<PAGE>   1

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

                                    FORM 10-Q

(Mark One)

       [X]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE 
                  SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended May 3, 1998

                                       OR

       [  ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE 
                  SECURITIES EXCHANGE ACT OF 1934

         For the transition period from ____________ to _____________

                         Commission file number 0-28072

                      West Coast Entertainment Corporation
                  --------------------------------------------
             (Exact name of registrant as specified in its charter)

             Delaware                                        04-3278751
 ------------------------------                       --------------------------
(State or other jurisdiction of                       (I.R.S. Employer I.D. No.)
incorporation or organization)        

One Summit Square, Suite 200, Rte. 413 & Doublewoods Rd.
Langhorne, Pennsylvania                                               19047
--------------------------------------------------------          -----------
(Address of principal executive offices)                           (Zip Code)

Registrant's telephone number, including area code:  (215)968-4318
                                                     --------------

       Indicate by check mark whether the registrant: (1) has filed all reports
       required to be filed by Section 13 or 15(d) of the Securities Exchange
       Act of 1934 during the preceding 12 months (or for such shorter period
       that the registrant was required to file such reports), and (2) had been
       subject to such filing requirements for the past 90 days.

                                Yes __X__ No ____

       Indicate the number of shares outstanding of each of the issuer's classes
       of common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
            Class                       Outstanding at June 8, 1998
            -----                       ---------------------------
       <S>                              <C>
       Common Stock, $.01                        14,034,582
       par value per share

</TABLE>
<PAGE>   2
                      WEST COAST ENTERTAINMENT CORPORATION



                                      INDEX



<TABLE>
<CAPTION>
                                                                                     Page No.
<S>                                                                                     <C>
Part I.           -  Financial Information                                              

         Item 1.  -  Financial Statements


                  Consolidated Balance Sheets -
                           As of May  3, 1998 and January 31, 1998                       3

                  Consolidated Statements of Operations-
                           Quarters Ended May 3, 1998 and April 30, 1997                 4

                  Consolidated Statements of Cash Flows-
                           Quarters Ended May 3, 1998 and  April 30, 1997                5


                  Consolidated Statement of Stockholders Equity-
                          As of May 3, 1998 and January 31, 1998                         6

                  Notes to Consolidated Financial Statements                             7

         Item 2.  -  Management's Discussion and Analysis of Financial Condition        12
                     and Results of Operations


Part II.          -  Other Information                                                  17

         Item 1.  -  Legal Proceedings
         Item 2.  -  Changes in Securities
         Item 3.  -  Defaults Upon Senior Securities
         Item 4.  -  Submission of Matters to a Vote of the Security Holders
         Item 5.  -  Other Information
         Item 6.  -  Exhibits and Reports on Form 8-K
</TABLE>



                                       2
<PAGE>   3
                      WEST COAST ENTERTAINMENT CORPORATION
                           CONSOLIDATED BALANCE SHEET
                      (In thousands, except for par value)


<TABLE>
<CAPTION>
                                        May 3,       January 31,
                                        1998            1998
                                      ---------      -----------
                                     (unaudited)

<S>                                 <C>            <C>

Assets:

Current assets:
 Cash and cash equivalents             $ 2,647      $ 2,604
 Accounts receivable                     1,542        1,629
 Merchandise inventory                  11,954        8,216
 Income taxes receivable                  --            441
 Deferred tax asset                        820          820
 Market development funds and
  co-op receivable                       1,531        2,124
 Receivable from officers                  349          341
 Prepaid expenses and other
  current assets                           545          652
                                       --------      ------

   Total current assets                 19,388       16,827

 Videocassette rental
  inventory, net                        32,496       32,005
 Furnishings, equipment and
  leasehold improvements, net           19,134       18,953
 Intangible assets, net of
  accumulated amortization             115,414      117,047
 Other assets                            2,774        2,404
                                       --------      ------
   Total assets                      $ 189,206    $ 187,236
                                     ==========   =========
 Liabilities and Stockholders'
  Equity:

 Current liabilities:
  Current portion of
   long-term debt                      $     8      $     8
  Accounts payable                      13,389       11,719
  Accrued expenses and other
   liabilities                           4,698        4,926
  Income taxes payable                     274          --
                                       --------      ------

   Total current liabilities            18,369       16,653

 Long-term debt
  (net of current portion)              65,004       65,006
 Deferred tax liability                  1,741        1,741
 Other long-term liabilities               130          155
                                       --------      ------
   Total liabilities                    85,244       83,555

 Stockholders' equity:                
  Common stock ($0.01 par value;
   14,159 shares as of May 3, 1998,
   of which 13,936 shares were
   outstanding and 223 shares to
   be issued; and 13,843 shares
   outstanding at January 31, 1998,
   of which 13,706 shares were
   outstanding and 137 shares to
   be issued)                              141          138  
  Preferred stock ($0.01 par value,
   2,000 shares authorized, no
   shares issued)                           --           --
  Additional paid in capital           104,085      104,063
  Accumulated deficit                      (22)        (520)
  Treasury stock (92 shares of
   common stock at cost)                  (242)         --
                                      --------     --------

