<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.20549
FORM 1O-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended: September 30, 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
---------------------------------------
(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
---
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: 7,133,700 shares as of December 01,
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
6.
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Liquidity and Capital Resources
Nine Months Ended September 30
1996 compared to 1995
Results of Operations:
a. Revenues
Overall the Company's revenues for the quarter ended September '96 were
$2,534,031 as compared to $229,172 for September '95. For the first nine months
of 1996 revenues were $6,368,400 compared to $269,861 for the same nine month
period in 1995. The increase in revenues for both periods is attributable to the
Company's sale of its investment in Intermedia Communications common stock. Net
gain from these stock sales amounted to $2,446,134 for the quarter ended
September 1996 and $185,622 for the same period in 1995. For the nine months
ended September 1996 the gain on stock sales was $6,148,027 as compared to
$185,622 for the nine months ended September 1995.
b. Expenses
(1) Selling, General, and Administrative
Expense for the September 1996 quarter was $130,558 down from $152,913
for the September 1995 quarter. For the nine month period ended
September 1996 expense was $792,390 and $285,489 for the September 1995
period. These increased expenses were attributable to additional
salary, travel, and associated expenses required to purchase the Retama
Park Bonds.
(2) Depreciation and Amortization
Expense for the September 1996 quarter was $2,180 compared to $3,813
for the September 1995 quarter. For the nine month period ended
September 1996 expense was $18,991 and $11,275 for the September 1995
period.
2
<PAGE> 3
(3) Interest
Expense for the September 1996 quarter was $25,252 compared to $26,290
for the September 1995 quarter. For the nine month period ended
September 1996 expense was $58,438 and $90,726 for the September 1995
period. Interest for the year to date period declined as a result of
payment of the margin loan in the first quarter of 1996. However,
interest expense for the September 1996 quarter trended upward again as
result of the property acquisition in Williamson County, Texas.
(4) Loss from unconsolidated entity
Loss recognized on the Company's investment in Cable-Sat Systems, Inc.
for the September 1996 quarter was $11,365 and for the nine month
period ended September 1996 was $105,332. There were no comparable
items in 1995.
c. Extraordinary items:
(1) Loss from operation of discontinued subsidiary
Call Now, Inc. discontinued operation of ARN Communications, Corp., its
long distance resale subsidiary in August 1996. Losses for the
September 1996 and 1995 quarters were $154,856 and $40,202,
respectively. Losses for the nine month periods ended September 1996
and 1995 were $154,856 and $198,564, respectively.
(2) Gain on disposal of subsidiary
Call Now, Inc. sold certain assets and liabilities of ARN
Communications, Corp. in exchange for 100,000 shares of Call Now,
Inc.'s common stock. As a result of this transaction the Company
recognized a net gain of $113,677 for the quarter and nine month period
ended September 1996.
(3) Gain on extinguishment of debt
In June 1996, the Company negotiated a settlement on an outstanding
payable balance owed by its subsidiary ARN Communications, Corp.
$525,000 had been provided for settlement of account. A settlement in
the amount of $425,000 was negotiated resulting in a net gain of
$57,712 for the nine month period ended September 1996.
3
<PAGE> 4
d. Earnings per share
Earnings per share increased to $.20 per share for the September 1996
quarter compared to ($.00) per share for the September 1995 quarter. For the
nine month period ended September 1996 earnings per share increased to $.47
compared to a loss per share of ($.04) in 1995.
Liquidity and Capital Resources:
Through September 1996 the Company sold 657,500 shares of ICI common
stock for gross proceeds of $14,892,809 compared to 37,000 shares and $1,020,690
at September 1995.
During 1996, the Company's operating activities used cash of $1,777,416
compared to $419,426 in 1995. Net cash was provided primarily from sale of ICI
stock, interest, and other income.
Cash flow from investing activities provided cash in 1996 of $3,380,071
versus $520,690 in 1995. The increased cash flow from investing activities
resulted from the sale of Intermedia Communications common stock, the sale of
the Retama Development Corp. Bonds, and the redemption of the Cable-Sat
Preferred stock.
Cash used in financing activities in 1996 was $1,330,444 used for the
repayment of a margin loan in the amount of $1,304,266 and lease payments of
$26,178. In 1995 $91,287 was used in borrowing activities.
The Company had investments in the 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 periodics sales of the ICI
stock.
