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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.20549
FORM 1O-KSB
X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
- -- Act of 1934 For the Fiscal Year Ended: December 31, 1996 (NO FEE
REQUIRED, EFFECTIVE OCTOBER 7, 1996).
Commission File No. 0-27160
CALL NOW, INC.
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(Exact name of small business issuer in its charter)
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<S> <C>
Florida 65-0337175
- ---------------------------------------- -----------------------------------------
(State of Incorporation) (IRS Employer Identification No.)
P.O.Box 531399
Miami Shores, Florida 33153
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(Address of principal executive offices) (zip code)
</TABLE>
Issuer's Telephone No. (305) 751-5115
-----------------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or 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 disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained 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. X
---
State issuer's revenues for twelve months ended December 31, 1996: $6,027,481
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The aggregate market value of the voting stock held by non-affiliates of the
Registrant based upon the average bid and asked prices of such stock, at March
19, 1997 was $10,964,375.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. 7,519,400 shares of common
stock, as of March 19, 1997.
Documents
Incorporated by Reference
NONE
Transitional Small Business Disclosure Format: No
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Item 1. Description of Business.
History and Recent Developments
Call Now, Inc. (the "Company") was organized under the laws of the
State of Florida on September 24, 1990 under the name Rad San, Inc. It changed
its name to Phone One International, Inc. in January 1994 and to Call Now, Inc.
in December 1994.
The Company was formed to acquire the assets or securities of another
business, through an acquisition of assets or securities, merger or other
business combination.
In July 1992 the Company acquired from unaffiliated parties $822,437
of promissory notes of APT Acquisition Corporation which operated switch-based
long distance service through its wholly owned subsidiary, Phone One, Inc.
("Phone One") of Orlando, Florida, for 200,000 shares of the Company's common
stock.
In February 1993 the Company acquired all of the outstanding common
stock of Doric, Inc. from William M. Allen, the Company's President, director,
and majority shareholder, and his spouse in exchange for 1,800,000 shares of
the Company's common stock. Doric owned a promissory note of Phone One, Inc.
and its parent, APT Acquisition Corporation, in the approximate amount of $3.8
million. This note was secured by certain assets of Phone One, Inc. and 100%
of the common stock of Phone One, Inc. and APT Acquisition Corporation. Phone
One, Inc. and APT Acquisition Corporation had filed for protection under
Chapter 11 of the Bankruptcy Act in January 1993. Doric acquired the note from
Mr. Allen for a note in the amount of $750,000. Mr. Allen acquired the note
from Resolution Trust Company for $750,000. The $750,000 note to Mr. Allen was
exchanged for 7,500 shares of the Company's Class B Convertible Preferred Stock
in December 1993. These shares were redeemed for $750,000 in 1994.
On September 30, 1993, the Company disposed of the other assets of
Doric, Inc., primarily a 12-1/2% interest in a thoroughbred stallion, to Mr.
Allen in exchange for 55,300 shares of the Company's common stock in order to
concentrate on the reorganization of APT Acquisition Corporation and Phone One,
Inc. On such day the Company's common stock was quoted at bid $4.50 and asked
$5.25. Accordingly, the Board of Directors determined this was a reasonable
price based upon the book value of the interest, expenses of maintaining the
horse, its life expectancy and earnings history. The Company did not obtain an
independent appraisal of the interest or solicit other bids.
On January 1, 1994, the Company became a long distance and
telecommunication service provider through acquisition of Phone One pursuant to
a confirmed bankruptcy plan. The Company exchanged notes receivable and
accrued interest in the face amount of $4,651,999 from Phone One and its former
parent company, APT Acquisition, Inc., for 4,500,000 shares of new common stock
of Phone One, Inc. Phone One became a wholly owned subsidiary of the Company.
The combination was accounted for by the purchase method. In connection with
the
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reorganization of Phone One, the Company agreed to raise capital to pay off
certain liabilities of Phone One. The Company changed its name to Phone One
International, Inc. in recognition of its entry into the long distance
telephone business. During May 1994 the Company acquired the assets of a
smaller alternative access long distance telephone provider, ARN Communications
Corporation. Such assets were acquired for $350,000. Such assets were
contributed to a new corporation wholly-owned by the Company, ARN
Communications Corp. ("ARN"), which was organized to operate the acquired
business. Alan Niederhoffer, part owner and President of ARN Communications
Corporation was hired as a Vice President of the Company and served as
President of ARN. See "Executive Compensation - Executive Employment
Agreement" and "Certain Transactions". In February 1994 the Company acquired
certain telecommunications assets, primarily long distance telephone customers,
from Telecommunications Services, Inc. in exchange for 234,000 shares of the
Company's common stock.
Effective November 30, 1994, the Company sold its shares of Phone One
for 740,000 shares of Intermedia Communications of Florida, Inc. (ICI). The
Company has subsequently sold substantially all of such ICI shares.
In August 1995 the Company acquired 25% of the outstanding common
shares of Compressent Corporation (f/k/a Cable Sat Systems, Inc.) and a warrant
to purchase an additional 13% of Compressent's Common Stock. The cost of such
shares and warrant was $500,000. Compressent is a developmental stage company
which is developing high order data compression products for
telecommunications, computers, satellite communications and video
applications. Its first announced product is a software program for sending
color facsimile. Edward T. Kalinowski, who provided financial consultant
services to and is a shareholder of the Company, was a founder of Compressent
Corporation and is a shareholder of Compressent Corporation. Additional shares
were purchased in February 1996. The Company declared and distributed a
dividend of 723,438 shares of Compressent common stock to its shareholders of
record as of March 12, 1996. The Company still holds 296,562 shares of
Compressent common stock. See "Certain Relationships and Related Transactions."
On July 15, 1996, Andice Development Co. (a wholly-owned subsidiary of
Call Now, Inc.) acquired 118 acres of development property in Williamson
County, Texas for a purchase price of $2,363,060. Under the terms of the
purchase, the Company paid $593,060 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 commencing on January 15, 1997 and
ending July 15, 2003, at which time, the entire remaining balance of $1,655,056
is due and payable. The Company is still formulating its plans for this
property.
In August 1996 the Company decided to exit the long distance telephone
business due to the competitive environment and its inability to develop its
business to the point of profitability. The business was sold to Alan
Niederhoffer, formerly the Company's Vice President and President of its ARN
subsidiary for 100,000 shares of Company's common stock owned by Niederhoffer
and assumption of substantially all of the liabilities of ARN.