   Total stockholders' equity          103,962      103,681    
                                      --------     --------

   Total liabilities and 
    stockholders' equity             $ 189,206    $ 187,236
                                    ==========    =========

</TABLE>
                 See accompanying notes to financial statements

                                      -3-

<PAGE>   4
                      WEST COAST ENTERTAINMENT CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS
                     (in thousands, except per share data)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                            Quarter ended
                                                            -------------
                                                       May 3,         April 30,
                                                       1998             1997
                                                       ------         ---------
<S>                                                    <C>            <C>
Revenues:
  Rental revenue.......................................    $26,159         $22,439
  Merchandise and other sales..........................      4,715           4,124
  Franchise fees.......................................        683             829
                                                            ------          ------ 
     Total revenues....................................     31,557          27,392
                                                            ------          ------ 
Operating costs and expenses:
  Store operating expenses.............................     13,923          12,282
  Cost of goods sold...................................      3,346           2,881
  Amortization of videocassette and video game rental
   inventory (Note 2)..................................      6,272           5,353
  Selling, general and administrative..................      3,518           3,755
  Amortization of intangible assets....................      1,654           1,426
                                                            ------          ------ 
     Total operating costs and expenses................     28,713          25,697
                                                            ------          ------ 
Income from operations.................................      2,844           1,695
                                                            ------          ------ 
Interest expense.......................................      1,638             757
Other expense (income).................................         74             (35)
                                                            ------          ------ 
Income before provision for income taxes...............      1,132             973

Provision for income taxes.............................        634             438
                                                            ------          ------ 
Net income.............................................       $498            $535
                                                            ======          ====== 
Net income per common share-basic and diluted..........      $0.04           $0.04
                                                            ======          ======
Weighted average number of shares outstanding..........     14,146          13,785
                                                            ======          ======  
</TABLE>

                 See accompanying notes to financial statements




                                      -4-
<PAGE>   5
                      WEST COAST ENTERTAINMENT CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                               Quarter ended
                                                               -------------
                                                             May 3,  April 30,
                                                              1998     1997
                                                              ----     ----
<S>                                                          <C>      <C>
Cash flows from operating activities:
 Net income                                                    $498     $535
 Adjustments to reconcile net income to cash
  flows provided by (used in) operating activities:
  Amortization of debt financing costs                          115       44
  Amortization of videocassette rental inventory              6,272    5,353
  Depreciation and amortization of furnishings,
   equipment and leasehold improvements                         784      427
  Amortization of intangible assets                           1,654    1,426
  Changes in assets and liabilities:
   Accounts receivable                                           87       96
   Merchandise inventories                                   (3,738)  (1,208)
   Prepaid expenses and other assets                            186     (526)
   Accounts payable                                           1,670   (1,190)
   Accrued expenses and other liabilities                      (253)    (299)
   Income taxes                                                 715   (1,628)
                                                             ------  -------
  Net cash provided by operating activities                   7,990    3,030

Cash flows from investing activities:
 Purchase of property and equipment                            (965)  (1,832)
 Purchase of videocassette rental inventory                  (6,763)  (6,796)
 Purchase of businesses, net of cash acquired                   --    (1,037)
                                                             ------  -------

  Net cash used in investing activities                      (7,728)  (9,665)
                                                             ------  -------

Cash flows from financing activities:
 Proceeds from long-term debt                                   --     8,000
 Repayment of long-term debt                                     (2)      (2)
 Proceeds from issuance of common stock, net                     25      --
 Purchase of treasury stock                                    (242)     --
 Changes in other assets relating to financing                  --    (1,751)
                                                             ------  -------

  Net cash provided by (used in) financing activities          (219)   6,247
                                                             ------  -------

Net increase (decrease) in cash and cash equivalents             43     (388)

Cash and cash equivalents, beginning of period                2,604    1,311
                                                             ------  -------

Cash and cash equivalents, end of period                     $2,647     $923
                                                             ======  =======

Supplemental cash flow data:
 Interest paid                                               $1,407     $676
                                                             ======  =======

 Income taxes paid                                             $150   $2,199
                                                             ======  =======

</TABLE>

                 See accompanying notes to financial statements


                                      -5-

<PAGE>   6
                      WEST COAST ENTERTAINMENT CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                         (in thousands, except shares)


<TABLE>
<CAPTION>
                                                     Common Stock          Additional     Accumulated                      Total
                                               ----------------------       Paid-in        Surplus         Treasury     Stockholders
                                                   Shares       Amount       Capital       (Deficit)        Stock          Equity
                                               -----------    -------     -----------    ------------    -----------  --------------
<S>                                             <C>          <C>        <C>             <C>            <C>     --      <C>  
Balance at January 31, 1995                       7,272,801      $ 73      $    819            ($527)                    $    365
Shares issued-West Coast Entertainment
  Corporation                                     6,727,200        67            --               --           --              67
Net income                                               --        --            --              334           --             334
S Corporation distribution                               --        --            --             (223)          --            (223)
                                                 ----------    ------      ---------      -----------    -----------   -----------