In addition, the Company has entered into an agreement with Barron
Chase Securities, Inc. whereby the Company executed a secured demand note
payable to Barron Chase in the amount of $1,155,000. Under the terms of the
agreement Barron Chase has purchased $1,327,162 in U.S. Treasury Bills as
security for the demand note. The note pays the Company $11,550 per month which
the Company utilizes as working capital. Such arrangement terminates on March
31, 1997.
ITEM 3. Other Information
The Company has been advised by the Securities and Exchange Commission
that it may be considered an investment company and therefore subject to certain
provisions of the Investment Company Act of 1940. The Company does not believe
it is an investment company and has taken the following actions
4
<PAGE> 5
1. On July 15, 1996 Registrant acquired 118.34 acres of land for
development for $2,360,000. Such land is located in Williamson County, Texas.
Registrant executed a purchase money mortgage in connection with the purchase
which is payable in semi-annual installments of $85,721.39 beginning on January
15, 1997, including interest at 9% with the entire unpaid balance due on July
15, 2003. Registrant paid $589,309.73 at closing from its working capital. The
land is currently vacant and the Company plans to begin development of the
property in 1997.
2. The Registrant disposed of its shares of Intermedia Communications,
Inc. which it received in December 1994 in connection with disposition of Phone
One, Inc. It currently owns less than 200 of such shares.
3. In August 1996 Registrant disposed of its remaining long distance
telephone business for 100,000 shares of the Companies common stock, plus
assumption by Buyer of certain liabilities of the Registrant. The business was
sold to a former employee and officer of Registrant.
4. In September and October 1996 the Company acquired certain secured
bonds issued by Retama Development Corporation of Selma, Texas. The bonds are
secured by a lien on real estate which includes the Retama Park Racetrack in
suburban San Antonio, Texas.
5. The balance of the Company's holdings in Cable-Sat Systems, Inc.
were registered by the Company in Cable-Sat's recent registration statement on
Form S-1. By agreement with the underwriter, such shares may not be sold until
September 25, 1997.
In the event the Company is deemed to be an investment company, the
Company may become subject to certain restrictions relating to the Company's
activities, including restrictions on the nature of its investments and the
issuance of securities. In addition, the Investment Company Act imposes certain
requirements on companies deemed to be within its regulatory scope, including
registration as an investment company, adoption of a specific form of corporate
structure and compliance with certain burdensome reporting, record keeping,
voting, proxy, disclosure and other rules and regulations. In the event of
characterization of the Company as an investment company, the failure of the
Company to satisfy regulatory requirements, whether on a timely basis or at all,
would, under certain circumstances have a materially adverse effect on the
Company.
PART II - OTHER INFORMATION
ITEM 4. Exhibits and Reports on Form 8-K
27....Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
Registrant filed no reports on Form 8-K during the quarter ended September 30,
1996.
5
<PAGE> 6
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
JANUARY 20, 1997 By: s/James D. Grainger
-------------------------------------
Chief Financial Officer
6
<PAGE> 7
CALL NOW, INC AND SUBSIDIARIES
Consolidated Balance Sheet as of September 30, 1996
(UNAUDITED)
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash $ 513,467
Short term securities - restricted 1,327,162
Note receivable 3,355,000
Marketable securities, at market value - partially restricted 2,139,002
Advance receivable 250,000
Investment in land 2,363,060
Other 34,635
-----------
TOTAL CURRENT ASSETS 9,982,326
Furniture and equipment (less accumulated depreciation of $63,880) 53,036
Investments - Retama Development Corp. Bonds 5,194,065
Other 60,056
-----------
TOTAL ASSETS $15,289,483
===========
</TABLE>
See notes to Consolidated Financial Statements
<PAGE> 8
CALL NOW, INC AND SUBSIDIARIES
Consolidated Balance Sheet as of September 30, 1996
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Current maturity of mortgage payable $ 12,416
Accounts payable 59,807
Note payable 1,155,000
Dividend payable 407,400