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On September 29, 1996 the Company acquired $52,274,000 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 a broker/dealer for
a down payment of $1,740,000 and future payments of $1,950,000. 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. The broker/dealer paid $1,100,000 of the obligation
in November 1996, leaving a balance due of $850,000 which is past due.
In November 1996 the Company purchased from Retama Partners, Ltd. the
principal amount of $39,275,000 of a Retama Development Corporation Series A
note and $500,000 of a Retama Development Corporation Series 1993B note. The
Company issued 385,700 shares of its common stock in exchange for such notes.
These notes are secured by a second lien on the Retama Park Racetrack
facilities, including real and personal property.
On March 26, 1997, the Company participated in the defeasance of the
RDC bonds and notes held by it, and received $3,640,000, 7% Series 1997 A Bonds
and $45,201,000, 8% Series 1997 B Bonds as part of the defeasance. As part of
the transaction, the Company collected the $850,000 receivable and
approximately $450,000 cash.
General
The Company's new direction, as disclosed above, is the ownership and
development of real estate interests.
In 1997, the Company hired a President with extensive real estate
development experience.
Employees
The Company has 6 full-time employees, including 4 executive
employees.
Item 2. Description of Property.
The Company's executive offices are provided by its Chairman on a month
to month basis. For the year ended December 31, 1996, the Company paid $30,000
to Mr. Allen for the rental expenses of such facility. Such facility was
purchased by the President for $300,000 in 1991. The Company has agreed to
purchase such facility from its Chairman for the current appraised value of
$410,000 payable in Company common stock. Such property includes 38,274 square
feet of property and a 3,698 sq.ft. building.
Item 3. Legal Proceedings.
The Company is defendant in a suit filed in 1994 in Circuit Court,
Dade County, Florida by Raymond Beahn seeking damages of $500,000 for breach of
contract of employment as President of the Company. The Company denies that
Mr. Beahn was ever employed as President of the Company. A copy of the
Company's letter agreement with Mr. Beahn is filed as Exhibit 8.8 to Company's
Form 10-KSB for year ended December 31, 1995.
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Although the Company does not believe that the outcome of the
foregoing matter will have a material effect on the financial position or
results of operations of the Company, such case will be tried before a jury and
there can be no assurance as to the outcome.
Item 4. Submission of Matters to a Vote of Securities Holders.
None.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company's Common Stock has been trading on the over-the-counter
market since March 25, 1993. The following sets forth the range of high and
low bid quotations for the periods indicated as reported by National Quotation
Bureau, Inc. Such quotations reflect prices between dealers, without retail
mark-up, markdown or commission and may not represent actual transactions.
<TABLE>
<CAPTION>
High bid Low bid
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January 1, 1995 through March 31, 1995 2 1-1/4
April 1, 1995 through June 30, 1995 2-1/2 1
July 1, 1995 through September 30, 1995 2-3/8 1-1/4
October 2, 1995 through December 29, 1995 2-1/4 3/4
January 1, 1996 through March 31, 1996 1-1/2 3/4
April 1, 1996 through June 30, 1996 3-3/8 3/4
July 1, 1996 through September 30, 1996 3-3/8 1-1/4
October 1, 1996 through December 31, 1996 2 1
</TABLE>
The Company paid a dividend of one share of Cable Sat Systems, Inc.
common stock for each ten shares of Company common stock to its stockholders of
record on March 12, 1996. The Company has not established a policy of payment
of regular dividends on its common stock. There are no restrictions on the
payment of dividends. As of March 17, 1997 there were approximately 307
registered holders of record of the Company's common stock.
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Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Year Ended December 31, 1996 compared to 1995
Results of Operations:
a. Income
The Company's revenues for the year ended December, 31, 1996 were
$6,027,481 as compared to $400,327 for the year ended December 31, 1995. The
increase in revenues is primarily attributable to the Company's sale of its
investment in Intermedia Communications common stock amounting to $6,704,067
and gain on redemption of Compressent preferred stock of $900,000, offset by
loss on sale of Retama Development Corporation Bonds of $1,719,038 for the year
ended December 1996 compared to a gain of $229,715 from the sale of securities
for the year ended December 1995. Interest income for the year ended December
1996 was $262,250 compared to $143,918 for the year ended December 1995. The
increase in interest income was the result of investment of higher cash
balances during the course of the year.
b. Expenses
(1) Selling, General, and Administrative
Expense for the year ended December 1996 was $1,279,638 compared to
$687,515 for the year ended December 1995. The increased expenses for the year
were attributable to additional salary and travel expenses. During 1996 the
Company compensated its Chief Executive Officer, Chief Financial Officer, and
other administrative employees. These salaries added approximately $400,000 to
operating cost in the current year. Travel expense increased due to travel
requirement associated with the acquisition of the Retama Park Bonds.
(2) Depreciation and Amortization
Expense for the year ended December 1996 decreased to $23,380 from
$28,423 for the year ended December 31, 1995. The decrease was the result of
full depreciation of certain assets, during the prior year.
(3) Interest
Expense for the year ended December 31, 1996 was $98,263 compared to
$114,753 for the year ended December 31, 1995. Interest for the year declined
as a result of payment of the margin loan in the first quarter of 1996.
However, interest expense during the second half of 1996 trended upward again
as result of interest relating to the debt on the property acquired in
Williamson County, Texas.
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(4) Loss from unconsolidated entity
Loss recognized on the Company's investment in Compressent Corporation
for the year ended December 1996 was $60,808 compared to $71,515 for the year
ended December 1995. The Company accounted for its investment in Compressent
on the equity method while it owned greater than 20% of outstanding stock.
After the dividend of Compressent to the Company's shareholders, it owned less
than 20% and does not maintain significant influence and control over
Compressant and, accordingly, carries its investment at cost.
c. Discontinued Operations.
(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 December
1996 and 1995 years (net of income tax benefits) were $29,108 and $328,201,
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 held by the purchaser. As a result of this transaction the Company
recognized a gain (net of income taxes) of $114,677 for the year ended December
1996.
d. Net Income vs. Net Loss
The Company had net income of $2,934,743 for 1996 compared to a net
loss of $641,223 for 1995. This increase is due principally to the gain on sale
of marketable securities.
Liquidity and Capital Resources:
During 1996 the Company sold marketable securities for gross proceeds
of $17,110,180, (of which $14,585,362 was from the sale of ICI stock), compared
to $1,235,120 in 1995.
During 1996, the Company's operating activities used cash of
$1,830,680 compared to cash used in 1995 of $553,648. Such increase in the use
of cash related primarily to increased general and administrative expenses and
payment of prior years' accounts payable.
