<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                   FORM 1O-KSB


 X       Annual report pursuant to Section 13 or 15(d) of the Securities
---      Exchange Act of 1934 For the Fiscal Year Ended: December 31, 1998

Commission File No. 0-27160

                                 CALL NOW, INC.
--------------------------------------------------------------------------------
              (Exact name of small business issuer in its charter)

         Florida                                        65-0337175
--------------------------                   ---------------------------------
(State of Incorporation)                     (IRS Employer Identification No.)

10803 Gulfdale, Suite 222
San Antonio, TX                                         78216-3634
----------------------------------------     -----------------------------------
(Address of principal executive offices)                (zip code)

Issuer's Telephone No.     (210) 349-4141
                      ----------------------------

Securities registered pursuant to Section 12(b) of the Act:

                                    None

Securities registered pursuant to Section 12(g) of the Act:

                                    Common Stock

Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or such shorter period that the Registrant was required to file such
reports); and, (2) has been subject to such filing requirements for the past 90
days.
                          Yes                                No X
                             ---                               ---

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10- KSB or any amendment to
this Form 10-KSB.    X
                    ---

State issuer's revenues for twelve months ended December 31, 1998:  $7,622,184.



<PAGE>   2

The aggregate market value of the voting stock held by non-affiliates of the
Registrant based upon the average bid and asked prices of such stock, at June
30, 1999 was $6,076,217.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 8,495,444 shares of common stock, as
of June 30, 1999.

                                    Documents
                            Incorporated by Reference
                                      NONE

Transitional Small Business Disclosure Format:  No



                                        2

<PAGE>   3

Item 1.           Description of 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. It changed
its name to Phone One International, Inc. in January 1994 and to Call Now, Inc.
in December 1994.

         Our primary operations are the management of Retama Park Racetrack in
Selma, Texas, a suburb of San Antonio, through our 80% owned subsidiary. Under
the Management Agreement, we are reimbursed for the expenses of operating the
track from revenues generated at the track.

         On July 15, 1996, Andice Development Co. (a wholly-owned subsidiary of
Call Now, Inc.) acquired 118 acres of development property in Williamson County,
Texas for a purchase price of $2,363,060. Under the terms of the purchase, we
paid $589,310 and executed a seven year, 9% note in the amount of $1,770,000.
The note requires us to make semi-annual principal and interest payments of
$85,721 commencing on January 15, 1997 and ending July 15, 2003, at which time,
the entire remaining balance of $1,655,056 is due and payable. We are still
formulating our plans for this property.

         In August 1996 we decided to exit the long distance telephone business
due to the competitive environment and its inability to develop its business to
the point of profitability. The business was sold to Alan Niederhoffer, formerly
our Vice President and President of our ARN subsidiary for 100,000 shares of our
common stock owned by Niederhoffer and assumption of substantially all of the
liabilities of ARN.

         On September 29, 1996 we acquired $52,274,000 of $54,040,000, 8.75%,
term bonds of the Retama Development Corporation Special Facilities Revenue
Bonds, Series 1993 for a purchase price of $10,300,000. The bonds are secured by
a first mortgage on the Retama Park Horse Racing facility. In a simultaneous
closing, we sold 50% of the bonds to a broker/dealer for a down payment of
$1,740,000 and future payments of $1,950,000. The broker/dealer also agreed to
pay $7,600 for stock purchase options granting the right to acquire 760,000
shares of Call Now, Inc. common stock at a purchase price of $2.60 per share.

         In November 1996 we purchased from Retama Partners, Ltd. the principal
amount of $39,275,000 of a Retama Development Corporation Series A note and
$500,000 of a Retama Development Corporation Series 1993B note. We issued
385,700 shares of our common stock in exchange for such notes. These notes were
secured by a second lien on the Retama Park Racetrack facilities, including real
and personal property.

         On March 26, 1997, we participated in the defeasance of the RDC bonds
and notes held by it, and received $3,640,000, 7% Series 1997 A Bonds (the "A
Bonds") and $45,200,000, 8% Series 1997 B Bonds (the "B Bonds") as part of the
defeasance. As part of the transaction, we



                                        3

<PAGE>   4

collected a $850,000 receivable from the broker/dealer. We subsequently acquired
the balance of the A Bonds and B Bonds.

         On December 1, 1997 our 80% owned subsidiary, Retama Entertainment
Group, Inc. obtained a management agreement to operate and manage the Retama
Park Racetrack. Our then President, Bryan P. Brown, relocated to Texas to
personally supervise such activities. The management agreement extends to
November 1, 2000 subject to certain extension rights, and provides monthly
management fee of $15,000 plus a variable fee equal to 25% of profits in excess
of $1,000,000.

         In February 1998, we entered into a loan agreement with Compressent
Corporation in which the Company was obligated to lend, on or before July 31,
1998, upon the request of Compressent's Board of Directors, up to $10,000,000.
Amounts loaned were to be due one year from the date of the loan and would bear
interest at 15% a year. In addition, we were to receive a $400,000 commitment
fee at the time of the first loan advance. In connection with the loan
agreement, we would receive warrants to acquire 500,000 shares of the
Compressent's common stock at $6.25 per share.

         In addition, we agreed to exchange $3,500,000 face amount of its
investment in RDC, Series A Bonds for 56,000 shares of Compressent, 7.5%
cumulative convertible preferred stock, which would be convertible into 560,000
shares of Compressent's common stock, and an option to acquire 500,000 shares of
Compressent common stock for $6.25 per share.

         On May 20, 1998, the Company and Compressent terminated the loan
agreement before any loan was made thereunder. In addition, the parties
rescinded the preferred stock and warrant purchase by each party returning to
the other the securities originally exchanged. However, Compressent, upon the
original receipt of the RDC bonds borrowed approximately $2,000,000, pledging
the bonds as collateral. In this connection, upon termination of the agreement,
the Company assumed the approximate $2,000,000 loan.

         In July 1998, we agreed to purchase three thoroughbred racetracks,
Louisiana Downs in Louisiana, Remington Park in Oklahoma and Thistledown in
Ohio. The Company deposited $2,000,000 as a down payment. We terminated the
Agreement during the inspection period and obtained the return of our down
payment.

         In July 1998, we sold $3,500,000 face amount of its RDC, Series A Bonds
for $2,150,000, subject to certain repurchase rights.

         In May 1999, we entered into an agreement with two unaffiliated trusts,
Global Trust and Hemisphere Trust, under which we exchanged $43,462,500 of the
Series B RDC Bonds for $2,000,000 of Series A RDC Bonds and the payment of the
Compressent debt assumed by the Company. After the next conversion date of
Series B Bonds into Series A Bonds, the parties will adjust their ownership of
the Bonds so that the Company owns 50% of the total Class A and B Bonds and
Global and Hemisphere own 25% each of such Bonds. Global and Hemisphere also
agreed to contribute up to $300,000 of the cost to repair the infield lake at
the Retama Park



                                        4

<PAGE>   5

Racetrack which we have agreed to repair and one-half of the annual salary and
bonus of the chief executive officer of the track, currently Bryan Brown, a
director of the Company. A copy of the Agreement with Global and Hemisphere is
filed as an exhibit herein.

         Employees

         The Company has about 210 full-time employees, including 4 executive
employees. This includes the employees of Retama Entertainment Group, Inc.

Item 2.           Description of Property.

         We lease 864 square feet of office space in Miami, Florida for
$1,224.75 per month on a month-to-month basis.

Item 3.           Legal Proceedings.

         On December 15, 1998, we were served as Defendants in a civil case
brought by Retama Development Corporation in the 224th Judicial District of
Bexar County, Texas District Court. The suit alleges that the Registrant's
Chairman interfered with Plaintiff's management contract with a third party by
instructing a representative of the management company to engage a contractor to
undertake repairs on a lake owned by Plaintiff, and such conduct constituted a
breach of duty of good faith and fair dealing and fraudulently and negligently
misrepresented the expertise of the contractor. The action seeks the sum of
$600,000 in damages and lost profits resulting from the "failed lake" which is
alleged to have caused the reduction in attendance at the Retama Park Racetrack,
and also seeks exemplary damages.

         In May, 1999, we entered into a settlement agreement under which we
agreed to repair the lake.

Item 4.           Submission of Matters to a Vote of Securities Holders.

         None.

