<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 1O-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1999
Commission File No. 0-27160
CALL NOW, INC.
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(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
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(Address of principal executive offices)
(210) 349-4141
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(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 [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 8,495,441 shares as of August 17,
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 MONTHS ENDED MARCH 31, 1999 COMPARED TO 1998.
RESULTS OF OPERATIONS:
a. REVENUES
The Company's revenues for the three months ended
March 31, 1999 were $1,045,778 as compared to
$846,125 for the three months ended March 31, 1998.
Revenues for the 1999 quarter were attributable to an
increase in the race track operations. There was also
interest income for the three months ended March 31,
1999 of $54,101 as compared to $202,700 for the three
months ended March 31, 1998. The decrease in interest
income is due to the disposition of one-half of the
Series A bonds and a reduction of a note receivable.
b. EXPENSES
(1.) Race track expenses for the three months ended
March 31, 1999 were $1,057,933 compared to $834,133
for the three months ended March 31, 1998. The
increase was due to increased race track activity.
(2.) GENERAL AND ADMINISTRATIVE
Expense for the quarter ended March 31, 1999 was
$394,187 compared to $328,662 for the March 31, 1998
quarter. The increase is due to the increase in race
track activity.
(3.) INTEREST
Interest expense for the quarter ended March 31, 1999
was $42,039 compared to $39,713 for the March 31,
1998 quarter,
<PAGE> 3
and relates to the debt on the property acquired in
Williamson County, Texas.
(4.) INCOME TAX
For the quarter ended March 31, 1999 the Company
recorded income tax benefit of $120,000 compared to
$95,250 for the three months ended March 31, 1998.
The increase is due to the increase in net operating
loss.
c. NET LOSS
The Company had a net loss of $298,687 for the
quarter ended March 31, 1999 compared to a net loss
of $62,774 for the quarter ended March 31, 1998. The
increase in net loss of $235,913 resulted primarily
from an increase in racetrack operations and decrease
in interest income.
d. EARNINGS PER SHARE
For the three months ended March 31, 1999, the
Company recorded a net loss of $.04 per share
compared to a net loss of $.01 per share for the
March 31, 1998 quarter.
LIQUIDITY AND CAPITAL RESOURCES:
During the quarter ended March 31, 1999, the Company
used $422,694 for operating activities compared to
$148,320 for the three months ended March 31, 1998.
The increase is due primarily to the increase in
operating activities of Retama Entertainment Group,
Inc.
Cash flows used for investing activities was $15,448
compared to cash provided of $35,208 for the quarter
ended March 31, 1998. The decrease was due to a
decrease on collections of notes and loans receivable
in the quarter ended March 31, 1999 and advances of
$15,448.
For the three months ended March 31, 1999, cash used
for financing activities was $7,240 compared to
$6,629 for the quarter ended March 31, 1998.
The Company has investments primarily in Retama
Development Corporation Bonds. The fair market value
of the securities at March 31, 1999 was $5,654,929.
<PAGE> 4
In addition, the Company executed a secured 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 25, 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.
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. 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
Company. The business was sold to a
former employee and officer of the
Company.
<PAGE> 5
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 Compresent common
stock.
