UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549







FORM 10-K/A-1




[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2010COMMISSION FILE NO. 0-27160




CALL NOW, INC. (Exact name of registrant in its charter)




NEVADA

65-0337175(State of Incorporation)

(IRS Employer Identification No.)1 Retama ParkwaySelma, TX 78154(Address of principal executive offices)


Registrant's Telephone No. (210) 651-7145




Securities registered pursuant to Section 12(b) of the Act: NONE




Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.001 par value per share




Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes oNo þ




Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ




Indicate by check mark 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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þNo o




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes oNo o




Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K. þ




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Rule 12b-2 of the Exchange Act. (Check one):




Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
Smaller Reporting Company þ


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ




The aggregate market value of the registrant’s common stock held by non-affiliates as of June 30, 2010 (the last business day of the registrants’ most recently completed second fiscal quarter) was $357,250.




The number of shares outstanding of the issuer's common equity is: 2,013,877  shares of common stock, as  of March 8, 2011.




Documents Incorporated by Reference: NONE




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Special Note Regarding Forward-Looking Statements




This Annual Report and the information contained herein contain forward-looking statements that involve both risk and uncertainty and that may not be based on current or historical fact. Although we believe our expectations to be accurate, forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Factors that could cause or contribute to such differences include but are not limited to:


- concentration of operations in our subsidiary
- concentration of assets one investment
- limited liquidity available in the secondary market for shareholders
- general economic conditions

Forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “hopes,” “may,” “will,” “plans,” “intends,” “estimates,” “could,” “should” “would,” “continue,” “seeks,” “pro forma,” or “anticipates” or other similar words (including their use in the negative), or by discussions of future matters such as the development of new technology, integration of acquisitions, possible changes in our regulatory environment and other statements that are not historical. Additional important factors that may cause our actual results to differ from our projections are detailed later in this report under the section entitled “Risk Factors.” You should not place undue reliance on any forward-looking statements, which speak only as of the date hereof. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement.




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PART I




ITEM 1. BUSINESS.




HISTORY AND DEVELOPMENTS DURING THE LAST THREE YEARS




Call Now, Inc. (the “Company”) was organized under the laws of the State of Florida on September 24, 1990 under the name Rad San, Inc. The Company changed its name to Phone One International, Inc. in January 1994 and to Call Now, Inc. in December 1994. The Company changed its domicile to the State of Nevada in 1999.




The primary operation of the Company is the management of Retama Park racetrack (“Retama Park”) in Selma, Texas, through an 80% owned subsidiary, Retama Entertainment Group, Inc. (“REG”). In late 1997 the Company, in conjunction with Retama Partners, the holder of the racing license for Retama Park Racetrack, formed REG, a management company created to assume management responsibilities at Retama Park. Retama Park is owned by the Retama Development Corporation (the “RDC”), a local government corporation organized by and acting on behalf of the City of Selma, Texas. The RDC has an agreement with REG to operate and manage Retama Park that extends through November 1, 2020. The RDC, as owner of the facility, reimburses REG for the majority of payroll and payroll related expenses, plus a monthly management fee.




Our strategy is to operate the Retama Park racetrack in order to maintain its status as a Class I racetrack, attract horsemen to its racing meets, provide a satisfactory gaming and entertainment experience for its customers and provide a safe and attractive facility. We are also seeking the legalization of additional forms of gaming at Texas racetracks. We believe that the offering of additional forms of gaming will be required to enable us to achieve a satisfactory return on our holdings of RDC Series B bonds, which are further described in the Bonds section of Item 7 of this Annual Report on Form 10-K.




Historically, we have provided loans to the RDC to support the operations of the racetrack and to meet its interest and sinking fund obligations on its Series A bonds, which are further described in the Bonds section of Item 7 of this Annual Report on Form 10-K. Such financial support has been entirely at the discretion of the Company and was documented by promissory notes secured by a mortgage on the Retama Park racetrack real estate and facilities which is subordinated to the RDC Series A bonds and converted Series B bonds, if any. As more fully described later in this section, on February 25, 2010 the Company entered into a transaction with the Company’s Chairman, Christopher J. Hall, whereby the principal and accrued interest value of loans made by the Company to the RDC, totaling $5,355,428, and other assets, was exchanged with Mr. Hall in favor of certain municipal bonds and shares of the Company’s stock. Following this transaction, the Company no longer held any debt secured by the RDC other than the Retama Series A and Series B bonds. Subsequently, on September 16, 2010 the Company loaned the RDC $400,000 for general operating purposes. The loan carries an interest rate of 8.50% and matures January 1, 2013. At December 31, 2010, the Company recognized interest of $9,728 as a result of the September 16, 2010 loan made by the Company; however, due to uncertain economic future of Retama Park, the Company elected to suspend further recognition of interest income until events and circumstances dictate otherwise.




The status of racing industry in Texas is similar to many other states around the country as the Texas racing facilities continue to experience greater competition from those facilities that have been granted the right to conduct additional forms of gaming such as video lottery terminals, slot machines and card games. All states that share a border with Texas – Louisiana, Arkansas, Oklahoma and New Mexico – currently allow additional forms of gaming at their racetracks. The benefits of additional gaming for racing facilities located in these states are two-fold. First, the operation of this additional gaming has provided these facilities with a new, and typically highly profitable, business line. Second, additional gaming has also provided supplemental funds for the horse purses (the prize money paid) within the state. These higher purses have attracted higher quality horses that tend to be more attractive to the betting public.




We have been actively pursuing the legalization of additional gaming at Texas racetracks through a coalition of Texas racetracks that includes the other two Class I tracks, Lone Star Park and Sam Houston Race Park. If the legalization of additional forms of gaming is approved at Texas racetracks, it is believed that the profit from this operation could provide sufficient cash flow to enable both the Series A and Series B bonds to be repaid. However, there can be no assurance that the Texas legislature and governor will approve such additional gaming and, if approved, whether the structure and taxation on such additional gaming would benefit the Company. There is substantial opposition to expanding gaming operations in Texas and no such expansion was approved during the 2009 Texas legislative session. The 2011 Texas legislative session commenced in January and legislation has been filed that would allow for the expansion of gaming at racetracks by legalizing the operation of slot machines at such facilities. The principals at Retama Park and the Company, as well as all other racing interests in Texas, are currently focused on the passage of favorable legislation.




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Retama Park experiences strong competition from other gaming alternatives including on-line gaming, other forms of gaming in surrounding states, as well as from other entertainment venues in its market area. We expect these factors to continue to adversely affect the liquidity of RDC in the absence of legislation allowing additional gaming.




However, the legalization of gaming in Texas remains uncertain in both the likelihood and timeframe. The alternative available to the Company as a majority Series B bondholder would be to develop a plan with the Series A bondholders and the RDC that would maximize the value of the underlying collateral real estate through a liquidation or a joint venture redevelopment with a third party.




On June 26, 2003 the Company entered into a “Convertible Promissory Note and Purchase Agreement” with Penson Worldwide, Inc. (“PWI”) to lend $6,000,000 with the note maturing on June 26, 2008 (the “PWI Note”). PWI is related to the Company as Thomas R. Johnson, President and CEO of Call Now, Inc., is also a Director of both companies. Mr. Johnson has served as a director of PWI since August 2003. The PWI Note also called for the Company to have the option to convert the entire outstanding principal amount into shares of PWI’s common stock. The conversion price per common share was 2.25 times PWI’s shareholders’ equity as of June 30, 2003 divided by the actual number of issued and outstanding shares of PWI as of June 30, 2003, which equated to $2.01 per share. On December 23, 2003 an additional $600,000 was loaned to PWI under similar terms and conditions as the original note.




On June 30, 2005, the Company converted the entire $6,600,000 principal balance of the PWI Note into 3,283,582 shares of PWI common stock. The Company originally extended credit to Penson in order to achieve a higher return on its capital for use in its business. After the loan was converted to Penson stock it continues to be held as a source of capital for the Company's business.




On May 16, 2006, PWI completed the Initial Public Offering (“IPO”) of their common stock (Nasdaq: PNSN). In a simultaneous transaction, PWI affected a 1-for-2.4 share reverse split and the split-off of certain non-core business operations known as SAMCO. As part of the IPO, the Company elected to participate in the exchange of PWI shares for SAMCO shares and sell a total of 11.5% of its investment, or 157,337 post-split shares, of the PWI shares in the IPO, resulting in a gain on the sale of $1,728,504. Following the completion of the PWI IPO, the Company’s resulting position was as follows: 79,900 shares of SAMCO and 1,130,922 shares of the publicly traded PWI common stock. During the fourth fiscal quarter of 2009, the Company sold 64,000 shares of SAMCO at an average price of $5.49 per share, resulting in a remaining position of 15,900 shares, or approximately 1.66% of the outstanding stock as December 31, 2009. During the first fiscal quarter of 2010, the Company sold its remaining shares of SAMCO at a price of $5.59 per share. In August 2008, the Company sold 30,000 shares of PWI common stock at an average price of $18.30 per share. In August 2009, the Company sold 100,000 shares of PWI common stock at an average price of $11.71 per share, leaving a balance of 1,000,922 shares of PWI common stock. As more fully described in the 8-K filed by the Company on February 25, 2010 and Part I – History and Developments During the Last Three Years of this 10-K, on February 25, 2010 the Company entered into a Purchase and Sale Agreement with Christopher J. Hall (“Hall”), the Company’s majority shareholder, Chairman and director, where the Company transferred to Hall, in addition to other assets and cash, 500,000 shares of PWI common stock in exchange for 898,000 shares of the Company’s common stock and two municipal bond positions. The Company holds a position of 500,922 shares of PWI common stock, or approximately 1.75% of the outstanding shares, as of December 31, 2010 and recognizes cumulative other comprehensive income from the increase in value of the PWI common stock of approximately $33,000 (gross) or $22,000 net of taxes.




The Company has maintained an investment account with Penson Financial Services, Inc. (“PFSI”), a wholly owned subsidiary of PWI, since 1999. At December 31, 2009, the Company had a margin loan in this account in the amount of $13,259,281, which is collateralized by a majority of its marketable securities. In September 2009 PFSI determined that, for margin account purposes due to, among other reasons, the lack of trading activity in the Retama Development Corporation Series B bonds, it should require a 100% margin requirement, effectively making these bonds non-marginable. As a result, the Company received a margin call letter on September 28, 2009 from PFSI notifying the Company that it needed to deposit $5,300,000 in additional cash or margin collateral into its margin loan account by September 30, 2009. The Company did not make the requested deposit by September 30, 2009. PFSI elected not to pursue remedial actions at the time, such as account liquidation, but continued to reserve all of their rights and remedies under the margin agreement while working with the Company to restructure the margin loan. As part of the margin loan restructuring, on February 25, 2010, the Company entered into a Promissory Note in favor of PWI, in the principal amount of $13,922,000, accumulating interest at a rate of 10% per year with a maturity of February 25, 2012. On September 16, 2010 the Company borrowed an additional $400,000 from PWI, bringing the balance of the Promissory Note to $14,322,000. On November 12, 2010 the Company made a payment of $1,000,000 in principal and $6,222 in interest on the Promissory Note, bringing the principal balance down to its current balance of $13,322,000. The Company has granted PWI a carried interest equal to 20% of the proceeds from its holdings of Retama Development Corp. B Bonds. If the Company repays the Promissory Note prior to the second anniversary of the issuance and there is no default or event of default prior to such repayment, the carried interest will be reduced to 15%. The carried interest entitles the lender to a percentage of all income, principal and other proceeds (in whatever form) from or in respect of the Retama Development Corp. B Bonds of any kind whether on account of interest, redemption of principal, proceeds of sale, pledge or other transfer or disposition of the Bonds, insurance proceeds, tax refunds, or otherwise made or payable in respect of any of the Bonds. The carried interest survives the repayment of the Promissory Note. The Promissory Note is secured by a lien on substantially all of the Company’s assets.




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Simultaneous with the execution of the Promissory Note with PWI on February 25, 2010, the Company entered into a Purchase and Sale Agreement with Christopher J. Hall, the Company’s majority stockholder, Chairman and a director. Under such agreement, which was approved by the Board of Directors in accordance with the Company’s By-laws, the Company purchased from Mr. Hall the following:





898,000 shares of Call Now, Inc. common stock for $11,404,600;$3,200,000 principal amount of Leon County FL Educational Facilities Authority (Southgate) Series B Bond, 7.625% due 9/1/28 for $2,080,000; and$2,200,000 principal amount of Cambridge Student Housing Financing Revenue Series C Bond, 9.70% due 11/1/39 for $1,870,000.




In consideration of the foregoing the Company transferred and paid to Mr. Hall the following:





The Retama Development Corporation Funding Agreement with a principal and interest balance totaling $5,355,428 ($3,627,569 principal plus $1,727,859 interest as of February 1, 2010);500,000 shares of Penson Worldwide, Inc. common stock valued at $4,480,000; and$5,511,800 in cash.




Additionally, on June 15, 2010 the Company sold 9,973 shares of the Company’s common stock to Mr. Hall for $126,567.




As a result of these transactions, the Company’s outstanding common stock is currently 2,013,877 shares as of December 31, 2010.




The simultaneous execution of the Promissory Note with PWI and the Purchase and Sale Agreement with Mr. Hall, although two distinct agreements, were assessed by the Company as mutually dependent transactions.




The transaction detailed above resulted in the Company receiving positions in two municipal bond issues – Leon County Florida Educational Facilities Authority – Southgate Dormitory, Series B bonds (“Southgate”) and Cambridge Student Housing Financing Revenue Series C bonds (“Cambridge – College Station”). Each of the bonds are secured by a subordinated lien on a student housing facility in their respective locations. The Southgate bonds are secured by a second lien on Southgate Campus Centre located in Tallahassee, Florida, located on the campus of Florida State University and the Cambridge – College Station bonds are secured by a third lien on Cambridge @ College Station located in College Station, Texas, near the campus of Texas A&M University. Neither of these bond issues are obligations in any way of the respective universities. It is not the intention of the Company to hold either one of these securities for long-term investment purposes. To that end, the Company has engaged a nationally recognized real estate firm specializing in the marketing of student housing facilities to evaluate the market for these two facilities. Given the bond structure of these two assets and the Company’s subordinated debt position, sale of these facilities will ultimately require the approval of each respective issuing authority. The Company is currently in the process of obtaining the necessary approval, however, it remains uncertain whether or not it will be granted and, if granted, what proceeds from the sale will ultimately be available to these bond positions. For additional details, please refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Leon County Florida Educational Facilities Authority (Southgate) and Cambridge Student Housing Financing, below.




