ten shares of Call Now,
Inc.'s common stock held on the record date. Such
distribution is being registered by Cable-Sat Systems, Inc.
under the Securities Act of 1933 (File #333-6121) and stock
certificates representing the Cable-Sat shares will be
distributed to the Company's stockholders six months after
the effective date of such registration. After the
distribution, the Company's holdings of Cable-Sat Systems,
Inc. common shares will be approximately 146,562.
6. Contingencies In 1994, a former director, filed a lawsuit in Florida
against the Company seeking damages of approximately
$500,000 for breach of an oral employment agreement. The
Company has filed a motion for summary judgment; management
belives there is a good likelihood of prevailing since the
statute of fraud requires that any agreement that cannot be
completed within one year must be in writing to be
enforceable. This action is in the early stages of
litigation and the ultimate outcome of this matter cannot
presently be determined. Management does not believe that
this matter will have a material adverse effect on the
financial statements.
The Company was a defendant in suits seeking to collect
$750,000 which is alleged to be due to a long distance
telephone service provider. The Company disputed the
amount of the liability and provided $525,000 for such
liability. On June 27, 1996 the Company negotiated a
settlement payment
<PAGE> 10
of $425,000 to satisfy the service provider's claim of
$750,000.
ICI gave notice to the Company of certain claims for
indemnification arising from the sale of Phone One, Inc. to
which the Company objected. ICI is seeking damages for
alleged errors in Phone One, Inc.'s unaudited September
1994 financial statements and the uncollectibility of an
account receivable of Phone One, Inc. ICI is seeking the
return of 37,643 of its shares and $585,321 as damages.
The Company filed an action against ICI seeking damages in
excess of those sought by ICI for failure to comply with
the terms of the agreement. In addition, the action
alleges that ICI and Phone One, Inc. refused to enter into
certain contracts with ARN at discounted rates. The
parties agreed to binding arbitration which began in July
1995 and was pending before the American Arbitration
Association. In July 1996 the Company settled all of ICI's
claims by returning 22,357 shares of ICI's stock to ICI.
In April 1996, National Communications Network, Inc.
(NCNI), a wholly owned subsidiary of Call Now, Inc., signed
an agreement with Liberty Mint, Inc. (Liberty) a Utah
corporation, which grants NCNI the exclusive rights to
purchase and resell certain specified products of Liberty
throughout the world, NCNI is also granted the
unconditional first right to purchase any and all new
additional products of Liberty with specific exceptions.
The Company agreed to make available up to $400,000, in
its sole discretion, for advertising and promotion. At the
time of the agreement, the Company executed a 6%, six
month note advancing $100,000 to Liberty Mint.
7. Subsequent On July 15, 1996, Andice Development Co. (a wholly owned
Events subsidiary of Call Now, Inc.) acquired 118 acres of
development property in Williamson County, Texas for a
purchase price of $2,360,000. Under the terms of the
purchase, the Company paid $589,310 and executed a seven
year, 9% note in the amount of $1,770,000. The note
requires the Company to make semi-annual principal and
interest payments of $85,721.39 commencing on January 15,
1997 and ending July 15, 2003, at which time, the entire
remaining balance is due and payable. The following is a
summary of annual principal payments due under this
agreement:
Year Amount
---- ------
1996 $ -0-
1997 12,416
1998 13,558
1999 14,806
2000 16,169
Thereafter $1,713,050
<PAGE> 11
In July the company entered into an agreement to sell
certain assets and liabilities of its long distance
services company, ARN Communications, Corp. (ARN). Under
the terms of the agreement, the former President of ARN
will exchange one-hundred thousand shares of Call Now, Inc.
common stock for certain assets and liabilities of ARN.
Call Now, Inc. will retain ownership of ARN.
During February '96, Call Now, Inc. purchased a
$100,000 CD to pledge as security against a line of credit
on behalf of ARN. The agreement requires that both the
purchaser's one-hundred thousand shares of Call Now common
stock and Call Now's $100,000 CD be placed in an escrow
account until the February '97 maturity of the CD. At such
time any unpaid obligations of ARN will be satisfied first.
Any remaining proceeds will be distributed to the
purchaser. The 100,000 shares of Call Now, Inc. common
stock will be returned to Call Now, Inc.
On July 17, 1996 the company signed an agreement to
acquire $52,274,000 of the $54,040,000, 8.75%, term bonds
of the Retama Development Corporation Special Facilities
Revenue Bonds, Series 1993 for a purchase price of
$3,000,000. The company has made a nonfundable deposit of
toward the total purchase price. The balance of $7,300,000
is due and payable on or before 11:00 A.M. Boston time,
September 20, 1996. The bonds are secured by a first
mortgage on the Retama Park Horse Racing facility.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.<F1>
</LEGEND>
<S> <C>
<RESTATED>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,924,936
<SECURITIES> 8,032,983
<RECEIVABLES> 130,413
<ALLOWANCES> 51,615
<INVENTORY> 0
<CURRENT-ASSETS> 11,484,872
<PP&E> 72,963
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,567,354
<CURRENT-LIABILITIES> 5,539,070
<BONDS> 0
0
0
<COMMON> 7,028,284
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,567,354
<SALES> 113,359
<TOTAL-REVENUES> 1,937,658
<CGS> 82,753
<TOTAL-COSTS> 174,914
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 68,128
<INTEREST-EXPENSE> 25,746
<INCOME-PRETAX> 1,586,117
<INCOME-TAX> 596,811
<INCOME-CONTINUING> 989,306
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 989,306
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
<FN>
<F1>AMOUNTS INAPPLICABLE OR NOT DISCLOSED AS A SEPARATE LINE ON THESE
STATEMENTS ARE REPORTED AS 0 HEREIN.
</FN>
</TABLE>
