<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.20549
FORM 1O-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 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 (IRS Employer Identification No.)
of incorporation or organization)
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 September 22,
1999.
Transitional Small Business Format: No
----
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Registrant's Financial Statements are filed herewith following the
signature page.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
LIQUIDITY AND CAPITAL RESOURCES.
THREE AND SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO 1998.
RESULTS OF OPERATIONS:
a. REVENUES
The Company's revenues for the three months ended June 30,
1999 were $1,790,136 as compared to $1,664,517 for the three
months ended June 30, 1998. For the six months ended June 30,
1999, revenues were $2,836,914 compared to $2,510,642 for the
six months ended June 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 June 30, 1999 was
$56,901 as compared to $56,333 for the three months ended June
30, 1998. For the six months ended June 30, 1999, interest
income was $111,002 compared to $259,033 for the six months
ended June 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 June 30,
1999 were $1,745,265 compared to $1,619,517 for the three
months ended June 30, 1998. For the six months ended June 30,
1999, racetrack expenses were $2,803,198 and $2,420,642 for
the six months ended June 30, 1998. The increase was due to
increased racetrack activity.
(2.) GENERAL AND ADMINISTRATIVE
Expense for the quarter ended June 30, 1999 was $462,668
compared to $387,337 for the June 30, 1998 quarter. For the
six months ended June 30, 1998 general and administrative
expenses were $856,855 and $749,007 for the six months ended
June 30, 1998. The increase is due to the increase in
racetrack activity.
(3.) INTEREST
Interest expense for the quarter ended June 30, 1999 was
$96,118 compared to $49,387 for the June 30, 1998 quarter. For
the six months ended June 30, 1999, interest expense was
$170,224 compared to $91,436 for the six months ended June 30,
1998. The increase was due to increased borrowing in 1999.
<PAGE> 3
(4.) INCOME TAX
For the quarter ended June 30, 1999 the Company recorded
income tax benefit of $191,000 compared to $128,060 for the
three months ended June 30, 1998. Income tax benefit for the
six months ended June 30, 1999 was $311,000 compared to
$223,310 for the six months ended June 30, 1998. The increase
is due to the increase in net operating loss.
a. NET LOSS
The Company had a net loss of $416,668 for the quarter ended
June 30, 1999 compared to a net loss of $204,557 for the
quarter ended June 30, 1998. For the six months ended June 30,
1999, there was a net loss of $715,355 compared to a net loss
of $274,005 for the six months ended June 30, 1998. The
increase in net loss resulted primarily from an increase in
racetrack operations and the loss on the sale of RDC Bonds.
b. EARNINGS PER SHARE
For the three months ended June 30, 1999, the Company recorded
a net loss of $.05 per share compared to a net loss of $.02
per share for the June 30, 1998 quarter. The net loss per
share for the six months ended June 30, 1999 was $.08 compared
to $.03 for the six months ended June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES:
During the quarter ended June 30, 1999, 1,015,066 was provided
by operating activities compared to 190,399 used for operating
activities for the three months ended June 30, 1998. For the
six months ended June 30, 1999, cash provided from operations
was $692,372 compared to cash used by operations of $338,719.
The increase is due primarily to the collection of the Federal
income tax refund claim.
Cash flows provided by investing activities were $2,479,022
compared to $208,586 for the quarter ended June 30, 1998. Cash
from investing activities for the six months ended June 30,
1999, was $2,463,574 compared to $243,794 for the six months
ended June 30, 1998. The increase was due to net proceeds from
the sale and purchase of RDC Bonds.
For the three months ended June 30, 1999, cash used for
financing activities was $2,000,000 compared to $0 for the
quarter ended June 30, 1998. The Company used $2,007,240 for
financing activities for the six months ended June 30, 1999,
compared to $6,629 for the six months ended June 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
June 30, 1999 was $3,078,076.
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.
<PAGE> 4
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.
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.
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.