Cash flow provided from investing activities was $4,589,988 in 1996
versus $732,783 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 Compressent
Preferred stock offset by the purchase of Retama Development Corp. Bonds.
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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 capital lease
payments of $26,178. In 1995, $62,121 was provided by borrowing activities.
The Company has investments in the common stock of Intermedia
Communications of Florida, Inc. and Compressent Such investments do not
generate revenues for the Company directly. The Company has been meeting its
working capital requirements out of the proceeds from ICI stock sales.
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 the Company has purchased $1,241,260 in U.S. Treasury Bills as
security for the demand note. Simultaneously, the broker-dealer signed a note
payable to the Company in a like amount bearing rates at 12% per annum.
The note pays the Company $11,550 per month which the Company utilizes
as working capital. Such arrangement terminates on March 31, 1998.
The Company believes that it has adequate financial resources to fund
its operations for the current fiscal year in view of its substantial working
capital.
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
1. On July 15, 1996 the Company acquired 118.34 acres of land for
development for $2,363,060. Such land is located in Williamson County, Texas.
The Company executed a purchase money mortgage in connection with the purchase
which is payable in semi-annual installments of $85,721 beginning on January
15, 1997, including interest at 9% with the entire unpaid balance of $1,655,056
due on July 15, 2003. The Company paid $593,060 at closing from its working
capital. The land is currently vacant and the Company plans to begin
development of the property in 1997. The Company is still formulating its plans
for the property.
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 Company's 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 Compressent were
registered by Compressent in its recent registration statement on Form S-1. By
agreement with the underwriter, such shares may not be sold until September 25,
1997.
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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.
Item 7. Financial Statements.
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Page
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Index to Consolidated Financial Statements
Independent Auditors' Report F-1
Consolidated Financial Statements:
Consolidated Balance Sheet, December 31, 1996 F-2
Consolidated Statements of Operations, years ended
December 31, 1996 and 1995 F-4
Consolidated Statements of Changes in Stockholders'
Equity, years ended December 31, 1996 and 1995 F-5
Consolidated Statements of Cash Flows, years ended
December 31, 1996 and 1995 F-6
Summary of Accounting Policies F-8
Notes to Consolidated Financial Statements. F-11
</TABLE>
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosures.
None.
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PART III
Item 9. Directors, Executive Officers, Promoters and Corporate Persons;
Compliance With Section 16(a) of the Exchange Act.
The directors and executive officers of the Company are as follows:
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Name Age Position
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William M. Allen 68 Chairman and Director
Bryan P. Brown 35 President and Director
James D. Grainger 65 Chief Financial Officer
Susan Lurvey 32 Secretary
Max D. Allen 66 Director
Robert C. Buffkin 65 Director
</TABLE>
William M. Allen has been President and director from June 1992 and
Chairman from February 1997. He has been managing partner of Black Chip
Stables from 1982 to date and President of Doric, Inc. from 1985 until its
merger with the Company in 1994. He has served as President of Kamm
Corporation from 1985 to date and President of Kamm Life from 1985 to date. He
was Chairman and CEO of Academy Insurance Group from 1975 to 1984.
Bryan P. Brown was elected as President and director in 1997. He was
previously President of Riverwood, a master plan golf course community in Port
Charlotte, Florida. He served as Treasurer of the Mariner Group, Inc. and
Assistant Vice President of First Union National Bank and First Republic Bank.
James D. Grainger was elected Chief Financial Officer in 1996. He has
been a certified public accountant since 1964 and maintains an outside
accounting practice.
Susan Lurvey has been the secretary since June 1992. She has served
as executive secretary to Mr. Allen since 1987.
Max D. Allen was elected as a director in October 1994. From 1993 to
1994 he was a general agent for Investors Life Insurance Co. From 1990 through
1993 he was President of Association Advisors, Inc. He was an agent for
American Life Casualty Insurance Co. from 1990-1992. He has also been active
in land development since 1992 as partner of Fountainwood Estates, a land
development subdivision.
Robert C. Buffkin has been a business consultant specializing in
associations and insurance since 1974. He was elected as a director in 1996.
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William M. Allen and Max D. Allen are cousins. Bryan P. Brown is
William M. Allen's son-in-law.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act 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 and are required to
furnish copies to the Company. To the best of the Company's knowledge, all
reports required to be filed were timely filed in fiscal 1996.
Item 10. Executive Compensation.
Summary Compensation Table
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<CAPTION>
Name and Other Annual
Principal Position Year Salary Bonus Compensation
- ------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
William M. Allen 1996 240,000 -0- -0-
Chairman 1995 -0- -0- -0-
1994 -0- -0- -0-
</TABLE>
There are no long term compensation or other compensation plans.
Director Compensation
Non-officer directors are entitled to a fee of $2,000 for attendance
at meetings of the Board of Directors, plus reimbursement for reasonable travel
expenses.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth, as of March 1997, the beneficial
ownership of the Company's Common Stock by (i) the only persons who own of
record or are known to own, beneficially, more than 5% of the Company's Common
Stock; (ii) each director and executive officer of the Company; and (iii) all
directors and officers as a group.
<TABLE>
<CAPTION>
Percent of
Number of Outstanding
Name and Address Shares Common Stock
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<S> <C> <C>
William M. Allen
P.O.Box 531399
Miami Shores, FL 33153 3,854,500(1) 51%
</TABLE>
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<TABLE>
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Max D. Allen 40,000 *
James D. Grainger 40,300 *
Robert C. Buffkin 11,000 *
Susan Lurvey 20,000 *
Bryan P. Brown 45,000 *
Officers and Directors
as a group (6 Persons) 4,010,800(2) 53%
</TABLE>
(1) Includes 890,000 shares owned by William M. Allen's wife as to which
he disclaims any beneficial interest..
*Less than 2%.
Item 12. Certain Relationships and Related Transactions.
On June 4, 1992 William M. Allen purchased 2,670,000 shares of the
Company's common stock for $100,000 cash and transfer of certain furniture and
equipment which has been valued at $100,000 on the Company's books.
In February 1993 William M. Allen and his spouse exchanged all of the
outstanding shares of Doric, Inc. for 1,800,000 shares of Company common stock.
