<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.

<PAGE>   2
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










                                        2
<PAGE>   3
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


                                        3
<PAGE>   4
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


                                        4
<PAGE>   5
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.


                                        5
<PAGE>   6
         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.




                                        6
<PAGE>   7
                                     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


                                        7
<PAGE>   8
         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.


                                        8
<PAGE>   9
         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.


                                        9
<PAGE>   10
         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.


                                       10
<PAGE>   11
         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.


                                       11
<PAGE>   12
                                    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.


                                       12
<PAGE>   13
         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>


                                       13
<PAGE>   14

         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%.


                                       14
<PAGE>   15
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>


                                       15
<PAGE>   16
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