<PAGE> 1
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, 1997
Commission File No. 0-27160
CALL NOW, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer in its charter)
Florida 65-0337175
- ------------------------ ---------------------------------
(State of Incorporation) (IRS Employer Identification No.)
P.O.Box 531399
Miami Shores, Florida 33153
- ---------------------------------------- -------------
(Address of principal executive offices) (zip code)
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 No X
--- ---
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, 1997: $3,069,042.
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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 July
15, 1998 was $6,283,836.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 8,408,944 shares of common stock, as
of July 15, 1998.
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
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Company. The combination was accounted for by the purchase method. In connection
with the 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 ("Compressent") 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 held 204,897 shares of Compressent common stock as of December 31, 1997.
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
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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.
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 were
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.
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 were 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
(the "A Bonds") and $45,200,000, 8% Series 1997 B Bonds (the "B Bonds") as part
of the defeasance. As part of the transaction, the Company collected a $850,000
receivable from the broker/dealer. The Company subsequently acquired the balance
of the A Bonds and B Bonds.
On December 1, 1997 the Company's 80% owned subsidiary, Retama
Entertainment Group, Inc. obtained a management agreement to operate and manage
the Retama Park Racetrack. The Company's President, Bryan P. Brown, relocated to
Texas to personally supervise such activities. The management agreement extends
to November 1, 2000 subject to certain extension rights, and provides monthly
management fee of $15,000 plus a variable fee equal to 25% of profits in excess
of $1,000,000. The management agreement is filed herewith as Exhibit 8.12.
In February 1998, the Company entered into a loan agreement with
Compressent in which the Company was obligated to lend, on or before July 31,
1998, upon the request of Compressent's Board of Directors, up to $10,000,000.
Amounts loaned were to be due one year from the date of the loan and would bear
interest at 15% a year. In addition, the Company was to receive a $400,000
commitment fee at the time of the first loan advance. In connection with the
loan agreement, the Company would receive warrants to acquire 500,000 shares of
the Compressent's common stock at $6.25 per share.
In addition, the Company agreed to exchange $3,500,000 face amount of
its investment in RDC, Series A Bonds for 56,000 shares of Compressent, 7.5%
cumulative convertible preferred stock, which would be convertible into 560,000
shares of Compressent's common stock, and an option to acquire 500,000 shares of
Compressent common stock for $6.25 per share.
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On May 20, 1998, the Company and Compressent terminated the loan
agreement before any loan was made thereunder. In addition, the parties
rescinded the preferred stock and warrant purchase by each party returning to
the other the securities originally exchanged. However, Compressent, upon the
original receipt of the RDC bonds borrowed approximately $2,000,000, pledging
the bonds as collateral. In this connection, upon termination of the agreement,
the Company assumed the approximate $2,000,000 loan, and agreed to receive
1,333,333 unregistered shares of Compressent common stock. The Company and the
lender agreed to extend the due date on the loan to January 1, 1999 and issue
150,000 shares of its common stock to the lender.
In July 1998, the Company agreed to purchase three thoroughbred
racetracks, Louisiana Downs in Bossier City, LA, Remington Park in Oklahoma and
Thistledown in Ohio. The Company deposited $2,000,000 as a down payment. The
Company has until September 24, 1998 to conduct due diligence on the tracks and
if it is not satisfied, cancel the purchase agreements and obtain a full refund
of its deposit.
In July 1998 the Company sold an additional $3,500,000 face amount of
its RDC, Series A Bonds for $2,150,000. It has the right to repurchase such
bonds for $2,150,000 plus accrued interest until January 1, 1999.
The Company is undertaking due diligence on and seeking financing for
the three racetracks.
Employees
The Company has about 180 full-time employees, including 4 executive
employees. This includes the employees of Retama Entertainment Group, Inc.
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, 1997, the Company paid $30,000
to Mr. Allen for the rental expenses of such facility. Such facility was
purchased by Mr. Allen for $300,000 in 1991. Such property includes 38,274
square feet of property and a 3,698 sq.ft. building. Such rental arrangement was
terminated in July 1998.
Item 3. Legal Proceedings.
The Company was a defendant in a suit filed in 1994 in Circuit Court,
Dade County, Florida by Raymond Beahn seeking damages for breach of a contract
of employment. The Company settled the suit in May 1998 for 26,500 shares of its
common stock and $50,000.
Item 4. Submission of Matters to a Vote of Securities Holders.
None.
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company's Common Stock trades on the over-the-counter market under
the symbol CNOW. 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
-------- --------
<S> <C> <C>
January 1, 1996 through March 31, 1996 $ 1.50 $ .75
April 1, 1996 through June 30, 1996 3.375 .75
July 1, 1996 through September 30, 1996 3.375 1.25
October 1, 1996 through December 31, 1996 2.00 1.00
January 1, 1997 through March 31, 1997 4.625 1.875
April 1, 1997 through June 30, 1997 3.125 2.0625
July 1, 1997 through September 30, 1997 3.875 1.75
October 1, 1997 through December 31, 1997 3.5625 1.00
</TABLE>
The Company paid a dividend of one share of Compressent Corporation
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 December 31, 1997 there were approximately 417 registered
holders of record of the Company's common stock.
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Year Ended December 31, 1997 compared to 1996
Results of Operations:
a. Revenues
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The Company's revenues for the year ended December 31, 1997 were
$3,069,042 compared to $6,027,481 for the year ended December 31, 1996. Revenue
for the current year is primarily attributable to the Company's gain on
defeasance of its holdings of Retama Development Corporation Bonds. Net gain
from the bond defeasance and the sale of Compressent securities amounted to
$2,309,878 for the year ended December 1997 compared to a gain on sale of
securities of $5,695,732 for the year ended December 31,1996. Interest income
for the year ended December 31, 1997 was $754,029 compared to $262,250 for the
year ended December 31, 1996. The increase in interest income is primarily
attributable to interest earned on the Retama Bonds which amounted to $408,333
in 1997.
b. Expenses
(1) Selling, General, and Administrative
Expenses for the year ended December 31,1997 were $1,952,327 compared
to $1,279,638 for the year ended December 31,1996. The increase in expenses was
attributable to increased consulting, travel and legal fees in connection with
new business opportunities.
(2) Depreciation and Amortization
Expense for the year ended December 31,1997 was $16,795 compared to
$23,380 for the year ended December 31,1996. Depreciation expense diminished as
a result of the retirement of certain assets which were no longer in use.
(3) Interest
Interest expense for the year ended December 31, 1997 was $288,918
compared to $98,263 for the year ended December 31, 1996. The increase was
primarily due to increased borrowing levels.
(4) Loss from unconsolidated entity
Loss recognized on the Company's investment in Compressent Corporation
for the year ended December 31,1996 was $60,808. The Company accounted for its
investment in Compressent on the equity method while it owned greater than 20%
of the outstanding stock. After the dividend of Compressent stock to the
Company's shareholders in 1996, the Company owned less than 20% of the
outstanding common stock. The Company does not maintain significant influence
and control over Compressent and therefore carries its investment in Compressent
at cost. As a result the Company did not recognize either a gain or loss from an
unconsolidated entity in 1997.
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c. Discontinued Operations:
(1) Gain on disposal of subsidiary
In August 1996 Call Now, Inc. sold certain assets and liabilities of
ARN Communications, Corp. in exchange for 100,000 shares of Call Now, Inc.'s
common stock. As a result of this transaction the Company recognized a net after
tax gain of $114,677.
(2) Loss from operation of discontinued subsidiary
Call Now, Inc. discontinued operation of ARN Communications, Corp., its
long distance resale subsidiary in August 1996. As a result the Company
recognized an after tax loss from discontinued operations of $29,108.
d. Net Income
The Company had net income for December 31, 1997 of $519,890 compared
to $2,934,743 for the year ended December 31, 1996. The decrease in net income
of $2,414,853 resulted primarily from an $2,958,439 decrease in revenues and
increased costs and expenses of $795,951 for the year ended December 31, 1997.
The Company's tax expense diminished by $1,425,106 compared to the previous
year. Net income per share was also reduced as a result of an increase in the
number of shares outstanding. Income of $85,569 from discontinued operations in
1996 was not repeated in 1997.
Liquidity and Capital Resources:
During the year ended December 31,1997, the Company's operating
activities used cash of $4,772,737 compared to $1,830,680 used for the year
ended December 31,1996. Such increase in 1997 was primarily due to payment of
income taxes and a decrease in the sale of securities as compared to 1996.
Cash flow from investing activities provided cash for the period ended
December 31,1997 of $2,426,057 versus $4,589,988 for the year ended December
31,1996. Such decrease in 1997 resulted primarily from a decrease from proceeds
from the sale of securities offset by a decrease in the purchase of securities
and the collection of certain receivables.
Cash provided by financing activities during the year ended December
31, 1997 was $856,534 compared to cash used for the year ended December 31, 1996
of $1,330,444. Such increse in 1997 as compared to 1996 was primarily
attributable to loan proceeds in 1997 compared to loan repayments in 1996.