Accrued expenses 243,878
Deferred income taxes payable 248,752
Income taxes payable 3,160,576
------------
TOTAL CURRENT LIABILITIES 5,287,829
Mortgage payable, less current maturity 1,757,584
------------
TOTAL LIABILITIES 7,045,413
------------
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 7,133,700 outstanding 3,122,477
Retained earnings 4,999,023
Less subscription notes receivable for 250,000 shares of common stock (200,000)
Treasury stock, 100,000 shares (200,000)
Unrealized holding gain on marketable securities
(net of $315,300 income taxes) 522,570
------------
TOTAL STOCKHOLDERS' EQUITY 8,244,070
------------
TOTAL LIABILITIES AND STOCKHOLDERS' $ 15,289,483
============
</TABLE>
See notes to Consolidated Financial Statements
<PAGE> 9
CALL NOW, INC AND SUBSIDIARIES
Consolidated Statements of Operations
For Three Months and Nine Months ended September 30, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
1996 1995 1996 1995
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Gain on sale of marketable securities $2,446,134 $ 185,622 $ 6,148,027 $ 185,622
Interest 69,974 43,550 197,642 84,239
Other 17,923 -- 22,731 --
---------- ---------- ----------- -----------
TOTAL REVENUES 2,534,031 229,172 6,368,400 269,861
---------- ---------- ----------- -----------
COST AND EXPENSES:
Selling, general, and administrative 130,558 152,913 792,390 285,489
Depreciation and amortization 2,180 3,813 18,991 11,275
Interest 25,252 26,290 58,438 90,726
Loss from unconsolidated entity 11,365 -- 105,332 --
---------- ---------- ----------- -----------
TOTAL COSTS AND EXPENSES 169,355 183,016 975,151 387,490
---------- ---------- ----------- -----------
Income/(loss) from continuing operations before
income taxes and extraordinary items 2,364,676 46,156 5,393,249 (117,629)
Income tax (expense)/benefit (886,214) (18,000) (2,033,515) 43,000
---------- ---------- ----------- -----------
Net income (loss) before extraordinary items 1,478,462 28,156 3,359,734 (74,629)
EXTRAORDINARY ITEMS:
Loss from operation of discontinued subsidiary
(less tax benefit of $94,000) (154,856) (40,202) (154,856) (198,564)
Gain on disposal of subsidiary
(less income taxes of $70,000) 113,677 -- 113,677 --
Gain on extinguishment of debt
(less income taxes of $35,000) -- -- 57,712 --
---------- ---------- ----------- -----------
NET INCOME (LOSS) $1,437,283 $ (12,046) $ 3,376,267 $ (273,193)
========== ========== =========== ===========
EARNINGS (LOSS) PER SHARE:
Continuing operations $ 0.20 $ 0.00 $ 0.46 $ (0.01)
Operation of discontinued subsidiaries (0.02) (0.00) $ (0.02) (0.03)
Gain on disposal of subsidiary 0.02 -- $ 0.02 --
Gain on extinguishment of debt -- -- $ 0.01 --
---------- ---------- ----------- -----------
Net income per share $ 0.20 $ (.00) $ 0.47 $ (0.04)
========== ========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - PRIMARY AND FULLY DILUTED 7,194,678 7,243,700 7,220,050 7,243,700
========== ========== =========== ===========
</TABLE>
See notes to Consolidated Financial Statements
<PAGE> 10
CALL NOW, INC AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For The Nine Months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
OPERATING ACTIVITIES: 1996 1995
- --------------------- ----------- ---------
<S> <C> <C>
Net income (loss) $ 3,376,267 $(273,123)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 50,274 95,451
Provision for doubtful accounts (21,409) 136,689
Deferred income taxes (1,561,707) (298,000)
Gain on sale of securities (6,148,027) (185,622)
Gain on sale of subsidiary (183,677) --
Loss from unconsolidated entity 105,336 --
Cancellation of stock for services (8,000) --
Changes in assets and liabilities net of business sold
(Increase) decrease in assets:
Accounts receivable 19,415 44,013
Other current assets (11,784) (27,904)
Other assets (924) (26,400)
Increase (decrease) in liabilities:
Accounts payable (633,947) 15,973
Accrued expenses 134,551 (37,503)
Income taxes payable 3,106,216 137,000
----------- ---------
CASH (USED) BY OPERATING ACTIVITIES (1,777,416) (419,426)
----------- ---------
INVESTING ACTIVITIES:
Capital expenditures (7,789) --
Cash transfer on sale of subsidiary (44,014) --
Purchase of short term securities (1,327,162) --
Purchase of marketable securities (270,433) --
Proceeds from sale of marketable securities 14,892,809 1,020,690
Proceeds from sale of Retama Development Corp. Bonds 1,740,000 --
Investment in Cable-Sat Systems, Inc. (546,000) (500,000)