Balance at January 31, 1996                      14,000,001       140           819             (416)          --             543
May 14, 1996 0.340-1 reverse stock split         (9,243,713)      (92)           92               --           --              --
Shares issued-public offering                     5,400,000        54        60,778               --           --          60,832
Shares issued or to be issued-1996 Acquisition    3,614,174        36        42,258               --           --          42,294
Net income                                               --        --            --            3,466           --           3,466
                                                 ----------    ------      ---------      -----------    -----------   -----------

Balance at January 31, 1997                      13,770,462       138       103,947            3,050           --         107,135
Shares issued-Employee Stock Purchase Plan           36,567        --           116               --           --             116
Shares issued-1996 acquisitions                      36,077        --            --               --           --              --
Net (loss)                                               --        --            --           (3,570)          --          (3,570)
                                                 ----------    ------      ---------      -----------   ------------  ------------

Balance at January 31, 1998                      13,843,106       138       104,063             (520)          --         103,681
Shares issued-1996 acquisitions                     302,065         3            (3)              --           --              --
Shares issued-Employee Stock Purchase Plan           13,843        --            25               --           --              25
Shares received in treasury stock                        --        --            --               --          (242)          (242)
Net income                                               --        --            --              498           --             498
                                                -----------    ------      ---------      -----------    ----------    -----------

Balance at May 3, 1998 (unaudited)               14,159,014      $141       $104,085            ($22)        ($242)      $103,962
                                                ===========    ======      =========      ===========    ==========    ===========

</TABLE>


                 See accompanying notes to financial statements




                                      -6-
<PAGE>   7
                      WEST COAST ENTERTAINMENT CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 3, 1998 (unaudited)


1        Basis of Presentation

         The accompanying unaudited consolidated financial statements have been
         prepared in accordance with generally accepted accounting principles
         for interim financial information and pursuant to the rules and
         regulations of the Securities and Exchange Commission ("SEC").
         Accordingly, they do not include all of the information and footnotes
         required by generally accepted accounting principles for complete
         financial statements. For further information, refer to the
         consolidated financial statements and footnotes included in West Coast
         Entertainment Corporation's (the "Company's") Form 10-K filed with the
         SEC on May 1, 1998.

         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 of contingent assets and liabilities at the
         date of the financial statements and the reported amounts of revenue
         and expenses during the reported period. Actual results could differ
         from these estimates.

         On April 30, 1998 the Company adopted a fiscal year ending on the first
         Sunday following January 30, which will result in the Company having a
         52 or periodically, a 53 week fiscal year. Results for this fiscal year
         will reflect a 52-week year ending on January 31, 1999. The Company's
         first quarter ended May 3, 1998 includes revenue and certain operating
         expenses such as salaries, wages and other miscellaneous expenses, on a
         daily basis. All other expenses, primarily rents, depreciation and
         amortization, are calculated and recorded monthly, with twelve months
         included in each fiscal year.

         In the opinion of management, all adjustments necessary for a fair
         presentation of this interim financial information have been included.
         Such adjustments consisted only of normal recurring items. The results
         of operations for the quarter ended May 3, 1998 are not necessarily
         indicative of the results to be expected for the year ending January
         31, 1999.

         Income per common share data has been calculated per Financial
         Accounting Standards Board Statement No. 128 "Earnings Per Share"
         ("SFAS 128"), which requires current and retroactive presentation of
         basic and diluted earnings per share. Basic earnings per share is
         computed by dividing net income by the weighted average number of
         common shares outstanding during the period. Diluted earnings per share
         is computed in a similar manner except that the weighted average number
         of common shares is increased for dilutive potential common shares.
         Potentially dilutive common shares were considered to be anti-dilutive
         the computation of diluted earnings per share for the quarters ended
         May 3, 1998 and April 30, 1997.

2        Videocassette Rental Inventory

         Videocassette rental inventory and related amortization are as follows
         (in thousands):

<TABLE>
<CAPTION>
                                                              May 3, 1998        January 31, 1998
                                                              -----------        ----------------

<S>                                                           <C>                <C>     
         Videocassette rental inventory                       $ 76,020                $ 69,257
         Accumulated amortization                              (43,524)                (37,252)
                                                              --------                --------
                                                              $ 32,496                $ 32,005
                                                              ========                ========
</TABLE>

         Amortization expense related to videocassette rental inventory totaled
         $6,272,000 and $5,353,000 for the quarters ended May 3, 1998 and April
         30, 1997, respectively.


                                       7
<PAGE>   8
                      WEST COAST ENTERTAINMENT CORPORATION

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

         May 3, 1998 (unaudited)



         Effective August 1, 1997, the Company adopted an accelerated method of
         amortizing its videocassette rental inventory. Under this new method,
         videocassette rental inventory base stock (the first three copies of a
         title in a particular store) is amortized over its economic life of 36
         months, to its estimated salvage value of $6. New release base stock,
         less the $6 salvage value, is amortized 50% in the first six months,
         then amortized on a straight-line basis to the $6 salvage value over
         the remaining 30 months. All copies of new release videocassette rental
         inventory in excess of 3 copies per store are amortized on a
         straight-line basis during the first nine months to $10, and the
         balance is amortized on a straight-line basis over the remaining 27
         months to the $6 salvage value.