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The Company has investments in U.S. Treasury Bills and the common stock
of Compressent and Retama Development Corporation Bonds. The fair market value
of the securities at December 31,1997 was $10,239,326.
In addition, the Company has entered into an agreement with Barron
Chase Securities, Inc. whereby the Company executed a secured demand note
payable to Barron Chase in the amount of $1,155,000. Under the terms of the
agreement Barron Chase has purchased $1,305,055 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 terminated on March
31, 1998 and the Company has advised Barron Chase that it will not be extended.
Based on the above information, management of the Company believes that
it has adequate financial resources to fund its operations for the current
fiscal year.
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 most of its shares of Intermedia
Communications, Inc. in 1996, 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 the Company. The business
was sold to a former employee and officer of the Company.
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. In
November 1997 the Company disposed of 76,000 of such shares.
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6. On December 1, 1997, the Company's 80% owned subsidiary,
Retama Entertainment Group, Inc. was engaged as the manager of the Retama Park
Racetrack effective January 1, 1998.
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.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Index to Consolidated Financial Statements
Independent Auditors' Report F-1
Consolidated Financial Statements:
Consolidated Balance Sheet, December 31, 1997 F-2
Consolidated Statements of Income, years ended
December 31, 1997 and 1996 F-4
Consolidated Statements of Changes in Stockholders'
Equity, years ended December 31, 1997 and 1996 F-5
Consolidated Statements of Cash Flows, years ended
December 31, 1997 and 1996 F-6
Summary of Accounting Policies F-8
Notes to Consolidated Financial Statements. F-12
</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:
<TABLE>
<CAPTION>
Name Age Position
---------------- --- --------
<S> <C> <C>
William M. Allen 71 Chairman and Director
Bryan P. Brown 36 President and Director
James D. Grainger, CPA 66 Vice President - Finance
Susan Lurvey 33 Secretary
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.
He also serves as President of the Company's 80% owned subsidiary, Retama
Entertainment Group, Inc.
James D. Grainger was elected Vice President - Finance in 1998. He has
been a certified public accountant since 1964 and maintains an outside
accounting practice. He served as Chief Financial Officer from 1996 to 1997.
Susan Lurvey has been the secretary since June 1992. She has served as
executive secretary to Mr. Allen since 1987.
Robert C. Buffkin has been a business consultant specializing in
associations and insurance since 1974. He was elected as a director in 1996.
Bryan P. Brown is William M. Allen's son-in-law.
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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 1997.
Item 10. Executive Compensation.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Name and Other Annual
Principal Position Year Salary Bonus Compensation
- ------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
William M. Allen 1997 $240,000 -0- -0-
Chairman, Chief 1996 $240,000 -0- -0-
Executive Officer 1995 -0- -0- -0-
Bryan P. Brown, 1997 $150,000 -0- -0-
President
</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.
Stock Options
In 1997 the Company granted its directors and officers five year stock
options as follows:
<TABLE>
<CAPTION>
Name No. Of Options Exercise Price
---- -------------- --------------
<S> <C> <C>
William M. Allen 300,000 $4.00
Bryan P. Brown 200,000 $2.34
Robert C. Buffkin 10,000 $2.34
</TABLE>
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The following table summarizes all stock option activities during the
year ended December 31, 1997:
<TABLE>
<CAPTION>
Stock Weighted average
Options exercise price per share
------- ------------------------
<S> <C> <C>
Outstanding as of December 31, 1996 115,000 $2.00
Granted 530,000 $3.28
Expired or canceled -0- --
Exercised (115,000) $2.00
Outstanding at December 31, 1997 530,000
</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth, as of March 23, 1998, 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
- ---------------- -------------- ------------
<S> <C> <C>
William M. Allen 4,146,000(1)(2) 48.1%
P.O.Box 531399
Miami Shores, FL 33153
Robert C. Buffkin 21,000(2) *
Susan Lurvey 20,000 *
Bryan P. Brown 245,000 2.8%
James D. Grainger, CPA 41,348 *
Officers and Directors
as a group (5 Persons) 4,783,348(2) 50.2%
</TABLE>
(1) Includes 890,000 shares owned by William M. Allen's wife as to which he
disclaims any beneficial interest.
(2) Includes stock options held as follows: William M. Allen - 300,000
shares, Bryan P. Brown - 200,000 shares, Robert C. Buffkin - 10,000
shares.
*Less than 2%.
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Item 12. Certain Relationships and Related Transactions.
Consulting fees aggregating approximately $384,000 and $160,000 were
paid to certain shareholders of the Company in 1997 and 1996, respectively.
In 1997 and 1996, the Company paid $46,200 and $52,234, respectively,
to Robert C. Buffkin, a director, for services rendered as a consultant to the
Company.
In December 1996 the Company loaned Bryan P. Brown $92,838 with
interest at 8%. The loan is due December 1998.
See "Item 2. Properties" herein for a description of the Company's
lease of its executive office from its Chairman.
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.
<TABLE>
<CAPTION>
Incorporated by
Exhibit No. Reference Note Description
- ----------- -------------- -----------
<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
8.7 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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Incorporation by Reference Notes:
<TABLE>
<CAPTION>
Note Incorporation by Reference
- ---- --------------------------
<S> <C>
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 8.9 of Form 10-KSB for
year ended December 31, 1996
H Incorporated by reference to Exhibit A of Form 8-K filed
November 21, 1996
I Incorporated by reference to Exhibit B of Form 8-K filed
November 21, 1996
J Incorporated by reference to Exhibit C of Form 8-K filed
November 21, 1996
</TABLE>
The following exhibits are filed herewith:
8.12 Management Agreement for Retama Park Racetrack
8.13 Agreement dated May 20, 1998 between Registrant and
Compressent relating to recision of Preferred Stock Purchase.
16
<PAGE> 17
8.14 Agreement dated May 20, 1998 between Registrant and
Compressent relating to termination of loan agreement.
8.15 Agreement dated July 15, 1998 relating to sale of Retama
Development Corporation bonds among Registrant, International
Trading Group I, Inc. And Howe Solomon & Hall, Inc.
27 Financial Data Schedule
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.
July 20, 1998 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 July 20, 1998.
s/William M. Allen
- ---------------------------------------
William M. Allen, Chairman and
Director (Principal Executive Officer)
s/Bryan P. Brown
- ---------------------------------------
Bryan P. Brown, President and
Director
s/James D. Grainger, CPA
- ---------------------------------------
James D. Grainger, Vice President -
Finance (Principal Accounting Officer)
s/Robert C. Buffkin
- ---------------------------------------
Robert C. Buffkin, Director
18
<PAGE> 19
CALL NOW, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<PAGE> 20
CALL NOW, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<PAGE> 21
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.
