Add
CLNW.PK to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| CLNW.PK > SEC Filings for CLNW.PK > Form 10-Q on 14-Aug-2008 | All Recent SEC Filings |
14-Aug-2008
Quarterly Report
Forward Looking Statements
The following discussion and analysis of financial condition and results of
operations may contain forward-looking statements that involve a number of risks
and uncertainties. Actual results in future periods may differ materially from
those expressed or implied in such forward-looking statements. This discussion
and analysis should be read in conjunction with the unaudited interim
consolidated financial statements and the notes thereto included in this report,
and our Annual Report on Form 10-KSB for the year ended December 31, 2007.
Results of operations for interim periods are not necessarily indicative of
results that may be expected for any other interim periods or the full fiscal
year.
Overview
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. The Company changed
its name to Phone One International, Inc. in January 1994 and to Call Now, Inc.
in December 1994. The Company changed its domicile to the state of Nevada in
1999.
Retama Park Racetrack
The primary operation of the Company is the management of Retama Park Racetrack
("Retama Park") in Selma, Texas, through an 80% owned subsidiary, Retama
Entertainment Group, Inc. ("REG"). Retama Park is owned by the Retama
Development Corporation (the "RDC"). The RDC has an agreement with REG to
operate and manage Retama Park. The RDC, as owner of the facility, reimburses
REG for the majority of payroll and payroll related expenses, plus a monthly
management fee.
The Company also owns a portion of the Retama Development Corporation Special
Facilities Revenue bonds that were issued in 1997. The proceeds of the 1997
issue were used to refinance the bonds that were issued in 1993 whose proceeds
were used to fund the construction of the Retama Park racetrack. Since the RDC
has emerged from bankruptcy in 1997, the Company has periodically provided loans
to the RDC for operating activities. (See Notes to Consolidated Financial
Statements, Note 8 - Notes and Interest Receivable for additional details.)
Penson Worldwide, Inc.
On June 26, 2003 the Company entered into a "Convertible Promissory Note and
Purchase Agreement" with Penson Worldwide, Inc. ("PWI") to lend $6,000,000 with
the note maturing on June 26, 2008 (the "PWI Note"). PWI is a related party to
the Company as Thomas R. Johnson, President and CEO of Call Now, Inc. is also a
member of the Board of Directors of both. On December 23, 2003 an additional
$600,000 was loaned to PWI under similar terms and conditions as the original
note. On June 30, 2005, the Company converted the entire $6,600,000 principal
balance of the PWI Note into 3,283,582 shares of PWI common stock.
On May 16, 2006, PWI completed the Initial Public Offering ("IPO") of their
common stock (Nasdaq: PNSN). In a simultaneous transaction, PWI affected a
1-for-2.4 share reverse split and the split-off of certain non-core business
operations known as SAMCO. As part of the IPO, the Company elected to
participate in the exchange of PWI shares for SAMCO shares and sell a total of
11.5% of its investment, or 157,337 shares, of the PWI shares in the IPO
resulting in a pre-tax gain on the sale of $1,728,504. Following the completion
of the PWI IPO, the Company's resulting position is as follows: 79,900 shares of
SAMCO which represents an approximate 7.29% interest in the company; and
1,130,922 shares of the publicly traded PWI common stock, which represents an
approximate 4.4% ownership interest. As of June 30, 2008 the realized other
comprehensive income is from the increase in value of the PWI common stock of
approximately $8,059,000.
The Estates at Canyon Ridge
On March 31, 2005 the Company entered into a partnership agreement to provide
approximately forty-six percent (46%) of the equity for the development of a
270-unit luxury apartment complex to be known as The Estates at Canyon Ridge,
located in the master planned community of Stone Oak in San Antonio, Texas. The
name of the partnership was originally Stone Oak Development, Ltd. and was
changed to The Estates at Canyon Ridge, Ltd. ("ECR Ltd.") on April 26, 2005. ECR
Ltd. closed on the purchase of the 19.739 acre development site on May 2, 2005.
The general partner of ECR Ltd. is an unrelated real estate developer ("General
Partner"). The Company
owns the largest interest in Stone Oak Prime, L.P. ("Limited Partner") at
forty-eight percent (48%). Other partners of the Limited Partner include Thomas
R. Johnson, President and CEO of the Company, Christopher J. Hall, Chairman and
the majority shareholder of the Company, and Bryan P. Brown, President of REG.
The General Partner is required to fund five percent (5%) of the equity and the
Limited Partner is required to fund ninety-five percent (95%).