                                     PART II

Item 5.           Market for Common Equity and Related Stockholder Matters.

         The Company's Common Stock trades on the over-the-counter market under
the symbol CNOW. The following sets forth the range of high and low bid
quotations for the periods indicated as reported by National Quotation Bureau,
Inc. Such quotations reflect prices between dealers, without retail mark-up,
markdown or commission and may not represent actual transactions.



                                        5

<PAGE>   6

<TABLE>
<CAPTION>
                                                            High bid                Low bid
                                                            --------                -------

<S>                                                         <C>                     <C>
January 1, 1997 through March 31, 1997                      $4.625                  $1.875

April 1, 1997 through June 30, 1997                          3.125                   2.0625

July 1, 1997 through September 30, 1997                      3.875                   1.75

October 1, 1997 through December 31, 1997                    3.5625                  1.00

January 1, 1998 through March 31, 1998                       1.875                   1.3125

April 1, 1998 through June 30, 1998                          4.                      1.625

July 1, 1998 through September 30, 1998                      3.4375                  1.375

October 1, 1998 through December 31, 1998                    1.625                    .875
</TABLE>

         The Company paid a dividend of one share of Compressent Corporation
common stock for each ten shares of Company common stock to its stockholders of
record on March 12, 1996. The Company has not established a policy of payment of
regular dividends on its common stock. There are no restrictions on the payment
of dividends. As of June 30, 1998 there were approximately 401 registered
holders of record of the Company's common stock.

Item 6.           Management's Discussion and Analysis of Financial Condition
                  and Results of Operations.

        Year Ended December 31, 1998 compared to 1997

         Results of Operations:

         a.       Revenues and Other Income

         The Company's income for the year ended December 31, 1998 was
$7,622,184 compared to $3,069,042 for the year ended December 31, 1997. The
increase in income for the current year is primarily attributable to the
operations of Retama Park Racetrack. Interest income for the year ended December
31, 1998 was $52,946 compared to $754,029 for the year ended December 31, 1997
due to disposal of bonds during the year and collections of notes receivable.



                                        6

<PAGE>   7

         b.       Expenses

                  Cost and Other Expenses of Revenues

         Expense for the year ended December 31,1998 was $12,196,163 compared to
$2,258,040 for the year ended December 31,1997. The increase in expenses was
attributable to expenses incurred to operate the racetrack, increased interest
expense, loss on sale of bonds, loss on financing transaction, lake repairs and
increased general and administrative expense.

         Income Tax

         We received an income tax benefit of $1,247,637 for fiscal 1998 due to
our net loss for the year, compared to income tax expense of $291,112 in fiscal
1997 when we had taxable income.

         Liquidity and Capital Resources:

         During the year ended December 31,1998, the Company's operating
activities used cash of $2,242,902 compared to $4,772,737 used for the year
ended December 31,1997.

         We have investments in Retama Development Corporation Bonds. The fair
market value of the securities at December 31, 1999 was $5,654,929. We have
applied for and received a $1,871,787 income tax refund.

         Barron Chase executed a note payable to the Company in the amount of
$750,000 bearing interest at 12% per annum. The note pays the Company $7,500.00
per month which the Company utilizes as working capital. Such arrangement
terminates on August 15, 1999.

         Based on the above information, management of the Company believes that
it has adequate financial resources to fund its operations for the current
fiscal year.

         The Company has been advised by the Securities and Exchange Commission
that it may be considered an investment company and therefore subject to certain
provisions of the Investment Company Act of 1940. The Company does not believe
it is an investment company and has taken the following actions:

         1.       On July 15, 1996 the Company acquired 118.34 acres of land for
development for $2,363,060. Such land is located in Williamson County, Texas.
The Company executed a purchase money mortgage in connection with the purchase
which is payable in semi-annual installments of $85,721 beginning on January 15,
1997, including interest at 9% with the entire unpaid balance of $1,655,056 due
on July 15, 2003. The Company paid $593,060 at closing from its working capital.
The land is currently vacant and a survey is in progress to determine the best
use of the property.



                                        7

<PAGE>   8

         2.       The Company disposed of most of its shares of Intermedia
Communications, Inc. in 1996, which it received in December 1994 in connection
with the disposition of Phone One, Inc. It currently owns less than 200 of such
shares.

         3.       In August 1996 the Company disposed of its remaining long
distance telephone business for 100,000 shares of the Company's common stock,
plus assumption by Buyer of certain liabilities of the Company. The business was
sold to a former employee and officer of the Company.

         4.       In September and October 1996 the Company acquired certain
secured bonds issued by Retama Development Corporation of Selma, Texas. The
bonds are secured by a lien on real estate which includes the Retama Park
Racetrack in suburban San Antonio, Texas.

         5.       The balance of the Company's holdings in Compressent were
registered by Compressent in its recent registration statement on Form S-1. In
November 1997, the Company disposed of 76,000 of such shares.

         6.       On December 1, 1997, the Company's 80% owned subsidiary,
Retama Entertainment Group, Inc., was engaged as the manager of the Retama Park
Racetrack effective January 1, 1998.

         In the event the Company is deemed to be an investment company, the
Company may become subject to certain restrictions relating to the Company's
activities, including restrictions on the nature of its investments and the
issuance of securities. In addition, the Investment Company Act imposes certain
requirements on companies deemed to be within its regulatory scope, including
registration as an investment company, adoption of a specific form of corporate
structure and compliance with certain burdensome reporting, record keeping,
voting, proxy, disclosure and other rules and regulations. In the event of
characterization of the Company as an investment company, the failure of the
Company to satisfy regulatory requirements, whether on a timely basis or at all,
would, under certain circumstances have a materially adverse effect on the
Company.

         Year 2000 Computer Problem:

         The Company has addressed the concerns of potential Year 2000 computing
problems, both internally and with external parties and believes that
significant additional costs will not be incurred because of this circumstance.
The Company has performed an evaluation of its computer hardware and software
and has determined that recent enhancements and upgrades have brought its
systems significantly into compliance with the Year 2000 phenomenon and that
existing support agreements are adequate to cope with any remaining issues.
Based upon equipment evaluations and analysis by consulting parties, management
does not believe that significant operational equipment modifications are
necessary.



                                        8

<PAGE>   9

Item 7.           Financial Statements.

         Index to Consolidated Financial Statements

         Report of Independent Certified Public Accountants

         Consolidated Financial Statements:

                  Consolidated Balance Sheet, December 31, 1998

                  Consolidated Statements of Income, years ended
                  December 31, 1998 and 1997

                  Consolidated Statements of Changes in Stockholders'
                  Equity, years ended December 31, 1998 and 1997

                  Consolidated Statements of Cash Flows, years  ended
                  December 31, 1998 and 1997

                  Notes to Consolidated Financial Statements

Item 8.           Changes In and Disagreements With Accountants on
                  Accounting and Financial Disclosures.

                  BDO Seidman, LLP ("BDO Seidman"), declined, effective June 1,
                  1999, to be engaged to audit our financial statements for the
                  fiscal year ended December 31, 1998.

                  BDO Seidman's report on our financial statements for the two
                  most recent fiscal years ended December 31, 1997 did not
                  contain an adverse opinion or a disclaimer of opinion, and was
                  not qualified or modified as to uncertainty, audit scope or
                  accounting principles.

                  As of December 31, 1997 and during our two most recent fiscal
                  years ended December 31, 1997 and the subsequent periods
                  preceding the resignation of BDO Seidman, there were no
                  disagreements with BDO Seidman on matters of accounting
                  principles or practices, financial statement disclosure or
                  auditing scope or procedure, which disagreements, if not
                  resolved to the satisfaction of BDO Seidman, would have caused
                  BDO Seidman to make reference to the subject matter of the
                  disagreements in connection with its reports.

                  We appointed the firm of Clyde Bailey P.C. in San Antonio,
                  Texas as the new principal audit firm for the year ended
                  December 31, 1998.



                                        9

<PAGE>   10

                                    PART III

Item 9.           Directors, Executive Officers, Promoters and Corporate
                  Persons; Compliance With Section 16(a) of the Exchange Act.

