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

                                   FORM 10-KSB

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
     ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
                                                          OR
[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXHANGE ACT 
     OF 1934 FOR THE TRANSITION PERIOD FROM [        ] TO [         ]

                           COMMISSION FILE NO. 0-21451

            BOWLIN Outdoor Advertising & Travel Centers Incorporated
                 (Name of small business issuer in its charter)

             NEVADA                                       85-0113644
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)


   150 LOUISIANA NE, ALBUQUERQUE, NM                        87108
(Address of principal executive offices)                  (Zip Code)

                    Issuer's telephone number: 505-266-5985

         SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:

     Title of each class               Name of each exchange on which registered
Common Stock , $.001 Par Value                            AMEX


         SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
                                      NONE

                                (Title of class)

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

Check if there is no 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]

The issuer's revenues for its most recent fiscal year were $27,439,398.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant at April 13, 1998 was $17,150,123.

The number of shares of Common Stock,  $.001 par value,  outstanding as of April
13, 1998: 4,384,848 
          ---------

DOCUMENTS INCORPORATED BY REFERENCE:

None

<PAGE>



                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS

Forward-Looking Statements

     Certain  statements  in  this  Annual  Report  on  Form  10-KSB  constitute
forward-looking  statements  within the meaning of Section 21E of the Securities
Exchange Act of 1934,  as amended,  and should be read in  conjunction  with the
Consolidated Financial Statements of BOWLIN Outdoor Advertising & Travel Centers
Incorporated,   a  Nevada   Corporation   (the  "Company"  or  "BOWLIN").   Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors that could cause the Company's actual results to differ materially
from those contained in these  forward-looking  statements,  including those set
forth under the heading "RISK FACTORS" under ITEM 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS  OR PLAN OF  OPERATION  and  the  risks  and  other  factors  described
elsewhere.  The cautionary factors, risks and other factors presented should not
be construed as  exhaustive.  The Company  assumes no obligation to update these
forward-looking  statements to reflect actual results, changes in assumptions or
changes in other factors affecting such forward-looking statements.

Company Overview

     The Company is a regional  leader in the  operation  of travel  centers and
outdoor advertising  displays dedicated to serving the traveling public in rural
and smaller  metropolitan areas of the Southwestern United States. The Company's
tradition of serving the public dates back to 1912, when the Company's  founder,
Claude M. Bowlin,  started  trading goods and services with Native  Americans in
New Mexico. BOWLIN currently operates fourteen full-service travel centers along
interstate highways in Arizona and New Mexico. The Company advertises its travel
centers  through a network of over 350 outdoor  advertising  display faces.  The
Company's travel centers offer brand name food, gasoline and a variety of unique
Southwestern merchandise to the traveling public.

     In  addition  to its  travel  centers,  the  Company  operates  over  2,760
revenue-generating  outdoor  advertising display faces for third party customers
such as hotels and motels,  restaurants  and consumer  products.  These  display
faces are strategically situated primarily along interstate highways in Arizona,
New Mexico,  and Texas and, to a lesser  extent,  in Colorado and Oklahoma.  The
Company provides a comprehensive  range of outdoor  advertising  services to its
clients,  including  customized  design and  production  services.  Although the
Company faces  substantial  competition in each of its  operational  areas,  the
Company believes that few of its competitors  offer the same breadth of products
and services dedicated to the traveling public.


Recent Developments

     On April 1, 1997,  the  Company  acquired  all of the  assets  and  assumed
certain liabilities of the outdoor  advertising  division of The McCarty Company
(known as Pony Panels) for $4.2 million  cash.  The purchased  assets  consisted
primarily of accounts  receivable,  prepaid assets,  sign structures,  vehicles,
machinery, operating equipment, office furniture and equipment, lease rights and
goodwill.  The liabilities  consisted  primarily of trade accounts payable.  The
purchase price was funded from proceeds of the initial public  offering (IPO) of
$1.7 million and bank debt ($2.5  million)  provided by Norwest Bank  Minnesota,
N.A. at the bank's  prime rate (8.5% at  closing)  and matures on April 2, 2007.
The bank debt is subject to certain financial and other restrictive covenants.

                                       2

<PAGE>


     On April 26,  1997,  the Company  acquired  the  outdoor  assets of General
Outdoor Advertising for $240,000 in cash. The cash was provided from proceeds of
the Company's initial public offering (IPO) of common stock.

     On April 29, 1997, the Company acquired the outdoor  advertising  assets of
Mesa Outdoor  Advertising  for $425,000.  The purchase price was funded from IPO
proceeds  ($150,000)  and a note  payable to the  former  owner in the amount of
$275,000 at a fixed rate of 9.0% per annum and matures May 1, 2007.

     On November 25, 1997 the Company  entered into a credit  agreement with one
of its  existing  lenders  for the  following:  1) a facility  line,  which is a
multiple  advance  line,  in the amount of  $8,000,000  to fund  acquisition  of
existing travel centers, or construction of new travel centers, and the purchase
of related  equipment;  2) a leasing line in the amount of $2,000,000;  and 3) a
working  capital open line in the amount of $500,000.  This agreement  carries a
variable interest rate based on the bank's prime lending rate, 8.5%.

     On  December  9, 1997,  the  Company  acquired  all of the assets of Sweezy
Outdoor  Advertising  Inc.  (Sweezy)  for $1.7  million.  The  purchased  assets
consisted primarily of sign structures, vehicles, operating equipment and office
furniture and equipment.  The  consideration  paid was funded by $700,000 of IPO
proceeds  and $1.0  million of bank debt.  The bank debt was provided by Norwest
Bank Minnesota,  N.A. at the bank's prime rate (8.5% at closing).  The bank debt
is subject to certain  financial and other  restrictive  covenants.  The Company
also entered into a  "Non-Competition"  agreement  with the principals of Sweezy
for a period of ten years from the date of acquisition.

Subsequent Events

     On February 1, 1998, the Company acquired the outdoor advertising assets of
Big-Tex  Outdoor  Advertising  for $1,559,000.  The purchased  assets  consisted
primarily of sign structures, vehicles, operating equipment and office furniture
and equipment.  The consideraton paid was funded by $559,000 of IPO proceeds and
$1.0 million of bank debt. The bank debt was provided by Norwest Bank Minnesota,
N.A.  at the bank's  prime rate (8.5% at  closing).  The bank debt is subject to
certain financial and other restrictive covenants. The Company also entered into
a "Non-Competition"  agreement with the principal of Big-Tex for a period of ten
years beginning in February 1999.

     On March 3, 1998, the Company  acquired the outdoor  advertising  assets of
Norwood Outdoor, Inc. for $1.0 million. The consideration was funded by $350,000
of IPO proceeds and $650,000 of bank debt. The bank debt was provided by Norwest
Bank Minnesota,  N.A. at the bank's prime rate (8.5% at closing).  The bank debt
is subject to certain  financial and other  restrictive  covenants.  The Company
also entered into a  "Non-Competition"  agreement  with the principal of Norwood
for a period of ten years beginning in February 1999.

Industry Overview

     Travel Services Industry. The travel services industry in which the Company
competes  includes  convenience  stores that may or may not offer gasoline,  and
fast food and full-service  restaurants located along rural interstate highways.
The Company  believes that the current trend in the travel services  industry is
toward strategic  pairings at a single location of  complementary  products that
are  noncompetitive,  such as brand  name  gasoline  and  brand  name  fast food
restaurants.  This concept,  known as  "co-branding,"  has recently seen greater
acceptance by both  traditional  operators and larger petroleum  companies.  The
industry  has also been  characterized  in recent  periods by  consolidation  or
closure of smaller operators.

                                       3

<PAGE>

     The convenience  store industry  includes both  traditional  operators that
focus  primarily on the sale of food and beverages  but also offer  gasoline and
large  petroleum  companies  that offer food and beverages  primarily to attract
gasoline customers. According to the National Association of Convenience Stores,
in 1996 the convenience store industry sold approximately  $70.7 billion in food
and merchandise, and $81.2 billion in petroleum products.

     The  restaurant   segment  of  the  travel  services   industry  is  highly
competitive,  most  notably in the areas of  consistency  of  quality,  variety,
price,  location,  speed of service,  and effectiveness of marketing.  The major
chains  are   aggressively   increasing   market   penetration  by  opening  new
restaurants,  including  restaurants at "special  sites" such as retail centers,
travel centers and gasoline outlets. Smaller quick-service restaurant chains and
franchise operations are focusing on brand and image enhancement and co-branding
strategies.

     Outdoor Advertising Industry.  According to recent estimates by the Outdoor
Advertising Association of America ("OAAA"), outdoor advertising generated total
billboard revenues of approximately $2.135 billion in 1997,  representing growth
of approximately  8.8% over 1996.  Outdoor  advertising offers repetitive impact
and a  relatively  low  cost-per-thousand  impressions  as compared to broadcast
media, newspapers,  magazines and direct mail marketing, making it attractive to
both local businesses targeting a specific geographic area or set of demographic
characteristics and national  advertisers  seeking mass market support.  Because
outdoor  advertising  reaches  potential  customers close to the  point-of-sale,
restaurants,  motels,  service  stations  and similar  businesses  find  outdoor
advertising  particularly  effective.  Repeated  viewing by people traveling the
same route on a daily basis makes outdoor  advertising  especially  suitable for
companies such as banks, insurance companies,  and soft drink manufacturers that
sell their  products  by  promoting  a  particular  image.  Outdoor  advertising
services have recently  expanded beyond  billboards to include a wide variety of
out-of-home  advertising  media,  including  advertising  displays  in  shopping
centers, malls, airports, stadiums, movie theaters and supermarkets,  as well as
on taxis,  trains,  buses and subways.  Recent  estimates  published by the OAAA
report  that  total  out-of-home  advertising  revenues,  including  traditional
billboard advertising, exceeded $4.047 billion in 1997.