and subsidiaries as of December 31, 1997 and the related consolidated statements
of income, changes in stockholders' equity, and cash flows for each of the two
years in the period ended December 31, 1997. 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, 1997, and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Miami, Florida BDO Seidman, LLP
February 24, 1998, except
for Note 13 which is as
of July 10, 1998
<PAGE> 22
CALL NOW, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, 1997
- -------------------------------------------------------------------------------------------
<S> <C>
ASSETS
CURRENT
Cash $ 179,974
Marketable securities - at market value (Notes 2, 3 and 4):
Unrestricted 10,239,326
Restricted 1,305,055
Notes and loans receivable (Notes 4 and 9) 1,247,838
Other 439,683
- -------------------------------------------------------------------------------------------
Total current assets 13,411,876
Furniture and equipment, net 11,059
Land (Note 5) 2,369,075
Notes receivable (Note 12) 753,000
Deferred tax asset (Note 3) 801,950
Other assets 65,730
- -------------------------------------------------------------------------------------------
$17,412,690
===========================================================================================
</TABLE>
<PAGE> 23
CALL NOW, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, 1997
- ------------------------------------------------------------------------------------------------
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable $ 53,577
Accrued expenses 328,420
Note payable (Note 4) 1,155,000
Income taxes payable 1,000,844
Current maturity of mortgage payable (Note 5) 13,558
- ------------------------------------------------------------------------------------------------
Total current liabilities 2,551,399
NON CURRENT
Deferred income taxes (Note 8) 162,032
Mortgage payable, less current maturity (Note 5) 1,744,026
Deferred gain from bond defeasance transaction (Note 3) 2,150,000
- ------------------------------------------------------------------------------------------------
Total long-term liabilities 4,056,058
- ------------------------------------------------------------------------------------------------
Total liabilities 6,607,457
- ------------------------------------------------------------------------------------------------
COMMITMENT AND CONTINGENCIES (Notes 3, 12 and 13)
- ------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (Note 6)
Preferred stock, no par, shares authorized 800,000, none outstanding --
Common stock, no par, shares authorized 50,000,000,
8,408,944 issued and 8,318,944 outstanding 5,704,965
Retained earnings 5,267,758
Less subscription notes receivable for 115,000 shares of common stock (230,000)
Unrealized holding gain on marketable securities, net of
$162,032 income taxes (Note 2) 268,560
Treasury stock, at cost (206,050)
- ------------------------------------------------------------------------------------------------
Total stockholders' equity 10,805,233
- ------------------------------------------------------------------------------------------------
$17,412,690
================================================================================================
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-3
<PAGE> 24
CALL NOW, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31, 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C>
INCOME:
Gain on disposal of marketable securities $ 606,792 $ 5,695,732
Gain on bond defeasance (Note 3) 1,703,086 --
Interest income 754,029 262,250
Miscellaneous 5,135 69,499
- ------------------------------------------------------------------------------------
Total income 3,069,042 6,027,481
- ------------------------------------------------------------------------------------
COSTS AND EXPENSES:
General and administrative 1,952,327 1,279,638
Interest 288,918 98,263
Loss from unconsolidated entity -- 60,808
Depreciation and amortization 16,795 23,380
- ------------------------------------------------------------------------------------
Total cost and expenses 2,258,040 1,462,089
- ------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS 811,002 4,565,392
Income taxes (291,112) (1,716,218)
- ------------------------------------------------------------------------------------
INCOME BEFORE DISCONTINUED OPERATIONS 519,890 2,849,174
DISCONTINUED OPERATIONS (Note 1):
Loss from operation of discontinued subsidiary
(less tax benefit of $17,500) -- (29,108)
Gain on disposal of subsidiary
(less income taxes of $69,000) -- 114,677
- ------------------------------------------------------------------------------------
NET INCOME $ 519,890 $ 2,934,743
====================================================================================
Earnings Per Share - Basic and Diluted (Note 14):
Continuing operations $ 0.06 $ 0.39
Discontinued operations $ -- $ 0.01
Net income $ 0.06 $ 0.40
====================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-4
<PAGE> 25
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Years ended December 31, 1997 and 1996
- ----------------------------------------------------------------------------------------------------------------------------------
Subscription
Common Stock Treasury Stock Notes Receivable
----------------------- --------------------- -------------------
Number of Number of Number of
Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 7,243,700 $3,130,477 -- $ -- 250,000 $(200,000)
Cancellation of shares (10,000) (8,000) -- -- -- --
Reduction of unrealized holding gain,
net of income taxes -- -- -- -- -- --
Property dividend -- -- -- -- --
Common stock received (and retired) in connection
with disposition of subsidiary (100,000) (200,000) -- -- -- --
Issuance of common stock for purchase
of marketable securities 385,700 337,488 -- -- -- --
Net income -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1996 7,519,400 $3,259,965 250,000 $ 200,000)
Reduction of unrealized holding gain,
net of income taxes -- -- -- -- -- --
Common stock issued in exchange for
marketable securities 760,000 2,185,000 -- -- -- --
Purchase of treasury stock -- -- 90,000 (206,050) -- --
Common stock bonus 14,544 30,000 -- -- -- --
Collection of stock subscription notes
receivable for services rendered -- -- -- -- (250,000) 200,000
Exercise of stock options for notes receivable 115,000 230,000 -- -- 115,000 (230,000)
Net income -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1997 8,408,944 $5,704,965 90,000 $(206,050) 115,000 $(230,000)
==================================================================================================================================
<CAPTION>
Years ended December 31, 1997 and 1996
- ----------------------------------------------------------------------------------------------------------
Unrealized
Holding Retained
Gain (Loss) Earnings Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance - December 31, 1995 $ 2,250,000 $2,030,156 $ 7,210,633
Cancellation of shares -- -- (8,000)
Reduction of 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 -- -- (200,000)
Issuance of common stock for purchase
of marketable securities -- -- 337,488
Net income -- 2,934,743 2,934,743
- ---------------------------------------------------------------------------------------------------------
Balance - December 31, 1996 $ 593,897 $4,747,868 $ 8,401,730
Reduction of unrealized holding gain,
net of income taxes (325,337) -- (325,337)
Common stock issued in exchange for
marketable securities -- -- 2,185,000
Purchase of treasury stock -- -- (206,050)
Common stock bonus -- -- 30,000
Collection of stock subscription notes
receivable for services rendered -- -- 200,000
Exercise of stock options for notes receivable -- -- --
Net income -- 519,890 519,890
- ---------------------------------------------------------------------------------------------------------
Balance - December 31, 1997 $ 268,560 $5,267,758 $10,805,233
=========================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-5
<PAGE> 26
CALL NOW, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTE 11)
<TABLE>
<CAPTION>
Years ended December 31, 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 519,890 $ 2,934,743
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 16,795 54,667
Cancellation of stock for services -- (8,000)
Furniture and equipment charged-off 24,100 --
Provision for doubtful accounts -- 19,167
Issuance of stock for services 30,000 --
Stock subscription receivable for services rendered 200,000 --
Gain on disposal of marketable securities (606,792) (5,695,732)
Gain on bond defeasance (1,703,086) --
Gain on disposal of subsidiary -- (183,677)
Loss from unconsolidated entity -- 60,808
Change in assets and liabilities, net of businesses
disposed of:
(Increase) decrease in:
Accounts receivables -- (21,161)
Other current assets (417,727) 895
Deferred tax asset (801,950) --
Other assets 2,380 (8,978)
Increase (decrease) in:
Accounts payable (484,967) (225,946)
Accrued expenses 215,508 24,321
Income taxes payable (1,766,888) 1,218,213
- --------------------------------------------------------------------------------------------
Cash used in operating activities (4,772,737) (1,830,680)
- --------------------------------------------------------------------------------------------
</TABLE>
F-6
<PAGE> 27
CALL NOW, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED) (NOTE 11)
<TABLE>
<CAPTION>
Years ended December 31, 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTING ACTIVITIES:
Capital expenditures $ (2,250) $ (8,846)
Cash transfer on sale of subsidiary -- (44,014)
Purchase of marketable securities (2,512,024) (10,657,693)
Proceeds from sale of marketable securities 748,669 17,110,180
Proceeds from bond defeasance 3,853,086 --
Advances and loans -- (1,190,429)
Addition to land (6,015) (593,060)
Payment for acquisition of customer base -- (26,150)
Notes and loans:
Advances (753,000) --
Collections 1,097,591 --
- -----------------------------------------------------------------------------------------------
Cash provided by investing activities 2,426,057 4,589,988
- -----------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from loans 1,075,000 --
Payments on margin loan -- (1,304,266)
Purchase of treasury stock (206,050) --
Payments on long term debt and capital lease obligations (12,416) (26,178)
- -----------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities 856,534 (1,330,444)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in cash (1,490,146) 1,428,864
Cash, beginning of year 1,670,120 241,256
- -----------------------------------------------------------------------------------------------
Cash, end of year $ 179,974 $ 1,670,120
===============================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-7
<PAGE> 28
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 primarily
into real estate by the acquisition of 118 acres of land
in Williamson County, Texas which it may develop and
acquiring $93,925,000 face amount bonds and notes
secured by a lien on the Retama Park Horse Racing
Facility ("Facility") in suburban San Antonio, Texas. In
addition, the Company entered into a contract to manage
the Facility commencing January 1998.
PRINCIPLES OF The accompanying consolidated financial statements
CONSOLIDATION include the accounts of Call Now, Inc. and its
wholly-owned subsidiaries ARN Communications Corp.
("ARN"), Retama Entertainment Group, Inc., and Andice
Development Co. (collectively "the Company").
Investments in which the Company does not have a
majority voting or financial controlling interest are
accounted for under the equity method of accounting
unless its ownership constitutes less than a 20%
interest in such entity for which such investment would
then be included in the consolidated financial
statements on the cost method. All significant
intercompany transactions and balances have been
eliminated in consolidation.
MARKETABLE In accordance with Statement of Financial Accounting
SECURITIES 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, 1997,
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.
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
F-8
<PAGE> 29
CALL NOW, INC.
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
for the expected future tax consequences of temporary
differences between the carrying amounts and the tax
bases of assets and liabilities.
EARNINGS PER Effective December 31, 1997, the Company adopted
COMMON SHARE Financial Accounting Standards (SFAS) No. 128, "Earnings
Per Share," which simplifies the computation of earnings
per share requiring the restatement of all prior
periods.
Basic earnings per share are computed on the basis of
the weighted average number of common shares outstanding
during each year.
Diluted earnings per share are computed on the basis of
the weighted average number of common shares and
dilutive securities outstanding. Dilutive securities
having an antidilutive effect on diluted earnings per
share are excluded from the calculation.
UNINSURED CASH The Company maintains its cash balances at several
BALANCES financial institutions. 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, 1997, uninsured balances
aggregated $55,300.
CONCENTRATION OF The Company's current business involves two ventures
CREDIT which are interest rate sensitive. First, is ownership
RISK/ECONOMIC of tax exempt bonds secured by a first mortgage on the
DEPENDENCY 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 low interest
rates and economic prosperity in the San Antonio
metropolitan area.
PREPARATION OF The preparation of financial statements in conformity
FINANCIAL STATEMENTS with generally accepted accounting 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.
F-9
<PAGE> 30
CALL NOW, INC.
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
FAIR VALUE OF The carrying value of financial instruments including
FINANCIAL marketable securities, notes and loans receivables,
INSTRUMENTS accounts payable and notes payable approximate their
fair values at December 31, 1997.