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

<TABLE>
<CAPTION>
              Name                          Age                        Position
         ----------------                   ---                        --------

         <S>                                <C>                        <C>
         William M. Allen                    72                        Chairman and Director

         Robert C. Buffkin                   67                        President and Director

         Bryan P. Brown                      37                        Director

         James D. Grainger, CPA              67                        Vice President - Finance

         Susan Lurvey                        34                        Secretary
</TABLE>

         William M. Allen was President from June 1992 to 1997 and a director
from June 1992 and Chairman from February 1997. He has been managing partner of
Black Chip Stables from 1982 to date and President of Doric, Inc. from 1985
until its merger with the Company in 1994. He has served as President of Kamm
Corporation from 1985 to date and President of Kamm Life from 1985 to date. He
was Chairman and CEO of Academy Insurance Group from 1975 to 1984.

         Bryan P. Brown 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. He also serves as CEO of the Company's 80% owned
subsidiary, Retama Entertainment Group, Inc.

         James D. Grainger was elected Vice President - Finance in 1998. He has
been a certified public accountant since 1964 and maintains an outside
accounting practice. He served as Chief Financial Officer from 1996 to 1997.

         Susan Lurvey has been the Secretary since June 1992. She has served as
administrative assistant to Mr. Allen since 1987.

         Robert C. Buffkin has been a business consultant specializing in
associations and insurance since 1974. He was elected as a director in 1996 and
President in December 1998.

         Bryan P. Brown is William M. Allen's son-in-law.



                                       10

<PAGE>   11

         Compliance with Section 16(a) of the Exchange Act

         Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who beneficially own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and are required to
furnish copies to the Company. To the best of the Company's knowledge, all
reports required to be filed were timely filed in fiscal year ended 1997.

Item 10.          Executive Compensation.

                           Summary Compensation Table

<TABLE>
<CAPTION>
Name and                                                                                             Other Annual
Principal Position                          Year              Salary               Bonus             Compensation
------------------                          ----              ------               -----             ------------

<S>                                         <C>               <C>                  <C>               <C>
William M. Allen                            1998              $240,000              -0-                   -0-
Chairman, Chief                             1997              $240,000              -0-                   -0-
Executive Officer                           1996              $240,000              -0-                   -0-

Bryan P. Brown,                             1998              $150,000              -0-                   -0-
President of Retama Entertainment           1997              $150,000              -0-                   -0-
</TABLE>

         There are no long term compensation or other compensation plans.

         Director Compensation

         Non-officer directors are entitled to a fee of $2,000 for attendance at
meetings of the Board of Directors, plus reimbursement for reasonable travel
expenses.

         Stock Options

         In 1997 the Company granted its directors and officers five year stock
options as follows:

<TABLE>
<CAPTION>
         Name                                        No. Of Options                     Exercise Price
         ----                                        --------------                     --------------

         <S>                                         <C>                                <C>
         William M. Allen                            300,000                            $4.00
         Bryan P. Brown                              200,000                            $2.34
         Robert C. Buffkin                            10,000                            $2.34
</TABLE>

         No options were granted to officers and directors in 1998.



                                       11

<PAGE>   12

         The following table summarizes all stock option activities during the
year ended December 31, 1998:

<TABLE>
<CAPTION>
                                                                        Stock              Weighted average
                                                                       Options         exercise price per share
                                                                       -------         ------------------------

         <S>                                                           <C>             <C>
         Outstanding as of December 31, 1997                           530,000                   $3.27
         Granted during year                                            10,000                    3.00
         Expired or canceled                                               -0-                      --
         Exercised                                                         -0-                      --

         Outstanding at December 31, 1998                              540,000                   $3.26
</TABLE>

Item 11.          Security Ownership of Certain Beneficial Owners and
                  Management.

         The following table sets forth, as of June 30, 1999, the beneficial
ownership of the Company's Common Stock by (i) the only persons who own of
record or are known to own, beneficially, more than 5% of the Company's Common
Stock; (ii) each director and executive officer of the Company; and (iii) all
directors and officers as a group.

<TABLE>
<CAPTION>
                                                                               Percent of
                                              Number of                        Outstanding
Name                                          Shares                           Common Stock
----                                          ---------                        ------------

<S>                                           <C>                              <C>
William M. Allen                              3,646,000 (1)(2)                      42.5%

Robert C. Buffkin                                21,000 (2)                            *

Susan Lurvey                                     20,000                                *

Bryan P. Brown                                  245,000 (2)                          2.6%

James D. Grainger, CPA                           46,630                                *

Officers and Directors
as a group (5 Persons)                        3,978,630 (2)                         46.3%
</TABLE>


(1)      Includes 890,000 shares owned by William M. Allen's wife as to which he
         disclaims any beneficial interest.

(2)      Includes stock options held as follows: William M. Allen - 300,000
         shares, Bryan P. Brown - 200,000 shares, Robert C. Buffkin - 10,000
         shares.

*Less than 2%.



                                       12

<PAGE>   13

Item 12.          Certain Relationships and Related Transactions.


         Consulting fees aggregating approximately $46,000 and $384,000 were
paid to certain shareholders of the Company in 1998 and 1997, respectively.

         In December 1996 the Company loaned Bryan P. Brown $92,838 with
interest at 8%. The loan was due January 7, 1999 and was extended to January
2000.

         We leased office space from our Chairman, William M. Allen, for $17,500
in 1998 and $30,000 in 1997. Such arrangement terminated in July 1998.

                                     PART IV

Item 13.          Exhibits and Reports on Form 8-K.

         (a)      Certain exhibits listed below are incorporated by reference to
previously filed registration statements and reports as indicated in the
"Incorporated by Reference Note" column and notes below.

<TABLE>
<CAPTION>
                           Incorporated by
Exhibit No.                Reference Note                     Description
-----------                ---------------                    -----------

<S>                        <C>                                <C>
3(a)                       A                                  Articles of Incorporation of the Registrant

3(b)                       B. C, D. E                         Articles of Amendment to Articles of
                                                              Incorporation

3(c)                       F                                  By-Laws of the Registrant

8.2                        G                                  Agreement of Purchase and Sale dated
                                                              May 12, 1994 relating to purchase of long
                                                              distance telephone business of ARN
                                                              Communications Corporation

8.3                        H                                  Employment Agreement of Alan R.
                                                              Niederhoffer

8.4                        I                                  Agreement dated February 21, 1994 and
                                                              Amendment dated February 28, 1994
                                                              relating to acquisition of certain assets
                                                              of Telecommunication Services, Inc.
</TABLE>



                                       13

<PAGE>   14

<TABLE>
<S>                        <C>                                <C>
8.5                        J                                  Acquisition Agreement relating to sale of
                                                              Phone One, Inc. subsidiary

8.6                        K                                  Letter Agreement with Raymond Beahn

8.7                        L                                  Agreement with Barron Chase Securities,
                                                              Inc.

8.8                        M                                  Agreement with Howe, Solomon & Hall
                                                              Financial, Inc. dated 10/17/96 covering
                                                              purchase of Retama Development Corp.
                                                              bonds

8.9                        N                                  Agreement with Retama Park Association,
                                                              Inc., Retama Partners, Ltd. and Retama Park
                                                              Management Co. L.C. relating to purchase
                                                              of certain Retama Development Corp. notes.

8.10                       O                                  Agreement to purchase certain real estate in
                                                              Texas.

8.11                       P                                  Agreement to sell assets of ARN
                                                              Communication Corp.