         The new method of amortization was adopted because the Company believes
         accelerated expense recognition for new release videocassettes during
         the first six months more closely matches the typically higher revenue
         generated following a title's release, and believes $6 represents a
         reasonable salvage value for all tapes after 36 months.

         The new method of amortization has been applied to videocassette rental
         inventory that was held in inventory at August 1, 1997. The adoption of
         the new method of amortization has been accounted for as a change in
         accounting estimate effected by a change in accounting principle and,
         accordingly, the Company recorded an $803,000 pre-tax charge to
         operating expense in the quarter ended October 31, 1997 and the year
         ended January 31, 1998.

         Prior to August 1, 1997, videocassette rental inventory, which includes
         video games, was stated at cost and was amortized over its estimated
         economic life with no provision for salvage value. Videocassettes that
         were considered base stock (the first three copies of a title in a
         particular store) were amortized over 36 months on a straight-line
         basis. New release videocassettes were amortized as follows: the first
         through third copies of each title per store were amortized as base
         stock and the fourth and succeeding copies of each title per store were
         amortized over nine months on a straight-line basis. The unamortized
         cost, if any, of videocassette rental inventory that was sold is
         charged to operations at the time of sale.

         Videocassette rental inventory amortization expense resulting from the
         allocation of purchase price to videocassette rental tapes of the
         acquired entities is based on current replacement cost for bulk
         purchases of used tapes as well as the assignment of a three year
         amortizable life which serves to extend the remaining economic useful
         lives of videocassette rental tapes acquired. Replacement cost for bulk
         purchases of used tapes is significantly less than the cost of new tape
         purchases. As a result, future amortization relating to these tapes, on
         a per tape basis, will be significantly less than the amortization
         relating to new tape purchases. In addition, to the extent the acquired
         tapes have book values lower than newly purchased tapes, sales of the
         acquired tapes should result in higher operating income than sales of
         new tape purchases. The favorable effects resulting from purchase
         accounting will diminish with the passage of time and will not extend
         beyond the three year period subsequent to acquisition which is the
         period over which these tapes will be amortized.

    3    Acquisitions

         May 1996 Acquisitions

         On May 17, 1996, the Company acquired 172 video specialty stores (the
         "May 1996 Acquisitions"), including 13 stores owned by franchisees of
         the Company. Taking into account certain adjustments and calculation of
         certain contingent payments, the aggregate consideration of $83.9
         million was paid consisting of the following: $53.0 million in cash,
         approximately $26.2 million in shares of common stock (2.1 million
         shares), and approximately $4.7 million of acquisition costs. Of these
         amounts, approximately $0.4 million represents remaining minimum
         contingent consideration (of which approximately $0.1 million and $0.3
         million (19,734 shares) is to be paid in cash and stock, respectively).
         These common shares to be issued have been



                                       8
<PAGE>   9
                      WEST COAST ENTERTAINMENT CORPORATION


         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 

         May 3, 1998 (unaudited)



         considered outstanding as of May 3, 1998 and April 30, 1997 as their
         issuance is dependent only on the passage of time.

         Early Fall 1996 Acquisitions

         Between August 26 and October 25, 1996, the Company acquired the assets
         of 21 video specialty stores (the "Early Fall 1996 Acquisitions").
         Aggregate consideration of $13.6 million was paid, consisting of the
         following: $8.2 million in cash, $4.9 million in shares of common stock
         (519,000 shares), and approximately $0.5 million of acquisition costs.
         The shares (465,000) associated with one of these acquisitions were
         issued in three equal installments (six, twelve and eighteen months
         from the acquisition date) and the number of shares issuable was
         increased in certain cases by the difference between the share price at
         issuance date and a formulaic common share price calculated as of the
         date of acquisition. A total of 340,000 shares were issued due to this
         difference. Additionally, 92,000 shares associated with another Early
         Fall 1996 Acquisition are to be issued. In both instances these common
         shares and other common shares to be issued in installments have been
         considered outstanding as of the beginning of the periods presented as
         their issuance is dependent only on the passage of time.

         Late Fall 1996 Acquisitions

         Between November 15 and December 3, 1996, the Company acquired the
         assets of 47 video specialty stores (the "Late Fall 1996
         Acquisitions"), including 19 stores owned by franchisees of the Company
         for aggregate consideration of $27.7 million consisting of the
         following: $14.4 million in cash, $11.0 million in shares of common
         stock (1.0 million shares) and approximately $2.3 million of
         acquisition costs. Additionally, 243,000 and 25,000 shares were to be
         issued as of April 30, 1997 and May 3, 1998 respectively. These common
         shares to be issued have been considered outstanding as of the
         beginning of the periods presented as their issuance is dependent only
         on the passage of time.


         June, 1997 Acquisitions

         On June 16, 1997, and June 24, 1997 the Company acquired a total of 38
         video specialty stores (the "June 1997 Acquisitions"), including 5
         stores owned by a franchisee of the Company for aggregate consideration
         of $17.9 million consisting of $17.2 million in cash and approximately
         $0.7 million of acquisition costs.

