<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: March 31, 1997
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: 8,420,481 shares as of May
12, 1997.
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
-------------------------------
Three Months Ended March 31, 1997 Compared to 1996
- --------------------------------------------------
Results of Operations:
----------------------
a. Revenues
-- --------
The Company's revenues for the three months ended March 31, 1997 were
$3,929,909 as compared to 1,824,299 for the three months ended March 31, 1996.
Revenues for the 1997 quarter were attributable to the exchange of the
Company's interest in industrial revenue bonds of Retama Development
Corporation pursuant to the Plan of Adjustment of such corporation approved by
the U.S. Bankruptcy Court resulting in net revenue to the Company of $3,853,087
on this transaction. There was also interest income for the three months ended
March 31, 1997 of $71,687 as compared to $48,485 for the three months ended
March 31, 1996.
b. Expenses
-- --------
(1) Selling, General, and Administrative
----------------------------------------
Expense for the quarter ended March 31, 1997 was $358,223 compared to
$190,296 for the March 31, 1996 quarter. Increase travel and legal expenses
were incurred in representing the Company's interest in the Retama Development
Corporation bankruptcy proceedings. The Company also incurred additional
administrative payroll.
(2) Interest
------------
Interest expense for the quarter ended March 31, 1997 was $39,713
compared to $24,665 for the March 31, 1996 quarter, relating to the debt on the
property acquired in Williamson County, Texas.
(3) Income Tax
---------------
For the quarter ended March 31, 1997 the Company recognized income tax
expense of $1,339,000 due to its gain on the bond defeasance and interest
earned during the quarter.
2
<PAGE> 3
Income tax expense of $596,811 for the quarter ended March 31, 1996 resulted
from gain on sale of marketable securities and interest income.
c. Discontinued Operations - Loss from operation of discontinued
----------------------------------------------------------------
subsidiary
----------
For the quarter ended March 31, 1996 there was a loss of $48,005 (net
of income tax benefit of $18,065) from the operations of ARN Communications
which was disposed of later in the 1996 fiscal year.
d. Net Income vs. Net Loss
--------------------------
The Company had net income of $2,232,686 for the quarter ended March
31, 1997 compared to a net income of $989,187 for the quarter ended March 31,
1996.
Liquidity and Capital Resources:
--------------------------------
During the quarter ended March 31, 1997 the Company participated in a
defeasance of its holdings of Retama bonds yielding gross proceeds of
$3,853,087. During the quarter ended March 31, 1996, the Company sold marketable
securities yielding $5,261,317.
During the quarter ended March 31, 1997, the Company's operating
activities used cash of $1,146,688 compared to cash used for the March 31, 1996
quarter of $175,353. Such increase in the use of cash related primarily to
increased general and administrative expenses, income taxes and reduction of
accounts payable.
Cash flow provided from investing activities was $4,641,579 in the
quarter ended March 31, 1997 versus $4,265,608 for the March 31, 1996 quarter.
The increased cash flow from investing activities resulted from the exchange of
Retama Development Corp. Bonds and collection of notes and loan receivable.
Cash flow provided by financing activities in the March 31, 1997
quarter was $1,068,929 of which $1,075,000 was provided by the deficit funding
agreement. In 1996, $1,306,575 was used for payment of margin loans.
The Company has investments in the common stock of Compressent and the
Retama Development Corporation bonds. Such investments do not generate revenues
in the current period. The Company has been meeting its working capital
requirements out of the proceeds from securities sales, including stock sales
which occurred in prior periods.
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 $1,253,441 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 has been extended to
March 31, 1998.
3
<PAGE> 4
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 and marketable assets.
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 a survey is in progress to determine
the best use of the property.
2. The Company 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 the Company 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 and notes 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. The Company has an option to acquire
the company which manages the track.
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.
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. However, the Company may qualify for certain favorable federal income
tax treatment as a result of any classification as an investment company. The
Company is investigating the requirements to qualify for this treatment.
4
<PAGE> 5
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
(b) Reports on Form 8-K
-------------------
Registrant filed no reports on Form 8-K during the quarter ended March 31,
1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CALL NOW, INC.