<PAGE> 5
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> 6
CALL NOW, INC.AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999
(UNAUDITED)
ASSETS
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Current Assets:
Cash and cash equivalents $1,593,928
Accounts receivable 15,000
Marketable securities at market value 3,078,076
Note receivable 750,000
Other 393,021
----------
Total Current Assets $5,830,025
Furniture and equipment (less accumulated
depreciation of $26,884) 6,315
Land 2,369,075
Long term notes and loan receivables 911,286
Deferred tax assets 493,984
Other 245,748
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TOTAL ASSETS $9,856,433
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturity of mortgage payable $ 15,473
Accounts payable 152,214
Accrued expenses 665,597
Accrued expenses-other 325,000
-----------
Total Current Liabilities $ 1,158,284
Long-term liabilities:
Mortgage payable, less current maturity 1,721,314
-----------
Total Liabilities $ 2,879,598
-----------
Minority interest in consolidated subsidiary 10,267
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Stockholders' equity:
Preferred stock, no par, 800,000 shares
authorized, none outstanding
Common stock, no par, 50,000,000 shares
authorized, 8,585,444 shares issued, and
8,495,444 shares outstanding 6,205,778
Retained earnings 1,206,629
Stock subscription notes receivable (230,000)
Accumulated other comprehensive loss (9,789)
Treasury stock, at cost (206,050)
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Total Stockholders' Equity 6,966,568
-----------
Total Liabilities And
Stockholders' Equity $ 9,856,433
===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 7
CALL NOW, INC.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
--------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $ (416,668) $ (211,231) $ (715,355) $ (274,005)
Adjustments to reconcile net loss to net cash
used in operating activities:
Income tax refund claim 1,871,787 -- 1,871,787 --
Issue of common stock for litigation
settlement -- 69,563 -- 69,563
Depreciation and amortization 2,706 803 3,626 1,606
Loss on sale of securities 150,159 -- 150,159 --
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 15,000 (15,000) 33,999 (15,000)
Deferred tax asset (191,000) (223,310) (311,000) (223,310)
Other current assets (323,930) 195,716 (361,227) 69,300
Other assets (26,254) (14,938) (34,054) (36,834)
Increase (decrease) in liabilities:
Accounts payable 94,051 (49,533) 100,865 (6,453)
Accrued expenses (160,070) (40,805) (137,063) 70,729
Income tax payable -- 95,250 -- --
Minority interest (715) 3,086 (9,365) 5,685
--------------------------------------------------------
Net cash provided by (used for) operating activities 1,015,066 (190,399) 592,372 (338,719)
--------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of marketable
securities 4,429,022 -- 4,429,022 --
Proceeds from sale of treasury bills -- 1,305,055 -- 1,305,055
Purchase of marketable securities (2,000,000) (45,208) (2,000,000) (60,000)
Notes and loans receivable:
Advances -- (1,300,000) (15,448) (1,300,000)
Collections 50,000 250,000 50,000 300,000
Capital expenditures -- (1,261) -- (1,261)
--------------------------------------------------------
Net cash provided by investing activities 2,479,022 208,586 2,463,574 243,794
--------------------------------------------------------
Cash flows from financing activities
Payment on note (2,000,000) -- (2,000,000) --
Payment on long term debt -- -- (7,240) (6,629)
--------------------------------------------------------
Net cash (used for) financing activities (2,000,000) -- (2,007,240) (6,629)
--------------------------------------------------------
Net increase (decrease) in cash 1,494,088 18,187 1,048,706 (101,554)
Cash balance, beginning of period 99,840 60,233 545,222 179,974
--------------------------------------------------------
Cash balance, end of period $ 1,593,928 $ 78,420 $ 1,593,928 $ 78,420
========================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 8
CALL NOW, INC.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
-------------------------- ---------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Racetrack income $ 1,745,136 $ 1,619,517 $ 2,745,914 $ 2,420,642
Management fees 45,000 45,000 90,000 90,000
---------------------------------------------------------------
Total revenue 1,790,136 1,664,517 2,835,914 2,510,642
---------------------------------------------------------------
COSTS AND EXPENSES:
Racetrack 1,745,265 1,619,517 2,803,198 2,420,642
General and administrative 462,668 387,337 856,855 749,007
Interest 96,118 49,397 170,224 91,436
Depreciation and amortization 1,210 803 2,200 1,606
---------------------------------------------------------------
Total costs and expenses 2,305,261 2,057,054 3,832,477 3,262,691
---------------------------------------------------------------
Operating (loss) before other income and
expenses,income taxes,and minority interest (515,125) (392,537) (996,563) (752,049)
Other income and (expense) (93,258) 56,833 (39,157) 260,219
---------------------------------------------------------------
(Loss) before income taxes and minority interest (608,383) (335,704) (1,035,720) (491,830)
Income tax bebefit 191,000 128,060 311,000 223,310
---------------------------------------------------------------
(Loss) before minority interest 417,383 (207,644) (724,720) (268,520)
Minority interest 715 3,087 9,365 (5,485)
---------------------------------------------------------------
Net (loss) (416,668) (204,557) (715,355) (274,005)
===============================================================
(Loss) per share-basic and diluted $(0.05) $(0.02) $(0.08) $(0.03)
===============================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 9
CALL NOW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
OTHER INCOME AND EXPENSES
Other income and (expense) is composed of the following:
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
---------------------- -----------------------
Interest income $ 56,901 $ 56,333 $ 111,002 $ 259,033
Miscellaneous income -- -- -- 1,186
Sale of securities $(150,159) -- $(150,159) --
---------------------- -----------------------
$ (93,258) $ 56,333 $ (39,157) $ 260,219
====================== =======================
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> 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.
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
September 22, 1999 Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,593,928
<SECURITIES> 3,078,076
<RECEIVABLES> 15,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,830,025
<PP&E> 33,199
<DEPRECIATION> 26,884
<TOTAL-ASSETS> 9,856,433
<CURRENT-LIABILITIES> 1,158,284
<BONDS> 1,721,314
0
0
<COMMON> 6,205,778
<OTHER-SE> 760,790
<TOTAL-LIABILITY-AND-EQUITY> 9,856,433
<SALES> 0
<TOTAL-REVENUES> 2,835,914
<CGS> 0
<TOTAL-COSTS> 2,803,198
<OTHER-EXPENSES> 1,029,279
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170,224
<INCOME-PRETAX> (996,563)
<INCOME-TAX> (39,157)
<INCOME-CONTINUING> (724,720)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (715,355)
<EPS-BASIC> (.08)
<EPS-DILUTED> (.08)
</TABLE>