     The outdoor advertising  industry uses three standardized  display formats:
traditional  bulletin-style  painted  billboards (with a typical face size of 14
feet by 48 feet),  30-sheet  posters  (with a typical face size of 12 feet by 25
feet) and junior or 8-sheet  posters  (with a typical  face size of 6 feet by 12
feet).  Generally,  the physical  advertising  structure is owned by the outdoor
advertising  company  and is built on  locations  either  owned or leased by the
operator  or  on  which  it  has a  permanent  easement.  Traditionally  outdoor
advertising  displays  are leased to  advertisers  on a unit basis.  Advertising
rates for outdoor advertising media are based on such factors as the size of the
advertising display,  visibility, cost of leasing,  construction and maintenance
and the  number  of  people  who have  the  opportunity  to see the  advertising
message.

     The outdoor advertising market is highly fragmented but is dominated in the
large  designated  market  areas by a few  sizable  firms,  several of which are
subsidiaries  of  diversified  companies.  In  addition  to  the  large  outdoor
advertising firms, there are many smaller regional and local companies operating
a limited number of displays in a single or a few local markets.  There has been
a trend toward consolidation in the outdoor advertising industry in recent years
and the Company expects this trend to continue.

                                       4

<PAGE>

Business Strategy

     Travel  Services  Business  Strategy.  The Company  opened its first travel
center in 1953 and has since expanded to fourteen travel centers.  The Company's
travel centers are strategically located along well-traveled interstate highways
in  Arizona  and  New  Mexico  where  there  are  generally  few  gas  stations,
convenience  stores or restaurants.  Most of the Company's  travel centers offer
food and beverages,  ranging from ice cream and snack foods at some locations to
full-service  restaurants at others.  The Company's  food service  operations at
seven  of  the  Company's  fourteen  travel  centers  operate  under  the  Dairy
Queen/Brazier  or Dairy Queen trade names.  Four of the Company's travel centers
operate  under the Stuckey's  brand name.  The  Stuckey's  specialty  stores are
family oriented shops that feature the Stuckey's line of pecan  confectioneries.
Stuckey's is well known among travelers as a place to shop for souvenirs,  gifts
and toys and travel games for children.

     The Company's  travel centers also offer brand name gasoline such as CITGO,
Chevron, and Diamond Shamrock.  Effective October 1, 1995, the Company became an
authorized  distributor of CITGO Petroleum  Corporation,  one of the largest and
fastest  growing  wholesalers of petroleum  products in the United  States.  The
Company has  converted  eight of its existing  locations to CITGO  "superpumper"
stations.  The Company also intends to market CITGO products to other  retailers
in Arizona and New Mexico.

     The Company's  billboard  advertising for its travel centers emphasizes the
wide range of unique  Southwestern  souvenirs and gifts  available at the travel
centers,  as well as the availability of gasoline and food.  Merchandise at each
of the  Company's  stores is offered at prices  intended to suit the budgets and
tastes  of  a  diverse  traveling   population.   The  merchandise  ranges  from
inexpensive  Southwestern  gifts and souvenirs to unique  hand-crafted  jewelry,
rugs,  pottery,  kachina dolls and other gifts  crafted  specially for BOWLIN by
several Native American tribes

     Outdoor  Advertising  Business  Strategy.  The Company  operates over 2,760
revenue-generating  advertising display faces,  primarily in Arizona, New Mexico
and Texas and, to a lesser extent,  in Colorado and Oklahoma.  Approximately 67%
of these  display  faces are  traditional  bulletin  style and 33% are  assorted
poster styles.  The Company's  bulletin style displays are located  primarily on
interstate highways,  while the smaller poster sizes are typically used in local
settings by advertisers who prefer to change the display message regularly.  The
Company's outdoor  advertising  displays are strategically  located in rural and
smaller  metropolitan  areas  throughout the Southwest,  where the dispersion of
population,  outdoor lifestyles and leading tourist  destinations have created a
strong dependence on highway travel.

     The Company began its outdoor advertising  operations in 1980 and has grown
into a regional leader in small to medium-sized outdoor advertising markets. The
Company offers its outdoor advertising  customers a complete full-service source
for  graphic  design and  painting  for the outdoor  billboards  operated by the
Company.  As a result,  the  Company  is able to attract  advertisers  that have
historically relied on other media in marketing their products and services. The
Company believes it is one of the largest outdoor advertising companies in rural
interstate markets in the Southwest.

Growth Strategy

     Travel  Centers.  The Company is committed to expanding  its travel  center
operations through internal development as well as strategic  acquisitions.  The
Company plans to further expand its travel center  operations in popular tourist
destinations,  along  heavily  traveled  interstate  corridors  and  in  smaller
metropolitan  areas.  The Company  believes that the co-branding  concept it has
implemented  at its travel centers has resulted in increased  revenues,  and the
Company intends to pursue  opportunities  to acquire rights to additional  brand
name products.  The Company is currently in the process of developing a new full
service  travel  center  with  CITGO  superpumper   dispensing  facilities  near
Albuquerque, New Mexico.

                                       5

<PAGE>

     The  following are the primary  components  of the  Company's  strategy for
expanding its travel center operations:

-    Continuing  to offer high quality  brand name food and products in a clean,
     safe environment designed to appeal to travelers on interstate highways.
-    Continuing  to  increase  sales  at  existing   locations  through  ongoing
     renovation  and  upgrading of  facilities  and the addition of products and
     services.
-    Pursuing  complementary  national food and/or merchandise brands to further
     implement the Company's co-branding concept.
-    Expanding  the  Company's   travel  center   operations   through  internal
     development and strategic  acquisitions in key tourist destinations,  along
     heavily traveled interstate highways and in smaller metropolitan areas.

     Gasoline Wholesaling. The Company is an authorized CITGO distributor. CITGO
is among the top five  petroleum  producers in the United  States and one of the
fastest  growing  brand names of gasoline  products  in the  country.  The CITGO
distribution  agreement  allows the Company to  streamline  its gasoline  supply
arrangements  and take  advantage  of  volume-driven  pricing  by  consolidating
purchases  from CITGO.  The  distribution  agreement has a three-year  term that
expires  September  30, 1998,  and  automatically  renews for  three-year  terms
thereafter.  CITGO's  ability to terminate or refuse to renew the agreement with
the  Company  is subject to the  occurrence  of certain  events set forth in the
Petroleum  Marketing Practices Act, which events currently include bankruptcy or
breach of the agreement by the Company or  termination by CITGO of its petroleum
marketing  activities  in the  Company's  distribution  area.  The  terms of the
distribution   agreement   require  the  Company  to  purchase  certain  minimum
quantities of gasoline during the term of the agreement, which includes gasoline
purchased for sale at the Company's travel centers.  Since the effective date of
the  distribution  agreement,  the  Company's  purchases of CITGO  products have
substantially exceeded the required minimum quantities.

     The  Company  will  continue  to grow  gasoline  sales by  focusing  on the
marketing  of the  CITGO  line of  petroleum  products  through  our own  travel
centers, and as a wholesale provider to other retailers in the Southwest.

     Outdoor Advertising.  The Company plans to increase its outdoor advertising
operations  through  internal  development as well as  acquisition.  The Company
increased its  inventory of billboard  structures by 979 in fiscal year 1998 and
87 in  fiscal  year  1997.  The  Company  anticipates  that it  will  be  adding
approximately  100 new billboard  structures per year to its operations  through
internal  development,  subject to the availability of necessary working capital
and the Company's ability to comply with applicable regulations.

     In addition  to internal  development,  the Company  plans to increase  its
outdoor  advertising  operations by pursuing  strategic  acquisitions of outdoor
advertising assets of small to medium-sized  outdoor advertising  operators when
appropriate.  The Company  routinely  engages in discussions  with third parties
regarding potential acquisitions.  Any such acquisitions would be subject to the
negotiation  and  execution  of  definitive  agreements,  appropriate  financing
arrangements,  performance of due diligence,  approval of the Company's Board of
Directors, and the satisfaction of other customary closing conditions, including
the receipt of third party consents.

     Consistent with its past practices, the Company intends to pursue expansion
into markets that are not included in the 50 largest  designated  market  areas.

                                       6
<PAGE>

the Company  believes that expansion  along  interstate  highways and in smaller
metropolitan areas permits the Company to operate in areas where competition for
site  acquisitions  is less  intense,  purchase  prices are more  favorable  and
government regulations are generally less onerous.

     The Company's  advertising  customers consist largely of local and regional
advertisers,  resulting  in a  diverse  client  base and  limiting  reliance  on
national advertising clients.  Unlike many of its competitors,  the Company does
not rely to a significant extent upon tobacco advertisers,  which are subject to
increasing  regulation.  The  following  table  sets  forth  the  categories  of
industries from which the Company  derived its outdoor  advertising net revenues
for the year ended January 31, 1998, and the respective  percentages of such net
revenues. The top three business categories accounted for approximately 62.0% of
the Company's total outdoor  advertising net revenues and approximately 11.6% of
the  Company's  total  revenues in the year ended  January 31,  1998.  No single
advertiser  accounted  for  more  than  2.4%  of  the  Company's  total  outdoor
advertising net revenues in such period.


                                Percentage of Net
                        Advertising Revenues by Category

                     Hotels and Motels               25.5%
                           Restaurants               21.3
                Travel & Entertainment               15.2
              Retail/Consumer Products               12.7
                            Government                8.8
                              Services                7.2
                            Automotive                3.7
                               Alcohol                 .3
                               Tobacco                 .1
                                 Other                5.2
                                                    ------
                                 TOTAL              100.0%
                                                    ======

     The Company plans to expand its outdoor  advertising  operations  primarily
by:

-    Continuing to develop the Company's  presence along interstate  highways in
     its existing markets throughout the Southwest.
-    Increasing revenues from existing billboards by implementing  programs that
     maximize advertising rates and occupancy levels.
-    Expanding  its  operations  within  current  markets  through new billboard
     construction.
-    Making  strategic  acquisitions of existing outdoor  advertising  assets of
     small to medium-sized outdoor advertising  operations in the less populated
     areas of the United States.