8.12                       Q                                  Management Agreement for Retama Park
                                                              Racetrack.
</TABLE>

Incorporation by Reference Notes:

<TABLE>
<CAPTION>
Note              Incorporation by Reference
----              --------------------------

<S>               <C>
A                 Incorporated by Reference to Exhibit 1.1 to Registration
                  Statement No. 33-37608 on Form S-18

B                 Incorporated by Reference to Exhibit A to Form 8-K dated
                  December 8, 1992

C                 Incorporated by Reference to Exhibit 1.2 to Form 10-KSB for
                  six months ended December 31, 1993

D                 Incorporated by Reference to Exhibit 1.3 to Form 10-KSB for
                  six months ended December 31, 1993
</TABLE>



                                       14

<PAGE>   15

<TABLE>
<S>               <C>
E                 Incorporated by Reference to Exhibit C to Form 8-K filed
                  December 14, 1994

F                 Incorporated by Reference to Exhibit 3.2 to Registration
                  Statement No. 33-37608 on Form S-18

G                 Incorporated by Reference to Exhibit 1 to Form 8-K
                  dated May 27, 1994

H                 Incorporated by Reference to Exhibit 2 to Form 8-K
                  dated May 27, 1994

I                 Incorporated by Reference to Exhibit 1 to Form 8-K
                  dated May 9, 1994

J                 Incorporated by Reference to Exhibit A to Form 8-K filed
                  December 14, 1994

K                 Incorporated by Reference to Exhibit 8.8 of Form 10-KSB for
                  year ended December 31, 1996

L                 Incorporated by reference to Exhibit 8.9 of Form 10-KSB for
                  year ended December 31, 1996

M                 Incorporated by reference to Exhibit A of Form 8-K filed
                  November 21, 1996

N                 Incorporated by reference to Exhibit B of Form 8-K filed
                  November 21, 1996

O                 Incorporated by reference to Exhibit C of Form 8-K filed
                  November 21, 1996

P                 Incorporated by reference to Exhibit D of Form 8-K filed
                  November 21, 1996

Q                 Incorporated by reference to Exhibit 8.12 of Form 10-KSB for
                  year ended December 31, 1997.
</TABLE>

The following exhibits are filed herewith:

8.13     Agreement with Global Trust and Hemisphere Trust dated May 27, 1999.

8.14     Agreement for Construction Services between Retama Development
         Corporation and William M. Allen.

27.      Financial Data Schedule.



                                       15

<PAGE>   16

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                                 CALL NOW,  INC.



July 14, 1999                                    By: /s/ Robert Buffkin
                                                    ----------------------------
                                                         Robert Buffkin,
                                                         President


         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities as of
July 14, 1999.



/s/ William M.Allen                                        July 14, 1999
-----------------------------------------
William M. Allen, Chairman and
Director  (Principal Executive Officer)


/s/ Robert C. Buffkin                                      July 14, 1999
-----------------------------------------
Robert C. Buffkin, President and Director


/s/ Bryan P. Brown                                         July 14, 1999
-----------------------------------------
Bryan P. Brown, Director


/s/ James D. Grainger, CPA                                 July 14, 1999
-----------------------------------------
James D. Grainger, Vice President -
Finance (Principal Accounting Officer)



                                       16

<PAGE>   17

CLYDE BAILEY P.C.
--------------------------------------------------------------------------------
                                                    CERTIFIED PUBLIC ACCOUNTANTS
                                                             10935 WURZBACH #203
                                                        SAN ANTONIO, TEXAS 78230
                                                            (210) 699-1287(OFC.)
                                           (888) 699-1287 - (210) 691-2911 (fax)

                                                                         Member:
                                                     American Institute of CPA's
                                                          Texas Society of CPA's

                Report of Independent Certified Public Accountant

To the Board of Directors and Shareholders
Call Now Inc.
10803 Gulfdale #222
San Antonio, Texas 78216

We have audited the accompanying consolidated balance sheet of Call Now Inc. and
subsidiaries (Company) as of December 31 1998 and the related consolidated
statements of operations, changes in stockholders' equity, and of cash flows for
the year ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these statements based on our audit. The financial statements of the
Company, as of December 31, 1997, were audited by other auditors whose report
dated July 10, 1998 expressed an unqualified opinion on those statements.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion. On May
25, 1999 an agreement was signed between the Company and two trusts known as the
Global Trust and the Hemisphere Trust to sell 50% of the Company's investment in
the Retama Development Corporation Special Facilities Revenue Bonds. This
subsequent event is further explained in Note 17 in the notes to financial
statements.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company and
subsidiaries as of December 31 1998, and the consolidated results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.

                                  Clyde Bailey
                           Certified Public Accountant


June 28, 1999



<PAGE>   18

                         CALL NOW, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                             AS OF DECEMBER 31, 1998


<TABLE>
<CAPTION>
                                   A S S E T S
                                   -----------
<S>                                            <C>             <C>
Current Assets
Cash And Cash Equivalents                      $   545,222
Accounts Receivable                                 48,999
Income Tax Refund Claim                          1,871,787
Marketable Securities, At Market Value
             Pledged                             3,500,000
             Unrestricted                        2,160,781
Note Receivable                                    750,000
Other                                               31,794
                                               -----------

             Total Current Assets                              $ 8,908,583

Furniture And Equipment (Less Accumulated
     Depreciation of $23,258)                                        9,941

Land                                                             2,369,075

Long-Term Notes and Loan Receivables                               945,838

Deferred Tax Assets                                                182,108

Other                                                              211,694
                                                               -----------

             Total Assets                                      $12,627,239
                                                               ===========
</TABLE>



See accompanying summary of accounting policies and notes to consolidated
financial statements                                                          F2



<PAGE>   19


                         CALL NOW, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                             AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
                         L I A B I L I T I E S   A N D   S T O C K H O L D E R S'  E Q U I T Y
                         ---------------------------------------------------------------------

<S>                                                                            <C>                 <C>
Current Liabilities
Accounts Payable                                                               $     51,349
Notes Payable                                                                     2,000,000
Current Portion of Mortgage Payable                                                  14,806
Accrued Expenses                                                                    802,660
Accrued Expenses - Other                                                            325,000
                                                                               ------------

             Total Current Liabilities                                                             $  3,193,815

Non-Current Liabilities
Mortgage Payable, less current maturity                                                               1,729,221
                                                                                                   ------------

             Total Liabilities                                                                        4,923,036
                                                                                                   ------------

Commitment and Contingencies                                                                                  0

Minority Interest in Consolidated Subsidiary                                                             19,632
                                                                                                   ------------

Stockholders' Equity
Preferred stock, no par, shares authorized 800,000 shares                                                     0
     none outstanding
Common Stock, no par shares authorized 50,000,000,                                                    6,205,778
     8,585,444 shares issued and 8,495,444 shares outstanding
Retained Earnings                                                                                     1,921,984
Less subscriptions notes receivable for 115,000 shares of common stock                                 (230,000)
Accumlulated other comprehensive loss                                                                    (7,141)
Treasury stock, at cost                                                                                (206,050)
                                                                                                   ------------

             Total Stockholders' Equity                                                               7,684,571
                                                                                                   ------------

             Total Liabilities and Stockholders' Equity                                              12,627,239
                                                                                                   ============
</TABLE>



See accompanying summary of accounting policies and notes to consolidated
financial statements                                                          F3

<PAGE>   20

                         CALL NOW, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                    Years Ended December 31

                                                                    1998                1997
                                                                    ----                ----
<S>                                                             <C>                  <C>
Income
Race Track Operating Income                                     $ 5,039,712          $        --
Management Fees                                                     180,000                   --
Concert Fees                                                        198,340                   --
Miscellaneous                                                         1,186                5,135
                                                                -----------          -----------

             Total Income                                         5,419,238                5,135
                                                                -----------          -----------

Costs and Expenses
Salaries and Wages                                                4,558,177              593,347
Payroll Taxes and Benefits                                          837,280               50,434
Legal & Professional                                                401,815              260,506
Consulting Fees                                                      96,450              436,209
Litigation Settlement                                                94,563                    0
General and Administrative                                          919,617              611,831
Concert Costs                                                       151,515                   --
Interest                                                            409,247              288,918
Depreciation and Amortization                                         3,745               16,795
                                                                -----------          -----------

             Total Cost and Expenses                              7,472,409            2,258,040
                                                                -----------          -----------

Income (Loss) from continuing operations before                  (2,053,171)          (2,252,905)
    other income and expenses, income taxes, and
    minority interest

             Other Income and Expenses                           (2,520,808)           3,063,907
                                                                -----------          -----------

(Loss) before income taxes and                                   (4,573,979)             811,002
     minority interest

             Income Tax Benefit (Expenses)                        1,247,637             (291,112)
                                                                -----------          -----------

Income (Loss) before minority interest                           (3,326,342)             519,890

             Minority Interest                                      (19,432)                  --
                                                                -----------          -----------


             Net Income (Loss)                                  $(3,345,774)         $   519,890
                                                                ===========          ===========

Earnings Per Share - Basic and Diluted:
             Net Income                                               (0.39)                0.06
</TABLE>



See accompanying summary of accounting policies and notes to consolidated
financial statements                                                          F4


<PAGE>   21

                         CALL NOW, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                     Years Ended December 31, 1998 and 1997