By: s/William M. Allen
-------------------------------------
William M. Allen
President
May 14, 1997 By: s/James Grainger
-------------------------------------
Chief Financial Officer
5
<PAGE> 6
CALL NOW, INC AND SUBSIDIARY
Consolidated Balance Sheet as of March 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 6,233,940
Marketable securities, at market value
Unrestricted 9,332,293
Restricted 1,253,441
Notes and loans receivable 1,454,253
Other 40,424
-----------
Total current assets 18,314,351
-----------
Property and Equipment:
Land 210,000
Building and improvements 213,244
Furniture and equipment (less accumulated depreciation of $7,160) 21,442
-----------
Total property and equipment 444,686
-----------
Land held for development 2,363,060
Note receivable 92,838
Other 74,590
-----------
Total Assets $21,289,525
===========
</TABLE>
See notes to Consolidated Financial Statements
6
<PAGE> 7
CALL NOW, INC AND SUBSIDIARY
Consolidated Balance Sheet as of March 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturity of mortgage payable $ 12,975
Accounts payable 63,819
Note payable 1,155,000
Funding obligation 1,075,000
Accrued expenses 71,372
Deferred income taxes payable 1,124,374
Income taxes payable 3,706,732
------------
Total current liabilities 7,209,272
Mortgage payable, less current maturity 1,750,954
------------
Total liabilities 8,960,226
------------
Contingencies and commitments --
Stockholders' equity:
Preferred stock, no par, 800,000 shares authorized, none
outstanding --
Common stock, no par, 50,000,000 shares authorized, 7,660,481
issued, and outstanding 3,683,209
Retained earnings 6,980,554
Less subscription notes receivable for 250,000 shares of common stock (200,000)
Unrealized holding gain on marketable securities
(net of $1,124,175 income taxes) 1,865,536
------------
Total stockholders' equity 12,329,299
------------
Total Liabilities and Stockholders' Equity $ 21,289,525
============
</TABLE>
See notes to Consolidated Financial Statements
7
<PAGE> 8
CALL NOW, INC AND SUBSIDIARY
Consolidated Statements of Operations
For the periods ended March 31
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Revenues:
Gain on sale of marketable securities $ 3,853,087 $ 1,780,814
Interest 71,687 43,485
Other 5,135 --
----------- -----------
Total revenues 3,929,909 1,824,299
----------- -----------
Cost and expenses:
General, and administrative 314,348 95,952
Loss from unconsolidated entity -- 60,247
Depreciation and amortization 4,162 9,432
Interest 39,713 24,665
----------- -----------
Total costs and expenses 358,223 190,296
----------- -----------
Income/(loss) from continuing operations before
income taxes and discontinued operations 3,571,686 1,634,003
Income tax (expense)/benefit (1,339,000) (596,811)
----------- -----------
Income (loss) before discontinued operations 2,232,686 1,037,192
Loss from operation of discontinued subsidiary
(net of tax benefit of $18,065) -- (48,005)
----------- -----------
Net income (loss) 2,232,686 989,187
=========== ===========
Earnings (loss) per share:
Continuing operations $ 0.29 $ 0.15
Operations of discontinued subsidiary -- $ (0.01)
----------- -----------
Net income per share $ 0.29 $ 0.14
=========== ===========
Weighted average number of common shares
outstanding - primary and fully diluted 7,572,519 7,243,700
=========== ===========
</TABLE>
See notes to Consolidated Financial Statements
8
<PAGE> 9
CALL NOW, INC AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
For the three months ended March 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Subscription
Common Stock Notes Receivable
--------------------- ------------------- Unrealized
Number of Number of Holding Retained
Shares Amount Shares Amount Gain Earnings Total
------ ------ ------ ------ ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1996 7,519,400 $ 3,259,965 250,000 $ (200,000) $ 593,897 $ 4,747,868 $ 8,401,730
Unrealized holding gain,
net of income taxes 1,271,639 1,271,639
Call Now common stock
exchanged for property 141,081 423,244 423,244
Net income 2,232,686 2,232,686
----------- ----------- -------- ----------- ----------- ----------- -----------
Balance - March 31, 1997 7,660,481 $ 3,683,209 250,000 $ (200,000) $ 1,865,536 $ 6,980,554 $12,329,299
=========== =========== ======== =========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
9
<PAGE> 10
CALL NOW, INC AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For The Periods ended March 31
(Unaudited)
<TABLE>
<CAPTION>
Operating activities: 1997 1996
---- ----
<S> <C> <C>
Net income $ 2,232,686 $ 989,187
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 4,162 24,291
Deferred income taxes -- (310,514)
Gain on bond defeasance (3,853,087) (1,780,814)
Furniture and equipment charged off 21,765 --
Loss from unconsolidated entity -- 60,247
Changes in assets and liabilities net of business sold
(Increase) decrease in assets:
Accounts receivable -- 1,617
Other current assets (18,468) (8,037)
Other assets (6,481) (5,422)
Increase (decrease) in liabilities:
Accounts payable (424,725) (8,209)
Accrued expenses (41,540) (45,024)
Income taxes payable 939,000 907,325
----------- -----------
Cash provided (used) by operating activities (1,146,688) (175,353)
----------- -----------
Investing Activities:
Capital (expenditures) refund 2,334 (3,126)
Purchase of marketable securities (12,181) (270,433)
Proceeds from bond defeasance 3,853,087 --
Proceeds from sale of marketable securities -- 5,261,317
Investment in Cable-Sat Systems, Inc. -- (546,000)
Notes and loans receivable:
Advances (147,530) (150,000)
Collections 945,869
Purchase of customer base -- (26,150)
----------- -----------
Cash provided by investing activities 4,641,579 4,265,608
----------- -----------
Financing Activities:
Proceeds from margin loan -- 24,852
Payments on margin loan -- (1,329,117)
Funding obligation 1,075,000 --
Payment on long term debt and capital lease obligations (6,071) (2,310)
----------- -----------
Cash provided (used) by financing activities 1,068,929 (1,306,575)
----------- -----------
Net increase in cash 4,563,820 2,783,680
Cash, beginning of period 1,670,120 241,256
----------- -----------
Cash, end of period $ 6,233,940 $ 3,024,936
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
10
<PAGE> 11
CALL NOW, INC.