BUSINESS OPERATIONS

     Travel Center Operations.  The Company sells food, gasoline and merchandise
through its fourteen travel centers located along two interstate  highways (I-10
and I-40) in  Arizona  and New  Mexico.  These are key  highways  for  travel to
numerous tourist and recreational  destinations as well as arteries for regional
traffic among major Southwestern cities. All of the Company's travel centers are
open every day of the year (except Christmas).

     Each of the Company's travel centers  maintains a distinct,  theme-oriented
atmosphere. In addition to the Southwestern merchandise it purchases from Native

                                       7
<PAGE>

American tribes, the Company also imports some 650 items from Mexico,  including
handmade blankets,  earthen pottery and wood items.  Additional goods, novelties
and imprinted  merchandise are imported from several Pacific Rim countries.  The
Company has long-standing relationships with many of its vendors and suppliers.

     The Company sells food under the Dairy Queen and Dairy  Queen/Brazier brand
names and sells snacks and souvenir  merchandise under the Stuckey's brand name.
The terms of its agreements  with Stuckey's and Dairy Queen obligate the company
to pay these  franchisers a franchise  royalty and in some instances a promotion
fee, each equal to a percentage of gross sales  revenues from products  sold, as
well as comply with certain provisions governing the operation of the franchised
stores.

     The Company continuously monitors and upgrades its travel center facilities
to  maintain a high  level of  comfort,  quality  and  appearance.  Improvements
include  new  awnings  and  facings,  new  signage  and  enhanced  lighting  and
furnishings.  The Company is also engaged in upgrading its petroleum storage and
dispensing equipment in order to increase fueling capacity and efficiency and to
satisfy new federal guidelines made mandatory by December 1998.

     Outdoor Advertising  Operations.  The outdoor advertising operations of the
Company include leasing of sites,  construction of display structures,  sales of
advertising  space and  production  and design of display  faces.  The Company's
leasing  department has the  responsibility  for  coordinating  land leases with
owners for the right to  construct  and  maintain  billboard  structures  on the
landowner's  property.  The  leasing  department  also  monitors  the  Company's
compliance with all government regulations regarding lease rights,  construction
and sales of outdoor  structures.  The Company's  construction  division  erects
billboard structures on any sites acquired by the Company without a pre-existing
structure,  with  the goal of  maximizing  the  amount  of  leaseable  area on a
particular site.

     The Company's sales department, through its account representatives,  sells
advertising  space to the Company's  clients from its inventory of approximately
2,760  display  faces.  The  account  representatives  work  with the  Company's
clients,  their advertising agencies and the Company's production  department to
provide  clients  with high  quality  design and artwork  for their  billboards.
Although the Company's consistent expansion of its outdoor advertising inventory
results  in an  advertising  occupancy  rate  of less  than  100%,  the  Company
generally has approximately 70% of its inventory under advertising agreements at
any time.

     The Company's production staff performs a full range of activities required
to create and install outdoor advertising. Production work includes creating the
advertising  copy design and layout,  painting  the design or  coordinating  its
printing and installing the design displays.  Billboards have  historically been
composed of several  painted  plywood  sheets,  but  recently  vinyl  facing has
replaced plywood in the majority of advertising  produced.  The increased use of
vinyl  and  pre-printed  advertising  copy  furnished  to  the  Company  by  the
advertiser or its agency results in less  labor-intensive  production  work. The
Company believes that this trend may reduce future operating expenses associated
with the Company's production activities.

Competition

     Travel Services  Competition.  The Company faces  competition at its travel
centers from  quick-service and full-service  restaurants,  convenience  stores,
gift shops and,  to some  extent,  from truck  stops  located  along  interstate
highways in Arizona and New Mexico.  Some of the travel centers that the Company
competes with are operated by large petroleum  companies,  while many others are
small  independently  owned operations that do not offer brand name food service
or  gasoline.  Giant  Industries,  Inc.,  a refiner and  marketer  of  petroleum
products,  operates  two travel  centers,  one in Arizona and one in New Mexico,
which are high volume diesel fueling and large truck repair facilities that also

                                       8
<PAGE>

include small shopping malls, full-service restaurants, convenience stores, fast
food restaurants and gift shops. The Company's principal  competition from truck
stops includes Love's Country Stores, Inc., Petro Corporation and Flying J. Many
convenience stores are operated by large, national chains that are substantially
larger,  better  capitalized  and have  greater name  recognition  and access to
greater resources than the Company.

     Outdoor Advertising Competition. The Company competes in all of its markets
with other outdoor  advertisers as well as other media,  including broadcast and
cable television,  radio,  newspaper and direct mail marketers.  The Company has
little  competition  in its rural  markets from other outdoor  advertisers,  but
encounters direct  competition in its smaller  metropolitan  markets from larger
outdoor media companies,  including Outdoor Systems, WhiteCo Outdoor Advertising
and Donrey Outdoor  Advertising,  each of which have large national networks and
greater  resources than the Company.  The Company believes that by concentrating
on interstate and tourist oriented advertising in markets other than the largest
50 designated market areas it will be able to compete more  effectively.  As the
Company expands geographically,  however, it may encounter increased competition
from other outdoor advertising firms, some of whom are substantially  larger and
have greater name recognition and access to substantially greater resources than
the Company.


Employees

     As of January 31, 1998, the Company had  approximately 171 full-time and 95
part-time  employees,  49 of which were  located in  Arizona,  207 of which were
located  in New  Mexico  and 10 of which  were  located  in  Texas.  None of the
Company's  employees  are covered by a collective  bargaining  agreement and the
Company believes that relations with its employees are good.

Regulation

     Travel Centers. Each of the Company's food service operations is subject to
licensing and  regulation by a number of  governmental  authorities  relating to
health,  safety,  cleanliness  and food  handling.  The  Company's  food service
operations  are also subject to federal and state laws governing such matters as
working  conditions,  overtime  and tip credits and minimum  wages.  The Company
believes that  operations at its fourteen  travel centers comply in all material
respects with applicable licensing and regulatory requirements;  however, future
changes in existing regulations or the adoption of additional  regulations could
result in material increases in the Company's costs.

     Historically,  the  Company  has  incurred  ongoing  costs to  comply  with
federal, state and local environmental laws and regulations,  primarily relating
to underground  storage tanks.  These costs include  assessment,  compliance and
remediation costs, as well as certain ongoing capital  expenditures  relating to
the Company's  gasoline  dispensing  operations.  Under recently enacted federal
regulations,  the Company is obligated  to upgrade or replace all  non-complying
underground  storage tanks it owns or operates to meet corrosion  protection and
overfill/spill  containment  standards by December 22, 1998. In response to such
programs, the Company has, wherever possible,  adopted a policy of replacing its
underground storage tanks with above-ground  storage tanks to minimize the costs
associated  with leak detection and compliance with other  regulatory  programs.
Non-complying  tanks  have  been  upgraded  or  replaced  at all  but one of the
Company's  travel  centers,  and the  Company  intends  to  complete  the  final
installation well in advance of the December 22, 1998 compliance deadline.

     The Company's  travel center  operations are also subject to extensive laws
and regulations  governing the sale of alcohol and tobacco, and fireworks in its
New Mexico travel centers.  Such regulations include certain mandatory licensing
procedures  and  ongoing  compliance  measures,  as well as  special  sales  tax

                                       9
<PAGE>

measures.  These regulations are subject to change and future  modifications may
result in decreased  revenues or profit margins at the Company's  travel centers
as a result of such changes.

     Outdoor  Advertising.  The  outdoor  advertising  industry  is  subject  to
governmental  regulation at the federal,  state and local  levels.  Federal law,
principally   the  Highway   Beautification   Act  of  1965,   as  amended  (the
"Beautification  Act"),  encourages states, by the threat of withholding federal
appropriations  for the  construction  and  improvement of highways  within such
states, to implement  legislation to regulate billboards located within 660 feet
of, or visible from,  interstate  and primary  highways  except in commercial or
industrial  areas.  All of the states have  implemented  regulations at least as
restrictive  as  the  Beautification  Act,  including  some  prohibition  on the
construction  of new  billboards  adjacent  to  federally  aided  highways.  The
Beautification Act, and the various state statutes implementing it, requires the
payment of just compensation whenever  governmental  authorities require legally
erected and maintained billboards to be removed from federally-aided highways.

     The states and local  jurisdictions  have, in some cases, passed additional
and more restrictive regulations on the construction, repair, upgrading, height,
size and location of, and, in some instances,  content of advertising copy being
displayed on outdoor advertising structures adjacent to federally-aided highways
and  other  thoroughfares.  Such  regulations,  often in the  form of  municipal
building,  sign or zoning ordinances,  specify minimum standards for the height,
size  and  location  of  billboards.  In some  cases,  the  construction  of new
billboards   or  relocation  of  existing   billboards   is   prohibited.   Some
jurisdictions  also have  restricted the ability to enlarge or upgrade  existing
billboards,  such as converting  from wood to steel or from  non-illuminated  to
illuminated  structures.  From time to time  governmental  authorities order the
removal of billboards by the exercise of eminent  domain.  Thus far, the Company
has been  able to obtain  satisfactory  compensation  for any of its  structures
removed at the  direction  of  governmental  authorities,  although  there is no
assurance that it will be able to continue to do so in the future.

     In  recent  years,   there  have  been  movements  to  restrict   billboard
advertising of tobacco  products.  It is likely that  additional  legislation of
this type will be enacted on the  national or on a local level in the  Company's
markets.  Revenues  from tobacco  advertisers  accounted for less than 1% of the
Company's total advertising revenues in fiscal 1998.

     Amortization  of  billboards  has also been  adopted  in  varying  forms in
certain  jurisdictions.  Amortization permits the billboard owner to operate its
billboard as a  non-conforming  use for a specified  period of time until it has
recouped its  investment,  after which it must remove or  otherwise  conform its
billboard to the applicable  regulations without any compensation.  Amortization
and other regulations  requiring the removal of billboards without  compensation
have been subject to vigorous  litigation in state and federal  courts and cases
have  reached  differing  conclusions  as  to  the  constitutionality  of  these
regulations.  To date,  amortization  and  other  regulations  in the  Company's
markets have not materially adversely affected its operations.