         The excess of the cost over the fair value of the assets acquired is
         being amortized over 20 years on a straight-line basis. The results of
         operations of the acquired stores have been included in operations of
         the Company since the date of acquisition. The purchase method of
         accounting was used to account for the acquisitions.

         The following unaudited pro forma information presents the results of
         operations as though (i) the June 1997 Acquisitions had occurred as of
         the beginning of the periods presented, (ii) each entity included in
         the consolidated statement of operations had been included in the
         Company's consolidated income tax returns and subject to corporate
         income taxation as a C corporation during all periods presented, and
         (iii) the borrowings under the Credit Facility (see Note 4) had
         occurred as of the beginning of the periods presented.

         The following unaudited pro forma net income per share for the quarters
         ended May 3, 1998 and April 30, 1997 was calculated by dividing the
         respective unaudited pro forma net income by the



                                       9
<PAGE>   10
                      WEST COAST ENTERTAINMENT CORPORATION


         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

         May 3, 1998 (unaudited)



         pro forma weighted average number of shares of common stock outstanding
         after giving effect to (i) the 0.340-for-1 reverse stock split approved
         by the Board of Directors on May 14, 1996, and the shares issued in
         conjunction with the Initial Public Offering on May 17, 1996 ("the
         Offering"), (ii) issuance of shares in connection with the May 1996,
         Early Fall 1996 and Late Fall 1996 Acquisitions, (iii) repayment of
         outstanding debt at the date of the Offering, and (iv) the impact of a
         detachable warrant with a primary supplier of videocassettes and a
         portion of a convertible note which was converted into shares of the
         Company's common stock as if the transactions had occurred on the first
         day of the periods presented. The pro forma weighted average number of
         common shares used to calculate pro forma net income per share was
         14,159,014 for the quarter ended May 3, 1998 and 14,108,604 for the
         quarter ended April 30, 1997.


<TABLE>
<CAPTION>
                                                                             Unaudited
                                                                             Pro Forma
                                                              ----------------------------------------
                                                              (in thousands, except per share data)

                                                                           Quarter ended

                                                              May 3, 1998               April 30, 1997
                                                              -----------               --------------


<S>                                                           <C>                          <C>      
         Pro forma revenues                                   $  31,557                    $  31,586
         Pro forma net income                                       498                          775

         Pro forma net income per share
              - basic and diluted                             $   0.04                     $    0.05
</TABLE>

4        Long Term Debt

         On May 17, 1996 the Company obtained a $60,000,000 Credit Facility
         ("the Credit Facility") from a bank which consists of a 17 month
         revolving credit facility followed by a three year term loan. In
         association with the borrowing the Company paid a fee of $700,000 on
         May 17, 1996 which has been recorded in other long term assets and will
         be amortized over the term of the Credit Facility. Borrowings under the
         Credit Facility are available for working capital, capital
         expenditures, refinancing of existing indebtedness, and for certain
         permitted acquisition financing.

         On October 31, 1996 the Company received a commitment from the Bank to
         increase the Credit Facility to $65,000,000 effective August 5, 1996.
         As of May 3, 1998, the Company had $65,000,000 outstanding under the
         Credit Facility.

         On December 15, 1997 the Company signed an amendment increasing the
         Credit Facility to $70,000,000 with current commitments from the
         participating banks for $65,000,000 (the "Amended Facility"). The
         Amended Facility has a three year term ending December 14, 2000 with
         two one-year options to extend the term to December 14, 2002. If the
         Company attains certain total debt to operating cash flow ratios, as
         defined, the commitment reduces quarterly commencing June 15, 1999 and
         continues through the end of the term. If such total debt to operating
         cash flow ratios are not attained, the quarterly commitment reductions
         start on December 15, 1998 whereby a $3 million reduction occurs for
         the year ended January 31, 1999. Any amounts in excess of the
         commitment, as it may be reduced from time to time, must be



                                       10
<PAGE>   11
                      WEST COAST ENTERTAINMENT CORPORATION



     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
     May 3, 1998 (unaudited)


         repaid.

         Borrowings under the Amended Facility are limited to a multiple of
         operating cash flow, as defined, over the previous four quarters. At
         May 3, 1998, this multiple is 4.00 times operating cash flow, and
         reduces over the next two fiscal quarters to a low of 3.25 times
         operating cash flow on October 31, 1998 and thereafter. Interest rates
         vary from either the Bank's base rate, as defined, to 1.5% above such
         base rate, or from the Eurodollar rate, as defined, to 5.0% above such
         Eurodollar rate. On January 14, 1998, the Company entered into an
         interest rate swap agreement with the bank for $30,000,000 of the
         Amended Facility. As of January 31, 1998, the bank estimates that it
         would have received $74,000 to terminate the interest rate swap
         agreements. The interest rate swap agreement is for a three year period
         ending on January 16, 2001 and fixes the Eurodollar rate to 5.62%. The
         Company's weighted average borrowing rate under the Amended Facility
         was 9.20% for the quarter ended May 3, 1998. Additionally, the Amended
         Facility provides for a commitment fee payable quarterly, computed at
         up to 0.5% of the unused portion of the available Amended Facility
         during the previous quarter.