In August 1993 the Company sold 710,000 shares of its common stock to
several of its officers, directors and consultants at $.80 per share which must
be paid within five years. The Company and the purchasers could agree to
accept payment in the form of services rendered to the Company. The Company
did recognize payment in the form of consulting fees to the following officers
and directors as follows in connection with such sales:
<TABLE>
<CAPTION> Shares
<S> <C>
William R. Williams (former director) 100,000 shares
Larry Cornwell (former officer) 25,000 shares
Susan Lurvey (Secretary) 20,000 shares
</TABLE>
In September 1993 William M. Allen exchanged the interest in a
thoroughbred stallion owned by the Company's Doric, Inc. subsidiary for 55,300
shares of the Company common stock.
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In December 1993 William M. Allen exchanged a $750,000 note issued by
Doric, Inc. for 7,500 shares of the Company's Class B Preferred Stock which
were redeemed in 1994. The Company incurred interest expense of $26,385 on
this note calculated at the rate of 10% per annum.
During May 1994 the Company acquired the assets of a smaller
alternative access long distance telephone provider, ARN Communications
Corporation. Such assets were acquired for $350,000. Such assets were
contributed to a new corporation wholly-owned by the Company, ARN
Communications Corp., which was organized to operate the acquired business.
Alan Niederhoffer, part owner and President of ARN Communications Corporation
was hired as a Vice President of the Company and served as President of ARN
Communications Corp. See "Executive Compensation - Executive Employment
Agreement" and "Certain Transactions".
The Company believes that the foregoing transactions are no less
favorable to the Company than could be obtained from non-affiliated parties.
In August 1995 the Company acquired 25% of the outstanding common
shares of Compressent Corporation and a warrant to purchase an additional 13%
of Compressent's Common Stock. The cost of such shares and warrant was
$500,000. Compressent is a developmental stage company which is developing
high order data compression products for telecommunications, computers,
satellite communications and video applications. Edward T. Kalinowski, who
provided financial consultant services to, and is a shareholder of, the
Company, was a founder of Compressent, and is a shareholder of Compressent.
Consulting fees aggregating approximately $297,000 and $152,000 were
paid to certain shareholders of the Company in 1996 and 1995, respectively.
In 1996, the Company paid $52,234 to Robert C. Buffkin, a director,
for services rendered.
In December 1996 the Company loaned Bryan P. Brown $92,838 with
interest at 8%. The loan is due December 1998.
PART IV
Item 13. Exhibits and Reports on Form 8-K.
(a) Certain of the exhibits listed below are incorporated by
reference to previously filed registration statement and reports as indicated
in the "Incorporated by Reference Note" column and notes below.
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<TABLE>
<CAPTION>
Incorporated by
Exhibit No. Reference Note Description
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<S> <C> <C>
3(a) A Articles of Incorporation of the Registrant
3(b) B. C, D. E Articles of Amendment to Articles of Incorporation
3(c) F By-Laws of the Registrant
8.2 G Agreement of Purchase and Sale dated May 12, 1994
relating to purchase of long distance telephone
business of ARN Communications Corporation
8.3 H Employment Agreement of Alan R. Niederhoffer
8.4 I Agreement dated February 21, 1994 and
Amendment dated February 28, 1994
relating to acquisition of certain assets
of Telecommunication Services, Inc.
8.5 J Acquisition Agreement relating to sale of
Phone One, Inc. subsidiary
8.6 K Letter Agreement with Raymond Beahn
8.7 L Agreement with Barron Chase Securities, Inc.
8.8 M Agreement with Hall Solomon & Howe Financial,
Inc. dated 10/17/96 covering purchase of Retama
Development Corp. bonds
8.9 N Agreement with Retama Park Association,
Inc., Retama Partners, Ltd. and Retama Park
Management Co. L.C. relating to purchase of
certain Retama Development Corp. Notes.
8.10 O Agreement to purchase certain real estate in Texas.
</TABLE>
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8.11 P Agreement to sell assets of ARN
Communication Corp.
Incorporation by Reference Notes:
Note Incorporation by Reference
A Incorporated by Reference to Exhibit 1.1 to Registration
Statement No. 33-37608 on Form S-18
B Incorporated by Reference to Exhibit A to Form 8-K
dated December 8, 1992
C Incorporated by Reference to Exhibit 1.2 to Form 10-KSB
for six months ended December 31, 1993
D Incorporated by Reference to Exhibit 1.3 to Form 10-KSB
for six months ended December 31, 1993
E Incorporated by Reference to Exhibit C to Form 8-K
filed December 14, 1994
F Incorporated by Reference to Exhibit 3.2 to Registration
Statement No. 33-37608 on Form S-18
G Incorporated by Reference to Exhibit 1 to Form 8-K
dated May 27, 1994
H Incorporated by Reference to Exhibit 2 to Form 8-K
dated May 27, 1994
I Incorporated by Reference to Exhibit 1 to Form 8-K
dated May 9, 1994
J Incorporated by Reference to Exhibit A to Form 8-K
filed December 14, 1994
K Incorporated by Reference to Exhibit 8.8 of Form 10-KSB
for year ended December 31, 1996
L Incorporated by reference to Exhibit 8.9 of Form 10-KSB
for year ended December 31, 1996
16
<PAGE> 17
M Incorporated by reference to Exhibit A of Form 8-K filed
November 21, 1996
N Incorporated by reference to Exhibit B of Form 8-K filed
November 21, 1996
O Incorporated by reference to Exhibit C of Form 8-K filed
November 21, 1996
P Incorporated by reference to Exhibit D of Form 8-K filed
November 21, 1996
(b) The Company filed a report on Form 8-K on November 21, 1996 reporting
acquisitions and dispositions of assets.
17
<PAGE> 18
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CALL NOW, INC.
March 28, 1997 By: s/Bryan P. Brown
------------------------
Bryan P. Brown
President
In accordance with the Exchange Act, 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>
<S> <C>
s/William M.Allen March 28, 1997
- -----------------
William M. Allen, Chairman and
Director (Principal Executive Officer)
s/Bryan P. Brown
- ----------------
Bryan P. Brown March 28, 1997
President and Director
s/ Max D. Allen
- ---------------
Max D. Allen, Director March 28, 1997
s/ James. D. Grainger
- ---------------------
James D. Grainger March 28, 1997
(Chief Financial Officer)
</TABLE>
18
<PAGE> 19
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
Call Now, Inc.
Miami Shores, Florida
We have audited the accompanying consolidated balance sheet of Call Now, Inc.
(formerly Phone One International, Inc.) and subsidiaries as of December 31,
1996 and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the two years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits.
