<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
Commission File No. 0-27160
CALL NOW, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer in its charter)
Florida 65-0337175
- --------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10803 Gulfdale, Suite 222, San Antonio, TX 78216
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(210) 349-4141
- --------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 8,585,444 shares as of November 9,
1999.
Transitional Small Business Format: No
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<PAGE> 2
PART I - FINANCIAL INFORMATION
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 1,281,598
Accounts Receivable 30,000
Marketable Securities, At Market Value 3,067,649
Note Receivable 750,000
Other 370,337
-----------
Total Current Assets $ 5,499,584
Furniture And Equipment (Less Accumulated
Depreciation of $27,804) 5,395
Land 2,369,075
Long-Term Notes and Loan Receivables 911,286
Deferred Tax Assets 592,895
Other 269,507
-----------
Total Assets $ 9,647,742
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 88,576
Current Portion of Mortgage Payable 16,169
Accrued Expenses 705,270
Accrued Expenses - Other 301,654
-----------
Total Current Liabilities $ 1,111,669
NON-CURRENT LIABILITIES
Mortgage Payable, less current maturity 1,713,052
-----------
Total Liabilities 2,824,721
-----------
Commitment and Contingencies 0
Minority Interest in Consolidated Subsidiary 12,322
-----------
STOCKHOLDERS' EQUITY
Preferred stock, no par, shares authorized 800,000 shares 0
none outstanding
Common Stock, no par shares authorized 50,000,000, 6,205,778
8,585,444 shares issued and 8,495,444 shares outstanding
Retained Earnings 1,050,575
Less subscriptions notes receivable for 115,000 shares of common stock (230,000)
Accumlulated other comprehensive loss (9,604)
Treasury stock, at cost (206,050)
-----------
Total Stockholders' Equity 6,810,699
-----------
Total Liabilities and Stockholders' Equity $ 9,647,742
===========
</TABLE>
<PAGE> 3
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME
Race Track Operating Income $ 1,682,204 $ 1,574,129 $ 4,428,118 $ 3,994,771
Management Fees 45,000 45,000 135,000 135,000
Miscellaneous 0 -- -- --
----------- ----------- ----------- -----------
Total Income 1,727,204 1,619,129 4,563,118 4,129,771
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Racetrack 1,682,979 1,609,373 4,486,177 4,092,592
General and Administrative 351,372 388,856 1,205,793 1,075,296
Interest 38,998 91,967 205,793 183,403
Depreciation and Amortization 990 892 3,190 2,498
----------- ----------- ----------- -----------
Total Cost and Expenses 2,074,339 2,091,088 5,904,381 5,353,789
----------- ----------- ----------- -----------
Income (Loss) from continuing operations before (347,135) (471,959) (1,341,263) (1,224,018)
other income and expenses, income taxes, and
minority interest
Other Income and Expenses 92,401 (3,747,504) 53,244 (3,487,275)
----------- ----------- ----------- -----------
Income (Loss) before income taxes and (254,734) (4,219,463) (1,288,019) (4,711,293)
minority interest
Income Tax Benefit (Expenses) 98,300 1,408,884 409,300 1,632,194
----------- ----------- ----------- -----------
Income (Loss) before minority interest (156,434) (2,810,579) (878,719) (3,079,099)
Minority Interest 2,055 (11,188) 7,310 (16,673)
----------- ----------- ----------- -----------
Net Income (Loss) $ (154,379) $(2,821,767) $ (871,409) $(3,095,772)
=========== =========== =========== ===========
Earnings Per Share - Basic and Diluted:
Net Income (0.02) (0.34) (0.10) (0.44)
</TABLE>
<PAGE> 4
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net (Loss) $ (871,409) $(3,095,772)
----------- -----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and Amortization 4,546 2,498
Income Tax Refund Claim 1,871,787 --
Financing transaction loss -- 2,181,250
Loss on sale of marketable securities 150,159 1,688,236
Changes in assets and liabilities:
(Increase) Decrease in Assets:
Accounts Receivable 18,999 (65,000)
Deferred Tax Asset (409,300) (1,632,194)
Other Current Assets (338,543) 53,101
Other Assets (57,811) (51,344)
Increase (Decrease) in Liabilities:
Accounts Payable 37,227 5,520
Accrued Expenses (120,736) 33,796
Income Tax Payable -- (854,518)
Minority Interest (7,310) 16,873
----------- -----------
Total Adjustments 1,149,018 1,378,218
----------- -----------
Net Cash provided by (used for) Operating Activities 277,609 (1,717,554)
----------- -----------
Cash flows from Investing Activities:
Proceeds from the sale of marketable securities 4,429,021 2,150,000
Proceeds from the sale of treasury bills -- 1,305,055
Capital Expenditures -- (2,347)
Purchase of marketable securities (2,000,000) --
Investment in equity security -- (60,000)