         The Amended Facility is secured by a first security interest in
         substantially all of the Company's assets, including the stock of its
         subsidiaries, and provides for certain restrictive covenants, including
         among others compliance with certain financial tests and ratios and
         dividend restrictions.


5        Treasury Stock

         In the quarter ended May 3, 1998, treasury stock valued at $242,000
         (92,000 shares) was received in satisfaction of amounts owed to the
         Company.




                                       11
<PAGE>   12
                      WEST COAST ENTERTAINMENT CORPORATION



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         RESULTS OF OPERATIONS

         Quarter ended May 3, 1998 compared to Quarter ended April 30, 1997

         Revenues

         Revenues increased $4.1 million, or 15.0%, from $27.4 million for the
         quarter ended April 30, 1997 to $31.5 million for the quarter ended May
         3, 1998. This change reflected an increase of $3.6 million in rental
         revenues, an increase of $0.6 million in merchandise sales and a
         decrease of $0.1 million in franchise fee revenue. The increases in
         rental and merchandise sales revenues are mostly attributable to the
         acquisition of a total of 38 video specialty stores, consisting of 37
         stores acquired on June 16, 1997 and 1 store on June 24, 1997.

         Rental revenues increased $3.6 million, or 16.0%, from $22.5 million
         for the quarter ended April 30, 1997 to $26.1 million for the quarter
         ended May 3, 1998. This change is attributable to the inclusion of $3.7
         million of rental revenues from the 38 video specialty stores acquired
         as described above. Rental revenues for the Company's stores decreased
         by $0.1 million for the quarter ended May 3, 1998 which were adversely
         impacted by the weather.

         Merchandise sales increased $0.6 million, or 14.6%, from $4.1 million
         for the quarter ended April 30, 1997 to $4.7 million for the quarter
         ended May 3, 1998, reflecting $0.5 million of merchandise sales
         contributed by the 38 video specialty stores purchased as described
         above. In addition, merchandise sales for the Company's stores owned
         prior to said acquisitions increased by $0.1 million as the Company has
         expanded its inventory levels to increase sales of new movies.

         Franchise fee revenues decreased $0.1 million, or 12.5%, from $0.8
         million for the quarter ended April 30, 1997 to $0.7 million for the
         quarter ended May 3, 1998. This decrease is attributable to a decline
         in the number of royalty payments received from franchisees due to both
         a decline in their business and a decline in the number of franchisees
         who make required payments.

         As a result of the Company's acquisition activities and other
         developments described above the mix of revenue sources changed to
         approximately 82.9% rental, 14.9% merchandising, and 2.2% franchising
         during the quarter ended May 3, 1998 from approximately 82.1%, 15.0%,
         and 2.9%, respectively, during the quarter ended April 30, 1997.

         Store Operating Expenses

         Store operating expenses increased $1.7 million, or 13.9%, from $12.2
         million for the quarter ended April 30, 1997 to $13.9 million for the
         quarter ended May 3, 1998. The acquisition of the 38 stores as
         described above caused store operating expenses to increase by $1.8
         million. As a percentage of total revenues, store operating expenses
         decreased 0.4 percentage points from 44.5% for the quarter ended April
         30, 1997 to 44.1% for the quarter ended May 3, 1998. The decrease as a
         percentage of revenues is primarily due to the continued efforts of
         management to reduce store payroll costs.

         Cost of Goods Sold

         Cost of goods sold increased $0.4 million, or 13.8%, from $2.9 million
         for the quarter ended April 30, 1997 to $3.3 million for the quarter
         ended May 3, 1998, primarily as a result of an increase in merchandise
         sales volume due to the acquisition of the 38 video specialty stores as
         described above. As a percentage of merchandise and other sales, cost
         of goods sold decreased by 2.6 percentage points from 70.7% for the
         quarter ended April 30, 1997 to 68.1% for the quarter ended May 3,
         1998. This decrease was primarily due to a change in sales mix.



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                      WEST COAST ENTERTAINMENT CORPORATION


Amortization of Videocassette and Video Game Rental Inventory

Amortization of rental inventory increased $0.9 million, or 16.7%, from $5.4
million for the quarter ended April 30, 1997 to $6.3 million for the quarter
ended May 3, 1998 primarily as a result of the acquisition of the 38 video
specialty stores as described above. As a percentage of rental revenues this
amortization increased 0.1 percentage points from 24.0% for the quarter ended
April 30, 1997 to 24.1% for the quarter ended May 3, 1998. This is primarily due
to the net effects of purchase accounting for acquired stores and the adoption
of the new method of amortization of rental inventory as described in Note 2.

General and Administrative Expense

General and administrative expenses decreased $0.3 million, or 7.9%, from $3.8
million for the quarter ended April 30, 1997 to $3.5 million for the quarter
ended May 3, 1998. The decrease is primarily related to a decrease in corporate
personnel which was partially offset by the additional general and
administrative expenses incurred due to the acquisition of the 38 stores as
described above. As a percentage of total revenues, general and administrative
expenses decreased 2.8 percentage points from 13.9% for the quarter ended April
30, 1997 to 11.1% for the quarter ended May 3, 1998 primarily reflecting the
ability of the Company's administrative staff to operate an increasing number of
corporate stores.