On March 31, 2005, the Company entered into a partnership agreement to provide approximately 46% of the equity for the development of a 270-unit luxury apartment complex known as The Estates at Canyon Ridge, located in the master planned community of Stone Oak in San Antonio, Texas. The Estates at Canyon Ridge, Ltd. (“ECR Ltd.”) closed on the purchase of the 19.739-acre development site on May 2, 2005. The general partner of ECR Ltd. is an unrelated real estate developer (“General Partner”) that also serves as the management company of the property. The limited partner of ECR Ltd. is Stone Oak Prime, L.P. (“Limited Partner”). The Company owns the largest interest in the Limited Partner at 48%. Other partners of the Limited Partner include Thomas R. Johnson, President, CEO and Director of the Company, Christopher J. Hall, the majority shareholder and Director of the Company, and Bryan P. Brown, President of REG and Director of the Company. The General Partner is required to fund 5% of the equity and the Limited Partner is required to fund 95%. As a member of the Limited Partner, the Company is entitled to receive a preferred return of its capital contribution plus a 10% per annum cumulative return, compounded monthly. Following the repayment of the preferred return, excess cash, at the discretion of the General Partner, and net refinancing or disposition proceeds shall be paid 50% to the General Partner and 50% to the Limited Partner. As of December 31, 2009, the Company’s investment totaled approximately $3.21 million. On November 2, 2010 the sale of The Estates at Canyon Ridge closed to an unrelated third party, resulting in a realized loss to the Company of approximately $1,683,000. This amount had previously been reported by the Company as an impairment charge to earnings in the quarter ended September 30, 2010. At closing the Company utilized its portion of proceeds to repay $1,000,000 in principal on its PWI Promissory Note and fund the Company’s general operating expenses. $250,000 of the closing proceeds are being held in an escrow account for six months as insurance against any breach of representations and warranties contained in the purchase agreement by the seller. The Company’s portion of the escrow is approximately $116,000 and was released in May 2011.




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On December 11, 2006 the Company entered into a partnership agreement to provide 95% of the equity for the acquisition and rehabilitation of a 156-unit, 312-bed full-service, private dormitory located in Auburn, Alabama, immediately adjacent to the campus of Auburn University. The project is now known as The Cambridge at Auburn and the partnership is known as Cambridge at Auburn, LP (“CA, LP”). The general partner of CA, LP is an unrelated real estate developer who also serves as the management company of the project. The general partner of CA, LP is the same general partner of The Estates at Canyon Ridge, Ltd. transaction described in the preceding paragraph. As the limited partner, the Company is entitled to receive a preferred return of its capital contribution plus a 10% per annum cumulative return, compounded monthly. Excess cash, at the discretion of the general partner, as well as refinancing or disposition proceeds shall be paid 50% to the general partner and 50% to the limited partner. In January 2009, the Company sold approximately 23.24% of the 95% limited partnership interest to Thomas R. Johnson, the President and Chief Executive Officer of the Company, for $400,000. As of December 31, 2009, the Company’s investment totaled approximately $1.08 million. For the 2009-2010 school year the project was approximately 26% occupied, due to the construction of new dormitories on the campus of Auburn University, and the high number of freshman that the University required to live on campus. As a result, the Company, as a limited partner, contributed an additional $215,000 in 2010 to cover operating losses. While it was anticipated that the decline in occupancy was a temporary issue during the absorption of the new dorms in the market, leasing for the current 2010-2011 school year did not rebound as much as anticipated, reaching approximately 65%. Additionally, due to a lack of available cash, the Company was unable to continue to fund operating losses and debt service payments in 2010. As a result, the first mortgage lender for the property has engaged a receiver to operate the property. Due to the current status of the property, the Company fully impaired its investment in this project, resulting in a charge to earnings of $1.3 million in the third quarter ended September 30, 2010. On March 10, 2011 the mortgage lender credit bid for the property at the foreclosure sale, thereby completing the foreclosure process on the property.




During 2007, the Company provided financing to TNO Holdings, LLC (“TNOH”), a Florida limited liability company, totaling approximately $811,000. TNOH owned three municipal bond issues secured by a first mortgage lien on five long-term care facilities located in Oklahoma and Texas. The purpose of the loan from the Company was to provide working capital for the facilities and fund various capital improvements. The loan accrued interest at a rate of 9.50% and compounded monthly. Following discussions with the managing member of TNOH, the Company agreed to convert the loan to an approximately 42% equity interest in TNOH. During the fourth quarter of 2007, the two nursing homes located in Texas were sold to a third party and the net sales proceeds were used to redeem a portion of the municipal bond issue secured by the facilities and owned by TNO Holdings. The subsequent distribution to the members of TNOH resulted in the repayment of substantially all of the funds originally loaned to TNOH by the Company plus an additional return. The Company continues to maintain an equity interest in TNOH. TNOH continues to own the Texas municipal bond issue pending collection of the remaining accounts receivable and two Oklahoma municipal bond issues secured by three nursing home facilities.




EMPLOYEES




The Company has approximately 88 full-time/year-round employees, 57 part-time/year-round employees and 120 seasonal employees. The majority of the personnel are employees of our 80% owned subsidiary, Retama Entertainment Group, Inc., which operates and manages the Retama Park racetrack.




AVAILABLE INFORMATION




Copies of the Company’s Form 10-K and proxy statement may be obtained by notifying the Company in writing at its physical address.




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ITEM 1A. RISK FACTORS.




You should carefully consider the following material risks in addition to the other information contained in this annual report in evaluating an investment in our common stock.




Risks Related to Our Business




Highly Leveraged Debt Structure




The Company has utilized a highly leveraged debt structure in order to fund our operations. Due to various factors including financial reporting requirements of certain assets and the decline in value of other assets, our liabilities exceed our assets by approximately $10.8 million.




Concentration of Operations of Subsidiary




Our 80% owned subsidiary, Retama Entertainment Group, Inc. provides management services to Retama Park racetrack, a Class 1 horseracing facility located in Selma, TX. The management contract with Retama Park is the only management agreement that REG has entered into with a track currently in operation and, therefore, the management fees received as a result of this management agreement represent the only source of revenue for REG. The financial performance of REG is reported on a consolidated basis with the Company. Under certain specific circumstances, the management agreement with Retama Park may be terminated. If this management agreement were to be terminated prematurely, it would have significant negative impact on our operations.




Concentration of Assets




As of December 31, 2010 the Company’s investment in Penson Worldwide, Inc. (“PWI”) common stock represented approximately 24% of the total assets of the Company. Any significant decline in the fair market value of this asset may negatively impact the financial position and operations of the Company.




Limited Liquidity Available in the Secondary Market




As detailed in Item 12 of this report, Christopher J. Hall, the Chairman of the Company holds approximately 84% of the outstanding common stock of the Company as of March 8, 2011. Given the majority position held by a single shareholder and the shareholder’s position as a director of the Company, there remains a relatively small amount of shares available in the public float. A limited float may have the effect of reducing the number of buyers and sellers of the Company’s stock, and as a result, negatively impact the liquidity of the Company’s common stock.




Internal Revenue Service Examination




As more fully detailed in Note 7 to our audited financial statements, in 2004 the Internal Revenue Service (“IRS”) conducted an examination of the tax-exempt status of the municipal bonds issued by the RDC in connection with that company’s reorganization in 1997. In February 2005, the IRS issued a proposed adverse determination with respect to the RDC’s 1997 Series A and Series B bonds. In August 2005, the IRS completed an examination of the Company’s tax returns for the years 2000 through 2003. As a result of the examination, the IRS submitted a request for change to include in taxable income the interest received by the Company on the RDC Series A bonds.




During the fourth fiscal quarter of 2009, the Company and the law firm that served as legal counsel for the original issuance of the 1997 RDC bonds entered into a Closing Agreement on Final Determination in settlement of issues raised by the IRS in the examination of the 1997 RDC bonds. The terms of the settlement consist of two components: 1.) there shall be a payment made to the IRS in the amount of $773,750. $375,000 of this amount will be paid by the law firm that provided the legal opinion for the 1997 RDC bond issue and will be funded at the time of final execution of the documents by the IRS. The Company will pay the remaining $398,750 over the next three years with $133,750 due on or before July 1, 2010, $135,000 due on or before July 1, 2011 and $130,000 due on or before July 1, 2012; and 2.) 35% of the Series B bonds, or $30,425,000 face amount of the $86,925,000 outstanding, shall be converted to taxable bonds. In favor of the cash contribution to be made by the Company, the majority of the other holders of the Series B bonds agreed to a higher percentage of their bonds to be converted to taxable bonds, resulting in the Company agreeing to convert only $4,897,500, or 11.14%, of the $43,962,500 Series B bonds held by the Company to taxable bonds. The Company paid the initial payment of $133,750 during 2010. The Company has accrued the remaining $267,500 as a liability as of December 31, 2010.




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General Economic Conditions




The severe economic downturn that the United States is currently experiencing has had an effect on most businesses. While it remains difficult to assess to long-term effects on the Company, it is anticipated that if the severe national economic difficulties are protracted, this could negatively impact the businesses the Company is involved with.




Investment Company Act




The Company has taken the position it is not an investment company required to be registered under the Investment Company Act of 1940 (the “1940 Act”), based on one or more applicable exemptions there under. If it were established that we are an unregistered investment company, there would be a risk, among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, in an action brought by the Securities and Exchange Commission. We would also be unable to enforce contracts with third parties or third parties could seek to obtain rescission of transactions undertaken with us during the period it was established that we were an unregistered investment company. See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Investment Company, for more information.




Risks Related to Our Common Stock




Stock Price Volatility




The market for our common stock is and can be volatile. In 2010, our closing stock price fluctuated between $1.55 and $3.00 per share. The trading price of our common stock could be subject to wide fluctuations in response to, among other things, quarterly variations in operating and financial results and the small trading float of our stock given the ownership of our majority owner of approximately 84% of our outstanding shares as of December 31, 2010.




Control by a Single Shareholder




Christopher J. Hall, the Chairman and a director of the Company, owns approximately 84% of issued and outstanding common stock as of December 31, 2010. As a result of such ownership, Mr. Hall has the power to effectively control the Company, including elections of directors, the determination of matters requiring shareholders approval and other matters pertaining to corporate governance.




Our Liquidity and Capital Resources may be Adversely Affected by our Margin Loan




We depend upon a margin loan secured by our marketable securities to provide us with working capital. The amount available for borrowing is related to the market price of the collateral securities. In the event the market prices of such securities decline we may have to deposit cash or additional securities or the lender may sell the collateral securities. We have no arrangements for alternative sources of capital and may be unable to obtain financing or sell assets on satisfactory terms, or at all. This would impair our ability to obtain funding for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes. As of December 31, 2010, the Company had no borrowing availability under this margin account. For additional information see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.




ITEM 2. PROPERTIES.




The Company has offices of approximately 512 square feet at Retama Park in space leased from the Retama Development Corporation on a month-to-month basis.




The Company has an equity interest in a partnership that owns a 156-unit dormitory, which is further described above in Item 1.




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ITEM 3. LEGAL PROCEEDINGS.




None.




ITEM 4. RESERVED.
















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PART II




ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES




The Company's Common Stock trades on the over-the-counter market under the symbol “CLNW”. 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.




FISCAL YEAR 2009
HIGH BID

LOW BID1stQuarter
$2.77

$2.752ndQuarter
2.00

.603rdQuarter
3.00

.604thQuarter
3.00

1.50FISCAL YEAR 2010
HIGH BID

LOW BID1stQuarter
No bid

No bid2ndQuarter
No bid

No bid3rdQuarter
2.50

2.004thQuarter
2.10

1.50


The Company has never declared or paid cash or stock dividends and has no present plans to pay any such dividends in the foreseeable future. There are no restrictions that limit the Company’s ability to pay dividends. As of March 8, 2011 there were approximately 298 registered holders of record of the Company's common stock.




ITEM 6. SELECTED FINANCIAL DATA.




Not applicable.




ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.




Retama Park Racetrack




Management




The Company is primarily engaged in the operation and management of Retama Park, a horse racetrack located in Selma, TX just outside of San Antonio, through our 80% owned subsidiary, Retama Entertainment Group, Inc. (“REG”). REG is responsible for all of the day-to-day operational activities at Retama Park including: the presentation of live horse racing meets; daily simulcasting of other racetracks from around the country; the operation of all food and beverage outlets that include a Turf and Field Club, fine dining, a sports bar and concession stands; all regulatory responsibilities with the Texas Racing Commission; and the pursuit of additional legislation from the Texas Legislature that would be favorable to Retama Park, such as other forms of gaming.




The facility and real estate are owned by the Retama Development Corporation (the “RDC”), a municipal subdivision of the city of Selma, TX, and it is encumbered by $93,175,000 face amount of debt that is discussed in greater detail below in the Bonds section. All personnel at the racetrack are employees of REG, as a result, it is only the payroll costs of the personnel that are reimbursed by the RDC to the Company. REG also receives a $20,000 per month management fee from the RDC. The financial performance of Retama Park is not included in the Company’s financial statements. However, the management fee and the reimbursement of payroll and payroll related expenses are the Company’s only source of revenue at this time, and the loss of this management contract or the inability to collect the management fee and other obligations of the RDC would negatively impact the Company’s revenue and financial condition.




Bonds




In addition to the management relationship, the Company also maintains a substantial investment in the facility through holdings of a portion of the Retama Development Corporation Special Facilities Revenue Refunding Bonds.




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The Company owns both Senior Series A Bonds and Subordinate Series B Bonds as detailed in the chart below.




Senior

SubordinateRetama Development Corporation

Series A Bonds

Series B BondsSpecial Facilities Revenue Bonds, Dated 1997

7.00%, due 9/1/33

8.00%, due 9/1/33Total Face Amount of Bonds Outstanding at December 31, 2010

$
6,045,000

$
86,925,000Face Amount of Bonds owned by Call Now, Inc. at December 31, 2010

$
133,000

$
43,962,500Cost Basis of Bonds owned by Call Now, Inc. at December 31, 2010

$
27,594

$
1,077,083Carrying Value of Call Now, Inc. position at December 31, 2010as reported on the balance sheet

$
133,000

$
-0-


The Series A bonds are subject to an annual mandatory sinking fund redemption and annual interest payment at the rate of 7% due on September 1st each year, all of which were current as of December 31, 2010. As of December 31, 2010, a total of $955,000 of the original $7,000,000 Series A bonds have been redeemed through the sinking fund, resulting in $6,045,000 in Series A bonds remaining outstanding. The scheduled annual sinking fund redemptions for the next five years are as follows:




Date

Amount9/1/11

$
115,0009/1/12

$
120,0009/1/13

$
130,0009/1/14

$
140,0009/1/15

$
150,000


The Company’s carrying value on its balance sheet is at the face value of the Series A bonds, or $133,000.




The Series B bonds are subject to an annual interest payment at the rate of 8% due on September 1st each year, with a maturity of September 1, 2033. There is no sinking fund requirement for the Series B bonds. Payment of accrued interest is subject to the availability of Excess Cash Flow, as defined in the Trust Indenture as cash or cash equivalent on hand less senior debt obligations, required deposits to the Reserve Fund, adjustments for working capital and trust funds held by the issuer. If there are insufficient funds available for the payment of interest, the amount due shall be deferred (“Deferred Interest”) and not constitute an event of default. Each such installment of Deferred Interest shall accrue interest from the interest payment date and payable at maturity. Additionally, on September 1 of each year, beginning September 1, 1999, all or a part of the Series B bonds shall be converted to senior lien obligations on a parity and payable pari passu with the Series A bonds (“Converted Series B bonds”, and the Series A bonds and Converted Series B bonds collectively referred to as “Senior Lien Obligations”), and thereafter shall bear interest at the rate of 7%, provided that there is no event of default existing on the Senior Lien Obligations. The number of Series B bonds to be converted to senior lien obligations shall equal (i) the quotient resulting from the lower of earnings before interest, taxes, depreciation and amortization for the last two immediately preceding fiscal years, divided by .0875, (ii) less the outstanding principal amount of the Series A bonds and Converted Series B bonds. Conversion is also subject to the RDC delivering to the bond Trustee to the Trustee’s satisfaction, the deed of trust including the Series B bonds to be converted and a new or amended mortgage title insurance policy ensuring that the liens securing the Series A bonds and all Converted Series B bonds are first and prior and pari passu, subject only to permitted encumbrances that are subordinate and inferior to the deed of trust. There have been no Series B bonds converted to Converted Series B bonds. The Company fully impaired the Series B bonds in 2006 based on the limited available market, the uncertainty of principal or interest payments to be made in the foreseeable future and the subordinated lien on the collateral.