LONG-LIVED ASSETS 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 included as a component of income from
continuing operations before taxes on income.
STOCK BASED Statement of Financial Accounting Standards 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.
FUTURE ACCOUNTING Statement of Financial Accounting Standards (SFAS) No.
PRONOUNCEMENTS 130, "Reporting Comprehensive Income," establishes
standards for reporting and display of comprehensive
income, its components and accumulated balances.
Comprehensive income is defined to include all changes
in equity except those resulting from investments by
owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that
are required to be recognized under current accounting
standards as components of comprehensive income be
reported in a financial statement that is displayed with
the same prominence as other financial statements.
Statement of Financial Accounting Standards (SFAS) No.
131, Disclosures about Segments of an Enterprise and
Related Information, supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise." SFAS
131, establishes standards for the way that public
companies report information about operating segments in
annual financial statements and requires reporting of
selected information about operating segments in interim
financial statements issued to the public. It also
establishes standards for disclosures regarding products
and services, geographic areas and major customers. SFAS
131 defines operating segments as components of a
company about which separate financial information
F-10
<PAGE> 31
CALL NOW, INC.
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate
resources and in assessing performance.
These new standards are effective for financial
statements for periods beginning after December 15, 1997
and require comparative financial information for
earlier years to be restated. Due to the recent issuance
of these standards, management has been unable to fully
evaluate the impact, if any, they may have on future
financial statement disclosures.
F-11
<PAGE> 32
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DISPOSITION OF Effective August 1996, the Company sold the assets and
SUBSIDIARY 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 results of operations of ARN for
the period January 1 to the date of disposition (August
20, 1996):
<TABLE>
<S> <C>
Revenues $ 323,412
Loss from operations $ (46,608)
====================================================
</TABLE>
2. MARKETABLE The carrying amounts of marketable securities as shown
SECURITIES in the accompanying balance sheet and their approximate
market values at December 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
(Note 4) $1,305,055 $ -- $ -- $ 1,305,055
---------------------------------------------------------------------------------------
1,305,055 -- -- 1,305,055
=======================================================================================
Available for sale:
Municipal bonds
and notes $9,154,929 $ -- $ -- $ 9,154,929
Corporate
securities 653,804 430,593 -- 1,084,397
--------------------------------------------------------------------------------------
$9,808,733 $430,593 $ -- $10,239,326
======================================================================================
</TABLE>
Unrealized gains on securities available for sale at
December 31, 1997 are shown net of income taxes as a
component of stockholders' equity.
F-12
<PAGE> 33
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1997, marketable securities with a
carrying value of $1,305,055 were pledged to
collateralize the note payable to a Broker Dealer.
(Note 4).
3. INVESTMENT IN BONDS On September 20, 1996, the Company acquired
AND BOND $52,274,000, 8.75% term bonds of Retama Development
DEFEASANCE Corporation ("RDC") Special Facilities Revenue Bonds,
TRANSACTION Series 1993 for a purchase price of $10,300,000. The
bonds were secured by a first mortgage on the Retama
Park Horse Racing facility.
In November 1996, the Company purchased $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. The
notes were secured by a lien on the Retama Park Horse
Racing facilities, including real and personal
property.
Simultaneously, the Company sold 50% of the bonds and
notes to a broker/dealer for an initial payment of
$1,740,000 and future payments of $1,950,000 to be
paid prior to December 16, 1996. At December 31,
1996, $850,000 was uncollected.
On March 26, 1997, the Company participated in the
defeasance of the RDC bonds and notes held by it, and
received cash in the amount of $3,853,086,
$3,640,000, 7% Series 1997 A Bonds and $45,200,000,
8% Series 1997 B Bonds as part of the defeasance. The
1997 bonds were valued by an independent third party
at the same value as the carrying value of the 1993
bonds.
On April 7, 1997, the Company acquired the balance of
the RDC bonds in exchange for 760,000 shares of the
Company's common stock, 15,000 shares of Compressent
Corporation ("Compressent") common stock, and
$2,150,000 in cash. The cost of the remaining bonds
purchased by the Company, including acquisition
costs, was $3,187,728. At December 31, 1997 the
Company's total holdings of RDC bonds are: (a) 1997
Series A, 7% bonds - $7,000,000 and (b) 1997 Series
B, 8% bonds - $86,925,000.
F-13
<PAGE> 34
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the terms of the bond defeasance, after giving
effect to the purchase of the additional bonds
referred to in the preceding paragraph, the Company
had a gain of $3,853,086. However, the Company is
obligated to lend to RDC, to fund any operating
deficit (as defined) of RDC, up to $2,150,000 for a
two-year period expiring March 1999, of which
$703,000 has been advanced at December 31, 1997.
As a result of the foregoing obligation, the Company
has reduced the gain on the bond defeasance by
$2,150,000 which is reflected in the accompanying
balance sheet as deferred gain from bond defeasance.
In this connection, a deferred tax asset of $801,950
has been recorded.
4. NOTES AND LOANS Notes and loans receivable at December 31, 1997
RECEIVABLE comprise the following:
<TABLE>
<S> <C>
On March 24, 1997, 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 ($1,305,055 at December 31, 1997);
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.
The Company has advised the broker-dealer that it
will not renew this agreement. $1,155,000
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. 92,838
-------------------------------------------------------------------------
$1,247,838
=========================================================================
</TABLE>
F-14
<PAGE> 35
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. LAND On July 15, 1996, the Company 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 $589,310 and executed
a seven year, 9% note, in the approximate amount of
$1,770,000 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>
1998 $ 13,558
1999 14,806
2000 16,169
2001 17,657
2002 19,282
2003 1,676,112
-----------------------------------------------------
$1,757,584
=====================================================
</TABLE>
6. STOCKHOLDERS' EQUITY The Company has authorized 800,000 shares of no 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, 1997.
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
F-15
<PAGE> 36
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
dividends, and is 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, 1997.
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, 1997.
In a prior year, 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 was payable in five years, with
interest at prime plus 1% per annum. All or a portion
of any compensation due by any of the individuals may
be credited to the purchase price of the stock.
During 1997, services provided by several individuals
in the aggregate amount of $200,000 have been applied
to the stock subscription notes receivable. In a
separate transaction, the Company authorized three of
its officers and employees to exercise options
aggregating 115,000 in exchange for notes totaling
$230,000. At December 31, 1997, accrued interest
receivable on the subscription notes receivable
amounted to $16,212.
The board of directors of the Company declared, and
distributed, a stock dividend from the Company's
holdings of Compressent's common stock, valued at
$217,031, on the basis of one share of Compressent
Corporation's common stock for each ten shares of the
Company'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 the loss is
reflected in gain on disposal of marketable
securities. At December 31, 1997, the Company
continues to hold 204,897 shares of Compressent
common stock (see Note 13).
F-16
<PAGE> 37
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. STOCK BASED At December 31, 1997, 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.
In 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. These options
were exercised during 1997.
On April 25, 1997, the Company granted a stock bonus
of 14,544 shares of its common stock to its corporate
counsel, chief financial officer and controller. In
addition, on the same date, the Company granted
options to purchase 530,000 shares of its common
stock to its president, chief executive officer and
two members of its board of directors. The options
are exercisable at prices ranging from $2.34 - $4 per
share and expire five 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 1997
and 1996: no dividend yield percent; expected
volatility of 46.5 and 0.1 percent; risk-free
interest rates of 6.8% and 6.0%, and expected lives
of 4.3 years and 3 years for the non-plan options.
Under the accounting provisions of FASB Statement
123, the Company's net income and earnings per share
would have been reduced to the pro forma amount
indicated below:
F-17
<PAGE> 38
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------------------
<S> <C> <C>
Net income
As reported $ 519,890 $2,934,743
Pro forma 256,522 2,934,743
Earnings per share
As reported .06 .40
Pro forma .03 .40
</TABLE>
A summary of the status of the Company's non-plan
options as of December 31, 1997 and 1996, and changes
during the years ended on those dates are presented
below:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
------------------------ ------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at beginning of
year 115,000 $2.00 115,000 $2.00
Granted 530,000 3.27 -- --
Exercised (115,000) 2.00 -- --
Forfeited -- -- -- --
----------------------------------------------------------------------------------------
Outstanding at end of year 530,000 3.27 115,000 2.00
----------------------------------------------------------------------------------------
Options exercisable at year-end 530,000 3.27 115,000 2.00
Weighted-average fair value of
options granted during the
year -- .80 -- .08
========================================================================================
</TABLE>
F-18
<PAGE> 39
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information about
non-plan options outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------- --------------------------
Weighted-
Average Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise Outstanding at Contractual Exercise Exercisable at Exercise
Prices 12/31/97 Life Price 12/31/97 Price
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.34 230,000 4.3 years 2.34 230,000 2.34
4.00 300,000 4.3 years 4.00 300,000 4.00
</TABLE>
8. INCOME TAXES The components of the provision for income taxes are
as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1997 1996
--------------------------------------------------------
<S> <C> <C>
Current:
Federal $ 224,657 $ 1,509,094
State 66,455 258,624
--------------------------------------------------------
$ 291,112 $ 1,767,718
========================================================
</TABLE>
Such income taxes are included in the accompanying
consolidated financial statements as follows:
<TABLE>
<CAPTION>
1997 1996
-----------------------------------------------------------------------
<S> <C> <C>
Income from operations $ 291,112 $ 1,716,218
Loss from operation of discontinued
subsidiary -- (17,500)
Gain on disposal of subsidiary -- 69,000
-----------------------------------------------------------------------
$ 291,112 $ 1,767,718
=======================================================================
</TABLE>
The above provision has been calculated based on
Federal and State statutory rates.