Redemption of Cable-Sat Systems, Inc. preferred stock 450,000 --
Purchase of Retama Development Corp. Bonds (8,438,130) --
Notes receivable (2,450,000) --
Purchase of land (593,060) --
Payment for acquisition of customer base (26,150) --
----------- ---------
CASH PROVIDED BY INVESTING ACTIVITIES 3,380,071 520,690
----------- ---------
FINANCING ACTIVITIES:
Cash overdraft -- (324,491)
Proceeds from margin loan -- 245,670
Payments on margin loan (1,304,266) --
Payment on long term debt and capital lease obligations (26,178) (12,466)
----------- ---------
CASH PROVIDED (USED) BY FINANCING ACTIVITIES (1,330,444) (91,287)
----------- ---------
NET INCREASE IN CASH 272,211 9,977
CASH, BEGINNING OF PERIOD 241,256 --
----------- ---------
CASH, END OF PERIOD $ 513,467 $ 9,977
=========== =========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 11
CALL NOW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 1996 and 1995
(UNAUDITED)
<TABLE>
<S> <C>
Supplementary information:
- --------------------------
Cash paid during the nine months for income taxes $ 500,000
----------
Schedule of noncash investing and financing activities:
1. Decrease in fair market value of marketable securities 2,770,130
Decrease in deferred income tax liability 1,042,700
----------
Net decrease in holding gain $1,727,430
==========
2. Fair market value of Cable-Sat dividend payable in
Common stock $ 407,400
----------
3. Mortgage payable incurred in the purchase of land $1,770,000
----------
4. On August 20, 1996 the Company sold all of the assets
and liabilities of its subsidiary ARN Communications Corp.
Fair value of assets sold $ 183,371
Liabilities sold (167,048)
----------
Net assets sold 16,323
Receipt of 100,000 shares of Call Now, Inc. common
at fair market value 200,000
----------
Gain on sale $ 183,677
==========
</TABLE>
<PAGE> 12
CALL NOW, INC AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
For the Nine-Months ended September 30,1996
(UNAUDITED)
<TABLE>
<CAPTION>
SUBSCRIPTION
COMMON STOCK TREASURY STOCK NOTES RECEIVABLE
--------------------- -------------------------------------- UNREALIZED
NUMBER OF NUMBER OF NUMBER OF HOLDING RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT GAIN EARNINGS TOTAL
--------------------- -------------------------------------- ---------- ---------- ----------
<S> <C> <C> <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 gain (decrease),
net of income taxes (1,727,430) (1,727,430)
Dividend declared (723,438 shares
of Cable-Sat Systems, Inc.
common stock) (407,400) (407,400)
Treasury stock (100,000) (200,000) (200,000)
Net income 3,376,267 3,376,267
--------------------- ------------------- ----------------- ---------- ---------- ----------
BALANCE, SEPTEMBER 30,1996 7,233,700 $3,122,477 (100,000) $(200,000) 250,000 $(200,000) $ 522,570 $4,999,023 $8,244,070
===================== =================== ================= ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 13
1
CALL NOW, INC.
and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 1996
1. MARKETABLE Marketable securities which are primarily Cable-Sat
SECURITIES Systems, Inc., Florida (CSSA), representing 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 September 30, 1996 are
as follows:
<TABLE>
<S> <C>
Marketable securities, at amortized cost $ 893,732
Restricted for dividend purposes 407,400
Gross unrealized holding gain 837,870
-----------
Market and carrying value $ 2,139,002
===========
</TABLE>
During the three months ended September 30, 1996
securities were sold for gross proceeds of $5,228,129
resulting in gross realized gains of $2,446,134. The
cost basis of the securities sold was by specific
identification and were all ICI securities. The net
unrealized holding gain decreased by $1,625,395 for
the three months ended September 30, 1996.
2. SHORT - TERM On March 24, 1996 the Company renewed an agreement
SECURITIES AND with a broker-dealer whereby the Company executed a
NOTES RECEIVABLE 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 $1,327,162 on September 28, 1996
and is included in short term securities- restricted.
Notes receivable were composed of the following:
<TABLE>
<S> <C>
Broker/dealer note $ 1,155,000
Howe, Solomon, and Hall 1,950,000
Shareholder note 150,000
Liberty Mint note 100,000
-----------
Total $ 3,355,000
===========
</TABLE>
<PAGE> 14
2
3. INVESTMENT IN The Company acquired 550,000 shares (25.2%) of the
UNCONSOLIDATED outstanding common stock of Cable-Sat Systems, Inc.