Our strategy is to operate the Retama Park racetrack in order to maintain its status as a Class I racetrack, attract horsemen to its racing meets, provide a satisfactory gaming and entertainment experience for its customers and provide a safe and attractive facility. We are also seeking the legalization of additional forms of gaming at Texas racetracks. We believe that the offering of additional forms of gaming will be required to enable us to achieve a satisfactory return on our holdings of RDC Series B bonds, which are further described in Item 1 – Business of this Annual Report on Form 10-K.




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In the event of a default on the Series A bonds, the holders of the bonds could seek to foreclose on the Retama Park racetrack facilities and real estate. We have provided loans to the RDC to support the operations of the racetrack and to meet its interest and sinking fund obligations on its Series A bonds, which are further described in Item 1 -Businessof this Annual Report on Form 10-K. We believe it has been in our best interest to help the RDC avoid default of the Series A bonds as the best strategy to achievereturns on the Series B bonds in the event of additional forms of gaming are approved for Texas racetracks, of which there can be no assurance. Such financial support is entirely at the discretion of the Company and has been documented by promissory notes secured by a mortgage on the Retama Park racetrack real estate and facilities which is subordinated to the RDC Series A bonds and converted Series B bonds, if any. As more fully described in the 8-K filed by the Company on February 25, 2010 and Part I – History and Developments During the Last Three Years of this 10-K, on February 25, 2010 the Company entered into a Purchase and Sale Agreement with Christopher J. Hall (“Hall”), the Company’s majority shareholder, Chairman and director, where the Company transferred to Hall, in addition to other assets and cash, the full principal and interest value of these RDC notes in exchange for 898,000 shares of the Company’s common stock and two municipal bond positions. Subsequently, on September 16, 2010 the Company loaned the RDC $400,000 for general operating purposes. The loan carries an interest rate of 8.50% and matures January 1, 2013. At December 31, 2010, the Company recognized interest of $9,728 as a result of a loan made by the Company in September of this year; however, due to uncertain economic future of Retama Park, the Company elected to suspend further recognition of interest income until events and circumstances dictate otherwise.




The status of racing industry in Texas is similar to many other states around the country as the Texas racing facilities continue to experience greater competition from those facilities that have granted the right to conduct additional forms of gaming such as video lottery terminals, slot machines and poker. All states that share a border with Texas - Louisiana, Arkansas, Oklahoma and New Mexico – currently allow additional forms of gaming at their racetracks. The benefits of additional gaming for racing facilities located in these states are two-fold. First, the operation of this additional gaming has provided these facilities with a new, and typically highly profitable, business line. Second, additional gaming has also provided supplemental funds for the horse purses (the prize money paid) within the state. These higher purses have attracted higher quality horses, which tend to be more attractive to the betting public.




We have been actively pursuing the legalization of additional gaming at Texas racetracks through a coalition of Texas racetracks that includes the other two Class I tracks, Lone Star Park and Sam Houston Race Park. If the legalization of additional forms of gaming is approved at Texas racetracks, it is believed that the profit from this operation could provide sufficient cash flow to enable both the Series A and Series B bonds to be repaid. However, there can be no assurance that the Texas legislature and governor will approve such additional gaming and, if approved, whether the structure and taxation on such additional gaming would benefit the Company. There is substantial opposition to expanding gaming operations in Texas and no such expansion was approved during the 2009 Texas legislative session. The 2011 Texas legislative session commenced in January and legislation has been filed that would allow for the expansion of gaming at racetracks by legalizing the operation of slot machines at such facilities. The principals at Retama Park and the Company, as well as all other racing interests in Texas, are currently focused on the passage of favorable legislation.




Retama Park experiences strong competition from other gaming alternatives including on-line gaming, other forms of gaming in surrounding states, as well as from other entertainment venues in its market area. We expect these factors to continue to adversely affect the liquidity of RDC in the absence of legislation allowing additional gaming.




However, the legalization of gaming in Texas remains uncertain in both the likelihood and timeframe. The alternative available to the Company as a majority Series B bondholder would be to develop a plan with the Series A bondholder and the RDC that would maximize the value of the underlying collateral real estate through a liquidation or a joint venture redevelopment with a third party.




Penson Worldwide, Inc.




On June 26, 2003 the Company invested $6,000,000 in Penson Worldwide, Inc. (“PWI”) of Dallas, Texas. On December 23, 2003, an additional $600,000 was loaned to PWI. PWI is a leading provider of a broad range of critical securities-processing infrastructure products and services to the global securities and investment industry. Their products and services include securities and futures clearing, margin lending, facilities management, technology and other related offerings to broker-dealers, investment funds, banks and financial technology.




The investment in PWI was made in the form of a convertible promissory note maturing on June 26, 2008 (the “PWI Note”). The PWI Note also called for the Company, as noteholder, to have the option to convert the entire outstanding principal amount into shares of PWI’s common stock. The conversion price per common share was 2.25 times PWI’s shareholders’ equity as of June 30, 2003 divided by the actual number of issued and outstanding shares of PWI as of June 30, 2003, which equated to $2.01 per share.




In August of 2003, the Company’s President and CEO, Thomas R. Johnson, was elected to the Board of Directors of PWI.




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On June 30, 2005, the Company converted the entire $6,600,000 principal balance of the PWI Note into PWI common stock, totaling 3,283,582 shares.




On May 16, 2006, PWI completed the Initial Public Offering (“IPO”) of their common stock (Nasdaq: PNSN). In a simultaneous transaction, PWI affected a 1-for-2.4 share reverse split and the split-off of certain non-core business operations known as SAMCO. As part of the IPO, the Company elected to participate in the exchange of PWI shares for SAMCO shares and sell a total of 11.5% of its investment, or 157,337 post-split shares, of the PWI shares in the IPO resulting in a gain on the sale of $1,728,504. Following the completion of the PWI IPO, the Company’s resulting position was as follows: 79,900 shares of SAMCO and 1,130,922 shares of the publicly traded PWI common stock. During the fourth fiscal quarter of 2009, the Company sold 64,000 shares of SAMCO at an average price of $5.49 per share, resulting in a remaining position of 15,900 shares, or approximately 1.66% of the outstanding stock as December 31, 2009. During the first fiscal quarter of 2010, the Company sold its remaining shares of SAMCO at a price of $5.59 per share. In August 2008, the Company sold 30,000 shares of PWI common stock at an average price of $18.30 per share. In August 2009, the Company sold 100,000 shares of PWI common stock at an average price of $11.71 per share, leaving a balance of 1,000,922 shares of PWI common stock. As more fully described in the 8-K filed by the Company on February 25, 2010 and Part I – History and Developments During the Last Three Years of this 10-K, on February 25, 2010 the Company entered into a Purchase and Sale Agreement with Christopher J. Hall (“Hall”), the Company’s majority shareholder, Chairman and director, where the Company transferred to Hall, in addition to other assets and cash, 500,000 shares of PWI common stock in exchange for 898,000 shares of the Company’s common stock and two municipal bond positions. The Company holds a position of 500,922 shares of PWI common stock as of December 31, 2010 and recognizes cumulative other comprehensive income from the increase in value of the PWI common stock of approximately $33,000 (gross) or $22,000 net of taxes.




The Company originally extended credit to Penson in order to achieve a higher return on its capital for use in its business. After the loan was converted to Penson stock it continues to be held as a source of capital for the Company's business.




The Company has maintained an investment account with Penson Financial Services, Inc. (“PFSI”), a wholly owned subsidiary of PWI, since 1999. At December 31, 2010, the Company had a margin loan in this account in the amount of $5,777,021, which is collateralized by a majority of its marketable securities. In September 2009, PFSI determined that, for margin account purposes due to, among other reasons, the lack of trading activity in the Retama Development Corporation Series B bonds, it should require a 100% margin requirement, effectively making these bonds non-marginable. As a result, the Company received a margin call letter on September 28, 2009 from PFSI notifying the Company that it needed to deposit $5,300,000 in additional cash or margin collateral into its margin loan account by September 30, 2009. The Company did not make the requested deposit by September 30, 2009. PFSI elected not to pursue remedial actions at the time, such as account liquidation, but continued to reserve all of their rights and remedies under the margin agreement while working with the Company to restructure the margin loan. As part of the margin loan restructuring, on February 25, 2010, the Company entered into a Promissory Note in favor of PWI, in the principal amount of $13,922,000, accumulating interest at a rate of 10% per year with a maturity of February 25, 2012. On September 16, 2010 the Company borrowed an additional $400,000 from PWI, bringing the balance of the Promissory Note to $14,322,000. On November 12, 2010 the Company made a payment of $1,000,000 in principal and $6,222 in interest on the Promissory Note, bringing the principal balance down to its current balance of $13,322,000. The Company has granted PWI a carried interest equal to 20% of the proceeds from its holdings of Retama Development Corp. B Bonds. If the Company repays the Promissory Note prior to the second anniversary of the issuance and there was no default or event of default prior to such repayment, the carried interest will be reduced to 15%. The carried interest entitles the lender to a percentage of all income, principal and other proceeds (in whatever form) from or in respect of the Retama Development Corp. B Bonds of any kind whether on account of interest, redemption of principal, proceeds of sale, pledge or other transfer or disposition of the Bonds, insurance proceeds, tax refunds, or otherwise made or payable in respect of any of the Bonds. The carried interest survives the repayment of the Promissory Note. The Promissory Note is secured by a lien on substantially all of the Company’s assets.




The Estates at Canyon Ridge




On March 31, 2005 the Company entered into a partnership agreement to provide approximately 46% of the equity for the development of a 270-unit luxury apartment complex to be known as The Estates at Canyon Ridge, located in the master planned community of Stone Oak in San Antonio, Texas. The Estates at Canyon Ridge, Ltd. (“ECR Ltd.”) closed on the purchase of the 19.739-acre development site on May 2, 2005. The general partner of ECR Ltd. is an unrelated real estate developer (“General Partner”). The Company owns the largest interest in Stone Oak Prime, L.P. (“Limited Partner”) at 48%. Other partners of the Limited Partner include Thomas R. Johnson, President, CEO and director of the Company, Christopher J. Hall, the majority shareholder and director of the Company, and Bryan P. Brown, CEO of Retama Entertainment Group, Inc. and director of the Company. The General Partner is required to fund 5% of the equity and the Limited Partner is required to fund 95%.




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As a member of the Limited Partner, the Company is entitled to receive a preferred return of its capital contribution plus a 10% per annum cumulative return, compounded monthly. Following the repayment of the preferred return on the capital contribution, excess cash, at the discretion of the General Partner, and net refinancing or disposition proceeds shall be paid 50% to the General Partner and 50% to the Limited Partner. The Estates at Canyon Ridge was sold on November 2, 2010 to an unrelated third party, resulting in a loss by the Company of approximately $1,683,000, which was reflected in an impairment charge. At closing, the Company utilized its portion of proceeds to repay a portion of the PWI Promissory Note and fund the Company’s general operating expenses. $250,000 of the closing proceeds are being held in an escrow account for six months as insurance against any breach of representations and warranties contained in the purchase agreement by the seller. The Company’s portion of the escrow is approximately $116,000 and was released in May 2011.




The Cambridge at Auburn




On December 11, 2006 the Company entered into a partnership agreement to provide 95% of the equity for the acquisition and rehabilitation of a 156-unit, 312-bed full-service, private dormitory located in Auburn, Alabama, immediately adjacent to the campus of Auburn University. The project is now known as The Cambridge at Auburn. The Company is the sole limited partner of Cambridge at Auburn, LP (“CA, LP”). The general partner of CA, LP is an unrelated real estate developer who also serves as the management company of the project. The general partner of CA, LP is the same general partner of The Estates at Canyon Ridge, Ltd. transaction described in the preceding paragraphs. As the limited partner, the Company is entitled to receive a preferred return of its capital contribution plus a 10% per annum cumulative return, compounded monthly. Following the repayment of the preferred return on the capital contribution, excess cash, at the discretion of the general partner, as well as refinancing or disposition proceeds shall be paid 50% to the general partner and 50% to the limited partner. In January 2009, the Company sold 23.2446% of its 95% limited partnership in CA, LP to Thomas R. Johnson, the President and CEO of the Company, for $400,000, representing the Company’s cost basis in that portion of the partnership. As of December 31, 2009, the Company’s investment totaled approximately $1.08 million. Rehabilitation of the facility was completed during 2007 and 100% occupancy was achieved for the beginning of the 2008-2009 school year, however, due to the construction of new dormitories on the campus of Auburn University, and the high number of freshman that the University required to live on campus, the facility only achieved 26% occupancy for the current 2009-2010 school year. As a result, the Company, as a limited partner, contributed an additional $215,000 in 2010 to cover operating losses. While it was anticipated that the decline in occupancy was a temporary issue during the absorption of the new dorms in the market, leasing for the current 2010-2011 school year did not rebound as much as anticipated, reaching approximately 65%. Additionally, due to a lack of available cash, the Company was unable to continue to fund operating losses and debt service payments in 2010. As a result, the first mortgage lender for the property has engaged a receiver to operate the property. Due to the current status of the property, the Company fully impaired its investment in this project, resulting in a charge to earnings of $1.3 million in the third quarter ended September 30, 2010. On March 10, 2011 the mortgage lender credit bid for the property at the foreclosure sale, thereby completing the foreclosure process on the property.




Leon County Florida Educational Facilities Authority (Southgate)




As part of the Company’s debt restructuring completed in February 2010, the Company received $3,200,000 principal amount of Leon County Florida Educational Facilities Authority Series B Bonds with an interest rate of 7.625% and a maturity of 9/1/28. The bonds were valued at $2,080,000 as part of the transaction. The bonds were issued in 1998 and are secured by a second lien on a full-service student housing complex, known as Southgate Campus Centre, located in Tallahassee, Florida on the campus of Florida State University (“FSU”) at the south entrance to the university, although there is no contractual relationship with the FSU and are not an obligation of FSU in any way. The project consists of three interconnected main structures: two five-story residence halls together containing 541 beds and a secured parking garage with 300 parking spaces. The first floor of the main building contains a food service facility designed around a cafeteria-type concept to provide meals for residents, as well as other patrons, a banquet room and several retail stores. The facility was 96% leased for the 2010-2011 school year and is currently 100% preleased for the 2011-2012 school year. It is not the intention of the Company to hold either these bonds, or the Cambridge-College Station bonds discussed below, for long-term investment purposes. To that end, the Company has engaged a nationally recognized real estate firm specializing in the marketing of student housing facilities to evaluate the market for these two facilities. Given the bond structure of these two assets and the Company’s subordinated debt position, sale of these facilities will ultimately require the approval of each respective issuing authority. The Company is currently in the process of obtaining the necessary approval, however, it remains uncertain whether or not it will be granted and, if granted, what proceeds from the sale will ultimately be available to these bond positions.