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 misstatement. 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 audits provide 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 Call Now, Inc.
and subsidiaries at December 31, 1996, and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
Miami, Florida BDO Seidman, LLP
March 12, 1997, except
for Note 11 which is
as of March 26, 1997
F-1
<PAGE> 20
CALL NOW, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
================================================================================
<TABLE>
<CAPTION>
December 31, 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Current
Cash $ 1,670,120
Marketable securities - at market value (Notes 2 and 3):
Unrestricted 7,293,429
Restricted 1,241,260
Notes and loans receivable (Note 3) 2,252,592
Other 21,956
- -------------------------------------------------------------------------------------------------------------
Total current assets 12,479,357
Furniture and equipment (less accumulated
depreciation of $68,544) 49,704
Land held for development (Note 4) 2,363,060
Note receivable (Note 3) 92,837
Other assets 68,110
- -------------------------------------------------------------------------------------------------------------
$ 15,053,068
=============================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-2
<PAGE> 21
CALL NOW, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(CONTINUED)
================================================================================
<TABLE>
<CAPTION>
December 31, 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Liabilities and Stockholders' Equity
Current
Accounts payable $ 488,544
Accrued expenses 112,912
Note payable (Note 3) 1,155,000
Deferred income taxes (Note 7) 357,150
Income taxes payable 2,767,732
Current maturity of mortgage payable (Note 4) 12,416
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 4,893,754
Mortgage payable, less current maturity (Note 4) 1,757,584
- -------------------------------------------------------------------------------------------------------------
Total liabilities 6,651,338
- -------------------------------------------------------------------------------------------------------------
Contingencies (Note 10)
- -------------------------------------------------------------------------------------------------------------
Stockholders' equity (Note 5)
Preferred stock, no par, shares authorized 800,000,
none outstanding -
Common stock, no par, shares authorized 50,000,000,
7,519,400 issued and outstanding 3,259,965
Retained earnings 4,747,868
Less subscription notes receivable for 250,000 shares
of common stock (200,000)
Unrealized holding gain on marketable securities, net of
$357,150 income taxes (Note 2) 593,897
- -------------------------------------------------------------------------------------------------------------
Total stockholders' equity 8,401,730
- -------------------------------------------------------------------------------------------------------------
$ 15,053,068
=============================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-3
<PAGE> 22
CALL NOW, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
Years ended December 31, 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Other Income:
Gain on disposal of marketable securities $ 5,695,732 $ 229,715
Interest income 262,250 143,918
Miscellaneous 69,499 26,694
- -------------------------------------------------------------------------------------------------------------
6,027,481 400,327
- -------------------------------------------------------------------------------------------------------------
Costs and expenses:
Selling, general and administrative 1,279,638 687,515
Interest 98,263 114,753
Loss from unconsolidated entity 60,808 71,515
Depreciation and amortization 23,380 28,423
- -------------------------------------------------------------------------------------------------------------
1,462,089 902,206
- -------------------------------------------------------------------------------------------------------------
Income (Loss) From Continuing Operations
Before Income Taxes and Discontinued Operations 4,565,392 (501,879)
Income Tax (Expense) Benefit (Note 7) (1,716,218) 188,857
- -------------------------------------------------------------------------------------------------------------
Income (Loss) Before Discontinued Operations 2,849,174 (313,022)
Discontinued Operations (Note 1):
Loss from operation of discontinued subsidiary
(less tax benefit of $17,500 and $188,984, respectively) (29,108) (328,201)
Gain on disposal of subsidiary
(less income taxes of $69,000) 114,677 -
- -------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 2,934,743 $ (641,223)
=============================================================================================================
Earnings (Loss) Per Share:
Continuing operations $ 0.39 $ (0.04)
Operations of discontinued subsidiary $ - $ (0.05)
Gain on disposal of subsidiary $ 0.01 $ -
- -------------------------------------------------------------------------------------------------------------
Net income per share $ 0.40 $ (0.09)
=============================================================================================================
Weighted average number of common shares outstanding
- primary and fully diluted 7,278,257 7,243,700
=============================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-4
<PAGE> 23
CALL NOW, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(NOTE 5)
================================================================================
<TABLE>
<CAPTION>
Years ended December 31, 1996 and 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Subscription
Common Stock Notes Receivable
----------------------- -------------------- Unrealized
Number of Number of Holding Retained
Shares Amount Shares Amount Gain (Loss) Earnings Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1994 7,243,700 $ 3,130,477 440,000 $ (352,000) $ (115,000) $ 2,671,379 $ 5,334,856
Collection of stock subscription
notes receivable - - (190,000) 152,000 - - 152,000
Unrealized holding gain, net
of income taxes - - - - 2,365,000 - 2,365,000
Net loss - - - - - (641,223) (641,223)
- ------------------------------------------------------------------------------------------------------------------------------------
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,
Net of income taxes - - - - (1,656,103) - (1,656,103)
Property dividend - - - - - (217,031) (217,031)
Common stock received (and retired)
in connection with disposition
of subsidiary (Note 1) (100,000) (200,000) - - - - (200,000)
Issue of common stock for purchase
of marketable securities 385,700 337,488 - - - - 337,488
Net income - - - - - 2,934,743 2,934,743
- ------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1996 7,519,400 $ 3,259,965 250,000 $ (200,000) $ 593,897 $ 4,747,868 $ 8,401,730
====================================================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-5
<PAGE> 24
CALL NOW, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTE 9)
================================================================================
<TABLE>
<CAPTION>
Years ended December 31, 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net income (loss) $ 2,934,743 $ (641,223)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 54,667 233,600
Cancellation of stock for services (8,000) -
Reduction in stock subscription notes receivable - 152,000
Provision for doubtful accounts 19,167 167,267
Deferred income tax - (377,841)
Gain on disposal of marketable securities (5,695,732) (229,715)
Gain on disposal of subsidiary (183,677) -
Loss from unconsolidated entity 60,808 71,515
Change in assets and liabilities, net of businesses
disposed of:
(Increase) decrease in:
Accounts receivables (21,161) 127,282
Other current assets 895 (13,190)
Other assets (8,978) (18,767)
Increase (decrease) in:
Accounts payable (225,946) 9,208
Accrued expenses 24,321 (33,784)
Income taxes payable 1,218,213 -
- -------------------------------------------------------------------------------------------------------------
Cash used in operating activities (1,830,680) (553,648)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
F-6
<PAGE> 25
CALL NOW, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED) (NOTE 9)
================================================================================
<TABLE>
<CAPTION>
Years ended December 31, 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investing Activities:
Capital expenditures (8,846) (4,932)
Cash transfer on sale of subsidiary (44,014) -
Purchase of marketable securities (10,657,693) (202,140)
Proceeds from sale of marketable securities 17,110,180 939,855
Advances and loans (1,190,429) -
Purchase of land (593,060) -
Payment for acquisition of customer base (26,150) -
- -------------------------------------------------------------------------------------------------------------
Cash provided by investing activities 4,589,988 732,783
- -------------------------------------------------------------------------------------------------------------
Financing Activities:
Cash overdraft - (324,491)
Proceeds from margin loan - 1,637,764
Payments on margin loan (1,304,266) (1,235,120)
Payment on long term debt and capital lease obligations (26,178) (16,032)
- -------------------------------------------------------------------------------------------------------------
Cash (used in) provided by financing activities (1,330,444) 62,121
- -------------------------------------------------------------------------------------------------------------
Net increase in cash 1,428,864 241,256
Cash, beginning of year 241,256 -
- -------------------------------------------------------------------------------------------------------------
Cash, end of year $ 1,670,120 $ 241,256
=============================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-7
<PAGE> 26
CALL NOW, INC.