Trademarks

     The  Company  operates  its  travel  centers  under  a  number  of its  own
trademarks, as well as certain trademarks owned by third parties and licensed to
the Company,  such as the Dairy Queen, Dairy Queen/Brazier,  Stuckey's and CITGO
trademarks.  The Company  believes that its trademark rights will not materially
limit  competition with its travel centers.  The Company also believes that none
of the  trademarks  it owns  is  material  to the  Company's  overall  business;
however, the loss of one or more of the Company's licensed trademarks could have
an adverse effect on the Company.

                                       10
<PAGE>


ITEM 2.   DESCRIPTION OF PROPERTY

     As of January 31, 1998, the Company operated  fourteen travel centers.  The
Company owns the real estate and  improvements  where five of its travel centers
are  located,  as well as real  estate  and  improvements  at  three  additional
locations, one of which the Company is currently developing into a travel center
and two of which are leased to third party restaurant operators.  The properties
at which  three of the travel  centers  owned by the Company  are  operated  are
subject to mortgages. Nine of the Company's existing travel centers and a travel
center  location  planned  for  development  are located on real estate that the
Company leases from various third parties.  These leases have terms ranging from
five to forty  years,  assuming  exercise by the Company of all renewal  options
available under certain leases.

     As of January 31, 1998, the Company operated over 2,760 revenue  generating
outdoor display faces throughout the Southwest.  The Company  typically owns the
billboard and related assets and enters into operating leases with the owners of
the real property upon which the billboards are located.  These leases typically
have a term of 1 to 5 years and provide for minimum annual rents.  As of January
31, 1998, the Company also owned and operated 55 and 295 non-revenue  generating
display  faces in Arizona and New Mexico,  respectively,  which are  exclusively
dedicated to the advertisement of its fourteen travel centers.  Listed below are
the locations of the Company's  inventory of revenue generating display faces as
of January 31, 1998.


                   Billboards    30-sheet Posters    8-sheet Posters    Total
                   ----------    ----------------    ---------------    -----
      Arizona          138              --                  --            138
     Colorado           14              --                  --             14
   New Mexico        1,557             130                 774          2,461
     Oklahoma            4              --                  --              4
        Texas          150              --                  --            150
                       ---              --                  --            ---
        TOTAL        1,863             130                 774          2,767
                     =====             ===                 ===          =====

     The Company's  principal  executive  offices  occupy  approximately  20,000
square  feet of space  owned by the  Company in  Albuquerque,  New  Mexico.  The
Company's  principal  office  space is subject to a mortgage,  which  matures on
January 29, 2000,  and the principal  balance of  which interest  accrues at the
bank's  prime  rate  (8.50% at January  31,  1998).  The  Company  owns  outdoor
advertising   production   plant  and   warehouse   facilities   consisting   of
approximately  10,000  square  feet in  Albuquerque,  New  Mexico  and a central
warehouse and distribution  facility occupying 27,000 square feet in Las Cruces,
New Mexico.  The Las Cruces property is subject to two mortgages which mature on
October  4,  2000 and May 13,  2003  and each  accrues  interest  on the  unpaid
principal  balance at a rate of 10% per annum.  The  Company  believes  that its
headquarters  and warehouse  facilities  are adequate for its operations for the
foreseeable future.

     The Company owns a pecan  orchard  located in southern  New Mexico.  During
this  fiscal  year,  the  operations  of the  pecan  orchard  were  leased to an
unrelated  third party.  This  investment  has not had a material  effect on the
Company's  business or results of operations and the Company's  management  does
not expect it to have such effect in the future.

                                       11
<PAGE>

ITEM 3.   LEGAL PROCEEDINGS

     The Company  from time to time is involved in  litigation  in the  ordinary
course of business,  including disputes involving  advertising  contracts,  site
leases, employment claims and construction matters. The Company is also involved
in routine  administrative and judicial proceedings regarding billboard permits,
fees and  compensation  for  condemnations.  The  Company  is not a party to any
lawsuit or proceeding  which, in the opinion of management,  is likely to have a
material adverse effect on the Company.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Company did not submit any matters to a vote of security holders in the
fourth quarter of fiscal 1998.




                                       12
<PAGE>



                                     PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's  Common Stock is quoted on the American  Stock Exchange under
the symbol  "BWN." On April 13,  1998,  there were  approximately  30 holders of
record of the  Company's  Common  Stock.  The  following  table  sets  forth the
quarterly high and low bid prices for the Company's  Common Stock.  These prices
reflect  inter-dealer prices and do not include adjustments for retail mark-ups,
markdowns or commissions and may not represent actual transactions.


Fiscal Year Ended                                  
January 31, 1997                         High                   Low
----------------                         ----                   ---
Fiscal Quarter Ended 1/31*             $ 8.8750              $ 7.3125


Fiscal Year Ended
January 31, 1998                         High                   Low
----------------                         ----                   ---
Fiscal Quarter Ended 4/30              $ 8.0000              $ 5.0000
Fiscal Quarter Ended 7/31              $ 6.1250              $ 3.3750
Fiscal Quarter Ended 10/31             $ 6.1250              $ 3.7500
Fiscal Quarter Ended 1/31              $ 5.1250              $ 3.7500

*Reflects trading from December 17, 1996, through January 31, 1997.


ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
          RESULTS OF OPERATIONS

Overview

     The following is a discussion of the consolidated  financial  condition and
results of  operations  of the Company as of and for the two fiscal  years ended
January 31, 1998 and 1997.  This discussion  should be read in conjunction  with
the  Consolidated  Financial  Statements  of the Company  and the related  Notes
included  elsewhere in this Form 10-KSB.  References to specific  years refer to
the Company's fiscal year ending January 31 of such year.

     The Company operates in two industry  segments,  travel centers and outdoor
advertising.  In  order to  permit  a  meaningful  evaluation  of the  Company's
performance  in  each of its  operating  segments,  the  Company  has  presented
selected  operating data which separately sets forth the revenues,  expenses and
operating  income  attributable to each segment,  and also separately sets forth
the corporate expenses of the Company which are not properly allocable to either
of the Company's segments for purposes of determining their respective operating
income.  The  discussion  of results of operations  which follows  compares such
selected  segment  operating  data and  corporate  expense  data for the  fiscal
periods presented.

                                       13
<PAGE>

Results of Operations

     The following table presents  certain income and expense items derived from
the Consolidated Statements of Income for the years ended January 31:





                                          1998           1997      % incr/(decr)
                                          ----           ----      -------------

Travel Centers
  Gross sales                         $ 22,583,587   $ 21,691,899       4.1%
  Discounts on sales                       279,943        303,000      (7.6%)
                                           -------        -------
  Net sales                             22,303,644     21,388,899       4.3%
  Cost of goods                         15,042,323     14,234,760       5.7%
                                        ----------     ----------
                                         7,261,321      7,154,139       1.5%
  General & administrative expenses      5,306,178      5,280,954       0.5%
  Depreciation and amortization            368,748        362,803       1.6%
                                           -------        -------
  Operating income                       1,586,395      1,510,382       5.0%

Outdoor Advertising
  Gross sales                            4,855,811      3,459,032      40.4%
  Direct operating expenses              2,488,880      2,105,615      18.2%
                                         ---------      ---------
                                         2,366,931      1,353,417      74.9%
  General & administrative expenses        780,436        368,564     111.8%
  Depreciation and amortization            660,210        281,899     134.2%
                                           -------        -------
  Operating income                         926,285        702,954      31.8%

Corporate and Other
  General & administrative expenses       (481,326)      (410,153)     17.4%
  Depreciation and amortization           (120,736)      (134,869)    (10.5%)
  Interest expense                        (722,117)      (677,746)      6.5%
  Other income, net                        558,887        518,113       7.9%
                                           -------        -------

Income before taxes                      1,747,388      1,508,681      15.8%

Income taxes                               678,200        603,472      12.4%
                                           -------        -------

Net income                             $ 1,069,188      $ 905,209      18.1%
                                       ===========      =========


                                       14
<PAGE>


Comparison of the Fiscal Years Ended January 31, 1998 and January 31, 1997.

     Travel Centers.  Gross sales at the Company's travel centers increased 4.1%
to $22.6  million for fiscal 1998 from $21.7  million for fiscal 1997.  Gasoline
sales  were  even at  $11.6  million  for  both  fiscal  years  1998  and  1997.
Merchandise  sales  increased  1.5% to $7.0  million  for the fiscal  year ended
January 31, 1998 from $6.9  million for the fiscal year ended  January 31, 1997.
Restaurant  sales  decreased  6.5% to $3.0  million  for  fiscal  1998 from $3.2
million  for fiscal  1997.  The  Company's  wholesale  CITGO  gasoline  products
relationship  commencing  in February  1997  produced  gross sales of  $917,000.
Travel  center  operations  were  affected in the fourth  quarter of the current
fiscal  year by the  reduction  in fuel  prices  and  margins as well as adverse
weather caused by El Nino which impacted the Western United States.

     Merchandise  sales were  negatively  impacted  by the  Company's  warehouse
computer  conversion  to a  perpetual  inventory  system  including  purchasing,
receiving and transfer of goods, and all other general  inventory  controls from
the  corporate  office  and  the  distribution  facility  to the  travel  center
locations.  The  conversion  progressed  slower than  anticipated  and  affected
shipment of goods to the stores during the fourth  quarter.  Construction of new
canopies and above ground tank storage  facilities  to meet  federally  mandated
regulations for 1998 has been completed at all but one location.

     Cost of goods sold for the travel  centers  increased 5.7% to $15.0 million
for fiscal 1998 from $14.2  million for fiscal 1997.  As a  percentage  of gross
sales,  cost of goods  sold  increased  slightly  to 66.6% from  65.6%,  for the
respective fiscal periods.