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Cambridge Student Housing Financing




Also part of the Company’s debt restructuring completed in February 2010, the Company received $2,200,000 principal amount of Cambridge Student Housing Financing Revenue Series C Bonds with an interest rate of 9.70% and a maturity of 11/1/39. The bonds were valued at $1,870,000 as part of the transaction. The bonds were issued in 2004 and are secured by a third lien on a full-service student housing complex, known as Cambridge @ College Station, located in College Station, Texas near the campus of Texas A&M University, but also services students of Blinn College in nearby Bryan. A concrete parking lot with 540 spaces surrounds the rectangular-shaped three story building containing a total of 530 beds. The project includes amenities such as a full in-house cafeteria style food service, clubhouse, fitness room, computer lab, theatre/lecture facility, game room, study rooms and a landscaped interior courtyard with two swimming pools. The facility was 98% leased for the 2010-2011 school year and is currently 100% preleased for the 2011-2012 school year.




TNO Holdings, LLC




During 2007, the Company provided financing to TNO Holdings, LLC (“TNOH”), a Florida limited liability company, totaling approximately $811,000. TNOH owned three municipal bond issues secured by a first mortgage lien on five long-term care facilities located in Oklahoma and Texas. The purpose of the loan from the Company was to provide working capital for the facilities and fund various capital improvements. The loan accrued interest at a rate of 9.50% and compounded monthly. Following discussions with the managing member of TNOH, the Company agreed to convert the loan to an approximately 42% equity interest in TNOH. During the fourth fiscal quarter of 2007 for the Company, the two nursing homes located in Texas were sold to a third party and the net sales proceeds were used to redeem a portion of the municipal bond issue secured by the facilities and owned by TNO Holdings. The subsequent distribution to the members of TNOH resulted in the repayment of substantially all of the funds originally loaned to TNOH by the Company plus an additional return. The Company continues to maintain an equity interest in TNOH. TNOH owns two Oklahoma municipal bond issues secured by three nursing home facilities.




Investment Company Act




The Company has taken the position that it is not an investment company required to be registered under the Investment Company Act of 1940 (the “1940 Act”) because under Section 3(b)(1) of such Act, an issuer which is primarily engaged in a business other than investment in securities is not considered an investment company under the Act. If it were established that the Company is an unregistered investment company, there would be a risk, among other material adverse consequences, that the Company could become subject to monetary penalties or injunctive relief, or both, in an action brought by the Securities and Exchange Commission. The Company would also be unable to enforce contracts with third parties or third parties could seek to obtain rescission of transactions undertaken in the period it was established the Company was an unregistered investment company.




If the Company were deemed an investment company under the 1940 Act and failed to qualify for an exemption, the Company would have to modify how it conducts business in order to conform to the Act. The 1940 Act places significant restrictions on the capital structure and corporate governance of a registered investment company, and materially restricts its ability to conduct transactions with affiliates. Such changes could have a material adverse affect on the Company's business, results of operations and financial condition.




In addition, if the Company is deemed to have been an investment company and did not register under the 1940 Act, it would be in violation of the 1940 Act and would be prohibited from engaging in business or certain other types of transactions and could be subject to civil and criminal actions for doing so. In addition, the Company's contracts would be voidable and a court could appoint a receiver to take control and liquidate it.




There can be no assurance that an exemption from the registration requirements of the 1940 Act will be available to the Company on a continuing basis. The Company is currently consulting with legal counsel and evaluating alternatives to ensure that it complies with applicable law.




Critical Accounting Policies and Estimates




General




Management’s discussion and analysis of its financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to the reported amounts of revenues and expenses and the valuation of our assets, income taxes, and contingencies. We base our estimates on historical experience and on various other assumptions and evidence as appropriate. We believe our estimates and assumptions to be reasonable under the circumstances. However, actual results could differ from those estimates under different assumptions or conditions.





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Valuation of Marketable Securities




Investments in equity and debt securities are generally based on quoted market prices. However, the investments in the RDC Series A and B bonds represent debt securities, and there is no readily available quoted market price, as these securities are owned by a limited number of holders. The Series A bonds are classified as available-for-sale and have been valued at their face value of $133,000 as supported by our estimate of the underlying value of the collateral (the Retama Park racetrack facility). We estimated the value based upon a complete appraisal of the racetrack land and improvements in June 2005, supplemented by our review of subsequent industry and economic trends, condition of the racetrack facilities and local real estate trends, and based our valuation of the Series A bonds on our percentage ownership. The Company has fully impaired the Series B bonds based on the limited available market, the uncertainty of principal or interest payments and the subordinate lien on the collateral.




Valuation of Penson Worldwide, Inc. Common Stock




The Penson Worldwide, Inc. (“PWI”) (Nasdaq: PNSN) common stock is valued at their quoted market price at the close of business on December 31, 2010, the last trading day of the fiscal year. Based on a closing price of $4.89 per share and a position of 500,922 shares, the Company’s holdings of PWI common stock is valued at $2,449,509 as of December 31, 2010. The Company held 1,000,922 shares of PWI common stock as of December 31, 2009 and the holdings were value at $9,068,353 at that time.




Notes and Interest Receivable – Retama Development Corporation




The Company has provided advances to the RDC primarily to meet the RDC’s interest and sinking fund obligations on its Series A bonds. Such advances are entirely at the discretion of the Company and are documented by promissory notes secured by a second lien mortgage on the Retama Park racetrack real estate and facilities, which is subordinated to the RDC Series A bonds and Converted Series B bonds, if any. We estimate at the end of each reporting period the valuation and collectibility of the RDC note and accrued interest that has been recognized as income, and report the total amount as other assets in our consolidated balance sheet. If such estimate indicates that the collateral value is sufficient to assure repayment of such advances and interest that has been recognized as income in the current and previous accounting periods, the notes and interest continue to be carried at the full amount. If we estimate the security for the RDC note and interest that has been previously recognized as income is insufficient to assure full repayment we would provide an allowance to reduce the carrying value of the notes and interest accordingly. Our policy in recognizing interest on the RDC note as income is discussed in greater detail in the following section, Interest Income Recognition – Retama Development Corporation.




Valuation of Other Investments




The Company estimates fair value for its other investments based on historical cost and other relevant information. The Company assesses the impairment of the other investments at least annually, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important, which could trigger an impairment review, include the following: significant underperformance relative to historical or projected future cash flows; significant changes in the strategy of the overall business; and significant negative industry trends. When management determines that the carrying value of the other investments may not be recoverable, impairment is measured as the excess of the assets’ carrying value over the estimated fair value. The Company recorded impairment losses during the fiscal year ended December 31, 2010 of $3,044,241.




Interest Income Recognition – Retama Development Corporation




During each accounting period, the Company evaluates whether to continue to recognize the accrued interest on the RDC note as income based on several criteria including, but not limited to, the value of the underlying collateral, the financial performance of Retama Park and the payment history of the RDC note and other similarly positioned debt securities. For the nine months ended September 30, 2009, the Company recognized the accrued interest on the RDC note as income; however, as of October 1, 2009, the Company elected to suspend further recognition of interest income until events and circumstances dictate otherwise. Due to the continued decline of the financial performance of Retama Park and the lack of timely funding of the Series A Bonds September 1, 2009 interest payment, the Company deemed it appropriate to suspend the income recognition of the interest on the RDC note. The Company will continue to evaluate its assessment, and make any adjustments it deems necessary.





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Accounting for Income Taxes




Significant management judgment is required to determine the provisions for income taxes and to determine whether deferred tax assets will be realized in full or in part. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. When it is more likely than not that all or some portion of specific deferred income tax assets will not be realized, a valuation allowance must be established for the amount of deferred income tax assets that are determined not to be realized. Accordingly, the facts and financial circumstances impacting deferred income tax assets are reviewed quarterly and management’s judgment is applied to determine the amount of valuation allowance required, if any, in any given period.




Tax authorities periodically audit the Company’s income tax returns. These audits include questions regarding our tax filing positions, including the timing and amount of deductions. In evaluating the exposures associated with the Company’s various tax filing positions, the Company adjusts its liability for unrecognized tax benefits and income tax provision in the period in which an uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position, or when more information becomes available.




The Company’s liability for unrecognized tax benefits (none at December 31, 2010) contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures associated with its various filing positions. The Company’s effective income tax rate is also affected by changes in tax law, the level of earnings and the results of tax audits. Although the Company believes that the judgments and estimates are reasonable, actual results could differ, and the Company may be exposed to losses or gains that could be material. An unfavorable tax settlement generally would require use of the Company’s cash and result in an increase in its effective income tax rate in the periods of resolution. A favorable tax settlement would be recognized as a reduction in the Company’s effective income tax rate in the period of resolution. The Company’s income tax expense includes the impact of reserve provisions and changes to reserves that it considers appropriate, as well as related interest.




New Accounting Standards




In December 2009, the FASB issued Accounting Standards Update (“ ASU ”) 2009-17, “ Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, ”  which codified the previously issued Statement of Financial Accounting Standards (“SFAS”) No. 167, “ Amendments to FASB Interpretation Mo. 46R. ” ASU 2009-17 changes the consolidation analysis for variable interest entities (“VIEs”) and requires a qualitative analysis to determine the primary beneficiary of the VIE. The determination of the primary beneficiary of a VIE is based on whether the entity has the power to direct matters which most significantly impact the activities of the VIE and has the obligation to absorb losses, or the right to receive benefits, of the VIE which could potentially be significant to the VIE. ASU 2009-17 was effective for periods beginning in the first interim or annual reporting period ending on or after December 15, 2009 and thus was effective for the Company’s first quarter reporting in 2010. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.




YEAR ENDED DECEMBER 31, 2010 COMPARED TO 2009




RESULTS OF OPERATIONS




a. Revenues and Other Income




Revenues




The Company's revenue for the year ended December 31, 2010 was $4,317,238 compared to $4,951,460 for the year ended December 31, 2009. The decrease in revenue is attributed to a decrease in the number of race days at Retama Park racetrack, 16 in 2010 as compared to 59 in 2009. As discussed in the “Retama Park Racetrack – Management ”  section under Item 7 in this section, the Company’s revenue is directly related to the reimbursement of payroll and payroll related expenses of the racetrack. Therefore, a decrease in race days results in a decrease in staffing requirements and, consequently, decreases reimbursements to the Company.




17




---




Interest Income




Interest income for the year ended December 31, 2010 was $332,853 compared to $437,006 for the year ended December 31, 2009. The Company’s increase in interest income from interest bearing municipal bonds acquired in the exchange of assets in February of 2010 as more fully described in the 8-K filed by the Company on February 25, 2010 and Part I – History and Developments During the Last Three Years of this 10-K, was more than offset by the decrease in accrued interest from the Funding Agreement with the Retama Development Corporation that was disposed of as part of the same transaction.




b. Expenses




Cost and Other Expenses of Revenues




Operating expenses for the year ended December 31, 2010 was $4,918,736 compared to $5,498,323 for the year ended December 31, 2009. The decrease in operating expense in 2010 as compared to 2009 is also attributable to the decrease in the number of race days at Retama Park racetrack in 2010 from the prior year.




Income Tax




The Company recognized a federal tax benefit in 2010 of $986,398 and an expense in 2009 of $76,019. The Company’s total federal income tax does not approximate the expected corporate tax rate due primarily to non-taxable municipal bond interest income. The significant increase in federal tax benefit in 2010 from 2009 is the result of an approximately $1.3 million impairment taken on the Company’s investment in Cambridge at Auburn and an impairment loss of approximately $1.68 million on the Company’s investment in The Estates at Canyon Ridge.




Other Comprehensive Income




As of December 31, 2010, the Company recognized cumulative other comprehensive income of ($197,782), net of related taxes, primarily on the disposition of a portion of the Company’s investment in PWI common stock and the subsequent decline in fair market value over the Company’s cost basis of its investments in PWI common stock based on the closing price of the common stock as of December 31, 2010. Accumulated other comprehensive income at December 31, 2009 was $2,840,676, net of taxes.




LIQUIDITY AND CAPITAL RESOURCES




During the year ended December 31, 2010, the Company's operating activities used cash of $2,268,138 compared to $1,404,834 used for the year ended December 31, 2009.




As discussed in Note 5 to the audited financial statements, the Company maintains an investment account that utilizes a margin loan collateralized by the Company’s marketable securities. As of December 31, 2010 there was no availability under this margin as detailed in the following chart. The Company is currently in the process of pursuing transactions, such as the liquidation of certain municipal bond positions that, if successful, would paydown the margin loan balance in an amount sufficient to provide operating a liquidity and restore borrowing availability. There can be no assurances that the Company will be successful in completing these transactions. While the Company pursues these transactions, PWI has elected not to engage in the liquidation of the underlying collateral.




As of December 31, 2009

As of December 31, 2010Margin value of Retama Series B bonds

$
-


$
-Margin value of all other marketable securities


9,259,476



6,130,097Total margin value of marketable securities

$
9,259,476


$
6,130,097Maximum loan based on 75% loan-to-value

$
6,944,607


$
4,597,573Margin loan outstanding

$
13,259,281


$
5,777,020Margin loan availability (call)

$
(6,314,674
)

$
(1,179,447
)


18




---




In September 2009, PFSI determined that, for margin account purposes due to, among other reasons, the lack of trading activity in the Retama Development Corporation Series B bonds, it should require a 100% margin requirement, effectively making these bonds non-marginable. As a result, the Company received a margin call letter on September 28, 2009 from PFSI notifying theCompany that it needed to deposit $5,300,000 in additional cash or margin collateral into its margin loan account by September 30, 2009. The Company did not make the requested deposit by September 30, 2009. PFSI elected not to pursue remedial actions at the time, such as account liquidation, but continued to reserve all of their rights and remedies under the margin agreement while working with the Company to restructure the margin loan. As part of the margin loan restructuring, on February 25, 2010, the Company entered into a Promissory Note in favor of PWI, in the principal amount of $13,922,000, accumulating interest at a rate of 10% per year with a maturity of February 25, 2012. In addition, the Company has granted PWI a carried interest equal to 20% of the proceeds from its holdings of Retama Development Corp. B Bonds. If the Company repays the Promissory Note prior to the second anniversary of the issuance and there is no default or event of default prior to such repayment, the carried interest will be reduced to 15%. The carried interest entitles the lender to a percentage of all income, principal and other proceeds (in whatever form) from or in respect of the Retama Development Corp. B Bonds of any kind whether on account of interest, redemption of principal, proceeds of sale, pledge or other transfer or disposition of the Bonds, insurance proceeds, tax refunds, or otherwise made or payable in respect of any of the Bonds. The carried interest survives the repayment of the Promissory Note. The Promissory Note is secured by a lien on substantially all of the Company’s assets.




In response to the Company’s continued operating losses, the Company will continue to assess the sale of certain assets and marketable securities in order to provide additional liquidity and the paydown of the outstanding debt. Specifically, management will assess the proper timing to continue selling a portion of the Company’s holdings of the Penson common stock. Given the highly liquid nature of this security, management believes it has adequate financial resources to fund its operations and capital requirements for the next twelve months.