<TABLE>
<CAPTION>

                                                                                                   Subscription
                                            Common Stock                 Treasury Stock          Notes Receivable     Unrealized
                                          -------------------------------------------------------------------------    Holding
                                            Shares        Amount        Shares    Amount       Shares       Amount    Gain(Loss)
                                          --------------------------------------------------------------------------------------

<S>                                       <C>          <C>              <C>     <C>           <C>        <C>          <C>
Balance December 31, 1996                 7,519,400    $ 3,259,965           0  $       --     250,000   $ (200,000)   $ 593,897

Reclassification of unrealized holding
    gain due to adoption of FASB 130                                                                                    (593,897)

Comprehensive (Loss):
Net Income (Loss)
Unrealized (Loss) on securities

Total Comprehensive Income (Loss)

Common Stock issued in Exchange             760,000      2,185,000
    for Marketable Securities

Purchase of Treasury Stock                                              90,000    (206,050)

Common Stock Bonus                           14,544         30,000

Collection of Stock Subscription Notes                                                        (250,000)     200,000
    Receivable for Services Rendered

Exercise of Stock Options for Notes         115,000        230,000                             115,000     (230,000)
    Receivable


                                          --------------------------------------------------------------------------------------

Balance December 31, 1997                 8,408,944      5,704,965      90,000    (206,050)    115,000     (230,000)          --

Comprehensive (Loss):
Net Income (Loss)
Unrealized (Loss) on securities
   Less: Reclassification adjustment for
            loss included in net loss
Total Comprehensive Income (Loss)

Issue of common stock in connection         150,000        431,250
   with financing transaction

Litigation settlement                        26,500         69,563

Balance, December 31, 1998                8,585,444    $ 6,205,778      90,000  $ (206,050)    115,000   $ (230,000)          --
                                          ======================================================================================

<CAPTION>

                                                Accumulated
                                                   Other
                                               Comprehensive  Retained
                                               Income (Loss)  Earnings        Total
                                               ---------------------------------------

<S>                                            <C>          <C>            <C>
Balance December 31, 1996                      $      --    $ 4,747,868    $ 8,401,730

Reclassification of unrealized holding
    gain due to adoption of FASB 130             593,897

Comprehensive (Loss):
Net Income (Loss)                                               519,890        519,890
Unrealized (Loss) on securities                 (325,337)                     (325,337)
                                                                           -----------
Total Comprehensive Income (Loss)                                              194,553

Common Stock issued in Exchange                                              2,185,000
    for Marketable Securities

Purchase of Treasury Stock                                                    (206,050)

Common Stock Bonus                                                              30,000

Collection of Stock Subscription Notes                                         200,000
    Receivable for Services Rendered



                                               ---------------------------------------

Balance December 31, 1997                        268,560      5,267,758     10,805,233

Comprehensive (Loss):
Net Income (Loss)                                            (3,345,774)    (3,345,774)
Unrealized (Loss) on securities                 (875,701)
   Less: Reclassification adjustment for
            loss included in net loss            600,000                      (275,701)
                                               ---------                   -----------
Total Comprehensive Income (Loss)                                           (3,621,475)

Issue of common stock in connection                                            431,250
   with financing transaction

Litigation settlement                                                           69,563

Balance, December 31, 1998                     $  (7,141)   $ 1,921,984    $ 7,684,571
                                               =======================================
</TABLE>



See accompanying summary of accounting policies and notes to consolidated
financial statements                                                          F5


<PAGE>   22

                         CALL NOW, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                              Years Ended December 31

                                                                             1998                 1997
                                                                             ----                 ----

<S>                                                                      <C>                  <C>
Cash Flows from Operating Activities:
Net Income (Loss)                                                        $(3,345,774)         $   519,890
                                                                         -----------          -----------

Adjustments to reconcile net income to net cash
             used in operating activities:

             Depreciation and Amortization                                     3,745               16,795
             Income Tax Refund Claim                                      (1,871,787)                  --
             Issuance of common stock for litigation settlement               69,563                   --
             Gain on Bond Defeasance                                      (2,150,000)          (1,703,086)
             Financing transaction loss                                    2,431,250                   --
             Furniture and equipment charged off                                  --               24,100
             Issuance of common stock for bonuses & services                      --               30,000
             Stock subscription receivable for services rendered                  --              200,000
             Loss(Gain) on sale of marketable securities                   2,305,740             (606,792)
             Changes in assets and liabilities:
             (Increase) Decrease in Assets:
                Accounts Receivable                                          (48,999)
                Deferred Tax Asset                                           624,194             (801,950)
                Other Current Assets                                          19,965             (417,727)
                Other Assets                                                 (96,599)               2,380
             Increase (Decrease) in Liabilities:
                Accounts Payable                                              (2,228)            (484,967)
                Accrued Expenses                                             799,240              215,508
                Income Tax Payable                                        (1,000,844)          (1,766,888)
                Minority Interest                                             19,632                   --
                                                                         -----------          -----------

             Total Adjustments                                             1,102,872           (5,292,627)
                                                                         -----------          -----------

Net Cash (used for) Operating Activities                                  (2,242,902)          (4,772,737)
                                                                         -----------          -----------
</TABLE>



See accompanying summary of accounting policies and notes to consolidated
financial statements                                                          F6

<PAGE>   23

                         CALL NOW, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                          Years Ended December 31

                                                                          1998                1997
                                                                          ----                ----

<S>                                                                  <C>                  <C>
Cash flows from Investing Activities:

             Proceeds from the sale of marketable securities           2,168,999              748,669
             Proceeds from the sale of treasury bills                  1,305,055                   --
             Capital Expenditures                                         (2,347)              (2,250)
             Purchase of marketable securities                                --           (2,512,024)
             Proceeds from bond defeasance                                    --            3,853,086
             Investment in land                                               --               (6,015)
             Notes and Loans Receivable:
                 Advances                                             (1,450,000)            (753,000)
                 Collections                                             600,000            1,097,591
                                                                     -----------          -----------

Net Cash provided by Investing Activities                              2,621,707            2,426,057
                                                                     -----------          -----------

Cash flows from Financing Activities

             Proceeds from Loans                                       2,000,000            1,075,000
             Issue of Stock for Financing Transaction                    431,250                   --
             Financing Transaction Loss                               (2,431,250)                   0
             Payment of Long Term Debt                                   (13,557)             (12,416)
             Purchase of Treasury Stock                                       --             (206,050)
                                                                     -----------          -----------

Net Cash (used for) provided by Financing Activities                     (13,557)             856,534
                                                                     -----------          -----------

Net Increase (Decrease) in Cash                                          365,248           (1,490,146)

Cash Balance, Begin of Year                                              179,974            1,670,120
                                                                     -----------          -----------

Cash Balance, End of Year                                            $   545,222          $   179,974
                                                                     ===========          ===========
</TABLE>



See accompanying summary of accounting policies and notes to consolidated
financial statements                                                          F7


<PAGE>   24

                                  CALL NOW, INC
                                AND SUBSIDIARIES

                         SUMMARY OF ACCOUNTING POLICIES


NATURE OF BUSINESS

         After exiting the long distance telephone business in 1996, the Company
has redeployed its assets primarily in acquiring $93,925,000 face amount bonds
and notes secured by a lien on the Retama Park Horse Racing Facility
("Facility") in suburban San Antonio, Texas, and into real estate by the
acquisition of 118 acres of land in Williamson County, Texas which it may
develop. In addition, the Company entered into a contract to manage the Facility
commencing January 1998.

PRINCIPLES OF CONSOLIDATION

         The accompanying consolidated financial statements include the accounts
of Call Now, Inc. and it's wholly owned subsidiaries Andice Development Co., ARN
Communications Corp., National Communication Inc., and Retama Entertainment
Group Inc. (Collectively "the Company"). Investments in which the Company does
not have a majority voting or financial controlling interest are accounted for
under the equity method of accounting unless its ownership constitutes less than
a 20% interest in such entity for which such investment would then be included
in the consolidated financial statements on the cost method. All significant
inter-company transactions and balances have been eliminated in consolidation.

MARKETABLE SECURITIES

         In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," (SFAS 115),
the Company classifies its investment portfolio according to the provisions of
SFAS 115 as either held to maturity, trading, or available for sale. At December
31, 1998, the Company classified its investment portfolio as available for sale
and held to maturity. Securities available for sale are carried at fair value
with unrealized gains and losses included in stockholders' equity.