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
================================================================================
Nature of Business After exiting the long distance telephone
business in 1996, the Company has redeployed its
assets into other ventures including the
acquisition of (i) 118 acres of land in
Williamson County, Texas which it intends to
develop and (ii) $46,000,000 face amount bonds
and notes secured by a lien on the Retama Park
Horse Racing facility in suburban San Antonio,
Texas.
Principles of The accompanying consolidated financial
Consolidation statements include the accounts of Call Now,
Inc. and its wholly-owned subsidiaries ARN
Communications Corp. ("ARN") and Andice
Development Co. (collectively "the Company").
Investments in which the Company does not have a
majority voting or financial controlling
interest were accounted for under the equity
method of accounting. All significant
intercompany transactions and balances have been
eliminated in consolidation.
Marketable In accordance with Statement of Financial
Securities Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity
Securities," (SFAS 115), the Company classifies
its investment portfolio according to the
provisions of SFAS 115 as either held to
maturity, trading, or available for sale. At
December 31, 1996, the Company classified its
investment portfolio as available for sale and
held to maturity. Securities available for sale
are carried at fair value with unrealized gains
and losses included in stockholders' equity.
Gain or losses from the sale or redemption of
the investments are determined using the
specific identification method.
Furniture and Furniture and equipment are recorded at cost
Equipment and are depreciated over their estimated useful
lives (which range from three to seven years)
using the straight line method.
Income Taxes The Company accounts for income taxes pursuant
to the provisions of the Financial Accounting
Standards Board Statement No. 109, "Accounting
for Income Taxes", which requires an asset and
liability approach to calculating deferred
income taxes. The asset and liability approach
requires the recognition of deferred tax
liabilities and assets for the expected future
F-8
<PAGE> 27
CALL NOW, INC.
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
================================================================================
tax consequences of temporary differences
between the carrying amounts and the tax bases
of assets and liabilities.
Earnings per Net income per common share has been computed
Common Share by dividing income applicable to common
shareholders by the weighted average number of
shares of common stock and common stock
equivalents outstanding during the year. In
1996 and 1995, common stock equivalents were
anti-dilutive.
Uninsured Cash The Company maintains its cash balances at
Balances several financial institutions located in South
Florida. Accounts at the institutions are
secured by the Federal Deposit Insurance
Corporation up to $100,000. Periodically,
balances may exceed this amount. At December
31, 1996, uninsured balances were $1,357,497.
Concentration of The Company's current business involves two
Credit ventures which are interest rate sensitive.
Risk/Economic First, is ownership of tax exempt bonds secured
Dependency by a first mortgage on the Retama Park Horse
Racing Facility near San Antonio, Texas. The
second, is ownership of development property in
Williamson County, Texas (near San Antonio,
Texas). Both ventures are dependent on
continued economic prosperity in the San Antonio
metropolitan area.
Comparability Certain 1995 balances have been reclassified to
conform with the 1996 financial statement
presentations.
Preparation of The preparation of financial statements in
Financial conformity with generally accepted accounting
Statements principles requires management to make estimates
and assumptions that affect the reported amounts
of assets and liabilities and disclosure of
contingent assets and liabilities at the date of
the financial statements and the reported
amounts of revenues and expenses during the
reporting period. Actual results could differ
from those estimates.
Fair Value of The carrying value of financial instruments
Financial including marketable securities, notes and loans
Instruments receivables, accounts payable and notes payable
approximate their fair values at December 31,
1996.
Long-Lived Assets In March 1995, the Financial Accounting
Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 121
"Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of"
requires, among other things, impairment loss of
assets to be held and gains or losses from
assets that are expected to be disposed of be
F-9
<PAGE> 28
CALL NOW, INC.
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
================================================================================
included as a component of income from
continuing operations before taxes on income.
The Company has adopted SFAS No. 121 as of
January 1, 1996 and its implementation did not
have a material effect on the financial
statements.
Stock Based In October 1995, FASB issued SFAS No. 123,
Compensation "Accounting for Stock Based Compensation." SFAS
No. 123 establishes a fair value method for
accounting for stock-based compensation plans
either through recognition or disclosure. The
Company did not adopt the fair value based
method but instead discloses the effects of
the calculation required by the statement.
F-10
<PAGE> 29
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. Disposition of Effective August 1996, the Company sold the
Subsidiary assets and liabilities of its long distance
services company, ARN. Under the terms of the
agreement, the former President of ARN exchanged
one hundred thousand shares valued at $200,000
of Call Now, Inc. common stock for all of the
assets and liabilities of ARN.
The following is the condensed financial
information of ARN at August 20, 1996 and the
results of its operations for the period then
ended:
<TABLE>
<S> <C>
Assets:
Current assets $ 126,423
Property and equipment 14,388
Other assets 42,560
--------------------------------------------------------------------------------
Total assets $ 183,371
================================================================================
Liabilities and stockholder's equity:
Current liabilities $ 167,048
Capital 1,152,025
Deficit (1,135,702)
--------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 183,371
================================================================================
Revenues $ 323,412
Loss from operations $ (46,608)
================================================================================
</TABLE>
2. Marketable The carrying amounts of marketable securities
Securities as shown in the accompanying balance sheet and
their approximate market values at December 31,
1996 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held to maturity:
U.S. government
obligations
(Note 3) $1,241,260 $ $ $1,241,260
--------------------------------------------------------------------------------
$1,241,260 $ -- $ -- $1,241,260
================================================================================
Available for sale:
Municipal Bonds
and Notes $5,396,701 $ -- $ -- $5,396,701
Corporate
securities 945,685 951,043 -- 1,896,728
--------------------------------------------------------------------------------
$6,342,386 $951,043 $ -- $7,293,429
================================================================================
</TABLE>
F-11
<PAGE> 30
Unrealized gains on securities available for sale
at December 31, 1996 are shown net of income
taxes as a component of stockholders' equity.