Additionally, the Company is actively pursuing capital transactions that would provide for the redemption of the Cambridge Student Housing Authority Bonds and the Leon County Florida Educational Facilities Authority Bonds detailed in Note 9 – Related Party Transactions of the financial statements below. The Company has engaged the services of a nationally recognized real estate firm that is experienced in marketing student housing facilities such as these. Given the bond structure of these two assets and the Company’s subordinated debt position, sale of these facilities will ultimately require the approval of each respective issuing authority. The Company is currently in the process of obtaining the necessary approval, however, it remains uncertain whether or not it will be granted and, if granted, what proceeds from the sale will ultimately be available to these bond positions.




The Company is also engaged in discussions with a variety of casino companies with an interest in investing in Retama Park. It is the intent of the Company to execute an agreement with a casino company that would provide additional expertise in pursuing our legislative agenda, experience in financing, constructing and operating a casino operation if favorable legislation is granted, liquidity for Retama Park operations during the pursuit of legislation and a meaningful capital transaction for the Company.




If the net proceeds are insufficient to repay the PWI Note and accrued interest, it is likely we would seek a restructuring of the remaining balance or a replacement credit facility, otherwise we may be unable to repay our loan to PWI in full when it comes due February 25, 2012.




In the past, the Company has provided loans to the RDC but has had no obligation to do so since 1999. These loans were provided in order to support the continued operation of Retama Park as a Class I racetrack while pursuing the approval of additional forms of gaming at Texas racetracks. We anticipate that the profits from additional gaming operations at Retama Park, if approved, would provide sufficient cash flow to the RDC to enable the Series B bonds to be repaid in full. We believe our loans to the RDC, which amount to $409,728 including accrued interest as of December 31, 2010, and our holdings of RDC Series A bonds in the amount of $133,000 are fully secured by the collateral security in the Retama Park facilities and real estate and would be repaid even if the operations of Retama Park racetrack were terminated. The Company will respond to any future requests for additional funding by the RDC as it deems appropriate.




OFF-BALANCE SHEET ARRANGEMENTS




We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.




ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK




Not applicable.




19




---




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.




Report of Independent Registered Public Accounting Firm
F-1Consolidated Balance Sheets, December 31, 2010 and 2009
F-2Consolidated Statements of Operations, years ended December 31, 2010 and 2009
F-3Consolidated Statements of Changes in Stockholders' Equity (Deficit), years ended December 31, 2010 and 2009
F-4Consolidated Statements of Cash Flows, years ended December 31, 2010 and 2009
F-5Notes to Consolidated Financial Statements
F-6


20




---




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Directors 
Call Now, Inc. and Subsidiary 
San Antonio, Texas




We have audited the accompanying consolidated balance sheets of Call Now, Inc. and Subsidiary (collectively referred to as “the Company”) as of December 31, 2010 and 2009 and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits.




We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Call Now, Inc. and Subsidiary as of December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.




/s/ Akin, Doherty, Klein & Feuge, P.C.Akin, Doherty, Klein & Feuge, P.C.San Antonio, TexasMarch 31, 2011


F-1




---




CALL NOW, INC. AND SUBSIDIARY 
Consolidated Balance Sheets




December 31,

December 31,2010

2009ASSETSCurrent Assets:Cash and cash equivalents

$
189,340


$
17,452Accounts receivable, net


777,460



789,069Marketable securities – related party


2,449,509



9,068,353Marketable securities – other


3,638,437



140,808Other current assets


232,007



139,696Total current assets


7,286,753



10,155,378Furniture, Equipment and Improvements (less accumulateddepreciation of $5,296 and $1,372)


10,401



14,325Other Assets:Marketable securities – Retama Development Corp.


133,000



145,000Investments


116,279



4,365,136Notes and interest receivable – Retama Development Corp.


409,728



5,222,893Deferred tax asset


2,048,940



936,601Total other assets


2,707,947



10,669,630Total Assets

$
10,005,101


$
20,839,333LIABILITIES AND EQUITY (DEFICIT)Current Liabilities:Accounts payable and accrued expenses

$
532,536


$
654,301Margin loan payable – related party


5,777,021



13,259,281Deferred taxes payable


-



1,463,379Total current liabilities


6,309,557



15,376,961Long-Term Note Payable and Accrued Interest – related party


14,508,750



-Equity (Deficit):Call Now Stockholders’ Equity (Deficit):Preferred stock, $.001 par value; authorized 266,667 shares,none outstanding


-



-Common stock, $.001 par value; authorized 16,666,667 shares,3,327,075 issued and 2,013,877 and 2,902,367 outstanding


3,327



3,327Additional paid-in-capital


7,091,120



7,091,120Treasury stock, at cost, 1,313,198 and 424,708 shares


(14,372,488
)


(3,094,455
)Accumulated other comprehensive income (loss)


(197,783
)


2,840,676Retained earnings (deficit)


(3,495,497
)


(1,502,733
)Total Call Now stockholders’ equity


(10,971,321
)


5,337,935Non-controlling interest


158,115



124,437Total equity (deficit)


(10,813,206
)


5,462,372Total Liabilities and Equity (Deficit)

$
10,005,101


$
20,839,333


See notes to consolidated financial statements.




F-2




---




CALL NOW, INC. AND SUBSIDIARY 
Consolidated Statements of Operations




Years Ended December 31,2010

2009RevenuesReimbursement of payroll and payroll related expenses

$
4,077,238


$
4,711,460Management fees


240,000



240,0004,317,238



4,951,460ExpensesPayroll and payroll related expenses


4,076,113



4,711,460Corporate general and administrative operations


842,623



786,863Total expenses


4,918,736



5,498,323Net Operating (Loss)


(601,498
)


(546,863
)Other Income (Expenses)Interest income – related party


149,635



283,429Interest income – other


183,218



153,577Gain on sale of marketable securities – related party


2,077,510



688,197Gain (loss) on sale of marketable securities – other


(10,001
)


41,571Gain on sale of investment – related party


12,179



107,162Gain on sale of investment – other


-



42,764Impairment of other investments, long-term


(3,044,241
)


-Interest expense – related party


(1,712,286
)


(1,059,953
)Total other income (expense), net


(2,343,986
)


256,747(Loss) before income taxes


(2,945,484
)


(290,116
)Income tax expense (benefit)


(986,398
)


76,019Net (loss) including non-controlling interest


(1,959,086
)


(366,135
)Less: net income attributable to non-controlling interest


(33,678
)


(48,000
)Net (Loss) Attributable to Call Now

$
(1,992,764
)

$
(414,135
)Per Share DataBasic and diluted (loss) per share attributed toCall Now common shareholders

$
(.90
)

$
(.14
)Weighted average common shares outstanding:Basic


2,214,868



2,902,367Dilutive


2,214,868



2,902,367


See notes to consolidated financial statements.




F-3




---




CALL NOW, INC. AND SUBSIDIARY Consolidated  Statements of Changes in Stockholders’ Equity (Deficit)




AccumulatedAdditional








Other

Retained

Non-

TotalCommon Stock

Paid-In

Treasury Stock

Comprehensive

Earnings

Controlling

Stockholders’Shares

Amount

Capital

Shares

Amount

Income

(Deficit)

Interest

Equity (Deficit)Balance, December 31, 2008

3,327,075

$
3,327

$
7,091,120

424,708


$
(3,094,455
)

$
2,113,109


$
(1,088,598
)

$
76,437

$
5,100,940Comprehensive income (loss):Net income (loss)

-


-


-

-



-



-



(414,135
)


48,000


(366,135
)Unrealized gain on securities, net of$375,000 in income taxes

-


-


-

-



-



727,567



-



-


727,567Total comprehensive income

-


-


-

-



-



-



-



-


361,432Balance, December 31, 2009

3,327,075

$
3,327

$
7,091,120

424,708


$
(3,094,455
)

$
2,840,676


$
(1,502,733
)

$
124,437

$
5,462,372Purchase of treasury stock from related party

-


-


-

898,463



(11,404,600
)













(11,404,600
)Sale of treasury stock to related party

-


-


-

(9,973
)


126,567














126,567Comprehensive income (loss):Net income (loss)

-


-


-

-



-



-



(1,992,764
)


33,678


(1,959,086
)Unrealized gain on securities, net of$1,565,000 in income taxes

-


-


-

-



-



(3,038,459
)


-



-


(3,038,459
)Total comprehensive income

-


-


-

-



-



-



-



-


(4,997,545
)Balance, December 31, 2010

3,327,075

$
3,327

$
7,091,120

1,313,198


$
(14,372,488
)

$
(197,783
)

$
(3,495,497
)

$
158,115

$
(10,813,206
)


See notes to consolidated  financial  statements.




F-4




---




CALL NOW, INC. AND SUBSIDIARY 
Consolidated Statements of Cash Flows




Year Ended December 31,2010

2009Operating ActivitiesNet (loss) including non-controlling interest

$
(1,959,086
)

$
(366,135
)Adjustments to reconcile net (loss) tonet cash (used) by operating activities:Net realized (gains) on sales of marketable securities – related party


(2,077,510
)


(688,197
)Net realized loss (gains) on sales of marketable securities – other


10,001



(41,571
)Net realized (gains) on sales of long-term investments – related party


(12,179
)


(107,162
)Net realized (gains) on sales of long-term investments – other


-



(42,764
)Loss on impairment


3,044,241



-Bad debt allowance


180,000



60,000Deferred income taxes


(1,010,451
)


(92,920
)Depreciation


3,924



3,924Changes in operating assets and liabilities:Accounts receivable


(168,391
)


(240,000
)Other current assets


(156,921
)


(20,036
)Accounts payable and accrued expenses


(121,766
)


130,027Net Cash (Used) by Operating Activities


(2,268,138
)


(1,404,834
)Investing ActivitiesAdvances on notes and interest receivable – Retama Development Corp.


(409,728
)


(283,429
)Sales of note receivable – Retama Development Corp.


5,222,893



-Proceeds from sales of available-for-sale marketable securities


54,999



1,106,364Proceeds from sales of available-for-sale marketable securities – related party


4,492,000



1,170,597Purchase of available-for-sale marketable securities


(3,950,000
)


-Proceeds from sale of other long-term investments


-



451,500Proceeds from sale of other long-term investments to related party


-



400,000Purchase of other long-term investments


(251,250
)


(723,762
)Proceeds from other investments


1,532,655



-Net Cash Provided by Investing Activities


6,691,569



2,121,270Financing ActivitiesProceeds from margin loans – related party


7,537,367



1,510,058Payments on margin loans – related party


(15,019,627
)


(2,297,879
)Proceeds from long-term debt – related party


15,514,972



-Repayment of long-term debt – related party


(1,006,222
)


-Purchase of treasury stock – related party


(11,404,600
)


-Sale of treasury stock – related party


126,567



-Net Cash (Used) by Financing Activities


(4,251,543
)


(787,821
)Net Change in Cash and Cash Equivalents


171,888



(71,385
)Cash and cash equivalents at beginning of year


17,452



88,837Cash and Cash Equivalents at End of Year

$
189,340


$
17,452Supplemental DisclosuresInterest paid in cash

$
1,720,619


$
1,059,953Income taxes paid in cash


12,813



7,429


See notes to consolidated financial statements.




F-5




---




CALL NOW, INC. AND SUBSIDIARY 
Notes to Consolidated Financial Statements 
December 31, 2010 and 2009




NOTE 1 – SUMMARY OF ACCOUNTING POLICIES




Nature of Business: Call Now, Inc. was organized under the laws of the State of Florida on September 24, 1990 under the name Rad San, Inc. The Company changed its name to Phone One International, Inc. in January 1994 and to Call Now, Inc. in December 1994. The Company changed its domicile to the State of Nevada in 1999.




The primary operation of the Company is the management of Retama Park racetrack (“Retama Park”) in Selma, Texas, through an 80% owned subsidiary, Retama Entertainment Group, Inc. (“REG”). Retama Park is owned by the Retama Development Corporation (the “RDC”). The RDC has an agreement with REG to operate and manage Retama Park. The RDC, as owner of the facility, reimburses REG for the majority of  payroll and payroll related expenses, plus a monthly management fee.




The management agreement with Retama Park is the only management agreement that REG has executed with a track currently in operation and is the only source of revenue for REG.




Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Call Now, Inc. and its 80% owned subsidiary, Retama Entertainment Group Inc. (collectively “the Company” or “Call Now”). All significant inter-company transactions and balances have been eliminated in consolidation.




Cash and Cash Equivalents: The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.




Accounts Receivable: Accounts receivable are reported at outstanding principal, net of an allowance for doubtful accounts of $240,000 and $60,000 at December 31, 2010 and 2009. The allowance for doubtful accounts is determined based on historical trends and an account-by-account review. Accounts are charged off when collection efforts have failed and the account is deemed uncollectible. The Company normally does not charge interest on accounts receivable.




Marketable Securities : The Company classifies its investment portfolio as held-to-maturity, available-for-sale, or trading. At December 31, 2010 and 2009, all of the Company’s marketable securities were available-for-sale. Securities available-for-sale are carried at fair value with unrealized gains and losses included in stockholders’ equity as a component of other comprehensive income. Classification as current or non-current is based primarily on whether there is an active public market for such security.




Securities that do not trade in an active market are valued based on the best information available to Management. Impairments are reviewed on at least an annual basis. Gains or losses from the sale or redemption of the marketable securities are determined using the specific identification method.




Furniture and Equipment: Furniture and equipment are stated at cost. Depreciation and amortization are computed on a straight-line method over the estimated useful lives of the related assets, ranging from three to seven years. Leasehold improvements are amortized over the lesser of the estimated useful lives or remaining lease period. Expenditures for maintenance and repairs are charged to expense as incurred.




Impairment of Long-Lived Assets: The Company periodically reviews, on at least an annual basis, the carrying value of its long-lived assets, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. To the extent the fair value of a long-lived asset, determined based upon the estimated future cash inflows attributable to the asset, less estimated future cash outflows, are less than the carrying amount, an impairment loss is recognized.




Notes and Interest Receivable – Retama Development Corporation: Notes and interest receivable from Retama Development Corporation are carried at outstanding principal plus accrued interest. The Company reviews the carrying value for impairment on at least an annual basis, and believes the security is sufficient to assure recovery of the principal and accrued interest.




Valuation of Other Investments – The Company estimates fair value for its other investments based on historical cost and other relevant information. The Company assesses the impairment of the other investments at least annually, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important, which could trigger an impairment review, include the following: significant underperformance relative to historical or projected future cash flows; significant changes in the strategy of the overall business; and significant negative industry trends. When management determines that the carrying value of the other investments may not be recoverable, impairment is measured as the excess of the assets’ carrying value over the estimated fair value. The Company recorded an impairment charge during the fiscal year ended December 31, 2010 of $3,044,241.