The temporary differences at December 31,1997 which
gave rise to a deferred income tax liability of
$162,032 is attributable to unrealized holding gains
on marketable securities and a deferred tax asset of
F-19
<PAGE> 40
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$801,950 due to the deferral of the $2,150,000 gain
from the bond defeasance (Note 3).
9. RELATED PARTY Consulting fees aggregating approximately $384,000
TRANSACTIONS and $160,000 were incurred to certain shareholders
and directors of the Company in 1997 and 1996,
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 for the use of such facilities for 1997
and 1996.
At December 31, 1997, outstanding notes receivables
from the Company's stockholders and officers amounted
to $322,838.
10. MANAGEMENT On October 27, 1997 the RDC's Board of Directors
AGREEMENT approved a management contract granting Retama
Entertainment Group, Inc., an 80% owned subsidiary of
the Company, the right to manage the operations of
the Facility commencing on January 1, 1998. The three
year agreement provides Retama Entertainment Group,
Inc., with a monthly management fee of $15,000 plus a
variable fee equal to 25% of profits in excess of
$1,000,000 annually. As of December 31, 1997,
operations of this subsidiary had not commenced.
11. SUPPLEMENTAL CASH
FLOW INFORMATION
<TABLE>
<CAPTION>
Year ended December 31, 1997 1996
--------------------------------------------------------
<S> <C> <C>
Cash paid for interest $ 288,900 $ 25,250
Cash paid for income taxes 2,877,000 550,000
========================================================
</TABLE>
SUPPLEMENTARY INFORMATION:
During the year ended December 31, 1997, noncash
investing and financing activities are as follows:
- Purchase of $45,085,000 principal amount of RDC
Series 1997 A and B for 760,000 shares of the
Company's common stock valued at $2,125,000, and
the assumption of a note payable in the amount of
F-20
<PAGE> 41
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$200,000 and funding liability obligation in the
amount of $1,075,000.
- Cancellation of a note payable in the amount of
$150,000 for 15,000 shares of Compressent common
stock valued at $10.00 for share.
- Issuance of 115,000 shares of the Company's
common stock in exchange for subscription notes
receivable in the amount of $230,000.
During the year ended December 31, 1996, 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>
- Fair market value of dividend paid in Compressent
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 RDC
Series 1993A notes and $500,000 of RDC 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 on marketable securities
aggregated $430,592
F-21
<PAGE> 42
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and $951,047 for the years ended December 31, 1997
and 1996 for which deferred income tax effects were
$162,032 and $357,000, respectively.
12. 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. On May 14, 1998, this
litigation was settled. In this connection, the
Company has agreed to pay $50,000 and to issue 26,500
shares of its common stock to the former director.
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.
13. SUBSEQUENT EVENTS In February 1998, the Company entered into a loan
agreement with Compressent in which the Company was
obligated to lend, on or before July 31, 1998, upon
the request of Compressent's Board of Directors, up
to $10,000,000. Amounts loaned were to be due one
year from the date of the loan and would bear
interest at 15% a year. In addition, the Company was
to receive a $400,000 commitment fee at the time of
the first loan advance. In connection with the loan
agreement, the Company would receive, warrants to
acquire 500,000 shares of the Compressent's common
stock at $6.25 per share.
In addition, the Company exchanged $3,500,000 face
amount of its investment in RDC, Series A Bonds for
56,000 shares of Compressent, 7.5% cumulative
convertible preferred stock, which would be
convertible into 560,000 shares of Compressent's
common
F-22
<PAGE> 43
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
stock and an option to acquire 500,000 shares of
Compressent's common stock for $6.25 per share.
On May 20, 1998, the Company and Compressent
terminated the loan agreement before any loan was
made thereunder. In addition, the parties rescinded
the preferred stock and warrant purchase by each
party returning to the other the securities
originally exchanged. However, Compressent, upon the
original receipt of the RDC bonds, borrowed
approximately $2,000,000, pledging the bonds as
collateral. In this connection, upon termination of
the agreement, the Company assumed the approximate
$2,000,000 loan, and agreed to receive 1,333,333
unregistered shares of Compressent common stock. The
Company and the lender have agreed to extend the due
date of the loan to January 1999. In addition, the
Company will issue 150,000 shares of its common stock
to the lender and receive 100,000 shares of
Compressent common stock plus warrants to purchase
100,000 shares of Compressent common stock at $1.00 a
share.
In July 1998, the Company entered into an agreement
to purchase, for substantial amounts, three
additional thoroughbred race tracks: Louisiana Downs,
Thistledown and Remington Park. In this connection,
the Company paid a $2,000,000 refundable deposit to
the sellers and has until September 24, 1998 to
complete its due diligence and financing arrangements
and decide if it intends to complete the transaction.
In July 1998, the Company sold $3,500,000 face amount
of its investment in RDC Series A Bonds for
$2,150,000. The Company has the option to repurchase
the bonds on or before January 1, 1999 for $2,150,000
plus accrued interest.
14. EARNINGS PER SHARE The following reconciles the components of the
earnings per share (EPS) computation:
F-23
<PAGE> 44
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
For the years ended December 31, 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings per common share
Income from continuing operations
available to common shareholders $ 519,890 8,090,594 $ .06 $2,849,174 7,278,257 $ .39
Effect of Dilutive Securities:
Stock options -- 25,510 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Income from continuing operations
available to common shareholders
plus assumed conversions $ 519,890 8,116,104 $ .06 2,849,174 7,278,257 $ .39
======================================================================================================================
</TABLE>
Options to purchase 300,000 shares and 115,000 shares
of common stock at $4.00 and $2.00 per share were
outstanding during 1997 and 1996, respectively, but
were not included in the computation of diluted EPS
as the options' exercise price was greater than the
average market price of the common shares. The
115,000 options, which expire in 1998 were
outstanding at December 31, 1996 and were exercised
in 1997; the 300,000 options which expire in 2002,
were outstanding at December 31, 1997.
F-24
<PAGE> 1
EXHIBIT 8.12
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT dated as of December 1, 1997, between Retama
Development Corporation having an office at 1 Retama Parkway, Selma,
Texas 78154 ("Owner"), Retama Partners, Ltd. having an office at 1964
South Alamo, San Antonio, Texas 78204 ("License Holder"), and Retama
Entertainment Group, Inc., a Texas Limited Liability Corporation,
having an office at 1 Retama Parkway, Selma, Texas 78154 ("Operator").
ARTICLE I
LIMITATIONS ON AUTHORITY OF OPERATOR
1.1 In addition to the other provisions of this Agreement which
limit the actions which Operator may take on its own behalf or on
behalf of Owner, Operator may not, without the prior written consent of
Owner (which consent shall not be unreasonably withheld or delayed),
negotiate or execute any of the following types of agreements on its
behalf or on behalf of Owner for leasing, licensing or granting of
concessions tbr commercial space or services at the Class I Horse
Racetrack located in the City of Selma, Bexar County, Texas (the
"Racetrack") or for providing services with respect to the Racetrack:
(a) Agreements providing for the sale or acquisition of real
property or of personal property which is not to be used in
the ordinary course of the business of operating the
Racetrack;
(b) Agreements which have a term or any commitment by Owner
or Operator in excess of one year, except agreements or
purchases approved and set tbrth in the annual Business Plan
as hereinafter defined in Section 4.4(a).
(c) Agreements which require aggregate expenditure by Owner
in excess of $250,000.00 except agreements or purchases
approved and set forth in the annual Business Plan.
ARTICLE II
TERM
2.1 This agreement shall be effective upon the Effective Date (the
"Commencement Date"), and shall continue in force until 11:59 p.m.,
November 1, 2000. Notwithstanding the foregoing, the Owner may extend
the Agreement, at its sole option, to 11:59 p.m. on November 1, 2002,
by giving to Operator not less than ninety (90) days
<PAGE> 2
prior written notice of its intention to extend this Agreement. Should
Owner chose to extend this Agreement, Operator may, but is not required
to, agree to such extension.
ARTICLE III
OPERATION OF RACETRACK BY OPERATOR
3.1 During the term of this Agreement, Operator shall operate the
Racetrack, considering the physical characteristics of the Racetrack
and the markets available to it, shall provide or cause to be provided
all amenities in connection therewith which are customary and usual to
such an operation and shall conduct regular horse race meetings with
wagering on the results and related activities as permitted by the
Texas Racing Commission in a manner calculated to optimize financial
performance.