At December 31, 1996, marketable securities with
a carrying value of approximately $1,241,260
were pledged to collateralize the note payable
to Broker Dealer.
During 1996, the Company sold 655,857 shares of
Intermedia Communications, Inc. stock and
recognized a gain of approximately $6,700,000.
On September 20, 1996, the Company acquired
$52,274,000, 8.75% term bonds of Retama
Development Corporation ("RDC") 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. The bonds are currently in
default and RDC has filed of protection under
Chapter 9 of the Federal Bankruptcy Code.
In November 1996, the Company purchased
$39,275,000 principal amount of Retama
Development Corporation Series 1993 A notes and
$500,000 of Retama Development Corporation Series
1993B notes for 385,700 shares of the Company's
common stock valued at $337,488. The notes are
secured by a lien on the Retama Park Race Horse
Racing facilities, including real and personal
property.
Simultaneously, the Company sold 50% of the bonds
and notes to a broker/dealer for a down payment
of $1,740,000 an future payments of $1,950,000 to
be paid prior to December 16, 1996. At December
31, 1996, $850,000 has not been collected.
In March 1997, the Company participated in the
defeasance of the abovementioned bonds and notes
(see Note 11).
3. Notes and Notes and loans receivable at December 31, 1996
Loans comprise the following:
Receivable
<TABLE>
<S> <C>
On March 24, 1996, the Company renewed an
agreement with a 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 U.S. Treasury
bills ($1,241,260 at December 31, 1996); such
amount is included in marketable
securities-restricted in the accompanying balance
sheet; simultaneously, the broker-dealer signed a
note payable to the Company in a like amount
bearing interest at 12% per annum, maturing March
31, 1998. $1,155,000
Non-interest bearing loan receivable, interest
imputed at 9.25% per annum, past due (Note 2) 850,000
</TABLE>
F-12
<PAGE> 31
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<S> <C>
Note receivable from shareholder bearing
interest at 9% per annum, principal and interest
due March 22, 1997, collateralized by 100,000
shares of the Company's common stock. The Company
is currently negotiating an extension on the due
date of the note. 150,000
Non-interest bearing loan receivable from former
President of ARN, interest imputed at 9.25% per
annum, principal and interest due on demand,
collateralized by 50,000 shares of the Company's
common stock 97,592
-----------------------------------------------------------------------
2,252,592
Note receivable from an officer bearing interest
at 8% per annum, principal and interest due
December 20, 1998, collateralized by 45,000
shares of the Company's common stock 92,837
-----------------------------------------------------------------------
$2,345,429
=======================================================================
</TABLE>
4.Land Held For On July 15, 1996, the Company acquired 118 acres
Development of development property in Williamson County,
Texas for a purchase price of $2,363,060. Under
the terms of the purchase, the Company paid
$589,310 and executed a $1,770,000 seven year, 9%
note, with annual principal and interest payments
of $85,721 commencing January 1997 and ending
July 15, 2003, at which time the remaining
$1,655,056 balance is due.
The following is a summary of annual principal
payments due under this note:
<TABLE>
<CAPTION>
Year Amount
------ -------------
<S> <C>
1997 $ 12,416
1998 13,558
1999 14,806
2000 16,169
2001 17,657
Thereafter 1,695,394
---------------------------------------------------------------------
$ 1,770,000
=====================================================================
</TABLE>
F-13
<PAGE> 32
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
5. Stockholders' The Company has authorized 800,000 shares of no
Equity par value preferred stock. Of the 800,000
shares, 300,000 are designated Class A
convertible redeemable preferred stock (Class
A), 7,500 are designated Class B convertible
redeemable preferred stock (Class B) and 300,000
are designated as Class C convertible redeemable
preferred stock (Class C).
The Class A preferred stock is non-voting,
redeemable at the option of the Company at a
price of $5 per share plus accrued but unpaid
dividends, and convertible into five shares of
common stock at the option of the holder. The
Class A preferred stockholders are entitled to
receive an annual dividend of $.30 per share. Of
the 300,000 designated shares, none were
outstanding at December 31, 1996.
The Class B preferred is non-voting, stock
redeemable at the option of the Company at a
price of $100 per share plus accrued but unpaid
dividends, and convertible into 100 shares of
common stock at the option of the holder. The
Class B preferred stockholders are entitled to
receive an annual dividend of $6.00 per share.
Of the 7,500 designated shares, none were
outstanding at December 31, 1996.
The Class C preferred stock is non-voting,
redeemable at the option of the Company at a
price of $3.00 per share plus one share of
common stock, and convertible into one share of
common stock at the option of the holder. Of
the 300,000 designated shares, none were
outstanding at December 31, 1996.
In 1993, the Company entered into "Consultant's
Stock Purchase and Sale Agreements" (stock
subscription notes receivable) with several
individuals. In exchange for providing certain
advisory and/or consulting services, the
individuals were entitled to purchase 710,000
shares of the Company's common stock at $.80 per
share. The purchase price is payable in five
years, with interest at prime plus 1% per annum.
All or a portion of any compensation due any of
the individuals may be credited to the purchase
price of the stock. The Company has retained a
security interest in the shares.
F-14
<PAGE> 33
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
During 1995, services provided by several
individuals in the aggregate amount of $152,000
have been applied to the stock subscription
notes receivable of $190,000 and 236,250 shares
of common stock of the Company. At December 31,
1996, accrued interest receivable on the
subscription notes receivable amounted to
$59,708.
The board of directors of Call Now, Inc.
declared, and distributed, a stock dividend from
the Company's holdings of Compressent Corporation
(formerly known as Cable-Sat Systems, Inc.)
common stock valued at $217,031 on the basis of
one share of Compressent Corporation's common
stock for each ten shares of Call Now, Inc.'s
common stock held on the record date of March 12,
1996. In this connection, $182,944, representing
the excess of the cost of the shares distributed
over the market value of such shares, was charged
to operations during 1996 and is included in gain
on disposal of marketable securities. The
Company continues to hold 296,562 shares of
Compressent Corporation common stock.
6. Stock Based At December 31, 1996, the Company has non-plan
Compensation options which are described below. The Company
applies APB Opinion 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES, and related Interpretations
in accounting for the options. Under APB Opinion
25, because the exercise price of the Company's
employee stock options equals or exceeds the
market price of the underlying stock on the date
of grant, no compensation cost is recognized.