F-6




---




CALL NOW, INC. AND SUBSIDIARY 
Notes to Consolidated Financial Statements 
December 31, 2010 and 2009




NOTE 1 – SUMMARY OF ACCOUNTING POLICIES – continued




Interest Income Recognition – Retama Development Corporation: During each accounting period, the Company evaluates whether to continue to recognize the accrued interest on the RDC note as income based on several criteria including, but not limited to, the value of the underlying collateral, the financial performance of Retama Park and the payment history of the RDC note and other similarly positioned debt securities. Through September 30, 2009, the Company recognized the accrued interest on the RDC note as income; however, as of October 1, 2009, the Company elected to suspend further recognition of interest income until events and circumstances dictate otherwise. Due to the continued decline of the financial performance of Retama Park the Company has deemed it appropriate to suspend the income recognition through December 31, 2010. The Company will continue to evaluate its assessment, and make any adjustments it deems necessary.




Income Taxes: Deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company is subject to the Texas margin tax.




The Company follows Accounting Standards Codification (“ASC”) Topic 740. The Standard defines the confidence level that a tax position must meet in order to be recognized in the financial statements. ASC 740 requires a two-step approach under which the tax effect of a position is recognized only if it is “more-likely-than-not” to be sustained and the amount of tax benefit recognized is equal to the largest tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement of the tax position. This approach requires the Company to exercise considerable judgment and estimates are inherent. ASC 740 also requires that the amount of interest expense to be recognized related to uncertain tax positions be computed by applying the applicable statutory rate of interest to the difference between the tax position recognized in accordance with ASC 740 and the amount previously taken or expected to be taken in a tax return.




Revenue Recognition: The Company receives reimbursement of payroll and related expenses for costs incurred under its management agreement with the RDC. Such amounts are recognized as revenue when the reimbursable expense is incurred. The Company also receives a monthly management fee under the agreement.




Interest and dividend income is recognized as earned on its investments, except for the RDC Series B bonds. The Company does not recognize interest income on the RDC Series B bonds (see Note 3), as the Company does not expect to realize such interest in the foreseeable future.




Earnings (Loss) Per Common Stock Attributable To Call Now, Inc.: Basic earnings (loss) per common share is 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 anti-dilutive effect on diluted earnings (loss) per share are excluded from the calculation.




Concentration of Credit Risk: Financial instruments that potentially expose the Company to credit risk consist of cash and cash equivalents, marketable securities, and notes receivable. The Company maintains its cash balances at two financial institutions. Accounts at the institutions are secured by the FDIC up to $250,000. Balances may periodically exceed this amount. Cash balances at Penson Financial Services, Inc. have additional insurance in excess of $10,000,000.




At December 31, 2010 and 2009, the Company’s investment in Penson Worldwide, Inc. common stock totaled $2,449,509 and $9,068,353, respectively, or approximately 24% and 44%, respectively, of the Company’s total assets. Any significant decline in the fair market value of this asset would negatively impact the financial position of the Company.




Fair Value of Financial Instruments: Cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and margin loan payable are reflected in the accompanying consolidated financial statements at cost, which approximates fair value because of the short-term maturity of these instruments. Marketable securities are recorded at fair value, with a majority of such securities being traded in an active market. Fair value of notes payable is based on rates available to the Company for debt with similar terms and maturities.




F-7




---




CALL NOW, INC. AND SUBSIDIARY 
Notes to Consolidated Financial Statements 
December 31, 2010 and 2009




NOTE 1 – SUMMARY OF ACCOUNTING POLICIES – continued




Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure on 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.




Stock Based Compensation: The Company applies the provisions of ASC Topic 718-10, “Compensation – Stock Compensation”, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including grants of stock options and employee stock purchases under the Company’s Employee Stock Purchase Plan, based on estimated fair values. There were no options granted in 2010 or 2009, and no options were outstanding at December 31, 2010 or 2009.




Comprehensive Income: Comprehensive income includes all changes in equity except those resulting from investments by owners and distributions to owners. The components of comprehensive income are included in the Statement of Changes in Stockholders’ Equity.




Subsequent Events: Management has reviewed and evaluated events and transactions which have occurred subsequent to December 31, 2010 through March 31, 2011, the date of issuance of these financial statements.




Reclassification: Certain reclassifications, all insignificant in amount, have been made to the prior year’s financial statements in order to conform to the current presentation.




NOTE 2 – MARKETABLE SECURITIES




The carrying amounts of marketable securities as shown in the accompanying balance sheet and their approximate market values are as follows at December 31, 2010 and 2009:




Gross

Gross

Carrying/Unrealized

Unrealized

Market2010

Cost

Gains

(Losses)

ValueCurrent Assets, available-for-sale:Equity securities, PWI commonstock, see note 4

$
2,416,449

$
33,060

$
-


$
2,449,509Municipal bonds


4,076,575


-


(438,138
)


3,638,437$
6,493,024

$
33,060

$
(438,138
)

$
6,087,946Non-current Assets, available-for-sale:RDC Series A bonds


27,594


105,406


-



133,000Total available-for-sale securities

$
6,520,618

$
138,466

$
(438,138
)

$
6,220,946


F-8




---




CALL NOW, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements 
December 31, 2010 and 2009




NOTE 2 – MARKETABLE SECURITIES – continued




Gross

Gross

Carrying/Unrealized

Unrealized

Market2009

Cost

Gains

(Losses)

ValueCurrent Assets, available-for-sale:Equity securities, PWI commonstock, see note 4

$
4,828,448

$
4,239,905

$
-


$
9,068,353Municipal bonds


191,575


-


(50,767
)


140,808$
5,020,023

$
4,239,905

$
(50,767
)

$
9,209,161Non-current Assets, available-for-sale:RDC Series A bonds


30,083


114,917


-



145,000Total available-for-sale securities

$
5,050,106

$
4,354,822

$
(50,767
)

$
9,354,161


Unrealized gains (losses) on marketable securities available-for-sale at December 31, 2010 and 2009 are shown net of income taxes as a component of stockholders’ equity.




The Company has five debt securities in an unrealized loss position at December 31, 2010. The unrealized loss on these securities at December 31, 2010 is $438,138 and the market value is $3,638,437. The Company does not consider these investments to be other than temporarily impaired.




NOTE 3 – MARKETABLE SECURITIES AND NOTES RECEIVABLE – RETAMA DEVELOPMENT




During 1996 and 1997, the Company purchased a significant portion of the Special Facilities Revenue Bonds, Series 1993, of the Retama Development Corporation (the “RDC”). The revenue bonds were originally issued to fund the construction of the Retama Park racetrack in Selma, Texas. Following the bankruptcy by the RDC and the defeasance of the Series 1993 bonds, the Company retained a significant interest in the new 1997 RDC Series B bonds, which are secured by a lien, subordinate to the Series A bonds and the funding agreement, on the Retama Park racetrack real and personal property, and now owns a small position the Series A bonds (the Retama Series A bonds hold the first lien position). Both the Series A and Series B bonds mature September 1, 2033. For several years following the initial acquisition, the Company purchased and sold several blocks of the bonds. However, the Company has not purchased or sold any of the Series B bonds since 2002, and changes to the Series A bonds have been limited to redemptions of $5,000 each year. The Company’s investment in the RDC Series B bonds was fully impaired in 2006.




Payment on the Series A bonds have remained current through the payment of interest and principal due December 31, 2010 substantially as a result of loans made through the Funding Agreement. There have never been any payments made on the Series B bonds and it is not anticipated that any payment will be made unless additional forms of gaming (video lottery terminals, slot machines, table games) are legalized at Texas racetracks or the underlying collateral real estate is either sold or redeveloped. The Company fully impaired the Series B bonds based on the limited available market, the uncertainty of principal or interest payments and the subordinate lien on the collateral.




As part of the bond defeasance agreement, the Company was obligated to lend certain amounts to the RDC to fund any operating losses for up to 2 years, which expired in 1999. Although the Company is not currently obligated to fund the RDC, it has continued to do so as part of its strategy to assure continued operations at the racetrack. At December 31, 2010, the total amount funded by the Company to the RDC for its operations includes principal of $400,000 plus interest of $9,728 as a result of a loan made by the Company in September of this year; however, due to uncertain economic future of Retama Park, the Company elected to suspend further recognition of interest income until events and circumstances dictate otherwise.




F-9




---




CALL NOW, INC. AND SUBSIDIARY 
Notes to Consolidated Financial Statements 
December 31, 2010 and 2009




NOTE 3 – MARKETABLE SECURITIES AND NOTES RECEIVABLE – RETAMA DEVELOPMENT – continued




At December 31, 2009, the Company had an outstanding receivable from the RDC in the principal amount of $3,627,569 plus accrued interest of $1,595,324. Such funding was secured by a second lien on the racetrack facility. As more fully described in the 8-K filed by the Company on February 25, 2010 and Part I – History and Developments During the Last Three Years of this 10-K, on February 25, 2010 the Company entered into a Purchase and Sale Agreement with Christopher J. Hall (“Hall”), the Company’s majority shareholder, Chairman and director, where the Company transferred to Hall, in addition to other assets and cash, the full principal and interest value of these RDC notes in exchange for 898,000 shares of the Company’s common stock and two municipal bond positions.




The balance of these bonds and notes receivable, all considered long-term, are as follows at December 31, 2010 and 2009:




Total

Face AmountFace Amount

Owned By

Cost

Carrying2010

Outstanding

Call Now

Basis

ValueRDC Bonds (Marketable Securities):RDC Series A bonds

$
6,045,000

$
133,000

$
27,594

$
133,000RDC Series B bonds


86,925,000


43,962,500


1,077,463


-Total bonds, long-term










$
133,000RDC Notes and Interest Receivable:Notes receivable, principal balance

$
400,000

$
400,000

$
400,000

$
400,000Accrued interest receivable


9,728


9,728


9,728


9,728Total notes and interest receivable










$
409,728


Total

Face AmountFace Amount

Owned By

Cost

Carrying2009

Outstanding

Call Now

Basis

ValueRDC Bonds (Marketable Securities):RDC Series A bonds

$
6,250,000

$
145,000

$
30,083

$
145,000RDC Series B bonds


86,925,000


43,962,500


1,077,463


-Total bonds, long-term










$
145,000RDC Notes and Interest Receivable:Notes receivable, principal balance

$
3,627,569

$
3,627,569

$
3,627,569

$
3,627,569Accrued interest receivable


1,595,324


1,595,324


1,595,324


1,595,324Total notes and interest receivable










$
5,222,893


NOTE 4 – MARKETABLE SECURITIES – RELATED PARTY




On June 26, 2003 the Company entered into a “Convertible Promissory Note and Purchase Agreement” with Penson Worldwide, Inc. (“PWI”) to lend $6,000,000 with the note maturing on June 26, 2008. The President of Call Now, Inc. is a Director of PWI. The note called for principal payments in the amount of $400,000 to be paid monthly beginning April 26, 2007 and ending on June 26, 2008. The note required the Company, as noteholder, to have the option to convert the entire outstanding principal amount into shares of PWI common stock. The conversion price per common share was 2.25 times PWI shareholders’ equity as of June 30, 2003 divided by the actual number of issued and outstanding shares of PWI as of June 30, 2003, which equated to $2.01 per share. On December 23, 2003, an additional $600,000 was loaned to PWI under similar terms and conditions as the original note.




On June 30, 2005, the Company converted the entire $6,600,000 principal balance of the PWI note into PWI common stock, totaling 3,283,582 shares.




F-10




---




CALL NOW, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 2010 and 2009




NOTE 4 – MARKETABLE SECURITIES – RELATED PARTY – continued




On May 16, 2006, PWI completed the Initial Public Offering (“IPO”) of their common stock (Nasdaq: PNSN). In a simultaneous transaction, PWI affected a 1-for-2.4 share reverse split and the split-off of certain non-core business operations known as SAMCO. As part of the IPO, the Company elected to participate in the exchange of PWI shares for SAMCO shares and sell a total of 11.5% of its investment, or 157,337 post-split shares, of the PWI shares in the IPO resulting in a gain on the sale of $1,728,504. Following the completion of the PWI IPO, the Company’s resulting position is as follows: 79,900 shares of SAMCO which represents an approximate 7.29% interest in the company; and 1,130,922 shares of the publicly traded PWI common stock. During the fourth fiscal quarter of 2009, the Company sold 64,000 shares of SAMCO at an average price of $5.49 per share, resulting in a remaining position of 15,900 shares, or approximately 1.66% of the outstanding stock as December 31, 2009. During the first fiscal quarter of 2010, the Company sold its remaining shares of SAMCO at a price of $5.59 per share. In August 2008, the Company sold 30,000 shares of PWI common stock at an average price of $18.30 per share. In August 2009, the Company sold 100,000 shares of PWI common stock at an average price of $11.71 per share, leaving a balance of 1,000,922. As more fully described in the 8-K filed by the Company on February 25, 2010 and Part I – History and Developments During the Last Three Years of this 10-K, on February 25, 2010 the Company entered into a Purchase and Sale Agreement with Christopher J. Hall (“Hall”), the Company’s majority shareholder, Chairman and director, where the Company transferred to Hall, in addition to other assets and cash, 500,000 shares of PWI common stock in exchange for 898,000 shares of the Company’s common stock and two municipal bond positions. The Company holds a position of 500,922 shares of PWI common stock, or approximately 1.75% of the outstanding shares as of December 31, 2010 and recognizes cumulative other comprehensive income from the increase in value of the PWI common stock of approximately $33,000 (gross) or $22,000 net of taxes. The Company originally extended credit to Penson in order to achieve a higher return on its capital for use in its business. After the loan was converted to Penson stock it continues to be held as a source of capital for the Company's business.




NOTE 5 – MARGIN LOAN PAYABLE – RELATED PARTY




The Company has a margin loan payable to Penson Financial Services, Inc., a wholly owned subsidiary of Penson Worldwide, Inc., which accrues interest at an interest rate of 7.45% at December 31, 2010 and 2009. The balance of the margin loan was $5,777,020 and $13,259,281 at December 31, 2010 and 2009, respectively. The margin loan is collateralized by a majority of the Company’s marketable securities, including all of its PWI common stock. The Company paid interest on the margin loan of $387,131 in 2010 and $1,059,953 in 2009. There was no borrowing availability from this margin account at December 31, 2010 and 2009.




NOTE 6 – NOTE PAYABLE – RELATED PARTY




On February 25, 2010, the Company entered into a Promissory Note in favor of PWI, in the principal amount of $13,922,000, accumulating interest at a rate of 10% per year with a maturity of the principal and interest on February 25, 2012. On September 16, 2010 the Company borrowed an additional $400,000 from PWI, bringing the balance of the Promissory Note to $14,322,000. On November 12, 2010 the Company made a payment of $1,000,000 in principal and $6,222 in interest on the Promissory Note, bringing the principal balance down to its current balance of $13,322,000. The Company has granted PWI a carried interest equal to 20% of the proceeds from its holdings of Retama Development Corp. B Bonds. If the Company repays the Promissory Note prior to the second anniversary of the issuance and there is no default or event of default prior to such repayment, the carried interest will be reduced to 15%. The carried interest entitles the lender to a percentage of all income, principal and other proceeds (in whatever form) from or in respect of the Retama Development Corp. B Bonds of any kind whether on account of interest, redemption of principal, proceeds of sale, pledge or other transfer or disposition of the Bonds, insurance proceeds, tax refunds, or otherwise made or payable in respect of any of the Bonds. The carried interest survives the repayment of the Promissory Note. The Promissory Note is secured by a lien on substantially all of the Company’s assets.