Intangible Amortization

Intangible amortization expense increased $0.3 million, or 21.4%, from $1.4
million for the quarter ended April 30, 1997 to 1.7 million for the quarter
ended May 3, 1998. As a percentage of total revenues, intangible amortization
increased 0.3 percentage points from 5.1% for the quarter ended April 30, 1997
to 5.4% for the quarter ended May 3, 1998. These increases are primarily related
to amortization of goodwill associated with the acquisition of 38 video stores
as described above.

Interest Expense and Other

Net interest expense and other increased $0.9 million, or 112.5%, from $0.8
million for the quarter ended April 30, 1997 to $1.7 million for the quarter
ended May 3, 1998. Interest expense comprises almost all of this net amount. As
a percentage of total revenues, interest expense increased 2.2 percentage points
from 2.9% for the quarter ended April 30, 1997 to 5.1% for the quarter ended May
3, 1998. The increase is substantially attributable to additional interest
expense incurred in connection with borrowings related to acquisitions.


Net Income

As a result of the foregoing, net income remained unchanged at $0.5 million for
each of the quarters ended April 30, 1997 and May 3, 1998.



Certain Factors That May Affect Future Results

The following important factors, among others, could cause actual results of
operations to differ materially from any forward-looking statements made in this
Quarterly Report on Form 10-Q or any forward-looking statements made elsewhere
by management of the Company from time to time.

The Company's rapid growth, particularly its acquisition of 280 video specialty
stores since May of 1996 and franchising additional stores, could strain the
Company's ability to manage operations, integrate newly acquired stores into its
systems, and effectively pursue its growth strategy. The Company competes with
many others, including the Blockbuster Entertainment division of Viacom, Inc.,
having significantly greater financial and marketing resources, market share,
and name recognition than the 


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                      WEST COAST ENTERTAINMENT CORPORATION


Company. Further developments in competing technologies could have a material
adverse effect upon the video retail industry and the Company. Industry and
Company revenues are somewhat seasonal and may be affected by many factors,
including variation in the acceptance of new release titles available for rental
and sale, the extent of competition, marketing programs, weather, the timing of
any holiday weekends, special or unusual events, and other factors that may
affect retailers in general. There can be no assurance that stores already
acquired or acquired in future will perform as expected or that the prices paid
for such stores will prove to be advantageous. The costs of integrating newly
acquired stores into the Company's systems may vary significantly from the
amounts assumed for purposes of the Company's pro forma financial statements.
The Company's common stock has traded publicly only since May 14, 1996 and no
prediction can be made as to future price levels for such stock.



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<PAGE>   15
                      WEST COAST ENTERTAINMENT CORPORATION



PRO FORMA RESULTS OF OPERATIONS (Note 3)


Quarter ended May 3, 1998 compared to Quarter ended April 30, 1997

Revenues

Pro forma revenues remained constant at $31.6 million for the quarters ended May
3, 1998 and April 30, 1997. The mix of revenues, however, changed in the quarter
ended May 3, 1998 compared to the quarter ended April 30, 1997. Franchise fees
decreased $0.1 million, but was offset by an increase in merchandise sales.
Merchandise sales increased due to an increase in inventory levels.

Net Income

Pro forma net income decreased by $0.3 million, from $0.8 million of net income
for the quarter ended April 30, 1997 to $0.5 million net income for the quarter
ended May 3, 1998. This decrease in net income was primarily attributable to an
increase in rental tape amortization caused by the change in the method of
amortization as described in Note 2 and a change in the mix of revenues (a
decrease in franchise fees and an increase in merchandise sales) resulting in an
increase in cost of sales.


LIQUIDITY AND CAPITAL RESOURCES

For the quarter ended May 3, 1998, the Company had net cash provided by
operating activities of $8.0 million, net cash used in investing activities of
$7.7 million (consisting primarily of cash used to purchase videocassette
rental inventory of $6.8 million) and net cash used in financing activities of
$0.2 million, resulting in a $0.1 million increase in cash and cash
equivalents.

During the current fiscal year, the Company has financed its operations and
capital expenditures primarily through available operating cash flow.

The amount of borrowings available under the Company's Credit Facility may
decrease during the year ended January 31, 1999 if the Company does not attain
certain debt-to-operating cash flow ratios (as defined); see Note 4.

Immediately following the Company's decision to indefinitely delay its proposed
private placement of debt securities in July of 1997, the Company instituted
cost-cutting measures, which included downsizing its general and administrative
costs from the levels reached in contemplation of the proposed acquisitions and
said debt securities. The effects of these cost cutting measures are reflected
in the financial results of the quarter ended May 3, 1998 and will continue to
be realized during the balance of this fiscal year. While there can be no
assurance, the Company expects these modifications to be sufficient to allow
the Company to attain its debt to operating cash flow ratios and to support its
current operations and growth plans over the next year.