ENTITY (Cable-Sat) in August 1995 at a purchase price of
$500,000. The purchase included warrants allowing
Call Now, Inc. to acquire an additional 320,000 shares
of Cable-Sat common stock exercisable at $.92 per
share. In March 1996, the company exercised the
warrants at a reduced price of $.30 per share for
total consideration of $96,000. Cable-Sat, a Florida
corporation whose principal office is located in San
Jose, California is a development stage company
specializing in high order data compression products
for telecommunication, computer, satellite TV and
video applications.
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
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.
In September, Cable-Sat Systems, Inc. redeemed the
perferred stock held by Call Now, Inc. for $450,000
and 150,000 share of shares of Cable-Sat Systems
common stock.
4. INVESTMENT IN On July 15,1996, Andice Development Co. (a wholly
LAND owned subsidiary of Call Now, Inc.), acquired 118
acres of development property in Williamson County,
Texas for a purchase price of $2,359,310. 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:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1997 $ 12,416
1998 13,558
1999 14,806
</TABLE>
<PAGE> 15
3
<TABLE>
<S> <C>
2000 16,169
2001 17,657
Thereafter 1,695,394
----------
Total $1,770,000
==========
</TABLE>
5. INVESTMENT IN On September 20, 1996 the company acquired $52,274,000
RETAMA BONDS of 54,040,000, 8.75%, term bonds of the Retama
Development Corporation special Facilities Revenue
Bonds, Series 1993 for a purchase price of
$10,300,000. The bonds are secured by a first
mortgage on the Retama Park Horse Racing facility. In
a simultaneous closing, the company sold 50% of the
bonds to broker/dealer for a down payment of
$1,740,000 and future payments of $1,950,000 to be
paid prior to December 16, 1996. The broker/dealer
also agreed to pay $7,600 for stock purchase options
granting the right to acquire 760,000 shares of Call
Now, Inc. common stock at a purchase price of $2.60
per share.
6. INCOME TAXES The components for the provision for income taxes are
as follows:
<TABLE>
<S> <C>
Current $ 3,606,216
Deferred (1,561,701)
-----------
Net income tax expense $ 2,044,515
===========
</TABLE>
7. STOCKHOLDER'S On March 5, 1996, the board of directors of Call Now,
EQUITY Inc. 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 March
25,1997. After the distribution, the Company's
holdings of Cable-Sat Systems, Inc common shares will
be approximately 296,562.
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 believes 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
<PAGE> 16
4
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
$517,000 for such liability. On June 27, 1996 the
Company negotiated a settlement payment of $425,000
which was paid in July 1996.
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 was 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 was 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. SALE OF In August 1996 the Company executed an agreement to
SUBSIDIARY sell all of the 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 all of the
assets and liabilities of ARN. Call Now, Inc. will
retain ownership of the Corporation.
8. SUBSEQUENT In November 1996 the Company purchased from Retama
Partners, Ltd. The principal amount of $39,275,000
of a Retama Development Corporation
<PAGE> 17
5
Series 1993A note and $500,000 of a Retama Development
Corporation Series 1993B note, as well as certain
goodwill, enhancements as specified in the Agreement
of Purchase and Sale. The Company issued 385,700
shares of its common stock in exchange for such notes.
These notes are secured by a lien on the Retama Park
Racetrack facilities, including real and personal
property.
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 513,467
<SECURITIES> 2,139,002
<RECEIVABLES> 250,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,982,326
<PP&E> 53,036
<DEPRECIATION> 63,880
<TOTAL-ASSETS> 15,289,483
<CURRENT-LIABILITIES> 5,287,829
<BONDS> 1,757,584
0
0
<COMMON> 3,122,477
<OTHER-SE> 5,121,593
<TOTAL-LIABILITY-AND-EQUITY> 15,289,483
<SALES> 0
<TOTAL-REVENUES> 6,368,400
<CGS> 0
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<OTHER-EXPENSES> 975,151
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,438
<INCOME-PRETAX> 5,393,249
<INCOME-TAX> (2,033,515)
<INCOME-CONTINUING> 3,359,734
<DISCONTINUED> (113,677)
<EXTRAORDINARY> (57,712)
<CHANGES> 0
<NET-INCOME> 3,376,267
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<EPS-DILUTED> .47
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