     General and administrative expenses for travel centers consist of salaries,
bonuses and commissions for travel center personnel,  property costs and repairs
and maintenance. General and administrative expenses for the travel centers were
unchanged at $5.3 million for the fiscal years ended  January 31, 1998 and 1997.
Depreciation  and  amortization  expenses  increased by 1.6% to $369,000 for the
fiscal  year ended  January  31,  1998 from  $363,000  for the fiscal year ended
January 31, 1997.

     The above factors  contributed  to an increase in travel  center  operating
income of 5.0% to $1.6  million  for the fiscal  year ended  January 31, 1998 as
compared to $1.5 million for the fiscal year ended January 31, 1997.

     Outdoor  Advertising.  Gross sales from the Company's  outdoor  advertising
increased  40.4% to $4.9  million  for fiscal  1998 from $3.5  million in fiscal
1997.  The increase  was  primarily  attributable  to certain  acquired  assets,
including the outdoor  advertising assets of The McCarty Company (formally known
as Pony Panels),  General Outdoor  Advertising,  Mesa Outdoor  Advertising,  and
Sweezy Outdoor Advertising Inc., as well as overall rate increases.

     Direct operating expenses related to outdoor  advertising consist of direct
advertising  expenses,  which include rental payments to property owners for the
use of land on which advertising  displays are located,  production expenses and
selling expenses.  Production expenses include salaries for operations personnel
and real estate representatives,  property taxes, and repairs and maintenance of
advertising  displays.  Selling  expenses  consist  primarily  of  salaries  and
commissions  for  salespersons  and travel  related to sales.  Direct  operating
expenses  increased  18.2% to $2.5 million for the fiscal year ended January 31,
1998 from $2.1  million for the same period in fiscal 1997,  principally  due to
the  addition  of sales and  production  personnel,  sign rent and  repairs  and
maintenance of advertising displays.

                                       15
<PAGE>

     General and  administrative  expenses  for outdoor  advertising  consist of
salaries  and  wages  for  administrative  personnel,   insurance,  legal  fees,
association  dues and  subscriptions  and other indirect  expenses.  General and
administrative  expenses  increased 111.8% to $780,000 for the fiscal year ended
January 31, 1998 from  $369,000  for fiscal 1997.  The  increase  was  primarily
attributable to increases in administrative personnel,  insurance and legal fees
due to the acquisition of the assets of The McCarty  Company  (formally known as
Pony Panels) and Sweezy Outdoor Advertising, Inc.

     Depreciation and amortization expenses increased 134.2% to $660,000 for the
fiscal year ended January 31, 1998 from  $282,000 for fiscal 1997.  The increase
was  attributable to the  acquisitions  of outdoor  advertising  assets,  of The
McCarty Company (Pony Panels) in April 1, 1997,  General Outdoor  Advertising on
April 26, 1997,  Mesa Outdoor  Advertising  on April 29, 1997 and Sweezy Outdoor
Advertising, Inc. on December 9, 1997.

     The above  factors  contributed  to the  increase  in  outdoor  advertising
operating income of 31.8% to $926,000 for the fiscal year ended January 31, 1998
as compared to $703,000 for the fiscal year ended January 31, 1997.

     Corporate and Other. General and administrative  expenses for corporate and
other   operations   of  the  Company   consist   primarily  of  executive   and
administrative compensation and benefits, investor relations, and accounting and
legal fees. General and administrative  expenses increased 17.4% to $481,000 for
the fiscal year ended  January 31, 1998 from  $410,000 for the fiscal year ended
January 31, 1997.

     For the fiscal year ended January 31, 1998, the Company's President and its
Chief  Operating  Officer elected to accept annual base salaries of $136,000 and
$90,000,  respectively,  which are less than the $195,000 and $145,000  salaries
provided for in their respective  employment  agreements  effective  February 1,
1997.  Each of the agreements has a perpetual  five-year  term, such that on any
given date, each agreement has a five-year remaining term.

     Depreciation  and  amortization  expenses for the  Company's  corporate and
other  operations   consist  of  depreciation   associated  with  the  corporate
headquarters  and  furniture  and fixtures  related  thereto.  Depreciation  and
amortization decreased 10.5% to $121,000 for fiscal 1998 as compared to $135,000
for fiscal 1997.

     Interest  expense  increased  6.5% to  $722,000  for the fiscal  year ended
January 31, 1998 from  $678,000 for the fiscal year ended January 31, 1997, as a
result of  borrowings  to fund outdoor  advertising  expansion and the continued
conversion of travel centers to CITGO branding.

     Income  before  taxes  increased  15.8% to $1.7 million for the fiscal year
ended  January 31, 1998 from $1.5 million for the fiscal year ended  January 31,
1997. As a percentage of gross  revenues,  income before taxes increased to 6.4%
for the fiscal year ended 1998 from 6.0% for the same fiscal period 1997.

     Income taxes were  $678,000  for the fiscal year ended  January 31, 1998 as
compared to $603,000 for the fiscal year ended  January 31, 1997, as a result of
higher pre-tax income.  The effective tax rate for fiscal year 1998 was 38.8% as
compared to 40.0% for fiscal year 1997.

     The foregoing factors  contributed to the Company's  increase in net income
for the fiscal  year ended  January  31,  1998 to $1.1  million as  compared  to
$905,000 for the fiscal year ended January 31, 1997.

                                       16
<PAGE>

Liquidity and Capital Resources

     At January 31, 1998, the Company had working  capital of $5.5 million and a
current  ratio of 2.65:1,  compared  to working  capital of $9.3  million  and a
current ratio of 5.00:1 at January 31, 1997.  The net cash provided by operating
activities  increased to $1.4  million from  $440,000 for the fiscal years ended
January 31, 1998 and 1997,  respectively.  The  increase  was due  primarily  to
increases in depreciation and amortization of $370,000, deferred income taxes of
$92,000, and changes in other operating assets and liabilities of $628,000, net.
The increase in depreciation  and  amortization in fiscal 1998 was primarily due
to  additional  display  structures,   machinery  and  equipment,  and  goodwill
associated with the  acquisitions of the assets of Pony Panels.  Deferred income
taxes increased as a result of book-tax timing differences.

     Net cash used in investing  activities  increased to $7.3 million in fiscal
1998 from $1.9  million in fiscal 1997.  The increase is due  primarily to asset
acquisitions  totaling $5.8 million in fiscal year 1998.  These  increases  were
offset by an increase in proceeds from the  sale/condemnation  of certain assets
of $326,000.

     Net cash  provided by  financing  activities  decreased  to $2.5 million in
fiscal 1998 from $7.3 million in fiscal 1997.  The decrease is due  primarily to
the  receipt of $7.4  million in IPO  proceeds in fiscal year 1997 that were not
present in fiscal year 1998. This was offset by an increase in borrowing, net of
$2.4  million in fiscal year 1998 as compared to fiscal year 1997.  The increase
in the Company's debt is a result of continued  expansion of outdoor advertising
operations  through  development  and  acquisition.  The Company  also  received
proceeds from the issuance of Common Stock prior to its IPO of $222,000 and paid
dividends of $50,600 for the fiscal year ended January 31, 1997 while there were
no proceeds from the issuance of Common Stock nor dividends paid for fiscal year
ended January 31, 1998.

     As of January  31,  1998,  the Company  was  indebted to various  banks and
individuals in an aggregate principal amount of approximately $9.6 million under
various loans and promissory  notes.  Many of the loans and promissory notes are
secured  by  land,  buildings,  equipment,  billboards  and  inventories  of the
Company.  The loans and  promissory  notes  mature at dates from May 15, 1998 to
October  1, 2008 and  accrue  interest  at rates  ranging  from 8.0 % to 12% per
annum.  At January 31, 1998, the Company had two revolving  lines of credit with
principal  commitments of $1,000,000 and $500,000,  respectively.  As of January
31, 1998, an aggregate of $745,000 was outstanding under these commitments.

     The Company made capital  expenditures  of  approximately  $2.8 million and
$2.1  million  during  fiscal  years  ended 1998 and 1997,  respectively.  These
expenditures  were made primarily for upgrades to the Company's  travel centers,
including the new warehouse  facility,  and for the construction and acquisition
of additional billboard  structures.  During the next twelve months, the Company
anticipates incurring capital expenditures of approximately $2.5 million related
to travel  center  operations.  Included  in the $2.5  million is  approximately
$150,000 for the removal and replacement of underground fuel storage facilities,
$2.35  million for upgrades and  improvements  to existing  facilities,  and the
development of one new facility.  With regard to outdoor advertising operations,
the Company has plans to build approximately 100 new billboard structures during
the fiscal year ending January 31, 1999, at a cost of approximately $1,000,000.

     As of January 31, 1998,  approximately  $8.0 million of the Company's total
indebtedness  accrued  interest at variable rates tied to the respective  bank's
prime lending rate. As such, the Company is subject to  fluctuations in interest
rates that could have a  negative  impact on the net income of the  Company.  In
addition,  it is likely that future indebtedness incurred by the Company will be

                                       17
<PAGE>

at  variable  rates  which  could  impact the  Company's  ability to  consummate
significant acquisitions in the future.

     On February  2, 1998,  the  Company  acquired  all of the assets of Big-Tex
Outdoor Advertising in Brownwood, Texas for $1.6 million cash. The consideration
paid by the Company was funded by working capital ($600,000 of IPO proceeds) and
$1,000,000 of bank debt.  The bank debt was provided by Norwest Bank  Minnesota,
N.A.  at the bank's  then  prevailing  prime rate  (8.5% at  closing)  and has a
maturity date of May 2, 2005. The bank debt is subject to certain  financial and
other restrictive covenants.

     On March 3,  1998,  the  Company  acquired  all of the  assets  of  Norwood
Outdoor,  Inc. in Brady,  Texas for $1.0 million cash. The consideration paid by
the  Company  was funded by  working  capital  ($350,000  of IPO  proceeds)  and
$650,000 of bank debt.  The bank debt was  provided by Norwest  Bank  Minnesota,
N.A.  at the bank's  then  prevailing  prime rate  (8.5% at  closing)  and has a
maturity date of May 2, 2005. The bank debt is subject to certain  financial and
other restrictive covenants.