         Gain or losses from the sale or redemption of the investments are
determined using the specific identification method.

INCOME TAXES

         The Company accounts for income taxes pursuant to the provisions of the
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes", which requires an asset and liability approach to calculating deferred
income taxes. The asset and liability approach requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax basis of assets
and liabilities.

EARNINGS PER COMMON SHARE

         Effective December 31, 1997, the Company adopted Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share," which simplifies the computation
of earnings per share requiring the restatement of all prior periods.



                                                                              F8
<PAGE>   25

                                  CALL NOW, INC
                                AND SUBSIDIARIES

                         SUMMARY OF ACCOUNTING POLICIES


         Basic earnings per share are computed on the basis of the weighted
average number of common shares outstanding during each year.

         Diluted earnings per share are computed on the basis of the weighted
average number of common shares and dilutive securities outstanding. Dilutive
securities having an anti-dilutive effect on diluted earnings per share are
excluded from the calculation.

UNINSURED CASH BALANCES

         The Company maintains its cash balances at several financial
institutions. Accounts at the institutions are secured by the Federal Deposit
Insurance Corporation up to $100,000. Periodically, balances may exceed this
amount. At December 31, 1998, uninsured balances aggregated $311,309.

CONCENTRATION OF CREDIT RISK/ECONOMIC DEPENDENCY

         The Company's current business involves two ventures, which are
interest rate sensitive. First is ownership of tax-exempt bonds partially
collateralized by a first mortgage on the Retama Park Horse Racing Facility near
San Antonio, Texas. The second is ownership of development property in
Williamson County, Texas (near Austin, Texas). Both ventures are dependent on
continued low interest rates and economic prosperity in the Austin and San
Antonio metropolitan area.

PREPARATION OF FINANCIAL STATEMENTS

         The preparation of financial statements in conformity with generally
accepting accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

USE OF ESTIMATES

         The preparation of financial statements in conformity with 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.

YEAR 2000 CONCERNS

         The Company has addressed the concerns of potential year 2000 computing
problems, both internally and with external parties and believes that
significant additional costs will not be incurred because of this circumstance.
The Company has performed an evaluation of its computer hardware and software
and has determined that recent enhancements and upgrades have brought



                                                                              F9
<PAGE>   26

                                  CALL NOW, INC
                                AND SUBSIDIARIES

                         SUMMARY OF ACCOUNTING POLICIES


it's systems significantly into compliance with the year 2000 phenomenon and
that existing support agreements are adequate to cope with any remaining issues.
Based upon equipment evaluations and analysis by consulting parties, management
does not believe that significant operational equipment modifications are
necessary.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying value of financial instruments including marketable
securities, notes and loans receivables, accounts payable and notes payable
approximate their fair values at December 31, 1998.

LONG-LIVED ASSETS

         Statement of Financial Accounting Standards No. 121 "Accounting for
Impairment of Long-Lived Assets to be Disposed of " requires, among other
things, impairment loss of assets to be held and gains or losses from assets
that are expected to be disposed of be included as a component of income from
continuing operations before taxes on income.

STOCK BASED COMPENSATION

         Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" SFAS No. 123 established a fair value method for
accounting for stock-based compensation plans either through recognition or
disclosure. The Company did not adopt the fair value based method but instead
discloses the effects of the calculation required by the statement.

COMPREHENSIVE INCOME

         Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
No.130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.



                                                                             F10
<PAGE>   27

                                  CALL NOW, INC
                                AND SUBSIDIARIES

                         SUMMARY OF ACCOUNTING POLICIES


SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

         Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures
about Segments of an Enterprise and Related Information, supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." SFAS 131
establishes standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.

RECLASSIFICATIONS

         Certain reclassifications have been made to the prior year's financial
statements in order to conform to the current presentation.



                                                                             F11
<PAGE>   28

                                 CALL NOW, INC.
                                AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


1.  MARKETABLE SECURITIES

         The carrying amounts of marketable securities as shown in the
accompanying balance sheet and their approximate market values at December 31,
1998 are as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                                 Cost       Gross       Gross         Market
                                                                                            Unrealized  Unrealized    Value
                                                                                            Gains       Losses

------------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>           <C>         <C>         <C>
Available for sale:
Municipal bonds                                                               $5,654,929     $    --    $     --    $5,654,929
Corporate securities                                                              17,301       3,218      14,667         5,852
 -----------------------------------------------------------------------------------------------------------------------------
                                                                              $5,672,230     $ 3,218    $ 14,667    $5,660,781
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


         Unrealized gains and losses on securities available for sale at
December 31, 1998 are shown net of income taxes as a component of stockholders'
equity.

2.  INCOME TAX REFUND CLAIM

         For Federal income tax purposes the Company had an operating loss of $
3,537,625 and a capital loss carry-back in the amount of $ 1,967,504 for the
current year. As a result, the Company has filed a Federal income tax refund
claim is the amount of $ 1,871,787. The claim was received in June 1999.

3.  INVESTMENT IN BONDS
    AND BOND DEFEASANCE TRANSACTION

         On September 20, 1996, the Company acquired $52,274,000, 8.75% term
bonds of Retama Development Corporation ("RDC") Special Facilities Revenue
Bonds, Series 1993 for a purchase price of $10,300,000. The bonds were secured
by a first mortgage on the Retama Park Horse Racing facility.

         In November 1996, the company purchased $39,275,000 principal amount of
Retama Development Corporation Series 1993A notes and $500,000 of Retama
Development Corporation Series 1993B notes for 385,700 shares of the company's
common stock valued at $337,488. The notes were secured by a lien on the Retama
Park Horse Racing facilities, including real and personal property.

         Simultaneously, the company sold 50% of the bonds and notes to a
broker/dealer for an initial payment of $1,740,000 and future payments of
$1,950.000 to be paid prior to December 16, 1996. At December 31, 1996, $850,000
was uncollected.

         On March 26, 1997, the Company participated in the defeasance of the
RDC bonds and notes held by it, and received cash in the amount of $3,853,086,
$3,640,000, 7% Series 1997 A Bonds and $45,200,000, 8% Series 1997 B Bonds as
part of the defeasance. The 1997 bonds were valued by an independent third party
at the same value as the carrying value of the 1993 bonds.



                                                                             F12
<PAGE>   29

                                 CALL NOW, INC.
                                AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


         On April 7, 1997, the company acquired the balance of the RDC bonds in
exchange for 760,000 shares of the Company's common stock, 15,000 shares of
compressent Corporation ("Compressent") common stock, and $2,150,000 in cash.
The cost of the remaining bonds purchased by the Company, including acquisition
costs, was $3,187,728. At December 31, 1997 the Company's total holdings of RDC
bonds were: (a) 1997 Series A 7% bonds-$7,000,000 and (b) 1997 Series B 8%
bonds-$86,925,000.

         Under the terms of the bond defeasance, after giving effect to the
purchase of the additional bonds referred to in the preceding paragraph, the
company had a gain of $3,853,086. However, the company was obligated to lend to
RDC, to fund any operating deficit (as defined) of RDC, up to $2,150,000 for a
two-year period expiring March 1999, of which $853,000 had been advanced at
December 31, 1998.

         As a result of the foregoing obligation, the Company reduced the gain
on the bond defeasance by $2,150,000 in 1997, which was reflected in the balance
sheet as deferred gain from bond defeasance. In this connection, a deferred tax
asset of $801,950 in 1997 was recorded. At December 31, 1998, the Company has
loaned a total of $ 853,000 to RDC. The funding agreement expired in March 1999
and no further loans have been made. As a result, the Company reversed the
deferral of $2,150,000 to income and recorded an accompanying income tax benefit
of $ 801,950 in 1998.

4.  NOTES AND LOANS
    RECEIVABLE

         Notes and loans receivable at December 31, 1998 comprise the following:

         On August 15, 1998, the Company executed a note with a broker-dealer in
the amount of $750,000. The note bears an interest rate of 12% per annum,
payable monthly and matures August 15, 1999. The note is an approved transaction
through the National Association of Securities Dealers. The company has advised
the broker-dealer that it will not renew this agreement.

5.  LAND

         On July 15, 1996, the Company acquired 118 acres of development
property in Williamson County, Texas for a purchase price of $2,363,060. Under
the terms of the purchase, the Company paid $589,310 and executed a seven year,
9% note, in the approximate amount of $1,770,000 with semi-annual principal and
interest payments of $85,721 commencing January 1997 and ending July 15, 2003,
at which time the remaining $1,655,056 balance is due.