As a Limited Partner, the Company is entitled to receive a preferred return of
its capital contribution plus a ten percent (10%) per annum cumulative return,
compounded monthly. Following the repayment of the capital contributions and
accrued interest, excess cash, at the discretion of the General Partner, and net
refinancing or disposition proceeds shall be paid fifty percent (50%) to the
General Partner and fifty percent (50%) to the Limited Partner. At June 30, 2008
and December 31, 2007, the Company's investment totaled approximately
$2.276 million and $1.780 million, respectively.
The Cambridge at Auburn
On December 11, 2006 the Company entered into a partnership agreement to provide
ninety-five percent (95%) of the equity for the acquisition and rehabilitation
of a 156-unit, 312-bed full service, private dormitory located in Auburn,
Alabama, immediately adjacent to the campus of Auburn University. The project is
now known as The Cambridge at Auburn. The Company is the sole limited partner of
Cambridge at Auburn, LP ("CA, LP"). The general partner of CA, LP is an
unrelated real estate developer that will also serve as the management company
of the project. The general partner of CA, LP is the same general partner of The
Estates at Canyon Ridge, Ltd. transaction described in the preceding paragraph.
As the limited partner, the Company is entitled to receive a preferred return of
its capital contribution plus a ten percent (10%) per annum cumulative return,
compounded monthly. Following the repayment of the preferred return on the
capital contribution, excess cash, at the discretion of the general partner, as
well as refinancing or disposition proceeds shall be paid fifty percent (50%) to
the general partner and fifty percent (50%) to the limited partner. At June 30,
2008 and December 31, 2007, the Company's investment totaled approximately
$1.36 million and $1.50 million, respectively.
TNO Holdings, LLC
During the course of 2007, the Company provided financing to TNO Holdings, LLC,
a Florida limited liability company, totaling approximately $811,000 at June 30,
2008. TNO Holdings owned three municipal bond issues secured by a first mortgage
lien on five long-term care facilities located in Oklahoma and Texas. The
purpose of the loan from the Company is to provide working capital for the
facilities and fund various capital improvements. The loan accrued interest at a
rate of 9.50% and compounds monthly. Following discussions with the managing
member of TNOH, the Company has agreed convert the loan to an approximately 42%
equity interest in TNOH. During the fourth quarter of 2007, the two nursing
homes located in Texas were sold to a third party and the net sales proceeds
were used to redeem a portion of the municipal bond issue secured by the
facilities and owned by TNO Holdings. The subsequent distribution to the members
of TNOH resulted in the repayment of substantially all of the funds originally
loaned to TNOH by the Company plus an additional return. The Company continues
to maintain an equity interest in TNOH. TNOH continues to own the Texas
municipal bond issue pending collection of the remaining accounts receivable and
two Oklahoma municipal bond issues secured by three additional nursing home
facilities.
Critical Accounting Policies
General
Management's discussion and analysis of its financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with U.S. generally accepted accounting principles. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and
expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate our estimates, including those related to the
reported amounts of revenues and expenses and the valuation of our assets,
income taxes, and contingencies. We base our estimates on historical experience
and on various other assumptions, as well as reliance on independent appraiser
reports on the valuation of certain of our debt securities. We believe our
estimates and assumptions to be reasonable under the circumstances. However,
actual results could differ form those estimates under different assumptions or
conditions.
Valuation of Marketable Securities
Investments in publicly traded equity securities are generally based on quoted
market prices. Investments in the RDC Series A and B bonds represent debt
securities and there is no readily available quoted market price, as these
securities are owned by a limited number of holders. The Series A bonds have
been valued at $145,000, which represents the pro rata share of the underlying
value of the collateral (the Retama Park horse track facility). The Company has
fully impaired the Series B bonds based on the limited available market, the
uncertainty of principal or interest payments and the subordinate lien on the
collateral.
Valuation of Other Investments
Other investments (in non-marketable securities) are generally stated at cost,
and are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount on the investment may not be fully
recoverable. Recoverability of such investments is measured by a comparison of
the carrying amount of the investment to future undiscounted net cash flows
expected to be generated by the asset. If such assets are considered impaired,
the impairment to be recognized is measured by the amount by which the carrying
amount of the investment exceeds the fair value of the investment.
Income Taxes
Deferred tax assets and liabilities are recorded based on the difference between
the tax basis of assets and liabilities and their carrying amount for financial
reporting purposes, as measured by the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
Risk Factors
In addition to the other information set forth in this quarterly report, you
should carefully consider the factors discussed in Part II, Item 6 in our Annual
Report on Form 10-KSB for the year ended December 31, 2007, which could
materially affect our business, financial condition or future results. The risks
described in our Annual Report on Form 10-KSB are not the only risks facing our
Company. Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial also may materially adversely affect our
business, financial condition or operating results.