Notes and Loans Receivable:
Advances (15,448) (1,450,000)
Collections 50,000 600,000
Proceeds from bond redemption 10,000
----------- -----------
Net Cash provided by Investing Activities 2,473,573 2,542,708
----------- -----------
Cash flows from Financing Activities
Payment on Note (2,000,000) 2,000,000
Loan Receivable (250,000)
Issue of Stock for Financing Transaction -- 431,250
Financing Transaction Loss 0 (2,181,250)
Payment of Long Term Debt (14,806) (13,557)
----------- -----------
Net Cash (used for) provided by Financing Activities (2,014,806) (13,557)
----------- -----------
Net Increase in Cash 736,376 811,597
Cash Balance, Begin of period 545,222 179,974
----------- -----------
Cash Balance, End of period $ 1,281,598 $ 991,571
=========== ===========
</TABLE>
<PAGE> 5
OTHER INCOME AND EXPENSES
Other income and (expense) is composed of the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income $ 92,401 $ 75,805 $ 203,403 $ 334,838
Gain (loss) on sale of
Marketable securities (1,688,236) (1,688,236)
Financing Transaction loss (2,181,250) (2,181,250)
Miscellaneous income -- 46,177 -- 47,373
Sale of securities -- -- (150,159) --
----------- ----------- ----------- -----------
$ 92,401 $(3,747,504) $ 53,244 $(3,487,275)
=========== =========== =========== ===========
</TABLE>
RECLASSIFICATIONS
Certain reclassifications have been made to prior year's financial
statements in order to conform to the current presentation.
SALE OF SECURITIES
On May 25, 1999 an agreement was signed between the Company and two
trusts known as the Global Trust and the Hemisphere Trust (Trusts) to
sell 50% of the Company's investment in the Retama Development
Corporation Special Facilities Revenue Bonds.
The agreement called for the Company to exercise an option to purchase
from ITG Fund $6,950,000 in aggregate principal amount of Retama
Development Corporation (RDC) Series 1997A bonds for a total exercise
price of $4,775,000. The agreement further provided for the Trusts to
purchase these bonds from the Company for a total price of $4,862,500
plus accrued interest on the Series A bonds and to deliver to the
Company $2,000,000 of these Series A bonds plus the payment of the
Compressent debt assumed by the Company, and the Company to deliver to
the Trusts $42,462,500 in the Series B bonds of RDC.
The agreement further provided for the Trusts to assume 50% of the
Company's obligation to the RDC for the repairs to the lake (not to
exceed a total of $600,000) and to provide 50% of the Chief Executive
Officer's compensation of the track operations.
<PAGE> 6
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with the generally
accepted accounting principles have been omitted. However, in the opinion of
management, all adjustments (which include only normal recurring accruals)
necessary to present fairly the financial position and results of operations for
the period presented have been made. The results for interim periods are not
necessarily indicative of trends or of results to be expected for the full year.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's annual report on Form
10-KSB, as amended.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
LIQUIDITY AND CAPITAL RESOURCES.
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO 1998.
RESULTS OF OPERATIONS:
a. REVENUES
The Company's revenues for the three months ended September
30, 1999 were $1,727,204 as compared to $1,616,129 for the
three months ended September 30, 1998. For the nine months
ended September 30, 1999, revenues were $4,563,118 compared to
$4,129,771 for the nine months ended September 30, 1998. The
increase was due primarily to increased racetrack attendance
and the improvement of simulcast betting facilities.
Interest income for the three months ended September 30, 1999
was $92,401 as compared to $75,805 for the three months ended
September 30, 1998. For the nine months ended September 30,
1999, interest income was $203,403 compared to $334,838 for
the nine months ended September 30, 1998. The decrease was due
to the redemption of Treasury Bills and reduction of notes
receivable.
b. EXPENSES
(1.) Racetrack expenses for the three months ended
September 30, 1999 were $1,682,979 compared to
$1,609,373 for the three months ended September 30,
1998. For the nine months ended September 30, 1999,
racetrack expenses were $4,486,177 and $4,092,592 for
the nine months ended September 30, 1998. The increase
was due to increased racetrack activity.
<PAGE> 7
(2.) GENERAL AND ADMINISTRATIVE
Expense for the quarter ended September 30, 1999 was
$351,372 compared to $388,856 for the September 30, 1998
quarter. For the nine months ended September 30, 1999
general and administrative expenses were $1,205,793 and
$1,075,296 for the nine months ended September 30, 1998.