On August 6, 1995, the Company granted options to
purchase 115,000 shares of its common stock to
its corporate counsel, chief financial officer
and controller. The options are exercisable at $2
per share and expire three years from the date of
grant.
FASB Statement 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, requires the Company to provide pro
forma information regarding net income and net
income per share as if compensation cost for the
Company's options had been determined in
accordance with the fair value based method
prescribed in FASB Statement 123. The Company
estimates the fair value of each stock option at
the grant date by using the Black-Scholes
option-pricing model with the following
weighted-average assumptions used for grants in
1995: no dividend yield percent; expected
volatility of 0.1, risk-free interest rates of
6.0% and expected lives of 3 years in the
non-plan options.
Under the accounting provisions of FASB Statement
123, the Company's net income (loss) and earnings
(loss) per share would not have materially
differed.
A summary of the status of the Company's non-plan
options as of December 31, 1996 and 1995, and
changes during the years ending on those dates
are presented below:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------------- --------------------
Weighted Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year 115,000 $ 2.00 -- $ --
Granted -- -- 115,000 2.00
Exercised -- -- -- --
Forfeited -- -- -- --
-------------------------------------------------------------------------------
Outstanding at end of year 115,000 2.00 115,000 2.00
-------------------------------------------------------------------------------
Options exercisable at
year-end 115,000 2.00 115,000 2.00
Weighted-average fair
value of options
granted during the year -- -- 0.08 --
===============================================================================
</TABLE>
The following table summarizes information about
non-plan options outstanding at December 31,
1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------- -----------------------
Weighted-
Number Average Weighted- Number Weighted-
Range of Outstanding Remaining Average Exercisable Average
Exercise at Contractual Exercise at Exercise
Prices 12/31/96 Life Price 12/31/96 Price
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2.00 115,000 1.6 2.00 115,000 2.00
</TABLE>
7. Income Taxes The components of the provision for income
taxes are as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995
---------------------------------------------------------------------------
<S> <C> <C>
Current:
Federal $ 1,509,094 $ (346,482)
State 258,624 (31,359)
---------------------------------------------------------------------------
$ 1,767,718 $ (377,841)
===========================================================================
</TABLE>
Such income taxes (benefit) are included in the
accompanying consolidated financial statements
as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------------------------------------
<S> <C> <C>
Income (loss) from operations $ 1,716,218 $ (188,857)
Loss from operation of discontinued
subsidiary (17,500) (188,984)
Gain on disposal of subsidiary 69,000 -
---------------------------------------------------------------------------
$ 1,767,718 $ (377,841)
===========================================================================
</TABLE>
The above provision has been calculated based on
Federal and State statutory rates.
F-15
<PAGE> 34
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The temporary difference at December 31,1996
which gave rise to a deferred income tax
liability of $357,150 is attributable to
unrealized holding gains on marketable
securities.
8. Related Party Consulting fees aggregating approximately
Transactions $160,000 and $152,000 were incurred to certain
shareholders of the Company in 1996 and 1995,
respectively.
The Company leases office space from its chief
executive officer and majority shareholder on a
month to month basis. The Company incurred
rental expenses of $30,000 and $47,500 for the
use of such facilities for 1996 and 1995,
respectively.
<TABLE>
<CAPTION>
9. Supplemental Year ended December 31, 1996 1995
Cash Flow ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Information Cash paid for interest $ 25,250 $ 117,860
Cash paid for income taxes 550,000 -
==================================================================================
</TABLE>
Supplementary Information:
Noncash investing and financing activities are
as follows:
- On August 20, 1996 the Company sold all of
the assets and liabilities of its subsidiary,
ARN. The gain on sale is reconciled as
follows:
<TABLE>
<S> <C>
Fair value of assets sold $ 183,371
Liabilities assumed by buyer (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>
F-16
<PAGE> 35
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- Fair market value of Cable-Sat dividend paid
in common stock, valued at $217,031.
- Mortgage payable of $1,770,000 incurred in
the purchase of land.
- Purchase of $39,275,000 principal amount of
Retama Development Corporation Series 1993A
notes and $500,000 of Retama Development
Corporation Series 1993B notes for 385,700
shares of the Company's common stock
valued at $337,488.
- Reversal of temporary differences resulting
in a reclassification between deferred and
current income tax payable of $1,495,195.
- Unrealized holding gains (losses) on
marketable securities aggregated $951,047 and
$3,608,000 for the years ended December 31,
1996 and 1995 for which deferred income tax
effects were $357,150 and $1,358,000,
respectively.
10. 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 presently be determined.
Management does not believe that this matter
will have a material adverse effect on the
financial statements.
During 1996, the Securities and Exchange
Commission advised the Company that it may be an
investment company as defined by the Investment
Company Act of 1940. 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 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, could, under certain
circumstances have a materially adverse effect on
the Company.
11. Subsequent Events In March 1997 the Company has agreed with its
Chairman to purchase the property leased by him
to the Company for its appraised value of
$410,000 payable in shares of the Company's
common stock.
In February 1997, the Company agreed to purchase
$3,500,000, 8.5% term bonds of RDC Special
Facilities Revenue Bonds, Series 1993. The
purchase price will be an amount equal to 41.5
cents for each principal dollar outstanding of
the bonds actually purchased and delivered.
On March 26, 1997, the Company participated in
the defeasance of the RDC bonds and notes held by
it, and received $3,640,000, 7% Series 1997 A
Bonds and $45,201,000, 8% Series 1997 B Bonds as
part of the defeasance. As part of the
transaction, the Company intends to collect
the $850,000 receivable (see Note 2) and
received $1,300,000 cash.
F-17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,670,120
<SECURITIES> 8,534,689
<RECEIVABLES> 2,345,429
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,479,357
<PP&E> 118,248
<DEPRECIATION> 68,544
<TOTAL-ASSETS> 15,053,068
<CURRENT-LIABILITIES> 4,893,754
<BONDS> 1,757,584
0
0
<COMMON> 3,259,965
<OTHER-SE> 5,141,765
<TOTAL-LIABILITY-AND-EQUITY> 15,053,068
<SALES> 0
<TOTAL-REVENUES> 6,027,481
<CGS> 0
<TOTAL-COSTS> 1,363,826
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 98,263
<INCOME-PRETAX> 4,565,392
<INCOME-TAX> 1,716,218
<INCOME-CONTINUING> 2,849,174
<DISCONTINUED> 85,569
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,934,743
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