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2008 COMPARED TO JUNE 30, 2007
RESULTS OF OPERATIONS
a. Revenues and Other Income
Revenue
The Company's revenue for the three months and six months ended June 30, 2008
was $1,366,614 and $2,300,803, respectively, compared to $1,329,177 and
$2,284,212, respectively, for the three months and six months ended June 30,
2007. Retama Entertainment Group, Inc. ("REG"), an 80% owned subsidiary of the
Company, is engaged as the management company of the Retama Park racetrack
located in Selma, TX. The owner of the facility, the Retama Development
Corporation (the "RDC"), reimburses REG for the majority of payroll and payroll
related expenses, plus a monthly management fee of $20,000. It is important to
note that the financial performance of Retama Park does not directly impact and
is not included in the Company's financial statements. As a result of this
arrangement, the majority of the Company's revenue consists of the reimbursement
of REG's payroll expenses. Therefore, the increase in revenue for the three
months and six months ended June 30, 2008 as compared to the three months and
six months ended June 30, 2007 is largely the result of raises offered to key
REG employees.
Interest Income
Interest income for the three months and six months ended June 30, 2008 was
$182,212 and $358,452, respectively, compared to $87,791 and $243,548,
respectively, for the three months and six months ended June 30, 2007. The
increase in interest income is largely attributable to the realization of a full
quarter's preferred return on the Auburn investment in 2008 as compared to 2007,
as well as an increase in the RDC receivable accruing additional interest.
b. Expenses
Cost and Other Expenses of Revenues
Operating expenses for the three months and six months ended June 30, 2008 was
$1,573,208 and $2,599,278 compared to $1,497,484 and $2,536,877, respectively,
for the three months and six months ended June 30, 2007. The increase in
expenses is directly related to an increase in payroll and payroll related
expenses as detailed in the Revenue section above, partially offset by the
elimination of certain professional fees at the REG management company level.
Income Tax
Total income tax benefit for each period presented is in the customary
relationship to net loss before taxes, as expected for a regular C corporation.
LIQUIDITY AND CAPITAL RESOURCES
During the six month ended June 30, 2008, the Company's operating activities
used cash of $461,772 compared to $1,149,373 cash used for the six months ended
June 30, 2007. The decrease in cash used for operating activities is largely due
to the gains on sales of marketable securities that were realized in the 2007
period, with no gains realized for the same period in 2008. The decrease is also
related to a reduction in the funding of the RDC notes receivable in 2008
compared to 2007. Gains on the sales of marketable securities are not recognized
as cash for operating activities.
OFF-BALANCE SHEET ARRANGEMENTS
We currently have no off-balance sheet arrangements that have or are reasonably
likely to have a current or future material effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources. See Note 6 - Related Party
Transactions to the financial statements herein.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement" ("SFAS
No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements. The
standard applies whenever other standards require (or permit) assets or
liabilities to be measured at fair value, but does not expand the use of fair
value in any new circumstances. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those years. Early adoption is permitted. The adoption of
SFAS No. 157 did not have a material impact on the Company's consolidated
financial statements.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS No. 159). SFAS No. 159 allows
entities the option to measure eligible financial instruments at fair value as
of specified dates. Such election, which may be applied on an instrument by
instrument basis, is typically irrevocable once elected. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007. The Company did
not elect the fair value option for any of its existing financial instruments
other than those mandated by other FASB standards; accordingly, the impact of
the adoption of SFAS No. 159 on the Company's financial statements was
immaterial. The Company has not determined whether or not it will elect this
option for financial instruments it may acquire in the future.
In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations"
("SFAS 141(R)"), which replaces SFAS 141. SFAS 141(R) establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
non-controlling interest in the
acquiree and the goodwill acquired. The Statement also establishes disclosure
requirements, which will enable users to evaluate the nature and financial
effects of the business combination. SFAS 141(R) is effective for fiscal years
beginning after December 15, 2008. The adoption of SFAS 141(R) will have an
impact on accounting for business combinations once adopted, but the effect is
dependent upon acquisitions at that time.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interest in
Consolidated Financial Statements - an amendment of Accounting Research Bulletin
No. 51" ("SFAS 160"), which establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the
amount of consolidated net income attributable to the parent and to the
non-controlling interest, changes in a parent's ownership interest and the
valuation of retained non-controlling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements that
provide sufficient disclosures that SFAS 160 is effective for fiscal years
beginning after December 15, 2008. The adoption of SFAS No. 160 will impact how
we report the minority interest in our consolidated 80% owned subsidiary, but
this impact will not be significant to our financial position.
|
|