3.2 Owner and License Holder engage Operator, as an independent
contractor, to be the exclusive operator and manager of the Racetrack
during the term of this Agreement upon the terms and conditions of the
Agreement. Subject to the provisions of Article I and the other
provisions of this Agreement, Operator shall have absolute control and
discretion in the operation, direction, marketing, maintenance, and
management of the Racetrack, including the authority to enter into
agreements and take such other actions, as an independent contractor,
but on behalf of Owner. as Operator shall reasonably deem appropriate,
in its name on behalf of the Owner or in Owner's name except as
expressly provided herein to the contrary.
3.3 Subject to the other terms and provisions of this Agreement,
Operator shall have the exclusive right to hire, discharge, supervise,
promote, train, determine salaries and benefits of, and establish
personnel policies and incentives for and otherwise handle relations
with Racetrack personnel. All Racetrack personnel shall be employees of
Operator, other than contracted labor and/or services such as
Grandstand cleaning.
3.4 Notwithstanding the powers and rights granted to Operator
pursuant to this Article III, Operator must operate the Racetrack
consistent with the provisions of the Texas Racing Act and the rules of
the Texas Racing Commission.
ARTICLE IV
REPORTING, OPERATING BUDGETS, AND CAPITAL BIJDGETS
4.1 Within sixty (60) days after the end of each Fiscal Year of
Owner ("Fiscal Year") that ends during the term of this Agreement,
Operator shall submit to Owner a balance sheet, a statement of
operations and a statement of net cash flow (the "Annual Financial
Statements"), in comparative form with the preceding Fiscal Year, all
in
<PAGE> 3
reasonable detail, in accordance with generally accepted accounting
principles. Fiscal Year shall be defined as the calendar year.
4.2 (a) Beginning on the Commencement Date, Operator shall keep or
cause to be kept, for the account of Owner, complete and accurate books
of account and other records reflecting the results of the operation of
the Racetrack, on an accrual basis in accordance with generally
accepted accounting principles.
(b) Owner and License Holder may through its duly appointed
agents, inspect all such operating reports, books and records during
normal daytime business hours at the racetrack or the offices of the
Operator, at whichever locations any such records are maintained from
time to time.
(c) Operator shall obtain an audit of the financial statements
which shall be completed within 180 days of the fiscal year end. The
auditor shall be approved bv Owner.
4.3 Within tbrty five (45) days alter the end of each month during
the term of this Agreement, Operator shall submit to Owner, Trustee and
License Holder a financial statement showing the financial results of
operation of the Racetrack tbr such month, together with the financial
results of the operation for the period from the beginning of the
Fiscal Year to the end of such month. Such statement shall: (i) be in
customary form, providing comparison with the items contained in the
current Business Plan (as defined in Section 4.4(a) which has been
approved by Owner or has otherwise been approved as provided in Section
4.4(c) and with the prior Fiscal Year's results; (ii) be taken from the
books and records with respect to the Racetrack maintained by the
Operator; (iii) be prepared on the accrual basis in accordance with
generally acceptable accounting principles; and (iv) include a
statement of operations (with budget variances including variances in
admissions and handle), a balance sheet, a reconciliation cash flow,
and any other financial schedules rcasonably requested by Owner or
License Holder.
4.4 (a) At least one hundred twenty (120) days before the end of
each Fiscal Year during the term of this Agreement, Operator shall
submit to Owner and License Holder, for written approval, an annual
Business Plan (the "Business Plan") for the operation of the Racetrack
for the forthcoming Fiscal Year. The Business Plan for each Fiscal Year
shall consist of: (i) an operating budget (the "Operating Budget")
showing, in reasonable detail, the projected or estimated revenue and
expenses, including reconciliation of cash flow, in respect of the
Racetrack for the Fiscal Year on a month-to-month basis; and (ii) a
capital budget (the "Capital Budget") showing in reasonable detail, the
projected or estimated capital expenditures to be made with respect to
the Racetrack for such Fiscal Year. Operating projections for the
Fiscal Year shall include a description of the methods to be employed
and the practices, policies and strategies to be adopted in order to
achieve such projections. The form of the Business Plan will be in the
form attached hereto as Exhibit ~'A", as such form may be modified
hereafter with the consent of Owner and Operator. The expenditures in
any Capital Budget shall be shown
<PAGE> 4
by fiscal month or quarter for each Fiscal Year (or portion thereof')
covered by the Capital Budget. All original and updated Capital Budgets
shall cover a minimum of twelve (12) fiscal months.
(b) Owner and Operator shall jointly review each Business Plan and
all of the items constituting the Business Plan and shall approve the
Business Plan and attempt to resolve any differences of opinion with
respect to the contents of the Business Plan.
(c) Owner shall give its written approval or disapproval of the
Business Plan not later than thirty (30) days after the delivery of the
proposed Business Plan to Owner by Operator. If Owner does not approve
or disapprove any portion of such Business Plan within such 30-day
period, then Owner shall be deemed to have approved the Business Plan
as submitted by Operator. If Owner objects to all or any portion of
such Business Plan, then Owner shall noti~, Operator of the reasons for
its objections. and Owner and Operator shall use their reasonable
efforts to agree in respect to the items to which Owner objects. Should
Owner and Operator not reach agreement on all or any portion of the
Business Plan prior to the commencement of the Fiscal Year to which
such Business Plan relates, Operator shall be entitled to operate the
Racetrack in accordance with the immediately prior Fiscal Year's
Business Plan (or those portions of the current Business Plan which
have been agreed upon by Owner and Operator or that Owner has not
disapproved), for the Fiscal Year covered by the Business Plan, pending
Owner's approval of a new Business Plan, or such disputed portions
thereof, for such Fiscal Year. With regard to the portions of the
Business Plan as to which agreement has not yet been reached, Operator
shall operate the Racetrack at rates or levels of expenditures
comparable to those of the preceding Fiscal Year with suitable
adjustments of rates and expenses for such items or portions thereof as
reasonably dictated by inflationary factors and for such other items
included within the disputed portions of the Business Plan which have
been agreed upon by Owner and Operator. Any interim business plan used
pursuant to this Section 4.4(c) shall be ret~rred to as the Interim
Business Plan.
(d) Once a Business Plan has been approved or deemed approved by
Owner (or portions thereof have been approved or an Interim Business
Plan has been deemed approved as proved for in Section 4.4[c]),
Operator may incur expenditures set forth in such Business Plan or
Interim Business Plan.
(e) For the purposes of reviewing the operation and management of
the Racetrack, including, but not limited to, Business Plans proposed
by Operator and such other matters as Owner may determine, Owner and
Operator shall meet as frequently and at such place, date, and time and
among such persons, all as Owner shall reasonably require. Without
limiting the foregoing, Operator agrees that at least four times each
Fiscal Year (e.g., on or about January 10, April 10, July 10, and
October 10) Owner and Operator shall review in particular the Business
Plan for such Fiscal Year, and in the case of the last meeting
scheduled before the end of the Fiscal Year, the Business Plan proposed
by Operator for the next succeeding Fiscal Year. Amendments to the
<PAGE> 5
Businesses Plan shall be made as agreed between Owner and Operator to
reflect changes in business activity or other factors affecting
economic performance.
4.5 Subject to approval oF Owner, which approval shall not be
unreasonably withheld or delayed, Operator shall have the right to
"subcontract" concessions or other service contracts when such action
is in the best interest of the Racetrack. Any such contract shall
comply with the provisions of Rev. Proc. 93-19, as amended by the
Internal Revenue Service.
4.6 Owner shall not during the term of this agreement compete with
the duties reserved to Operator by this Agreement.
ARTICLE V
BANK ACCOUNTS AND CASH DISBURSEMENTS
5.1 The Owner shall establish one or more commercial banking
accounts as provided for in the Business Plan and the Indenture.
Operator shall designate at least two employees of Operator who will
have signature authority on such accounts. Operator shall take all
necessary actions to make the daily transfers from such accounts held
by the Trustee under the Indenture as required thereby. The accounts
described in this Section 5.1 shall be referred to as the Agency
Accounts. Operator shall annually present to Owner a list of employees
with signature authority. Owner may request bonding of employees with
signature authority if adequate insurance is not in place covering the
actions of such persons.
5.2 Owner shall bear all losses resulting t(Y)om any failure or
insolvency of the bank, trust company or other financial institution in
which the Agency Accounts or the investments authorized by Section 5.3
are maintained. Operator shall maintain the Agency Accounts at either
Frost National Bank, Banc One or another financial institution
acceptable to Owner. Upon the termination of this Agreement, and the
payment to Operator of all amounts due upon such termination, all
remaining amounts in the Agency Accounts shall be transferred to Owner.
5.3 After adequate working capital reserves have been provided in
accordance with the current approved Business Plan and the Indenture,
Operator shall pay to the Trustee from the Agency Accounts any fund not
required for current obligations per the terms of the Indenture.
Surplus funds shall be invested by Operator in bank certificates of
deposit, repurchase agreements, treasury bills or similar securities,
or money market or other day-to-day depository accounts, in accordance
with the procedures proposed by Operator and approved by Owner, and in
accordance with the Indenture.