         The following is a summary of annual principal payments due under this
note:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Year                                                    Amount

--------------------------------------------------------------------------------
<S>                                                     <C>
1999                                                    $   14,806
2000                                                        16,169
2001                                                        17,657
2002                                                        19,282
2003                                                     1,676,112
--------------------------------------------------------------------------------
                                                        $1,744,027
--------------------------------------------------------------------------------
</TABLE>



                                                                             F13

<PAGE>   30

                                 CALL NOW, INC.
                                AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


6. STOCKHOLDERS' EQUITY

         The company has authorized 800,000 shares of no par value preferred
stock. Of the 800,000 shares, 300,000 are designated Class A convertible
redeemable preferred stock (Class B) and 300,000 are designated as Class C
convertible redeemable preferred stock (Class C).

         The Class A preferred stock is non-voting, redeemable at the option of
the company at a price of $5 per share plus accrued but unpaid dividends, and
convertible into five shares of common stock at the option of the holder. The
Class A preferred stockholders are entitled to receive an annual dividend of
$.30 per share. Of the 300,000 designated shares, none were outstanding at
December 31, 1998.

         The Class B preferred is non-voting stock redeemable at the option of
the Company price of $100 per share plus accrued but unpaid dividends, and is
convertible into 100 shares of common stock at the option of the holder. The
class B preferred stockholders are entitled to receive an annual dividend of
$6.00 per share. Of the 7,500 designated shares, none were outstanding at
December 31, 1998.

         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 at the
option of the holder. Of the 300,000 designated shares, none were outstanding at
December 31,1998.

         In a prior year, the Company entered into "Consultant's Stock purchase
and Sale Agreements" (stock subscription notes receivable) with several
individuals. In exchange for providing certain advisory and/or consulting
services, the individuals were entitled to purchase 710,000 shares of the
Company's common stock at $.80 per share. The purchase price was payable in five
years, with interest at prime plus 1% per annum. All or a portion of any
compensation due by any of the individuals may be credited to the purchase price
of the stock.

         During 1997, the Company authorized three of its officers and employees
to exercise options aggregating 115,000 in exchange for notes totaling $230,000.
At December 31,1998, accrued interest receivable on the subscription notes
receivable amounted to $27,184.

7.  STOCK BASED COMPENSATION

         At December 31, 1998, the Company has non-plan options, which are
described below. The Company applies APB Opinion 25; Accounting for stock issued
to employees, and related Interpretations in accounting for the options. Under
APB Opinion 25, because the exercise price of the company's employee stock
options equals or exceeds the market price of the underlying stock on the date
of grant, no compensation cost is recognized.

         In 1995, the Company granted options to purchase 115,000 shares of its
common stock to its corporate counsel, chief financial officer and controller.
The options are excisable at $2 per share and expire three years from the date
of grant. These options were exercised during 1997.

         On April 25, 1997, the Company granted a stock bonus of 14,544 shares
of its common stock to its corporate counsel, chief financial officer and
controller. In addition, on the same date, the Company granted options to
purchase 530,000 shares of the Company's common stock to its president, chief
executive officer and two members of the Company's board of directors. The
options are exercisable at prices ranging from $2.34 - $4 per share and expire
five years from the date of grant.

         FASB Statement 123, Accounting for Stock-Based Compensation, requires
the company to provide pro forma information regarding net income per share as
if compensation cost for the Company's options had been determined in



                                                                             F14

<PAGE>   31

                                 CALL NOW, INC.
                                AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


accordance with the fair value based method prescribed in FASB Statement 123.
The Company estimates the fair value of each stock option at the grant date by
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1998 and 1997: no dividend yield percent;
expected volatility of 46.5 and 0.1 percent; risk-free interest rates of 6.8%
and 6.0%, and with expected lives of 3.3 years and 5 years for the non-plan
options.

         Under the accounting provisions of FASB Statement 123, the Company's
net income and earnings per would have been reduced to the pro forma amount
indicated below:

<TABLE>
<CAPTION>
                                                     1998                             1997
-------------------------------------------------------------------------------------------

<S>                                              <C>                               <C>
Net income
As reported                                      $(3,345,774)                      $519,890
Pro forma                                        $(3,639,142)                       256.522
-------------------------------------------------------------------------------------------
Earnings per share
As reported                                             (.39)                           .06
Pro forma                                               (.40)                           .03
-------------------------------------------------------------------------------------------
</TABLE>


         A Summary of the status of the Company's non-plan options as of
December 31, 1998 and 1997, and changes during the years ended on those dates
are presented below:

<TABLE>
<CAPTION>
                                December 31, 1998                        December 31, 1997
--------------------------------------------------------------------------------------------------
                          Shares                 Weighted           Shares               Weighted-
                                                 average                                 Average
                                                 Exercise                                Exercise
                                                 Price                                   Price
--------------------------------------------------------------------------------------------------

<S>                       <C>                    <C>               <C>                   <C>
Outstanding at
beginning of year         530,000                 $3.27             115,000                  $2.00
Granted                    10,000                  3.00             530,000                   3.27
Exercised                      --                    --            (115,000)                  2.00
Forfeited                                            --                  --                     --
--------------------------------------------------------------------------------------------------
Outstanding at the
end of year               540,000                  3.26             530,000                   3.27
--------------------------------------------------------------------------------------------------
Options
exercisable at
year end                  540,000                  3.26             530,000                   3.27

Weighted-
average fair
value of options
granted during
the year                       --                   .80                  --                    .80

--------------------------------------------------------------------------------------------------
</TABLE>



                                                                             F15

<PAGE>   32

                                 CALL NOW, INC.
                                AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


         The following table summarizes information about non-plan options
outstanding at December 31, 1998:

<TABLE>
<CAPTION>
                          Options Outstanding                                Options Exercisable
----------------------------------------------------------------------------------------------------
 Range of             Number            Weighted         Weighted         Number            Weighted
 Exercise             outstanding at    average          average          exercisable at    average
 Prices               12/31/98          remaining        exercise         12/31/98          exercise
                                        contractual      Price                              Price
                                        life
----------------------------------------------------------------------------------------------------
 <S>                  <C>               <C>              <C>              <C>               <C>
 $   2.34              230,000           3.3 Years       2.34              230,000           2.34
     4.00              300,000           3.3 Years       4.00              300,000           4.00
     3.00               10,000           5   Years       3.00               10,000           3.00
----------------------------------------------------------------------------------------------------
</TABLE>


8.  INCOME TAXES

         The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
Year ended December 31,                    1998                            1997
---------------------------------------------------------------------------------

<S>                                   <C>                               <C>
Current:
Federal                               $ (1,247,637)                     $ 224,657
State                                          -0-                         66,455
---------------------------------------------------------------------------------
                                      $ (1,247,637)                     $ 291,112
---------------------------------------------------------------------------------
</TABLE>



         Such income taxes are included in the accompanying consolidated
financial statements as follows:


<TABLE>
----------------------------------------------------------------------------------
<S>                                   <C>                                <C>
Income from operations                $ (1,247,637)                      $ 291,112
Extraordinary Items                             --                              --

----------------------------------------------------------------------------------
                                      $ (1,247,637)                      $ 291,112
----------------------------------------------------------------------------------
</TABLE>



         The above provision has been calculated based on Federal and State
statutory rates.

9.  RELATED PARTY
    TRANSACTIONS

         Consulting fees aggregating approximately $46,000 and $384,000 were
incurred to certain shareholders and directors of the Company in 1998 and 1997,
respectively.

         The Company leased office space from its chief executive officer and
majority shareholder on a month-to-month basis. The Company incurred rental
expenses of $17,500 until July 31, 1998 and $30,000 in 1997 for the use of such
facilities.

         At December 31, 1998, outstanding notes receivables from the Company's
stockholders and officers amounted to $92,838 with accrued interest in the
amount of $ 14,856.