     Although the Company does not have any agreements in place, it is currently
negotiating with independent  parties for the acquisition of outdoor advertising
assets.  The  Company  has not  executed a letter of intent or other  agreement,
binding or non-binding, to make such acquisitions. Any such acquisition would be
subject to the negotiation and execution of definitive  agreements,  appropriate
financing arrangements,  performance of due diligence, approval of the Company's
Board of Directors,  and the satisfaction of other customary closing conditions,
including the receipt of third party consents.  The Company would likely finance
any such acquisitions with cash, additional indebtedness or a combination of the
two. To the extent that any such acquisition would be paid for by the Company in
cash,  the Company  could decide to use a portion of the  remaining net proceeds
from the IPO, use funds from its ongoing operations,  seek additional  financing
from a commercial  lender or some  combination of the foregoing.  Any commercial
financing  obtained  for purposes of  acquiring  additional  assets is likely to
impose certain  financial and other  restrictive  covenants upon the Company and
increase the Company's interest expense.

Recent Accounting Pronouncements

     In June 1997,  the Financial  Accounting  Standards  Board issued SFAS 130,
"Reporting  Comprehensive  Income". SFAS 130 establishes standards for reporting
and display of  comprehensive  income and its  components  (revenues,  expenses,
gains,  and  losses)  in a full  set of  general-purpose  financial  statements.
Specifically,  SFAS 130  requires  that all items  that meet the  definition  of
components of comprehensive  income be reported in a financial statement for the
period in which they are recognized.  However, SFAS 130 does not specify when to
recognize or how to measure the items that make up  comprehensive  income.  SFAS
130 is effective for fiscal years  beginning  after  December 15, 1997 and early
application is permitted.  Management  believes the application of SFAS 130 will
not have a  material  effect  on the  Company's  future  consolidated  financial
statements.

     In June 1997,  the  Financial  Accounting  Standards  Board issued SFAS 131
"Financial  Reporting  for  Segments  of  a  Business   Enterprise".   SFAS  131
establishes  standards  for the way  that  public  business  enterprises  report
information  about  segments in annual  financial  statements  and requires that
those  enterprises  report  selected  information  about  operating  segments in
interim  financial  reports  issued to  shareholders.  SFAS 131  supersedes  the
"industry  segment" concept of SFAS 14 with a "management  approach"  concept as
the basis for identifying reportable segments.  SFAS 131 is effective for fiscal
years  beginning  after  December 15, 1997 and early  application  is permitted.
Management  believes the application of SFAS 131 will not have a material effect
on the Company's future consolidated financial statements.

                                       18
<PAGE>

Impact of the Year 2000

     The Year 2000 Issue is the result of computer  programs being written using
two digits rather than four to define the applicable  year. Any of the Company's
computer programs that have  date-sensitive  software may recognize a date using
"00" as the year 1900 rather than the year 2000.  This could  result in a system
failure or miscalculations.  The Company has conducted a comprehensive review of
its computer  systems to identify the systems that could be affected by the Year
2000 Issue and is developing an  implementation  plan to resolve the issue.  The
Company  estimates over the next eighteen months that the costs  associated with
the implementation plan will not exceed $50,000.  The Company presently believes
that, with  modifications to existing  software and conversions to new software,
the Year 2000 problem  will not pose  significant  operational  problems for the
Company's computer systems as so modified and converted.

Risk Factors

     The Company  does not  provide  forecasts  of  potential  future  financial
performance.  While the Company's  management is optimistic  about the Company's
long-term prospects, the following issues and uncertainties, among others should
be considered in evaluating its growth outlook.

     No  Assurance  of  Successful  Expansion.  The Company  intends to open new
travel centers, expand its outdoor advertising operations and implement gasoline
wholesaling  activities.  Although the Company's  existing  operations are based
primarily in the  Southwest,  the  Company's  current  expansion  plans  include
consideration  of  acquisition  opportunities  in both the  Southwest  and other
geographic regions of the United States. However, there can be no assurance that
suitable  acquisitions  can be  identified,  and the  Company  is likely to face
competition from other companies for available  acquisition  opportunities.  Any
such  acquisition  would be subject to  negotiation  of  definitive  agreements,
appropriate financing  arrangements and performance of due diligence.  There can
be no  assurance  that the Company will be able to complete  such  acquisitions,
obtain acceptable  financing or any required consent of its bank lenders or that
such  acquisitions  that are completed can be integrated  successfully  into the
Company's existing  operations.  The success of the Company's  expansion program
will depend on a number of factors,  including  the  availability  of sufficient
capital,  the  identification  of  appropriate  expansion   opportunities,   the
Company's  ability  to  attract,   train  and  retain  qualified  employees  and
management,  and the continuing profitability of existing operations.  There can
be no assurance that the Company will achieve its planned  expansion or that any
expansion will be profitable. See "BUSINESS -Growth Strategy."

     Need for  Additional  Financing.  In order to  successfully  implement  the
Company's  growth  strategy,  the Company may need to seek additional  financing
from  external  sources.  The Company has been able to secure  financing for the
acquisition of additional  assets from commercial  lenders in amounts up to 100%
of the fair  market  value of the  acquired  assets.  However,  there  can be no
assurance that such  additional  financing  will be available in the future,  or
that if available,  it will be on terms  acceptable to the Company.  The Company
anticipates that any financing which it does secure may impose certain financial
and other restrictive  covenants upon the Company and its operations.  There can
be no assurance  that the Company  will be able to  successfully  integrate  any
acquired companies or assets into its existing operations,  which could increase
the Company's  operating expenses in the short-term and materially and adversely
affect the Company's  results of operations.  Any acquisition by the Company may
result in  potentially  dilutive  issuances  of equity or debt  securities,  the
incurrence of additional  debt, and amortization of expenses related to goodwill
and  intangible  assets,  all of which  could  adversely  affect  the  Company's
profitability. Acquisitions involve numerous risks, such as the diversion of the
attention of the Company's management from other business concerns, the entrance

                                       19
<PAGE>

of the Company into  markets in which it has had no or only limited  experience,
and the potential  loss of key employees of the acquired  company,  all of which
could  have a  material  adverse  effect on the  Company's  business,  financial
condition, and results of operations.

     Dependence  on Third Party  Relationships.  The Company is  dependent  on a
number of third party  relationships  under which it offers brand name and other
products  at its travel  centers.  These  brand name  relationships  include the
Company's  distributorship  relationship with CITGO, and its existing  franchise
agreements  with Dairy  Queen/Brazier  and  Stuckey's.  The  Company's  existing
operations  and plans for future growth  anticipate  the continued  existence of
such  relationships.  There can be no assurance that the agreements  that govern
these relationships will not be terminated.  Several of these agreements contain
provisions  that  prohibit  the Company  from  offering  additional  products or
services that are  competitive to those of its  suppliers.  Although the Company
does  not  currently   anticipate  having  to  forego  a  significant   business
opportunity in order to comply with such  agreements,  there can be no assurance
that adherence to existing agreements will not prevent the Company from pursuing
opportunities  that management would otherwise deem advisable.  The Company also
relies upon several at will relationships with various third parties for much of
its souvenir  and gift  merchandise.  Although the Company  believes it has good
relationships  with its  suppliers,  there can be no assurance  that the Company
will be able to maintain relationships with suppliers of suitable merchandise at
appropriate  prices  and in  sufficient  quantities.  See  "BUSINESS  - Business
Operations."

     Possible  Adverse Impact of Competition.  The Company's travel centers face
competition  from  major and  independent  oil  companies;  independent  service
station operators; national and independent operators of restaurants, diners and
other  eating   establishments;   and  national  and  independent  operators  of
convenience  stores  and  other  retail  outlets.  In  its  outdoor  advertising
operations,  the Company faces  competition for advertising  revenues from other
outdoor  advertising  companies,  as well as from  other  media  such as  radio,
television,  print media and direct mail  marketing.  The Company also  competes
with a wide  variety  of other  out-of-home  advertising  media,  the  range and
diversity of which has  increased  substantially  over the past  several  years,
including  advertising  displays  in  shopping  centers  and  malls,   airports,
stadiums,  movie theaters and supermarkets.  Some of the Company's  competitors,
including major oil companies and convenience store operators, are substantially
larger,  better  capitalized  and have  greater name  recognition  and access to
greater resources than the Company. There can be no assurance that the Company's
travel  centers  and  outdoor  advertising  operations  will be able to  compete
successfully  in  their  respective  markets  in the  future.  See  "BUSINESS  -
Competition."

     Seasonality and Other Factors;  Quarterly  Fluctuations.  The travel center
portion of the  Company's  business is somewhat  seasonal,  and  revenues may be
affected  by  many  factors,  including  weather,  holidays  and  the  price  of
alternative  travel modes.  The Company's  revenues and earnings may  experience
substantial fluctuations from quarter to quarter.

     Potential Adverse Effects of Government  Regulation of Travel Centers. Each
of the Company's food service  operations is subject to licensing and regulation
by a number of  governmental  authorities,  including  regulations  relating  to
health, safety, cleanliness and food handling, as well as federal and state laws
governing  such  matters as working  conditions,  overtime  and tip  credits and
minimum  wages.  The  Company's  travel  center  operations  are also subject to
extensive laws and  regulations  governing the sale of alcohol and tobacco,  and
fireworks in its New Mexico travel  centers.  Such  regulations  include certain
mandatory licensing procedures and the ongoing compliance  measures,  as well as
special sales tax measures. The Company believes that its operations at fourteen
travel centers comply with all applicable licensing and regulatory requirements.
Any failure to comply with applicable regulations, or the adoption of additional
regulations  or  changes  in  existing   regulations   could  impose  additional
compliance  costs on the Company,  require a cessation of certain  activities or
otherwise have a material  adverse effect on the Company's  business and results
of operations. See "BUSINESS - Regulation."

