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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. The Company changed its name to Phone One International, Inc. in January 1994 and to Call Now, Inc. in December 1994. The Company changed its domicile to the State of Nevada in 1999.

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

On September 29, 1996 the Company acquired $52,274,000 of $54,040,000, 8.75%, term bonds of the Retama Development Corporation Special Facilities Revenue Bonds, Series 1993 (the “1993 Bonds”) for a purchase price of $10,300,000. The 1993 Bonds were secured by a first mortgage on the Retama Park racetrack facility. In a simultaneous closing, the Company sold 50% of the 1993 Bonds to a securities broker/dealer for $3,690,000.

In November 1996 the Company purchased from Retama Partners, Ltd. (“Retama Partners”) the principal amount of $39,275,000 of a Retama Development Corporation Series A note and $500,000 of a Retama Development Corporation Series 1993B note (the “1993 Notes”). The Company issued 385,700 shares of common stock in exchange for such notes. The 1993 Notes were secured by a second lien on the Retama Park racetrack facilities, including real and personal property.

On March 26, 1997, the Company participated in the refunding of the RDC 1993 Bonds and 1993 Notes through a Chapter 9 bankruptcy proceeding of the RDC through the issuance of $7,000,000 RDC Special Facilities Revenue Senior Series A Bonds (the “1997A Bonds”) and $86,925,000 RDC Special Facilities Revenue Subordinate Series B Bonds (the “1997B Bonds”). The Company recognized a profit of $3,853,086 in 1997 from the refunding of the 1993 Bonds and 1993 Notes.

On April 7, 1997, the Company acquired the balance of the RDC bonds for a total cost of $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.

In late 1997 the Company, in conjunction with Retama Partners, the holder of the racing license for Retama Park Racetrack, formed REG, a management company created to assume management responsibilities at Retama Park. REG is an 80% owned subsidiary of the Company. On December 1, 1997 REG negotiated a management agreement with the RDC to operate and manage the racetrack. This contract extends through November 1, 2010.

The Company, in association with other Texas racing interests, continues to pursue a legislative agenda that would allow for additional forms of gaming at Texas racetracks. There can be no assurance that this effort will be successful.

On June 26, 2003 the Company entered into a “Convertible Promissory Note and Purchase Agreement” with Penson Worldwide, Inc. (“PWI”) to lend $6,000,000 with the note maturing on June 26, 2008 (the “PWI Note”). PWI is affiliated to the Company as Thomas R. Johnson, President and CEO of Call Now, Inc., is also a Director of both companies. The PWI Note called for mandatory principal payments in the amount of $400,000 to be paid monthly beginning April 26, 2007 and ending on June 26, 2008. Interest on the note was 5% above the “Broker’s Call Rate” was paid monthly. The PWI Note also called for the Company to have the option to convert the entire outstanding principal amount into shares of PWI’s common stock. The conversion price per common share was 2.25 times PWI’s shareholders’ equity as of June 30, 2003 divided by the actual number of issued and outstanding shares of PWI as of June 30, 2003. The conversion price was $2.01 per share. On December 23, 2003 an additional $600,000 was loaned to PWI under similar terms and conditions as the original note.

On June 30, 2005, the Company converted the entire $6,600,000 principal balance of the PWI Note into 3,283,582 shares of PWI common stock, which represents approximately 9.01% of PWI’s total outstanding common stock.

The Company has maintained an investment account with Penson Financial Services, Inc., a wholly owned subsidiary of PWI, since 1999. On December 31, 2005, the Company had a margin loan in this account in the amount of $10,619,017, which is collateralized by its marketable securities.

On March 31, 2005 the Company entered into a partnership agreement to provide approximately 46% of the equity for the development of a 275-unit luxury apartment complex to be known as The Estates at Canyon Ridge, located in the master planned community of Stone Oak in San Antonio, Texas. The Estates at Canyon Ridge, Ltd. (“ECR Ltd.”) closed on the purchase of the 19.739 acre development site on May 2, 2005. The general partner of ECR Ltd. is an unrelated real estate developer (“General Partner”). The Company owns the largest interest in Stone Oak Prime, L.P. (“Limited Partner”) at 48%. Other partners of the Limited Partner include Thomas R. Johnson, President, CEO and Director of the Company, Christopher J. Hall, the majority shareholder and Director of the Company, and Bryan P. Brown, President of REG and Director of the Company. The General Partner is required to fund 5% of the equity and the Limited Partner is required to fund 95%.

The total development cost is projected to be $24.5 million and the Company’s equity obligation is projected to be $2.25 million. As a member of the Limited Partner, the Company is entitled to receive a preferred return of its capital contribution plus a 10% per annum cumulative return, compounded monthly. Following the repayment of the capital contributions and accrued interest, excess cash, at the discretion of the General Partner, and net refinancing or disposition proceeds shall be paid 50% to the General Partner and fifty 50% to the Limited Partner. As of December 31, 2005, the Company’s investment totaled $1,260,000.

EMPLOYEES

The Company has approximately 210 full-time employees, including 4 executive employees. This includes the employees of our 80% owned subsidiary, Retama Entertainment Group, Inc., which operates and manages the Retama Park racetrack.

AVAILABLE INFORMATION

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