The increase is due to the increase in racetrack
activity.
(3.) INTEREST
Interest expense for the quarter ended September 30,
1999 was $38,998 compared to $91,967 for the September
30, 1998 quarter. For the nine months ended September
30, 1999, interest expense was $209,221 compared to
$183,403 for the nine months ended September 30, 1998.
The increase was due to increased borrowing in 1999.
(4.) INCOME TAX
For the quarter ended September 30, 1999 the Company
recorded income tax benefit of $98,300 compared to
$1,408,884 for the three months ended September 30,
1998. Income tax benefit for the nine months ended
September 30, 1999 was $409,300 compared to $1,632,194
for the nine months ended September 30, 1998. The
increase in 1998 was due to the increase in net
operating loss and loss on financing transactions.
a. NET LOSS
The Company had a net loss of $154,379 for the quarter
ended September 30, 1999 compared to a net loss of
$2,821,767 for the quarter ended September 30, 1998. For
the nine months ended September 30, 1999, there was a
net loss of $871,409 compared to a net loss of
$3,095,772 for the nine months ended September 30, 1998.
The decrease in net loss resulted primarily from an
increase in racetrack operations and the loss on the
sale of RDC Bonds in 1998.
b. EARNINGS PER SHARE
For the three months ended September 30, 1999, the
Company recorded a net loss of $.02 per share compared
to a net loss of $.34 per share for the September 30,
1998 quarter. The net loss per share for the nine months
ended September 30, 1999 was $.10 compared to $.44 for
the nine months ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES:
For the nine months ended September 30, 1999, cash
provided from operations was $277,609 compared to cash
used by operations of $1,717,554. The increase is due
primarily to the collection of the Federal income tax
refund claim.
Cash from investing activities for the nine months ended
September 30, 1999, was $2,473,573 compared to
$2,542,708 for the nine months ended September 30, 1998.
The decrease was due to net proceeds from the sale and
purchase of RDC Bonds and a reduction of notes and loans
advances and collections.
<PAGE> 8
For the nine months ended September 30, 1999, cash used
for financing activities was $2,014,806 compared to
$13,557 for the nine months ended September 30, 1998.
The increase was for the payment of a short-term note.
The Company has investments primarily in Retama
Development Corporation Bonds. The fair market value of
the securities at September 30, 1999 was $3,067,649.
In addition, the Company executed a demand note payable
to Barron Chase in the amount of $750,000. The note pays
the company $7,500 per month which the Company utilizes
as working capital. The note matures in August 2000.
FEDERAL INCOME TAX
The refund claim of $1,871,787 was collected in June
1999.
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.
INVESTMENT COMPANY ISSUE
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
semiannual installments of $85,721 beginning
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 study 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.
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
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 included the Retama
Park Racetrack in suburban San Antonio, Texas.
<PAGE> 9
5. The balance of the Company's holdings in
Compressent were registered by Compressent in its
recent registration statement on Form 9-1. In
November 1997 the Company disposed of 76,000 of
such shares.
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.
7. In December 1998 the Company disposed of 200,000
shares of Compressent common stock.
8. In April 1999, the Company disposed of the balance
of its investment in the common stock of
Intermedia Communications, Inc.
9. In May 1999, the Company reduced its investment in
the Series A Retama Development Bonds to
$2,000,000 and sold one-half of the Series B bonds
(face amount of $42,462,500).
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 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 timely basis
or at all would, under certain circumstances have a
materially adverse effect on the Company.
<PAGE> 10
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
<PAGE> 11
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CALL NOW, INC.
By: /s/ William M. Allen
--------------------------------
William M. Allen
Chairman (Chief Executive Officer)
By: /s/ James D. Grainger
--------------------------------
James D. Grainger
Vice President-Finance
Principal Accounting Officer
November 11, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,281,598
<SECURITIES> 3,067,649
<RECEIVABLES> 30,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,499,584
<PP&E> 33,199
<DEPRECIATION> 27,804
<TOTAL-ASSETS> 9,647,742
<CURRENT-LIABILITIES> 1,111,869
<BONDS> 1,713,052
0
0
<COMMON> 6,205,778
<OTHER-SE> 604,921
<TOTAL-LIABILITY-AND-EQUITY> 9,647,742
<SALES> 0
<TOTAL-REVENUES> 4,563,118
<CGS> 0
<TOTAL-COSTS> 4,486,177
<OTHER-EXPENSES> 1,418,204
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 209,221
<INCOME-PRETAX> (1,288,019)
<INCOME-TAX> (409,300)
<INCOME-CONTINUING> (878,719)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (871,409)
<EPS-BASIC> (.10)
<EPS-DILUTED> (.10)
</TABLE>