                                       20
<PAGE>

     Environmental Risks. The Company is subject to federal, state and municipal
laws and regulations  governing the use,  storage,  handling and disposal of its
petroleum  products.  Specifically,  the federal  government has recently issued
more  stringent  regulations  governing  the storage of petroleum  products with
which the Company is required to comply by December  1998.  Although the Company
believes that its activities comply with the current standards prescribed by law
and the Company has already completed  certain  renovations of its facilities to
satisfy the  federal  government's  recently  enacted  regulations,  the risk of
accidental contamination to the environment or injury can not be eliminated.  In
the event of such an accident,  the Company could be held liable for any damages
that result and any such liability  could exceed the available  resources of the
Company. The Company could be required to incur significant costs to comply with
environmental  laws and  regulations  that may be  enacted  in the  future.  See
"BUSINESS - Regulation."

     Potential Adverse Effects of Government  Regulation of Outdoor Advertising.
Outdoor  advertising  displays are subject to regulation by federal,  state, and
local governmental agencies. These regulations, in some cases, limit the height,
size and  location of  billboards  and, in limited  circumstances,  regulate the
content of the advertising copy displayed on the billboards,  particularly  with
respect to tobacco  advertising.  Some  governmental  regulations  prohibit  the
construction of new billboards or the  replacement,  relocation,  enlargement or
upgrading  of  existing  structures.   Some  cities  have  adopted  amortization
ordinances  under which,  after the  expiration  of a specified  period of time,
billboards  must be removed at the  owner's  expense  and without the payment of
compensation.  Due to the location of its billboard  structures  outside smaller
metropolitan  and rural areas,  the Company has not been materially  affected by
such ordinances to date.  However,  there can be no assurance that the Company's
billboard  structures  will not  become  subject to  similar  ordinances  in the
future.  Ordinances  requiring the removal of a billboard without  compensation,
whether through amortization or otherwise, are being challenged in various state
and federal courts with conflicting results.  Although, to date, the Company has
been adequately  compensated for any of its structures  removed at the direction
of  governmental  authorities,  future  changes in such  regulations  as well as
others applicable to the Company's outdoor  advertising  operations could have a
material adverse effect on the Company's business and results of operations.

Other Uncertainties

     Other operating, financial or legal risks or uncertainties are discussed in
this Form 10-KSB in specific context and the Company is subject to the financial
or legal  risks or  uncertainties  discussed  in  other  documents  filed by the
Company with the Securities and Exchange  Commission.  In addition,  the Company
is, of course,  also  subject to general  economic  risks,  and other  risks and
uncertainties.

ITEM 7.   FINANCIAL STATEMENTS

     Following on next page.



                                       21
<PAGE>

















                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

                            January 31, 1998 and 1997

                   (With Independent Auditors' Report Thereon)













                                       
<PAGE>






                          Independent Auditors' Report




The Board of Directors
BOWLIN Outdoor Advertising
     & Travel Centers Incorporated:


We have audited the accompanying  consolidated  balance sheets of BOWLIN Outdoor
Advertising & Travel Centers  Incorporated  and  subsidiaries  as of January 31,
1998 and 1997, and the related consolidated statements of income,  stockholders'
equity, and cash flows for the years then ended.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of BOWLIN  Outdoor
Advertising & Travel Centers  Incorporated  and  subsidiaries  as of January 31,
1998 and 1997,  and the  results  of its  operations  and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.


                                                           KPMG Peat Marwick LLP


Albuquerque, New Mexico
April 1, 1998












                                       23
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                           Consolidated Balance Sheets

                            January 31, 1998 and 1997


<TABLE>
<S>                                                                                <C>                <C>

                                 Assets                                                   1998             1997
                                 ------                                                   ----             ----

Current assets:
     Cash and cash equivalents                                                      $   4,053,330         7,518,971
     Accounts receivable, net                                                             579,216           365,424
     Notes receivable - related parties, current maturities (note 2)                       30,029            20,021
     Notes receivable, current maturities (note 2)                                          6,781             6,169
     Inventories                                                                        3,622,916         3,202,191
     Prepaid expenses                                                                     448,172           417,375
     Income taxes                                                                          89,993           --
     Other current assets                                                                   4,177            48,147
                                                                                    -------------     -------------
                      Total current assets                                              8,834,614        11,578,298
                                                                                    -------------     -------------

Investment and long-term receivables:
     Investment in partnership                                                             16,968            12,763
     Notes receivable - related parties, less current maturities (note 2)                  20,016            30,024
     Notes receivable, less current maturities (note 2)                                    59,173            65,953
                                                                                    -------------     -------------
                      Total investment and long-term receivables                           96,157           108,740

Property and equipment, net (notes 3, 5 and 6)                                         15,728,243         9,970,546

Intangible assets, net (note 4)                                                         1,200,302           185,133
                                                                                    -------------     -------------

                      Total assets                                                  $  25,859,316        21,842,717
                                                                                    =============     =============


                 Liabilities and Stockholders' Equity
                 ------------------------------------

Current liabilities:
     Short-term borrowing, bank (note 6)                                            $     745,000           --
     Accounts payable                                                                   1,350,626         1,197,428
     Long-term debt, current maturities (note 7)                                          779,179           576,186
     Accrued liabilities                                                                  455,851           399,223
     Income taxes payable                                                                 --                145,072
                                                                                    -------------     -------------
                      Total current liabilities                                         3,330,656         2,317,909

Deferred income taxes (note 10)                                                           177,300            42,600

Long-term debt, less current maturities (note 7)                                        8,123,736         6,118,406
                                                                                    -------------     -------------
                      Total liabilities                                                11,631,692         8,478,915
                                                                                    -------------     -------------

Minority interest                                                                         --                205,366
                                                                                    -------------     ------------- 
Stockholders' equity:
     Common stock, $.001 par value; authorized 100,000,000
        shares; outstanding 4,384,848 (note 9)                                              4,385             4,385
     Additional paid-in capital                                                        11,604,303        11,604,303
     Retained earnings                                                                  2,618,936         1,549,748
                                                                                    -------------     -------------
                      Total stockholders' equity                                       14,227,624        13,158,436

Commitments and contingencies (notes 11 and 12)                                           --                --
                                                                                    -------------     ------------- 

                      Total liabilities and stockholders' equity                    $  25,859,316        21,842,717
                                                                                    =============     =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       24
<PAGE>

                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                        Consolidated Statements of Income

                      Years ended January 31, 1998 and 1997


                                                     1998              1997
                                                     ----              ----

Gross sales                                      $ 27,439,398        25,150,931

Less discounts on sales                               279,943           303,000
                                                 ------------      ------------
          Net sales                                27,159,455        24,847,931

Cost of goods sold                                 17,531,203        16,340,375
                                                 ------------      ------------
          Gross profit                              9,628,252         8,507,556

General and administrative expenses                (6,567,940)       (6,115,350)

Other operating income                                 89,732           379,228

Depreciation and amortization                      (1,149,694)         (779,571)
                                                 ------------      ------------
          Operating income                          2,000,350         1,991,863
                                                 ------------      ------------

Other income (expense):
     Interest income                                  268,555           138,885
     Gain on sale of assets                           200,600            55,679
     Interest expense                                (722,117)         (677,746)
                                                 ------------      ------------
          Total other income (expense), net          (252,962)         (483,182)
                                                 ------------      ------------
          Income before income taxes                1,747,388         1,508,681

Income taxes (note 10)                                678,200           603,472
                                                 ------------      ------------

Net income                                       $  1,069,188           905,209
                                                 ============      ============

Earnings per share:
     Basic                                       $        .24               .26
                                                 ============      ============
     Diluted                                     $        .24               .26
                                                 ============      ============

See accompanying notes to consolidated financial statements.

                                       25
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

                  For the years ended January 31, 1998 and 1997


<TABLE>
<S>                                                   <C>             <C>            <C>            <C>            <C> 

                                                                       Common        Additional
                                                       Number          stock,         paid-in        Retained
                                                      of shares        at par         capital        earnings         Total
                                                      ---------        ------        ----------      --------         -----   
Balance at January 31, 1996                           3,050,427       $ 3,051         3,806,220       993,912       4,803,183

Net income                                               --              --               --          905,209         905,209
Cash dividends on common
     stock, $.02 per share                               --              --               --          (50,600)        (50,600)
Stock dividends issued on common stock
     and sale of fractional shares                      191,799           192           301,596      (298,773)          3,015
Issuance of common stock                                141,159           141           221,967         --            222,108
Redemption of previously issued shares (note 8)         (98,537)          (99)         (154,945)        --           (155,044)
Contributed services                                     --              --             155,044         --            155,044
Initial public offering of common stock, net of
     expenses                                         1,100,000         1,100         7,274,421         --          7,275,521
                                                      ---------       -------        ----------     ---------      ----------
Balance at January 31, 1997                           4,384,848         4,385        11,604,303     1,549,748      13,158,436

Net income                                               --              --               --        1,069,188       1,069,188
                                                      ---------       -------        ----------     ---------      ----------

Balance at January 31, 1998                           4,384,848       $ 4,385        11,604,303     2,618,936      14,227,624
                                                      =========       =======        ==========     =========      ==========

</TABLE>

See accompanying notes to consolidated financial statements.