5.4 The Operator shall pay out of Agency Accounts all Racetrack
Costs incurred by the Owner or by the Operator on behalf of Owner.
<PAGE> 6
ARTICLE VI
OPERATOR'S FEES
6.1 As consideration for its services hereunder, Operator shall be
entitled to receive a monthly fixed management ibe (the "Fixed
Management Fee") in the amount of $15,000.00 plus, subject to the
limitations set forth in this Section, a variable management fee (the
"Variable Management Fee"), which together with the Fixed Management
Fee are collectively retbrred to as the "Management Fees." The Fixed
Management Fee shall be payable in arrears on or before the first
working day of each month during the term of this Agreement. The
Variable Management Fee shall be payable in arrears on the first day of
August for the preceding Fiscal Year. It is the intention of the Owner
and the Operator that the Management Fees comply with the terms and
provisions of Rev. Proc. 93-19. Until such time as all bonded
indebtedness related to the project is discharged in full, the
Management Fees set forth in this Article VI shall not be amended
unless Owner first obtains an opinion of nationally recognized bond
counsel, to the effect that such changes shall not adversely affect the
exclusion from gross income under Section 103(a) of the Internal
Revenue Code of 1986, as amended, of interest on the Bonds.
6.2 The Variable Management Fee is an amount equal to 25% of the
profit of the Racetrack in excess of $1 million before depreciation and
amortization, and before the payment of debt service on the Bonds
computed in accordance with the Business Plan. By way of example, if
the profit before depreciation and amortization and before the payment
of debt service on the Bonds is $1,500,000, the Variable Management Fee
would equal $125,000 (i.e., $1,500,000 minus $1,000,000 then multiplied
by 25%). Notwithstanding the foregoing, the Variable Management Fee
will not be paid (but will accrue) until the accrued interest on the
Series A Bonds has been paid.
6.3 All calculations shall be based upon the audited Annual
Financial Statements of the Racetrack.
ARTICLE VII
EXPENSES
7.1 For the purposes of this Agreement, the term "Racetrack
Expense" shall mean all costs and other expenditures which are (a) paid
by Operator or are paid on behalf of Owner (and reimbursed by Owner or
Trustee to Operator) or are paid by Owner or Trustee to Operator or to
any person for materials or services provided and which directly relate
to the operation of the Racetrack and are included in the Business Plan
for the Fiscal Year in question which has been approved by Owner and
Operator or has been approved as otherwise provided in Section 4.4(c),
as the case may be, or (b) otherwise expressly provided in this
Agreement to be a Racetrack Expense. Racetrack Expense
<PAGE> 7
shall not include any costs or other expenditures which are paid or
incurred by Operator or any affiliated party and which relate only
indirectly to the ownership, construction, use, occupancy or operation
of the Racetrack, such as, but not limited to, overhead allowances or
charges for Operator or any affiliated party of any off-site personnel
of Operator or any affiliated party who are not providing services
directly to the Racetrack. Only Racetrack Expense shall be incurred by
Operator in a proposed Business Plan.
7.2 Except as provided in Section 7.1, all costs and expenses
incurred by Operator in the performance of Operator's obligations under
this Agreement shall be for and on behalf of Owner and for its account,
and such costs and expenses shall be a Racetrack Expense. Subject to
the provisions of Section 7.1 and this 7.2, Operator sh
<PAGE> 1
EXHIBIT 8.13
AGREEMENT
THIS AGREEMENT dated May 20, 1998, between and among COMPRESSENT
CORPORATION ("COMPRESSENT") and CALL NOW, INC. ("CNI").
WITNESSETH:
WHEREAS, on or about February 6, 1998 and pursuant to a Preferred Stock
and Warrant Purchase Agreement (the "Agreement") between the parties hereto CNI
agreed to purchase 56,000 shares of Series A Convertible Preferred Stock and a
Stock Purchase Warrant to purchase 500,000 shares of Common Stock of Compressent
in exchange for $3,500,000 in principal amount of a Retama Development
Corporation Revenue Refunding Bonds (Series A 1997) (the "Bonds"); and
WHEREAS, in order to resolve certain disputes in connection with the
Agreement the parties have agreed to rescission of the Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereby agree to rescind the Agreement and the sale
of Compressent Preferred Stock and Stock Purchase Warrants thereunder as
follows:
1. The Agreement and all documents executed pursuant thereto or
in connection therewith by the parties hereto are hereby rescinded and shall be
null and void and of no force and effect.
2. Simultaneously herewith and as a part of the rescission
provided for herein, CNI hereby tenders to Compressent all shares of Series A
Convertible Preferred Stock and Stock Purchase Warrant to be purchased pursuant
to the Agreement.
3. Compressent hereby assigns to CNI all of its right, title and
interest in and to the Bonds. The parties acknowledge that the Bonds are subject
to a lien in favor of Hall, Solomon & Howe, Inc. in the approximate amount of
$2,000,000 which CNI hereby assumes and agrees to pay.
<PAGE> 2
In consideration of the diminution of value of the Bonds due to such lien and
assumption thereof by CNI Compressent shall issue to CNI 2,000,000 shares of its
Common Stock. Such shares have not been registered under the Securities Act of
1933 and shall contain a restrictive legend to such effect.
4. Compressent hereby represents and warrants to CNI that:
4.1 Compressent owns all the right, title and interest in
and to the Bonds, free and clear of any security interests, liens, claims and
encumbrances of any kind subject only to the lien set forth above, and has full
right and power effectively to transfer record and beneficial ownership of such
Bonds to CNI pursuant to the terms of this Agreement.
4.2 Compressent has authority to take, and has taken, all
action required to be taken to permit it to enter into and carry out this
agreement. This Agreement has been duly executed and delivered by Compressent
and is valid and enforceable against it in accordance with its terms.
5. CNI hereby represents and warrants to Compressent that it has
authority to take, and has taken, all action required to be taken to permit it
to enter into and carry out this agreement. This Agreement has been duly
executed and delivered by CNI and is valid and enforceable against it in
accordance with its terms.
6. Compressent hereby indemnifies and holds CNI harmless from and
against any and all liabilities, losses, damages and claims (including
attorney's fees) which may be asserted against CNI by any past, present or
future creditor of Compressent arising out of this agreement. The relief
afforded hereunder shall be in addition to all other relief provided by law.
2
<PAGE> 3
7. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their successors and assigns. The parties
shall take such further actions and execute such further instruments as may be
necessary or appropriate to carry out the transactions herein.
8. This Agreement constitutes the entire agreement and
understanding between the parties with respect to the rescission provided for
herein.
9. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
10. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Florida. The parties acknowledge that
Joel Bernstein has acted as attorney for CNI in connection with the Agreement
and this agreement.
11. All representations, warranties, covenants and agreements of
any of the parties hereto made in this Agreement or in any certificate or
document delivered by it pursuant hereto, shall survive the execution and
delivery hereof and the closing hereunder.
IN WITNESS WHEREOF, CNI amd Compressent have caused their corporate
names to be hereunto subscribed and their corporate seals to be hereunto affixed
by their officers thereunto duly authorized.
COMPRESSENT CORPORATION
By: /s/
------------------------------------
Chairman
3
<PAGE> 4
CALL NOW, INC.
By: /s/
------------------------------------
Chairman
4
<PAGE> 1
EXHIBIT 8.14
TERMINATION AGREEMENT
This Termination Agreement made as of this 20th day of May, 1998
between COMPRESSENT CORPORATION ("COMPRESSENT") and CALL NOW, INC. ("CALL NOW").
WHEREAS, on or about February 2, 1998 the parties entered into a Loan
Agreement under which Call Now could lend certain amounts to Compressent (the
"Agreement"); and
WHEREAS, the Agreement was entered into primarily to facilitate a
proposed acquisition by Compressent; and
WHEREAS, the proposed acquisition has not been consummated, the parties
have agreed to terminate such Agreement on the terms set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. The Agreement is hereby terminated by mutual consent of the
parties. The Stock Purchase Warrant issued to Call Now in connection with the
Agreement is hereby cancelled.
2. Call Now hereby releases Compressent from the Commitment Fee
and all other payments due to Call Now under the Agreement. Compressent hereby
releases all rights under the Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date above written by their respective officers thereunto duly authorized.
COMPRESSENT CORPORATION
By: /s/
--------------------------------
Chairman
CALL NOW, INC.
By: /s/
--------------------------------
Chairman
<PAGE> 1
EXHIBIT 8.15
Term Sheet
Retama Bond Investment
Parties:
- - Howe Solomon & Hall ("HSH")
- - International Trading Group, Inc., Individually and on behalf of The ITG
Tax Free Income & Capital Appreciation Fund, Ltd. (collectively, "ITG")
- - Call Now, Inc. ("CNI")
Background:
- - ITG currently holds $3,500,000 face amount of Ratama Series 1997A Bonds
(the "ITG Retama Bonds") which it purchased from HSH in March, 1,008 free
and clear of adverse claims of $2,000,000.
- - HSH loaned ("the Loan") the proceeds of sale of the ITG Retama Bonds to
Compressant Corporation ("Compressant"), and this loan was due and payable
on or before September 1, 1998. CNI has subsequently assumed the Loan and
Compressant has assigned its rights in the ITG Ratama Bonds to CNI.