and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 1997
1. SHORT TERM & The carrying amounts of marketable securities as shown in the
MARKETABLE accompanying balance sheet and their approximate market
SECURITIES values at March 31, 1997 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 $ 1,253,441 $ - $ - $ 1,253,441
=========== ===========
Available for sale:
Municipal bonds
and notes $ 5,396,701 $ - $ - $ 5,396,701
Corporate securities 945,685 2,989,907 $ - 3,935,592
----------- ----------- ----------- -----------
$ 6,342,386 $ 2,989,907 $ - $ 9,332,293
=========== =========== =========== ===========
</TABLE>
The net unrealized holding gain increased by $2,989,907 for
the period ended March 31, 1997. Unrealized gains on
securities available for sale at March 31, 1997 are shown
net of income taxes as a component of stockholders' equity.
At March 31, 1997 U.S. government obligations with a
carrying value of $1,253,441 were pledged to collateralize
the note payable to a broker dealer.
2. NOTES AND Current notes and loans receivable were composed of the
LOANS following:
RECEIVABLE
<TABLE>
<CAPTION>
<S> <C>
Broker-dealer note $ 1,155,000
Stockholders' notes 297,530
Employee advances 1,723
--------------
Total $ 1,454,253
==============
</TABLE>
11
<PAGE> 12
3. INCOME TAXES The components for the provision for income taxes are as
follows:
<TABLE>
<CAPTION>
<S> <C>
Current $ 1,339,000
Deferred ( -0- )
-------------
Net income tax expense $ 1,339,000
=============
</TABLE>
4. RELATED PARTY On March 31, 1997 the Company acquired its office building
TRANSACTIONS from its chief executive officer at its appraised value of
$423,244 in exchange for 141,081 shares of Call Now, Inc.
common stock.
5. BOND On March 26, 1997, the Company participated in a defeasance
DEFEASANCE of its holdings of Retama Development Corporation Special
Facilities Revenue Bonds, Series 1993. Under the terms of the
defeasance Call Now, Inc. exchanged the Series 1993 bonds
for Retama Development Corporation Special Facilities Revenue
Bonds, 1997 Series A and B plus cash in the amount of
$3,853,087.
6. CONTINGENCIES Under the terms of the bond defeasance, Call Now, Inc. agreed
to fund any operating deficit of the Retama Development
Corporation for a two year period in an amount up to
$1,075,000 and for a two-year period commencing on the date
of the defeasance. In addition, the company received
$1,075,000 from the owner of the other portion of the bonds
representing their matching share of the two year deficit
funding agreement. This amount has been recorded in the
balance sheet as current liability.
7. SUBSEQUENT On April 7, 1997, the Company acquired the balance of the
EVENTS Retama Development Corp. Bonds in exchange for 760,000 shares
of Call Now, Inc. common stock and $2,300,000 in cash. The
Company's total holdings of Retama Bonds after the
acquisition is as follows:
Retama Development Corporation
Special Facilities Revenue Bonds,
1997, 7% Series A $ 7,000,000
Retama Development Corporation
Special Facilities Revenue Bonds,
1997, 8% Series B $ 86,925,000
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,233,940
<SECURITIES> 10,585,734
<RECEIVABLES> 1,454,253
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,314,351
<PP&E> 451,846
<DEPRECIATION> 7,160
<TOTAL-ASSETS> 21,289,525
<CURRENT-LIABILITIES> 7,209,272
<BONDS> 1,750,954
0
0
<COMMON> 3,683,209
<OTHER-SE> 8,646,090
<TOTAL-LIABILITY-AND-EQUITY> 21,289,525
<SALES> 3,929,909
<TOTAL-REVENUES> 3,929,909
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 358,223
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,713
<INCOME-PRETAX> 3,571,686
<INCOME-TAX> 1,339,000
<INCOME-CONTINUING> 2,232,686
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,232,686
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