                                                                             F16

<PAGE>   33

                                 CALL NOW, INC.
                                AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


10.  MANAGEMENT
     AGREEMENT

         On October 27, 1997 the RDC'S Board Of Directors approved a management
contract granting Retama Entertaining Group, Inc., an 80% owned subsidiary of
the Company, the right to manage the operations of the Facility commencing on
January 1, 1998. The three-year agreement provides Retama Entertainment Group,
Inc., with a monthly management fee of $15,000 plus a variable fee equal to 25%
of profits in excess of $1,000,000 annually. Operations of this subsidiary began
January 1, 1998.

11.  SUPPLEMENTAL
     CASH FLOW INFORMATION

<TABLE>
<CAPTION>
Year ended December 31,                    1998                              1997
------------------------------------------------------------------------------------
<S>                                     <C>                               <C>
Cash paid for interest                  $  216,244                        $  288,900
Cash paid for income taxes               1,027,663                         2,877,000
------------------------------------------------------------------------------------
</TABLE>

SUPPLEMENTARY INFORMATION:

         During the year ended December 31, 1998, non-cash investing and
financing activities are as follows:

                  1) Termination of agreement with a broker-dealer represented
                  by a note receivable of $1,155,000 bearing interest at 12% per
                  annum and a non-interest note payable of $1,155,000.
                  2) Issuance of 150,000 shares of the Company's common stock in
                  the amount of $431,250 as part of a financing transaction.
                  3) Issuance of 26,500 shares of the Company's common stock in
                  settlement of a former director's lawsuit.

         During the year ended December 31, 1997, non-cash investing and
financing activities are as follows:

  -               1) Purchase of $45,085,000 principal amount of RDC Series 1997
                  A and B Bond's for 760,000 shares of the Company's common
                  stock valued at $2,125,000, and the assumption of a note
                  payable in the amount of $200,000 and funding liability
                  obligation in the amount of $1,075,000.
  -               2)Cancellation of a note payable in the amount of $150,000 for
                  15,000 shares of Compressent common stock valued at $10.00
                  for share.
  -               3) Issuance of 115,000 shares of the Company's common stock in
                  exchange for subscriptions notes receivable in the amount
                  $230,000.


12.  LITIGATION SETTLEMENT

         In 1994, a former director, filed a lawsuit in Florida against the
Company seeking damages of approximately $500,000 for breach of an oral
employment agreement. On May 14, 1998, this litigation was settled. In this
connection, the Company paid $50,000 and issued 26,500 of the Company's common
stock to the former director in 1998.



                                                                             F17

<PAGE>   34

                                 CALL NOW, INC.
                                AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


13.  CONTINGENCIES

         During 1996, the Securities and Exchange Commission advised the
Company that it may be an investment company as defined by the Investment
Company Act of 1940. In the event the company is deemed to be an investment
company, the Company may become subject to certain restrictions relating to the
Company's activities, including restrictions on the nature of it's investments
and the issuance of securities. In addition, the Investment Companies Act
imposes certain requirements on companies deemed to be within it's regulatory
scope, including registration as an investment company, adoption of a specific
form of corporate stucture and compliance with certain reporting, record
keeping, voting, proxy, disclosure, and other rules and regulations. In the
event of characterization of the company as an investment company, the failure
of the company to satisfy regulatory requirements, whether on a timely basis or
at all, could, under certain circumstances have materially adverse effect on
company.

14.  NOTE PAYABLE AND FINANCING TRANSACTION

         In February 1998, the Company entered into a loan agreement with
Compressent Inc. (Compressent) in which the Company agreed to provide certain
financing to Compressent and to receive a commitment fee along with warrants to
acquire shares of Compressent common stock. This loan agreement was terminated
on May 20, 1998 before any loan was made and as a result, the Company did not
receive the commitment fee or warrants from Compressent.

         In addition, the Company exchanged $3,500,000 face amount of its
investments in RDC Series A bonds for specific shares of Compressent's
convertible preferred stock and an option to acquire additional shares of
Compressent's common stock.

         Compressent subsequently borrowed, from a third party, $2,000,000,
pledging the 3,500,000 RDC Series A bonds as collateral. In connection with a
rescission of the purchase of Compressent convertible preferred stock, the
Company received the $3,500,000 Series A RDC bonds, assumed the $2,000,000 loan,
and was to receive 2,000,000 unregistered shares of Compressent common stock.
This was subsequently reduced to 500,000 Compressent common stock shares and a
10% interest in the business venture between Compressent and a third party. In
addition, the Company agreed to issue 150,000 shares of its common stock. The
500,000 Compressent shares have not been received and are deemed worthless at
December 31, 1998. The company has recorded a loss of $2,431,250 on the
financing transaction.



                                                                             F18
<PAGE>   35

                                 CALL NOW, INC.
                                AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS



15.  EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                                    1998                                            1997
Earning per common              Income             Shares            Per-Share    Income           Shares           Per-Share
Share                         (Numerator)       (Denominator)         Amount    (Numerator)     (Denominator)        Amount
-----------------------------------------------------------------------------------------------------------------------------
<S>                           <C>               <C>                  <C>        <C>             <C>                 <C>
Net Income                    $(3,345,774)        8,404,804           $(.39)     $ 519,890        8,090,594           $ .06


Effect of Dilative
Securities: Stock                                                                                    25,510
options
-----------------------------------------------------------------------------------------------------------------------------

Income from continuing        $(3,345,774)        8,404,804          $(.39)      $ 519,890        8,116,104           $ .06
operations available to
common shareholders plus
assumed conversions

-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

         Options to purchase 540,000 shares were outstanding at December 31,
1998 were not included in the computation of diluted EPS as they would be
anti-dilutive.

16.  OTHER INCOME AND EXPENSE ITEMS

         The following items are shown on the consolidated statement of income
as other income and expenses items and are disclosed elsewhere in these notes:

<TABLE>
<CAPTION>
                                                      1998                 1997
                                                      ----                 ----

<S>                                               <C>                  <C>
Loss on Sale of Bonds                             $(1,967,504)         $       --
Gain on Bond Defeasance                             2,150,000           1,703,086
Gain on Disposal of Marketable Securities                  --             606,792
Loss on Compressent Transaction                    (2,431,250)                 --
Interest Income                                        52,946             754,029
Accrued Expense - Other                              (325,000)                 --
                                                  -------------------------------

         Total                                    $(2,520,808)         $3,063,907
                                                  ===========          ==========
</TABLE>



                                                                             F19

<PAGE>   36

                                 CALL NOW, INC.
                                AND SUBSIDIARIES

                         NOTES TO FINANCIAL STATEMENTS



17.  SUBSEQUENT EVENTS

         The Company and its CEO (William M Allen) have been sued by RDC, the
issuer of the bonds held by the Company, in connection with the repair of the
lake at Retama Park Race Track. The action seeks $600,000 in damages plus
exemplary damages. The Company had indemnified the contractor regarding matters
related to the race track. The Company has entered into a construction services
contract with the RDC to 1) dismiss the lawsuit against the Company and Mr.
Allen, and an assignment by the RDC of its claims and causes of action against
the contractor and related parties. The Company has engaged an engineering firm
to perform a study to repair the lake, and plans to engage qualified contractors
to repair the lake. The Company estimates that the total cost to repair the lake
and therefore the liability, will be somewhere around $650,000 and one-half of
that amount has been accrued in 1998. Due to the agreement detailed in the
following paragraph $325,000 is accrued at December 31, 1998.

         On May 25, 1999 an agreement was signed between the Company and two
trust known as the Global Trust and the Hemisphere Trust (Trusts) to sell 50% of
the Company's investment in the Retama Development Corporation Special
Facilities Revenue Bonds.

         The agreement calls for the Company to exercise an option to purchase
from ITG Fund $6,950,000 in aggregate principal amount of Retama Development
Corporation (RDC) Series 1997A bonds for a total exercise price of $4,775,000.
The agreement further provides for the Trusts to purchase these bonds from the
Company for a total price of $ 4,862,500 plus accrued interest on the Series A
bonds and to deliver to the Company $2,000,000 of the Series A bonds plus the
payment of the Compressent debt assumed by the Company, and the Company will
deliver to the Trusts $42,462,500 in the Series B bonds of RDC.

         The agreement further provides for the Trusts to assume 50% of the
Company's obligation to the RDC for the repairs to the lake (not to exceed a
total of $600,000) in the aforementioned lawsuit, and to provide 50% of the
Chief Executive Officer`s compensation of the track operations.

         No other material subsequent events have occurred that warrants
disclosure since the balance sheet date.



                                                                             F20