- - CNI currently owns all of the Issued and outstanding 1997 Series B Ratama
Bonds (the "B Bonds").
- - At the time of purchase of the ITG Retama Bonds, HSH agreed to deliver to
ITG 16,000 shares of common stock and warrants to purchase 50,000 shares
of Compressant common stock at $5.25 per share (collectively the
"Compressant Securities"). To date, the Compressant Securities have not
been delivered to ITG, and they have declined in value to the extent that
ITG will not accept them.
- - At CNI's request, ITG purchased or caused to be purchased from CNI for
$2,150,000 an additional $3,500,000 face amount of Retama Series 1997 A
Bonds (the "HSH Retama Bonds") on July 10, 1998 to be sold to HSH.
- - HSH has arranged a sale of the HSH Retama Bonds for $2,150,000 plus
accrued interest.
- - HSH, ITG and CNI desire to document their respective arrangements with
respect to the ITG Retama Bonds and the HSH Retama Bonds, as follows:
Term Sheet
Retama Bond Investment ITG Page 1
---
HSH
---
CNI
---
<PAGE> 2
Agreement:
- - ITG agrees to sell the HSH Retama Bonds to HSH for $2,150,000 plus half of
the accrued and unpaid interest to date of sale, (ie, half of $338,235.10,
or $169,115.05), for a total purchase price of $2,319,118.05. The sale will
take place as of July 15, 1998 and settlement will be on Friday,
July 17, 1998.
- - When and if paid by the Issuer, ITG will receive the entire $50,000
sinking fund payment in respect to the Retama Bonds and will remit $25,000
to HSH, ITG and HSH will instruct the trustee as to which Bond Numbers
will be sunk from the Retama Bonds.
- - HSH and CNI agree to extend the due date of the Loan until January 1,
1999. ITG acknowledges and consents to said extension.
- - HSH agrees to deliver, or cause to be delivered, to ITG 50,000 shares of
unrestricted Call Now Stock and 25,000 shares of restricted Call Now Stock
upon receiving the 150,000 shares from Call Now. In satisfaction and
replacement of its obligation to deliver the Compressant Securities to
ITG. HSH will deliver said stock to ITG on or before August 15, 1998. On
August 3, 1998, ITG agrees to notify CNI and confirm notification that HSH
has not performed under this section. In the event that HSH has not made
delivery of said stock, CNI would then deliver said Call Now Stock
directly to ITG.
- - HSH and ITG agrees to assign its right and interest to receive 100,000
shares Compressant and 100,000 shares of Compressant warrants to purchase
Compressant Shares at $1.00 to Call Now.
- - Upon receipt of the interest payment due September 1, 1998 on the ITG
Retama Bonds, ITG will remit $86,116 to HSH, which amount includes a
deduction for ITG's cost of carry of ITG Retama Bonds through
July 17, 1998.
- - From and after July 17, 1998, ITG and HSH (or the registered bondholders
acquiring Bonds from ITG or HSH) respectively, shall each be responsible
for their costs of carry for Retama Bonds.
- - Provided CNI pays the Loan in full prior to January 1, 1999, and HSH has
timely delivered the CNI Stock to ITG, CNI shall have an option,
exerciseable on or before January 1, 1999 by written notice to ITG, to
purchase the ITG Retama Bonds for $2,000,000 plus accrued interest. HSH
agrees that payment by CNI of the purchase price of the ITG Retama Bonds,
to ITG will
Term Sheet
Retama Bond Investment ITG Page 2
----
HSH
----
CNI
----
<PAGE> 3
satisfy in full CNI's obligation to HSH under the Loan and ITG's
obligations to HSH and CNI with respect to the ITG Retama Bonds.
- - HSH agrees that it will procure for CNI and option to repurchase the
HSH Retama Bonds for $2,150,000 plus accrued interest on or before January
1, 1988. Exercise of such option and payment of the $2,150,000 plus accrued
interest shall constitute payment in full of the Loan.
- - HSH and CNI releases and discharges ITG and its officers, agents and
employees from any and all liability, claims or obligations in respect of
the transactions described herein. HSH and CNI agree to release, indemnify
and hold ITG, its agents, servants and employees harmless from loss or
liability of any kind in connection with the transactions described herein
and/or any failure by HSH to deliver the HSH Retama Bonds to CNI or
Compressant.
- - In the event that the September 1, 1996 principal and interest payments
due on the Retama Series 1997 A Bonds is not made, CNI agrees to support
the foreclosure rights and actions of the holders of such bonds.
Furthermore, CNI will lose all rights to repurchase the ITG and the HSH
Retama Bonds.
- - In the event CNI fails for any reason to repay the Loan and to acquire all
of the ITG Retama Bonds and the HSH Retama Bonds in accordance with this
Term Sheet on or before January 1, 1988, CNI agrees as follows:
- For so long as ITG and/or HSH own any Retama Series 1997 A Bonds, in
the event that CNI desires to sell H Bonds at or below 80% of par
value:
- CNI grants to ITG and HSH a right of first refusal (the "Right
of First Refusal") to purchase CNI's holdings of B Bonds,
including any such B Bonds which may in the future be converted
to A Bonds. At the time CNI desires to sell any such Bonds, CNI
shall send a written notice by facsimile (the "Sale Notice") to
ITG and HSH describing the principal amount and identity of the
Bonds proposed to be sold, in the event that ITG and HSH and CNI
have not agreed upon the terms of purchase of the Bonds covered
by the Sale Notice, CNI may send ITG and HSH and CNI have agreed
upon the terms of purchase of the Bonds covered by the Sale
Notice, CNI may send ITG and HSH a written notice by facsimile,
by no later than 10:00 A.M. Eastern Time on the fifth business
day after delivery of the Sale Notice to ITG and HSH, setting
forth the proposed purchase price and payment terms of the Bonds
covered by the Sale Notice (the "Price Notice"). ITG and HSH
shall have the right to purchase the Bonds covered by the Sale
Notice in proportion to their ownership (if any) of B Bonds by
paying the purchase price specified in the Price Notice (on
Term Sheet
Retama Bond investment ITG /s/ Page 3
HSH /s/
CNI /s/
<PAGE> 4
the terms specified in the Price Notice) to CNI no later than
5:00 P.M. Eastern Time on the 5th business day after ITG and
HSH's receipt of the Price Notice. In the event ITG or HSH does
not select to purchase its full share of B Bonds, the other party
may exercise the Right of First Refusal with respect to the
remainder of sold B Bonds. Time is of the essence in connection
with the transactions herein. The right described in this Section
4 shall not apply to any sale of the B Bonds to a partnership or
other entity organized by Seller, but subsequent sale of such
Bonds by that partnership or other entity during the term of the
Right of First Refusal shall be subject to such right.
- If ITG and HSH fails to exercise the Right of First Refusal by
making payment for the Bonds covered by the Sale Notice as
specified above, CNI may, not later than 15 days following the
sending of the Price Notice, conclude a sale of the Bonds subject
to the Sale Notice at the price and upon the terms set forth in
the Price Notice. Any proposed sale at a price lower than that
specified in the Price Notice, or on terms different from those
specified in the Price Notice, shall again be subject to ITG and
HSH's Right of First Refusal and shall require strict compliance
by CNI with the procedures described in Section 4.1 of this
Agreement. If ITG and HSH exercises the Right of First Refusal.
CNI shall take such steps as may be necessary and appropriate to
transfer the purchased Bonds to ITG.
- CNI will enter into a remarketing agreement with respect to the
Retama Series 1997 A Bonds and take any and all such steps as are
necessary to permit the A Bonds to be eligible for sale and delivery
through Depository Trust Corporation without restriction on transfer,
sale or distribution by ITC or any subsequent purchaser or holder of
said Bonds.
Signed by ITG, HSH and CNI this 15th day of July, 1998.
International Trading Group, Inc. Howe Solomon & Hall, Inc.
By: /s/ Dan Carter By: /s/ Chris Hall
--------------------------------- -------------------------
Dan Carter, President Chris Hall, Principal
Call Now, Inc.
By: /s/ Bryan Brown
----------------------------------
Bryan Brown, President Call Now
Term Sheet
Retama Bond Investment ITG /s/ DC Page 4
- ---------------------- HSH /s/ CJH
CMI /s/ BPB
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 179,974
<SECURITIES> 11,544,381
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,411,876
<PP&E> 30,852
<DEPRECIATION> 19,793
<TOTAL-ASSETS> 17,412,690
<CURRENT-LIABILITIES> 2,551,399
<BONDS> 1,744,026
0
0
<COMMON> 5,704,965
<OTHER-SE> 5,100,268
<TOTAL-LIABILITY-AND-EQUITY> 17,412,690
<SALES> 0
<TOTAL-REVENUES> 3,069,042
<CGS> 0
<TOTAL-COSTS> 1,969,122
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 288,918
<INCOME-PRETAX> 811,002
<INCOME-TAX> 291,112
<INCOME-CONTINUING> 519,890
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 519,890
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