F-11




---




CALL NOW, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 2010 and 2009




NOTE 7 – STOCKHOLDERS’ EQUITY




Preferred Stock: The Company has authorized 266,667 shares of $.001 par value preferred stock, of which 100,000 shares are designated Class A convertible redeemable preferred stock (Class A), 66,667 shares are designated Class B convertible redeemable preferred stock (Class B), and 100,000 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. No Class A shares are outstanding at December 31, 2010 and 2009.




The Class B preferred stock is non-voting, redeemable at the option of the Company at a price of $100 per share plus accrued but unpaid dividends, and 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. No Class B shares are outstanding at December 31, 2010 and 2009.




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 at the option of the holder. No Class C shares are outstanding at December 31, 2010 and 2009.




NOTE 8 – INCOME TAXES




Income tax expense does not approximate the expected corporate tax rate due primarily to non-taxable municipal bond interest income received in each year. The components of the provision for income tax expense (benefit) are as follows at December 31:




2010

2009Deferred federal income tax (benefit)

$
(1,010,449
)

$
(92,921
)Current federal income tax


-



148,750State income tax


24,051



20,190Income tax expense (benefit)

$
(986,398
)

$
76,019


Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows as of December 31, 2010 and 2009:




2010

2009Deferred tax assets:Net operating loss carryforward, long-term

$
1,775,847


$
765,397Basis difference in assets, long-term


-



171,204Unrealized losses on marketable securities, current


101,888



-$
(1,877,735
)

$
936,601Deferred tax (liabilities):Unrealized gains on marketable securities, current

$
-


$
(1,463,379
)


The Company has net operating loss carryforwards for tax purposes of approximately $5,223,000 that begin to expire in the year 2023.




F-12




---




CALL NOW, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 2010 and 2009




NOTE 8 – INCOME TAXES - continued




Other Tax Matters: The Company recognizes interest and penalties related to unrecognized tax benefits in tax expense. The Company included accruals for unrecognized income tax benefits totaling $0 as a component of other liabilities as of December 31, 2010 and 2009.  During 2009 an unrecognized tax position of $398,750 has been settled with the taxing authority. The Company accrued interest of $21,250 at December 31, 2009. The Company does not anticipate a significant change in the amount of unrecognized tax benefits in the next 12 months.




A reconciliation of the change in the unrecognized tax benefits is as follows:




Unrecognized tax benefit at December 31, 2008
$
250,000Gross increases – tax positions in prior years

148,750Settlements

(398,750
)Unrecognized tax benefits at December 31, 2009
$
0


As of December 31, 2010, the tax years ending December 31, 2006 through 2009 remain subject to examination by tax authorities.




NOTE 9 – RELATED PARTY TRANSACTIONS




The Company owns 500,922 shares of Penson Worldwide, Inc. common stock with a market value of $2,449,509 at December 31, 2010, and 1,000,922 shares with a market value of $9,068,353 at December 31, 2009. The Company also has a margin loan payable to Penson Financial Services, Inc., a wholly owned subsidiary of Penson Worldwide, Inc., with a balance of $5,777,021 at December 31, 2010 and $13,259,281 at December 31, 2009. The President of Call Now, Inc. is a Director of Penson Worldwide, Inc.




In 2005 the Company purchased a limited partnership interest in a 270-unit luxury apartment complex under development at the master planned community of Stone Oak in San Antonio, Texas. Other limited partners include the Company’s President/CEO, the Company’s majority shareholder and the President of REG. The general partner is an unrelated real estate development company based in Houston. The Estates at Canyon Ridge was sold on November 2, 2010 to an unrelated third party, resulting in a realized loss by the Company of approximately $1,683,000. This amount had previously been reported by the Company as an impairment charge to earnings in the quarter ended September 30, 2010.




In January 2009, the Company sold approximately 23.24% of the 95% limited partnership interest in Cambridge at Auburn, LP to Thomas R. Johnson, the President and Chief Executive Officer of the Company for $400,000. The purchase price represented the Company’s cost basis in the partnership and the proceeds were utilized to support other investments of the Company. The transaction was evaluated and approved by the Company’s directors who had no interest in the transaction.




On February 25, 2010, the Company entered into a Promissory Note in favor of PWI, in the principal amount of $13,922,000, accumulating interest at a rate of 10% per year with a maturity of February 25, 2012. On September 16, 2010 the Company borrowed an additional $400,000 from PWI, bringing the balance of the Promissory Note to $14,322,000. On November 12, 2010 the Company made a payment of $1,000,000 in principal and $6,222 in interest on the Promissory Note, bringing the principal balance down to its current balance of $13,322,000. In addition, the Company has granted PWI a carried interest equal to 20% of the proceeds from its holdings of Retama Development Corp. B Bonds. If the Company repays the Promissory Note prior to the second anniversary of the issuance and there is no default or event of default prior to such repayment, the carried interest will be reduced to 15%. The carried interest entitles the lender to a percentage of all income, principal and other proceeds (in whatever form) from or in respect of the Retama Development Corp. B Bonds of any kind whether on account of interest, redemption of principal, proceeds of sale, pledge or other transfer or disposition of the Bonds, insurance proceeds, tax refunds, or otherwise made or payable in respect of any of the Bonds. The carried interest survives the repayment of the Promissory Note. The Promissory Note is secured by a lien on substantially all of the Company’s assets.




F-13




---




CALL NOW, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 2010 and 2009




NOTE 9 – RELATED PARTY TRANSACTIONS - continued




Simultaneous with the execution of the Promissory Note with PWI on February 25, 2010, the Company entered into a Purchase and Sale Agreement with Christopher Hall, the Company’s majority stockholder, Chairman and a director. Under such agreement, which was approved by the Board of Directors in accordance with the By-laws, the Company purchased from Mr. Hall the following:




898,000 shares of Call Now, Inc. common stock for $11,404,600;


$3,200,000 principal amount of Leon County FL Educational Facilities Authority (Southgate) Series B Bond, 7.625% due 9/1/28 for $2,080,000; and


$2,200,000 principal amount of Cambridge Student Housing Financing Revenue Series C Bond, 9.70% due 11/1/39 for $1,870,000.




In consideration of the foregoing the Company transferred and paid to Mr. Hall the following:




The Retama Development Corporation Funding Agreement with a current principal and interest balance totaling $5,355,428 ($3,627,569 principal + $1,727,859 interest);


500,000 shares of Penson Worldwide, Inc. common stock valued at $4,480,000; and


$5,511,800 in cash.




Additionally, on June 15, 2010 the Company sold 9,973 shares of the Company’s common stock to Mr. Hall for $126,567.




NOTE 10 – MANAGEMENT AGREEMENT




The Company’s agreement to operate and manage the Retama Park racetrack extends through November 1, 2020. The Company is reimbursed for the majority of its payroll and payroll related expenses, and receives a management fee is $20,000 per month, with certain adjustments.




NOTE 11 – FAIR VALUE MEASUREMENTS




ASC Topic 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. As defined in ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).




The three levels of the fair value hierarchy are as follows:Level 1:

Quoted prices are available in active markets for identical asset or liabilities;Level 2:

Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability; orLevel 3:

Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash flow models or valuations.


Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of December 31, 2010 and 2009.




F-14




---




CALL NOW, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 2010 and 2009




NOTE 11 – FAIR VALUE MEASUREMENTS – continued




December 31, 2010Recurring Fair Value Measures

Level 1

Level 2

Level 3

TotalAssets:Marketable securities – related party

$
2,449,509

$
-

$
-

$
2,449,509Marketable securities – other


3,638,437


-


-


3,638,437Marketable securities – Retama Development Corp. – Series A


-


-


133,000


133,000Liabilities:None


-


-


-


-December 31, 2009Recurring Fair Value Measures

Level 1

Level 2

Level 3

TotalAssets:Marketable securities – related party

$
9,068,353

$
-

$
-

$
9,068,353Marketable securities – other


140,808


-


-


140,808Marketable securities – Retama Development Corp. – Series A


-


-


145,000


145,000Liabilities:None


-


-


-


-


The Company’s financial instruments, other than marketable securities – Retama Development Corp., relate to its available-for-sale marketable securities, which are valued using quoted market prices.




The marketable securities – Retama Development Corp. financial instruments are debt securities. The fair value of these instruments are determined based on observable and unobservable pricing inputs and therefore, the data sources utilized in these valuation models are considered level 3 inputs in the fair value hierarchy.




The following table sets forth a reconciliation of changed in the fair market value of financial assets classified as level 3 in the fair value hierarchy.




Marketable Securities –Retama Development Corp.

TotalBalances as of January 1, 2009

$
145,000

$
145,000Total losses (realized or unrealized):Included in earnings


-


-Included in other comprehensive income


-


-Purchases, issuances, redemptions and settlements


-


-Transfers in and out of level 3


-


-$
145,000

$
145,000Change in unrealized gains or losses in earnings (or changes in netassets) relating to asset still held as of December 31, 2009

$
-

$
-


F-15




---




CALL NOW, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 2010 and 2009




NOTE 11 – FAIR VALUE MEASUREMENTS – continued




Marketable Securities –Retama Development Corp.

TotalBalances as of January 1, 2010

$
145,000


$
145,000Total losses (realized or unrealized):Included in earnings


-



-Included in other comprehensive income


-



-Purchases, issuances, redemptions and settlements


(12,000
)


(12,000
)Transfers in and out of level 3


-



-$
133,000


$
133,000Change in unrealized gains or losses in earnings (or changes in netassets) relating to asset still held as of December 31, 2010

$
-


$
-


December 31, 2010TotalNon-Recurring Fair Value Measures

Level 1

Level 2

Level 3

Total

ImpairmentsAssets:Investments – Long-term

$
-

$
-

$
116,279

$
116,279

$
(3,044,241
)December 31, 2009TotalNon-Recurring Fair Value Measures

Level 1

Level 2

Level 3

Total

ImpairmentsAssets:Investments – Long-term

$
-

$
-

$
4,365,136

$
4,365,136

$
-


NOTE 12 – EARNINGS PER SHARE ATTRIBUTABLE TO CALL NOW, INC.




The following reconciles the components of the earnings per share (EPS) computation:




Income

Shares

Per Share(Numerator)

(Denominator)

AmountYear Ended December 31, 2010Basic EPS:Net (loss) attributable to Call Now, Inc.

$
(1,992,764
)

2,214,868

$
(.90
)Effect of dilutive options


-


-


-Dilutive EPS

$
(1,992,764
)

2,214,868

$
(.90
)Year Ended December 31, 2009Basic EPS:Net (loss) attributable to Call Now, Inc.

$
(414,135
)

2,902,367

$
(.14
)Effect of dilutive options


-


-


-Dilutive EPS

$
(414,135
)

2,902,367

$
(.14
)


F-16




---




CALL NOW, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 2010 and 2009




NOTE 13 – CONTINGENCY




Investment Company Act: Management has taken the position that the Company is not an investment company required to be registered under the Investment Company Act of 1940. If it was established that the Company is an unregistered investment company, there would be a risk, among other material adverse consequences, that the Company could become subject to monetary penalties or injunctive relief, or both, in an action brought by the Securities and Exchange Commission. The Company would also be unable to enforce contracts with third parties or third parties could seek to obtain rescission of transactions undertaken during the period it was established that the Company was an unregistered investment company.




REMAINDER OF PAGE INTENTIONALLY LEFT BLANK





F-17




---




ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.




None.




ITEM 9A. CONTROLS AND PROCEDURES




Evaluation of Disclosure Controls and Procedures




Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of December 31, 2010 are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (i) is recorded, processed summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures include components of our internal control over financial reporting. Management’s assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance that the control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system’s objectives will be met.




Management’s Report on Internal Control Over Financial Reporting




Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.




Under the supervisions and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework as supplemented by the COSO publication, Internal Control over Financial Reporting – Guidance for Smaller Public Companies. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as December 31, 2010 based on these criteria.




This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm.




Changes in Control Over Financial Reporting




There were no changes in our internal controls over financial reporting that occurred during the quarter ended December 31, 2010 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.




ITEM 9B. OTHER INFORMATION




None.




21




---




PART III




ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.




The directors and executive officers of the Company are as follows:




NAME AND POSITION
AGEBryan P. Brown, Director and CEO of Retama Entertainment Group, Inc.
50Christopher J. Hall, Director and Chairman
52Thomas R. Johnson, Director and President and Chief Executive Officer
43William P. McNeer III, Director
50


Bryan P. Brown has served as director since 1997. He was President from 1997 to December 1998. He was previously President of Riverwood, a master planned 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.




For the past five years, Mr. Brown has served as CEO of Retama Entertainment Group, Inc. which is an 80% owned subsidiary of the Company. Mr. Brown has over 25 years experience in corporate finance, real estate development and finance in addition to 14 year experience in the horse racing industry as Retama Entertainment Group, Inc. CEO. Mr. Brown is familiar with and has worked on real estate closings, financing closings, multi-party agreements and regulatory compliance. He has shown the ability to analyze and handle complex transactions and compliance matters. Mr. Brown is a graduate of the University of Texas at Austin having received a BBA in Finance and Accounting and an MBA in Finance and Organizational Behavior. The Board believes that Mr. Brown’s experience in the horse racing industry as well as real estate finance and development provides it with valuable insights in dealing with Retama Development Corp. and its real estate portfolio.




Christopher J. Hall has served as a director since 2001 and Chairman since 2008. Mr. Hall was the co-founder and co-owner of Howe, Solomon and Hall, Inc. (“HSH”) from 1985-1998. HSH was a NASD licensed securities firm founded on Wall Street. In 1998 Mr. Hall left to pursue entrepreneurial efforts, which include Call Now, Inc.




Mr. Hall’s extensive experience in the restructuring of numerous distressed assets with the successful sale or recapitalization of these workout situations has proved valuable for the Company. Mr. Hall is a graduate of St. Lawrence University and has a Masters in Business Administration from the University of Miami. The Board believes that Mr. Hall’s experience and status as majority shareholder provides valuable insights in financial matters and investor relations.




Thomas R. Johnson was elected as President, Chief Executive Officer and Director of Call Now, Inc. in November 2001. Mr. Johnson has served on the Board of Directors of Penson Worldwide, Inc. (“PWI”), a publicly traded company that the Company holds a position of 500,922 shares, from August of 2003 through May of 2011. Prior to joining the Company, Mr. Johnson was an independent fixed-income bond trader, specializing in the analysis of defaulted and distressed fixed income investments. He also has been a fixed-income bond analyst and broker for a municipal bond firm from 1989 to 1999.




Mr. Johnson’s experience as an analyst of distressed securities prior to joining and his continued application of those skills as President and CEO of the Company since 2001 has proved invaluable as the Company continues to negotiate through a challenging economic environment. Mr. Johnson is a graduate of St. Lawrence University. The Board believes that Mr. Johnson’s experience as its CEO and CFO provides essential insight and expertise concerning the business, operations and strategies of the Company that is needed for the Board’s oversight and decision-making responsibilities.




William P. McNeer III has served as director since 2010. Since 1992 he has been engaged as a self-employed consultant specializing in assisting clients in locating financing alternatives and providing guidance in foreclosure workouts. He has also concurrently served as President of Mortgage Operations for WRC Mortgage in North Palm Beach Florida from 1997 to 2008. The Board believes that Mr. McNeer provides essential insight and expertise in dealing with the Company’s real estate interests as well as an independent viewpoint.