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
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
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William M. Allen
Chairman (Chief Executive Officer)
By: /s/ James D. Grainger
--------------------------------------
James D. Grainger
Vice President-Finance
August 17, 1999 Principal Accounting Officer
<PAGE> 7
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(UNAUDITED)
ASSETS
------
Current Assets:
Cash And Cash Equivalents $ 99,840
Accounts Receivable 30,000
Income Tax Refund Claim 1,871,787
Marketable Securities, At Market Value
Pledged 2,163,156
Unrestricted 3,500,000
Note Receivable 750,000
Other 69,090
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Total Current Assets $ 8,483,873
Furniture And Equipment (Less Accumulated
Depreciation Of $24,178) 9,021
Land 2,369,075
Long Term Notes And Loan Receivables 961,286
Deferred Tax Assets 300,765
Other 219,494
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TOTAL ASSETS $12,343,514
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 8
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current Maturity Of Mortgage Payable $ 15,473
Accounts Payable 58,163
Note Payable 2,000,000
Accrued Expenses 825,667
Accrued Expenses-Other 325,000
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Total Current Liabilities 3,224,303
Long-Term Liabilities:
Mortgage Payable, Less Current Maturity 1,721,314
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Total Liabilities 4,945,617
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Minority Interest In Consolidated Subsidiary 10,982
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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 1,623,297
Stock Subscription Notes Receivable (230,000)
Accumulated other comprehensive loss (6,110)
Treasury stock, at cost (206,050)
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Total Stockholders' Equity 7,386,915
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 12,343,514
============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 9
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31
(UNAUDITED)
1999 1998
--------------------------
REVENUES:
Race Track Income $ 1,000,778 $ 801,125
Management Fees 45,000 45,000
--------------------------
Total Revenue $ 1,045,778 $ 846,125
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COSTS AND EXPENSES:
Race Track 1,057,933 834,133
General And Administrative 394,187 328,662
Interest 74,106 42,039
Depreciation And Amortization 990 803
--------------------------
Total Costs And Expenses $ 1,527,216 $ 1,205,637
--------------------------
Operating (Loss) before other income and
expenses,income taxes, and minority interest (481,438) (359,512)
Other Income and (Expenses) 54,101 203,886
--------------------------
(Loss) before income taxes and minority interest (427,337) (155,626)
Income Tax Benefit 120,000 95,250
--------------------------
(Loss) before minority interest $ (307,337) $ (60,376)
Minority Interest 8,650 (2,398)
--------------------------
Net (Loss) $ (298,687) $ (62,774)
==========================
Earnings Per Share - Basic and Diluted:
Net Loss $ (0.04) $ (0.01)
==========================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 10
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31
(UNAUDITED)
1999 1998
----------------------
Cash Flows from Operating Activitites:
Net (Loss) $(298,687) $ (62,774)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and Amortization 920 803
Changes in assets and liabilities:
(Increase) Decrease in Assets:
Accounts Receivable 18,999 --
Deferred Tax Asset (120,000) --
Other Current Assets (37,297) (126,416)
Other Assets (7,800) (21,896)
Increase (Decrease) in Liabilities:
Accounts Payable 6,814 43,080
Accrued Expenses 23,007 111,534
Income Tax Payable -- (95,250)
Minority Interest (8,650) 2,599
----------------------
Net Cash (used for) Operating Activities $(422,694) $(148,320)
----------------------
Cash flows from Investing Activities:
Purchase of marketable securities (14,792)
Notes and Loans Receivable:
Advances (15,448) --
Collections -- 50,000
----------------------
Net Cash (used for) provided by Investing Activities $ (15,448) $ 35,208
----------------------
Cash Flows from Financing Activities
Payment on Long Term Debt (7,240) (6,629)
----------------------
Net Cash (used for) Financing Activities $ (7,240) $ (6,629)
----------------------
Net Increase (Decrease) in Cash (445,382) (119,741)
Cash Balance, Beginning of period 545,222 179,974
----------------------
Cash Balance, End of period $ 99,840 $ 60,233
======================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 11
CALL NOW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
Other Income and Expense
Other income and expense is composed of the following:
1999 1998
---- ----
Interest income $54,101 $202,700
Miscellaneous income -- 1,186
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$54,101 $203,886
Income Tax Refund Claim
The Company has filed a Federal income tax refund claim in the amount
of $1,871,787 which was collected in June 1999.
Reclassifications
Certain reclassifications have been made to the prior year's financial
statements in order to conform to the current presentation.
Subsequent Events
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 calls 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 provides 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 the Series A bonds plus the payment of the
Compressent debt assumed by the Company, and the Company will deliver
to the Trusts $42,462,500 in the Series B bonds of RDC.
The agreement further provides 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.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 99,840
<SECURITIES> 5,663,156
<RECEIVABLES> 30,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,483,873
<PP&E> 33,199
<DEPRECIATION> 24,178
<TOTAL-ASSETS> 12,343,514
<CURRENT-LIABILITIES> 3,224,303
<BONDS> 1,736,787
0
0
<COMMON> 6,205,778
<OTHER-SE> 1,181,137
<TOTAL-LIABILITY-AND-EQUITY> 12,343,514
<SALES> 0
<TOTAL-REVENUES> 1,045,778
<CGS> 0
<TOTAL-COSTS> 1,057,933
<OTHER-EXPENSES> 469,283
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,106
<INCOME-PRETAX> (481,438)
<INCOME-TAX> (120,000)
<INCOME-CONTINUING> (307,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (298,687)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