In the future, the Company may seek debt refinancing, additional debt financing
or equity capital through additional private or public offerings of securities.
The availability of debt refinancing, additional debt financing or equity
capital will depend on prevailing market conditions, the market price of the
Company's common stock and other factors over which the Company has no control,
as well as the Company's financial condition and results of operations. The
number of shares of common stock, if any, to be issued to sellers in connection
with future acquisitions will also be affected by such factors, since the
number will be determined in accordance with a formula based on trading prices
of the common stock.

The Board of Directors has adopted a resolution of the possible delisting from
NASDAQ by declaring the advisability of, and submitting to the stockholders for
approval during the annual meeting on July 1, 1998, a proposal to amend the
Company's Certificate of Incorporation to effect a reverse split of the
Company's common stock, pursuant to which each four shares of common stock will
be automatically converted into one share without any action on

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                      WEST COAST ENTERTAINMENT CORPORATION


the part of the stockholder (the "Reverse Split"). For more information on the
Reverse Split see the Company's proxy statement dated June 1, 1998.

Capital Commitments. The remaining aggregate costs of upgrading West Coast's
management information systems and integrating stores acquired in prior
acquisitions onto such systems are expected to be approximately $1.8 million
over the next 12-15 months.

The Company has conducted a review of its computer systems to identify the
systems that are affected by the year 2000. The year 2000 problem is the result
of computer programs being written using two digits rather than four to define
the applicable year. The Company intends to upgrade its POS systems over the
next 12-15 months in an effort to make more detailed data available on a system
wide basis in a timely manner at a cost of approximately $1.8 million. Such
costs will be capitalized and amortized over the useful life of the new
software. The Company believes that with modifications to existing software and
conversions to the new POS system, the year 2000 issue will not pose
significant operational problems for the Company's computer systems. The
Company will continue to address any further year 2000 issues and believes that
any costs relating to such issues will not be material to the Company's
financial condition or results of operations.

Subject to the availability of sufficient funds under the Credit Facility, the
Company's capital expenditure plan provides for continuing to convert the
stores acquired in various prior acquisitions to West Coast Video(R) signage
and format and installing certain West Coast layout and features at a rate of
up to 50 stores per year at an estimated cost of $32,000 per store; the Company
also has immediate plans to open up to 50 new stores and relocate up to 3
existing stores. Build-out costs for new stores are expected to range from
$325,000 to $375,000 per store and build-out costs for relocated stores are
expected to range from $175,000 to $225,000 per store. The Company's expansion
plans are subject to the availability of sufficient funds under the Credit
Agreement. Under certain cross-purchase and area development agreements, the
Company will be entitled to acquire (and, subject to certain conditions, will
be required to acquire, if the owners elect to put) all of the assets of up to
51 stores operated or to be operated by such owners at specified times between
1998 and 2002. In conjunction with such agreements, the Company is subject to
puts during the next 12 months; however it is not certain that any of the puts
will be consummated. The purchase prices will be equal to specified multiples
of the stores' net operating cash flow; the purchase prices of 24 such stores
will be payable in shares of common stock and the other purchase prices will be
payable in cash or in shares of common stock, at the Company's election.

Rental inventories are treated as noncurrent assets under generally accepted
accounting principles because they are not assets which are reasonably expected
to be completely realized in cash or sold in the normal business cycle.
Although the rental of this inventory generates the major portion of the
Company's revenue, the classification of these assets as noncurrent results in
their exclusion from working capital. The aggregate amount payable for this
inventory, however, is reported as a current liability until paid and,
accordingly, is included in the computation of working capital. Consequently,
the Company believes working capital is not an appropriate measure of its
liquidity.

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                      WEST COAST ENTERTAINMENT CORPORATION

                                    PART II
                               OTHER INFORMATION

Item 1.        Legal Proceedings
                    None

Item 2.        Changes in Securities
                    None

Item 3.        Defaults Upon Senior Securities
                    Not Applicable

Item 4.        Submission of Matters to a Vote of the Security Holders
                    None

Item 5.        Other Information
                    None

Item 6.        Exhibits and Reports on Form 8-K

               (a)  Exhibits
                         27.0 - Financial Data Schedule

               (b)  Reports on Form 8-K
                    A Form 8-K reporting on item 8 change in fiscal year filed
                    on May 15, 1998.


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                      WEST COAST ENTERTAINMENT CORPORATION


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                   WEST COAST ENTERTAINMENT
                                         CORPORATION

Date: June 17, 1998           By: /s/ T. Kyle Standley
                                  --------------------------------------------
                                  T. Kyle Standley, President and
                                  Chief Executive Officer
                                  (Principal Executive Officer)


Date: June 17, 1998           By: /s/ Richard G. Kelly
                                  --------------------------------------------
                                  Richard G. Kelly, Chief Financial Officer
                                  (Principal Financial Officer)


Date: June 17, 1998           By: /s/ Jerry L. Misterman
                                  --------------------------------------------
                                  Jerry L. Misterman, Chief Accounting Officer
                                  (Principal Accounting Officer)




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                      WEST COAST ENTERTAINMENT CORPORATION





















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