Our directors are elected yearly at our annual shareholders’ meeting. The Board of Directors may fill vacancies with an appointment until the next annual meeting. Officers serve until removed or replaced by the Board.




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CODE OF ETHICS




The Company has adopted a Business Ethics and Conduct Policy that has been filed as Exhibit 14 to the Annual Report as its code of ethics. This policy is applicable to all of the Company’s directors, officers and employees, including its principal executive officer, principal financial officer and principal accounting officer. We will provide a copy to any person, without charge, upon a request in writing to: Thomas R. Johnson, President, Call Now, Inc., P.O. Box 47535, San Antonio, Texas, 78265.




ITEM 11. EXECUTIVE COMPENSATION.




The following table presents compensation information for the year ended December 31, 2010 for the persons who served as our principal executive officer and each of our two other most highly compensated executive officers whose aggregate salary and bonus was more than $100,000 in such year. We refer to these executive officers as our "named executive officers" elsewhere in this annual report. Mr. Brown and Mr. Johnson were each paid a $10,000 bonus for 2008 in the 2009 fiscal year. Mr. Hall and Mr. Johnson each earned $7,000 for their participation in 2009 as directors of the Company, but elected to defer collection of these directors fees until an improved financial position of the Company allows.




Name and Principal
   Position

Year


Salary


Bonus


Options
Awards


All Other
Compensation(1)


TotalThomas R. Johnson,

2010


$
200,000



-


-


$
0


$
200,000President/CEO

2009


$
200,000


$
10,000


-


$
0


$
210,000Christopher J. Hall,

2010


$
200,000



-


-


$
0


$
200,000Chairman

2009


$
200,000



-


-


$
0


$
200,000Bryan P. Brown,

2010


$
200,000



-


-


$
0


$
200,000CEO, Retama

2009


$
200,000


$
10,000


-


$
7,000


$
217,000Entertainment Group




(1)       Consists of director meeting fees.




EXECUTIVE EMPLOYMENT CONTRACTS




In March 2004, the Company and REG entered into an employment agreement with Thomas R. Johnson (“Johnson”). The terms of the agreement called for a base salary of $125,000 per year that has been amended and is currently at the rate of $200,000. If Electronic Gaming Machines (“EGM”) are authorized for operation at Retama Park, Johnson shall receive a monthly bonus of 1⁄2% of monthly Net Win generated from EGMs up to $120 million at Retama. For annual net win in excess of $120 million at Retama, Johnson shall receive a monthly bonus of 1⁄4% of monthly Net Win. In the event of Johnson’s termination upon a Change of Control, Johnson shall receive at closing, one lump sum payment equal to the payment made according to the percentage bonus based on Net Win in the month immediately preceding the Change of Control multiplied by seventy-six (76). The term of Johnson’s employment continues for one (1) year and thereafter for successive terms of one (1) year each unless at the option of either party upon at least thirty days’ prior written notice such employment is terminated at the end of the current term.




In March 2004, REG entered into an employment agreement with Bryan P. Brown (“Brown”) as CEO of REG. The terms of the agreement call for a base salary of $200,000 per year. If EGM are authorized for operation at Retama Park, Brown shall receive bonus compensation of a one-time payment of $100,000 upon the commercial operation of EGMs at Retama. Brown shall receive a monthly bonus of 1⁄2% of monthly Net Win generated from EGMs up to $120 million at Retama. For annual net win in excess of $120 million at Retama, Brown shall receive a monthly bonus of 1⁄4% of monthly Net Win. In the event of Brown’s termination upon a Change of Control, Brown shall receive at closing, one lump sum payment equal to the payment made according to the percentage bonus based on Net Win in the month immediately preceding the Change of Control multiplied by seventy-six (76). The term of Brown’s employment continues for one (1) year and thereafter for successive terms of one (1) year each unless at the option of either party upon at least thirty days’ prior written notice such employment is terminated at the end of the current term.




In May 2008, the Company engaged Christopher J. Hall, the majority shareholder of the Company, as Chairman with an annual salary of $200,000 per year. At this time, there is no employment agreement with Mr. Hall.




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RISK CONSIDERATIONS




The Board considers whether the Company’s compensation policies and practices for both executives and other employees encourage unnecessary or excessive risk taking. The Board believes the Company’s compensation policies and practices are appropriate and do not encourage unnecessary and excessive risk taking.




EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2010




The Company does not have any equity compensation plans outstanding as of December 31, 2010. All equity compensation awards have been exercised or expired prior to such date.




DIRECTOR COMPENSATION




Our directors, including our directors who are named executive officers, are paid $1,000 for each board meeting attended. We reimburse our directors for reasonable travel and lodging expenses incurred in attending meetings.




Director compensation paid to named executive officers is included in the summary compensation table above.




The following table sets forth compensation earned or paid to our non-employee directors in 2010.




Fees Earned or

Non-equity Incentive
All OtherName
Paid in Cash
Option Awards
Plan Compensation
Compensation
TotalWilliam P. McNeer III
$5,000
-
-
-
$5,000




ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.




The following table sets forth, as of March 8, 2011, 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. As detailed in Note 9 – Related Party Transactions  of the audited financial statements for fiscal year ended December 31, 2010 above, the Company acquired 898,000 shares and sold 9,973 shares of the Company’s common stock from the Company’s Chairman, Christopher J. Hall leaving a total number of shares outstanding as of March 8, 2011 of 2,013,877.




Percent of OutstandingName
Number of Shares
Common StockChristopher J. Hall
1,696,621
84.25%Thomas R. Johnson
93,975
4.69%Bryan P. Brown
-0-
0%





Officers and Directors as a group (4 Persons)...... 1,790,596     88.91%




ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; DIRECTOR INDEPENDENCE.




As of December 31, 2010, the Company owned 500,922 shares of common stock of Penson Worldwide, Inc. with a market value of $2,449,509. In August of 2003, the Company’s President and CEO, Thomas R. Johnson, was elected to the Board of Directors of PWI pursuant to a provision in the original PWI Note which required that PWI use its best efforts to appoint a nominee of the Company to PWI’s board of directors. The Company has maintained an investment account with Penson Financial Services, Inc., a wholly owned subsidiary of Penson Worldwide, Inc., since 1999. On December 31, 2010, the Company had a margin loan in this account in the amount of $5,777,021, which is collateralized by its marketable securities.




In 2005, the Company purchased a limited partnership interest in The Estates at Canyon Ridge, a 270-unit luxury apartment complex under development at the master planned community of Stone Oak in San Antonio, Texas. Other limited partners include the Company’s President/CEO, the Company’s majority shareholder and the President of REG, each of who is also a director of the Company. The general partner is an unrelated real estate development company based in Houston. The Estates at Canyon Ridge was sold on November 2, 2010 to an unrelated third party, resulting in a realized loss by the Company of approximately $1,683,000. The Company’s cost basis at the time of the sale was $3,243,623.




24




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In January 2009, the Company sold approximately 23.24% of the 95% limited partnership interest in Cambridge at Auburn, LP to Thomas R. Johnson, the President and Chief Executive Officer of the Company for $400,000. The purchase price represented the Company’s cost basis in the partnership and the proceeds were utilized to support other investments of the Company.




On February 25, 2010 the Company entered into an agreement to acquire 898,000 shares of the Company’s common stock and two municipal bond positions from Hall in exchange for a combination of the Company’s interest in the RDC Note receivable, 500,000 shares of PWI stock owned by the company and $5,511,800 in cash. The effective value of the transaction was $12.70 per share of common stock.




On June 15, 2010 the Company sold 9,973 shares of the Company’s common stock to Mr. Hall for $126,567.




Each related party transaction is required to be reviewed and approved by a majority of directors with no interest in the transaction.




DIRECTOR INDEPENDENCE




The following information concerning director independence is based on the director independence standards of The NASDAQ Stock Market Corporate Governance Rules. Because more than 50% of our voting power is held by Christopher J. Hall, we would be considered a “controlled company” under such rules and would not be subject to the requirements of NASDAQ Rule 4350(c) that would otherwise require us to have (i) a majority of independent directors on the Board; (ii) a compensation committee composed solely of independent directors; (iii) a nominating committee composed solely of independent directors; (iv) compensation of our executive officers determined by a majority of the independent directors or a compensation committee composed solely of independent directors; and (v) director nominees selected, or recommended for the Board’s selection, either by a majority of the independent directors or a nominating committee composed solely of independent directors.




The Board has determined that directors Christopher J. Hall, Thomas R. Johnson and Bryan P. Brown are not independent and William P. McNeer III is independent. In determining independence, the Board reviews and seeks to determine whether directors have any material relationship with the Company, direct or indirect, which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Board reviews business, professional, charitable and familial relationships of the directors in determining independence. The Board has not designated a separate compensation or nominating committee.




AUDIT COMMITTEE




The Board of Directors has not designated a separate audit committee and the entire Board, whose members are named above, conducts the functions of such committee. The Board has determined that Thomas R. Johnson is an audit committee financial expert and that Mr. Johnson in not an independent director.




ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.




Akin, Doherty, Klein & Feuge, P.C. (“Akin”) audited the Company’s financial statements for the year ended December 31, 2010 and December 31, 2009.




25




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Fees related to services performed by Akin in the year ended December 31, 2010 and December 31, 2009 was as follows:




2010

2009Audit Fees (1)
$
60,500

$
60,500Audit-Related Fees

-


-Tax Fees (2)

5,150


4,650All Other Fees (3)

750


11,500Total
$
66,400

$
76,650


(1)

Audit Fees represent services provided in connection with the fiscal year audit of our financial statements and review of our quarterly financial statements, notwithstanding when the fees were billed or when the service was rendered.(2)

Tax fees principally included tax advice, tax planning and tax return preparation for services billed from January through December of the fiscal year.(3)

All other fees include services billed from January through December of the fiscal year.




BOARD OF DIRECTORS REPORT




The Board of Directors has reviewed and discussed with the Company's management and independent auditor the audited consolidated financial statements of the Company contained in the Company's Annual Report on Form 10-K for the Company's 2010 fiscal year. The Board has also discussed with the independent auditor the matters required to be discussed pursuant to SAS No. 61 (Codification of Statements on Auditing Standards, AU Section 380), which includes, among other items, matters related to the conduct of the audit of the Company's consolidated financial statements.




The Board has received and reviewed the written disclosures and the letter from the independent auditor required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Board concerning independence, and has discussed with its independent auditor its independence from the Company.




The Board has considered whether the provision of services other than audit services is compatible with maintaining auditor independence.




Based on the review and discussions referred to above, the Board approved the inclusion of the audited consolidated financial statements in the Company's Annual Report on Form 10-K for its 2010 fiscal year for filing with the SEC.




Pre-Approval Policies




The Board's policy is to pre-approve all audit services and all permitted non-audit services (including the fees and terms thereof) provided by the Company's independent auditor; provided, however, pre-approval requirements for non-audit services are not required if all such services (1) do not aggregate to more than five percent of total revenues paid by the Company to its accountant in the fiscal year when services are provided; (2) were not recognized as non-audit services at the time of the engagement; and (3) are promptly brought to the attention of the Board and approved prior to the completion of the audit.




The Board pre-approved all fees described above.




26




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PART IV




ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES




1.

Financial statements.The index for the Consolidate Financial Statements and Report of Independent Registered Public Accounting Firm can be found on page 18.2.

Financial statement schedules.All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included the Consolidated Financial Statements and Notes thereto.3.

Exhibits.A list of exhibits filed or furnished with this report on Form 10-K (or incorporated by reference to exhibits previously filed or furnished by us) is provided in the Exhibit Index immediately following the signature pages of this report. We will furnish copies of exhibits for a reasonable fee (covering the expense of furnishing copies) up written request. Stockholders may request exhibit copies by contacting: Thomas R. Johnson, President, Call Now, Inc., 1 Retama Parkway, Selma, TX 78154.




27




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SIGNATURES




Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




CALL NOW, INC.




By:
/s/ THOMAS R. JOHNSONName:
Thomas R JohnsonTitle:
President, Chief Executive Officer, Principal Accounting Officer and DirectorDate:
August 11, 2011


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.




/s/ THOMAS R. JOHNSON

President, Chief Executive Officer and Director (Principal

August 11, 2011Thomas R. Johnson

Executive Officer and Principal Accounting Officer)/s/ CHRISTOPHER J. HALL

Chairman and Director

August 11, 2011Christopher J. Hall/s/ BRYAN P. BROWN

Director

August 11, 2011Bryan P. Brown/s/ WILLIAM P. MCNEER III

Director

August 11, 2011William P. McNeer III


28




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INDEX TO EXHIBITS




Exhibit

Incorporated ByNumber

Reference Note

Description3(a)

A

Articles of Incorporation of Registrant as filed with the Secretary of State of Nevada on September 3, 1999.3(c)

C

By-Laws of the Registrant.8.12

G

Management Agreement for Retama Park.8.15

L

First Amendment to Management Agreement for Retama Park.8.16

M

Second Amendment to Management Agreement for Retama Park.8.17

N

Third Amendment to Management Agreement for Retama Park.10.3

O

Employment Agreement between Call Now, Inc. and Thomas R. Johnson, dated November 3, 2003. *10.4

P

Employment Agreement between Retama Entertainment Group and Bryan P. Brown, dated March 31, 2004. *10.6

V

Fourth Amendment to Management Agreement for Retama Park.10.7

W

Senior Secured Promissory Note between Call Now, Inc. and Penson Worldwide, Inc., dated February 25, 2010.10.8

X

Purchase and Sale Agreement between Call Now, Inc. and Christopher J. Hall, dated February 25, 2010.10.9



Director Compensation. *10.10



Summary of Compensation for Named Executive Officers as of March 8, 2011. *14

U

Business Ethics and Conduct Policy (Code of Ethics).21



Subsidiaries31.1



Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).32.1



Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 (filed herewith).


NOTE INCORPORATION BY REFERENCE




A
Incorporated by reference to Exhibit 3(a) of Form 10-KSB for the year ended December 31, 1999.C
Incorporated by reference to Exhibit 3(c) of Form 10-KSB for the year ended December 31, 1999.G
Incorporated by reference to Exhibit 8.12 of Form 10-KSB for year ended December 31, 1997.L
Incorporated by reference to Exhibit 8.15 of Form 10-KSB for year ended December 31, 2004.M
Incorporated by reference to Exhibit 8.16 of Form 10-KSB for year ended December 31, 2004.N
Incorporated by reference to Exhibit 8.17 of Form 10-KSB for year ended December 31, 2004.O
Incorporated by reference to Exhibit 10.3 of Form 10-KSB for year ended December 31, 2004. *P
Incorporated by reference to Exhibit 10.4 of Form 10-KSB for year ended December 31, 2004. *U
Incorporated by reference to Exhibit 14 of Form 10-KSB for year ended December 31, 2005.V
Incorporated by reference to Exhibit 10.6 of Form 10-K for year ended December 31, 2009.W
Incorporated by reference to Exhibit 10.7 of Form 10-K for year ended December 31, 2009.X
Incorporated by reference to Exhibit 10.8 of Form 10-K for year ended December 31, 2009.




* - Indicates a management contract or compensatory plan or agreement.




29




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