                                       26
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                      Years ended January 31, 1998 and 1997

<TABLE>
<S>                                                                                   <C>               <C>

                                                                                          1998              1997
                                                                                          ----              ----
Cash flows from operating activities:
     Net income                                                                       $ 1,069,188           905,209
     Adjustments to reconcile net income to
        net cash provided by operating activities:
           Depreciation and amortization                                                1,149,694           779,571
           Income from partnership investment                                              --                (9,504)
           Gain on sale of assets                                                        (200,600)          (55,679)
           Deferred income taxes                                                          134,700            42,600
           Minority interest                                                             (205,366)          (21,225)
           Changes in operating assets and liabilities, net of effects from
              acquisitions:
                 Accounts receivable                                                     (139,851)         (171,442)
                 Inventories                                                             (420,725)         (799,171)
                 Prepaid expenses and other current assets                                 28,230          (130,658)
                 Accounts payable and accrued liabilities                                 194,328          (244,989)
                 Income taxes                                                            (235,065)          145,072
                                                                                      -----------       -----------
                           Net cash provided by operating activities                    1,374,533           439,784
                                                                                      -----------       -----------

Cash flows from investing activities:
     Capital received from (contributed to) partnership                                    (4,205)           13,000
     Proceeds from sale/condemnation of assets                                            703,201           376,973
     Business acquisitions                                                             (5,845,000)           --
     Purchases of property and equipment                                               (2,184,808)       (2,149,471)
     Disbursements on notes receivable                                                     --              (195,813)
     Collections on notes receivable                                                        6,168            99,258
                                                                                      -----------       -----------
                           Net cash used in investing activities                       (7,324,644)       (1,856,053)
                                                                                      -----------       -----------

Cash flows from financing activities:
     Short-term borrowings, net                                                           745,000          (149,000)
     Payments on long-term debt                                                        (1,015,530)       (4,660,892)
     Payments for debt issuance costs                                                      --               (84,794)
     Proceeds from borrowings                                                           2,755,000         4,778,052
     Proceeds from issuance of common stock                                                --               222,108
     Redemption of previously issued shares                                                --              (155,044)
     Proceeds from sale of fractional shares of common
        stock sold in conjunction with stock dividend                                      --                 3,015
     Dividends paid                                                                        --               (50,600)
     Proceeds from initial public offering of common stock                                 --             8,800,000
     Payment of registration costs associated with initial public
        offering of common stock                                                           --            (1,369,435)
                                                                                      -----------       -----------
                           Net cash provided by financing activities                    2,484,470         7,333,410
                                                                                      -----------       -----------
</TABLE>
                                                                     (Continued)

                                       27
<PAGE>

                                        2

                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                Consolidated Statements of Cash Flows, Continued

<TABLE>
<S>                                                                                   <C>               <C> 
                                                                                          1998             1997
                                                                                          ----             ----

Net (decrease) increase in cash and cash equivalents                                  $(3,465,641)        5,917,141

Cash and cash equivalents at beginning of period                                        7,518,971         1,601,830
                                                                                      -----------       -----------

Cash and cash equivalents at end of period                                            $ 4,053,330         7,518,971
                                                                                      ===========       ===========

Supplemental disclosure of cash flow information:
     Interest paid                                                                    $   722,986           678,694
                                                                                      ===========       ===========

     Income taxes paid                                                                $   778,565           678,694  
     Noncash investing and financing activities:
        Acquisition of land and outdoor advertising assets in
           exchange for long-term debt                                                $ 1,275,000         1,189,000
                                                                                      ===========       ===========
        Disposition of land and buildings in exchange for
           assumption of long-term debt of subsidiary                                 $(1,090,910)           --
        Acquisition of covenant not-to-compete in exchange
           for long-term debt                                                         $   284,763            --
                                                                                      ===========       ===========

        Stock dividend issued to shareholders                                         $    --               298,733
                                                                                      ===========       ===========

        Acquisitions  of  the  net  assets  of  Pony  Panels,   General  Outdoor
           Advertising,   Mesa   Outdoor   Advertising,   and   Sweezy   Outdoor
           Advertising. Fair value of assets acquired and liabilities assumed at
           the date of the acquisitions were as follows:
               Account receivable                                                     $    73,941            --
               Prepaid expenses                                                            15,057            --
               Billboards                                                               4,814,000            --
               Machinery and equipment                                                     84,500            --
               Excess of purchase price over fair value of assets acquired                863,000            --
               Covenants not-to-compete                                                    10,000            --
               Accounts payable                                                           (15,498)           --
                                                                                      ===========       ===========

</TABLE>

See accompanying notes to consolidated financial statements.

                                       28
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                            January 31, 1998 and 1997


(1)  Summary of Significant Accounting Policies

     (a)  Description of Business

          BOWLIN  Outdoor   Advertising  &  Travel  Centers   Incorporated   and
               subsidiaries  (the  Company)  are  located  in  Albuquerque,  New
               Mexico. On August 28, 1996,  BOWLIN Outdoor  Advertising & Travel
               Centers,  Inc.  (BOATC) was  incorporated in the state of Nevada.
               BOATC's articles of incorporation  authorize 10,000,000 shares of
               preferred  stock  ($.001  par  value)  which can be issued at the
               discretion  of the Board of  Directors.  Pursuant to an agreement
               and plan of merger effective September 27, 1996,  BOWLIN'S,  Inc.
               (BI),  which  was  incorporated  in the  state of New  Mexico  on
               February  20,  1953,  was merged with and into  BOATC.  Under the
               terms  of the  agreement,  BI  shareholders  received  211 of the
               Company's  shares  for each BI share.  Accordingly,  the  Company
               issued  approximately  3.4 million shares of its common stock for
               all the outstanding  shares of BI stock and all references to the
               number of shares of common stock have been retroactively restated
               to  reflect  the   exchange  for  all  periods   presented.   The
               transaction  has  been  accounted  for in a manner  similar  to a
               pooling of interests.

          The  Company's  principal business activities include the operation of
               full-service  travel  centers and  restaurants  which offer brand
               name food and  gasoline,  and a unique  variety  of  Southwestern
               merchandise to the traveling  public in the  Southwestern  United
               States.  In addition to the travel centers,  the Company operates
               outdoor  billboard  advertising  displays  which are  situated on
               interstate highways, primarily in the Southwestern United States.

          Dragoon Water Company,  Inc.  (Dragoon),  a majority owned subsidiary,
               was  acquired  by the  Company in 1986.  On October 1, 1996,  the
               Company  sold  Dragoon  to an  unrelated  third  party.  The sale
               agreement provides for the continued  provision of adequate water
               utilities to the Company.

          The  Company  acquired  all  of  the  outstanding   stock  of  another
               subsidiary,  BMI Inc.  (BMI),  in November  1993.  BMI's business
               activities have historically been the acquisition of inventory in
               Mexico  which has been sold to the  Company  for the  purpose  of
               resale in the United  States.  BMI has a January  31 fiscal  year
               end.

          Neither  Dragoon  nor  BMI  is  considered  material  to  the  overall
               operations of the Company.

          The  Company also held a majority general partnership  interest in the
               Los Cuatros Apartments Limited Partnership (Los Cuatros) together
               with a limited  partnership  interest.  The partnership  owns and
               leases an  apartment  complex  in Las  Cruces,  New  Mexico.  The
               partnership  was  formed in January  1991 and has a  December  31
               fiscal year end. On June 16,  1997,  the Company sold Los Cuatros
               to an unrelated third party.

                                                                     (Continued)

                                       29
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


     (b)  Principles of Consolidation

          The  accompanying   consolidated   financial  statements  include  the
               accounts of the Company,  its wholly owned subsidiary BMI and its
               majority owned subsidiaries, Dragoon and Los Cuatros. Dragoon and
               Los Cuatros are  included  from  February 1, 1996  through  their
               respective  dates sold.  All material  intercompany  transactions
               have been eliminated or disclosure has been made of the effect of
               intervening  events  from  December  31 to  January  31,  if any,
               related to the  differing  fiscal  year ends for  Dragoon and Los
               Cuatros.

     (c)  Cash and Cash Equivalents

          The  Company considers all liquid investments with a maturity of three
               months or less when purchased to be cash equivalents.

     (d)  Accounts Receivable and Allowance for Doubtful Accounts

          Trade receivables are stated at face amount less the related allowance
               for doubtful accounts.

     (e)  Inventories

          Inventories consist  primarily of merchandise  and gasoline for resale
               and are  stated at the lower of cost or market  value,  with cost
               being determined using the first-in, first-out (FIFO) method.

     (f)  Property and Equipment

          Property and equipment are carried at cost.  Maintenance  and repairs,
               including  the  replacement  of  minor  items,  are  expensed  as
               incurred,  and major  additions  to property  and  equipment  are
               capitalized.  Depreciation  is  provided  by  the  Company  using
               primarily straight-line, as well as accelerated methods.

     (g)  Intangible Assets

          Goodwill,  which  represents  the excess of  purchase  price over fair
               value of net assets  acquired,  is amortized  on a  straight-line
               basis over the expected  periods to be benefited,  generally 5 to
               15  years.  The  Company  assesses  the  recoverability  of  this
               intangible  asset by determining  whether the amortization of the
               goodwill balance over its remaining life can be recovered through
               undiscounted   future   operating  cash  flows  of  the  acquired
               operation. The amount of goodwill impairment, if any, is measured
               based on projected discounted future operating cash flows using a
               discount rate reflecting the Company's average cost of funds. The
               assessment of the  recoverability of goodwill will be impacted if
               estimated future operating cash flows are not achieved.

                                                                     (Continued)

                                       30
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


          Covenants not-to-compete are amortized over the life of the respective
               covenants using the straight-line method, ranging from one to ten
               years.

          Franchise fees are amortized on a straight-line basis over the shorter
               of the life of the related  franchise  agreements  or the periods
               estimated to be  benefited,  ranging from fifteen to  twenty-five
               years.

     (h)  Sales and Cost Recognition

          Sales of merchandise  are  recognized  at the  time  of  sale  and the
               associated  costs  of the  merchandise  are  included  in cost of
               sales.  Revenues from rental of billboard space are accounted for
               as  operating  leases  with rental  assets  recorded at cost less
               accumulated  depreciation  and rental income is recorded  ratably
               over the life of the lease contract.

     (i)  Income Taxes

          Income taxes are accounted  for under the asset and liability  method.
               Deferred tax assets and liabilities are recognized for the future
               tax   consequences   attributable  to  differences   between  the
               financial  statement  carrying  amounts  of  existing  assets and
               liabilities and their respective tax bases and operating loss and
               tax credit carryforwards. Deferred tax assets and liabilities are
               measured  using  enacted  tax rates  expected to apply to taxable
               income  in the years in which  those  temporary  differences  are
               expected to be recovered  or settled.  The effect on deferred tax
               assets and  liabilities of a change in tax rates is recognized in
               income in the period that includes the enactment date.

     (j)  Year 2000

          During the year ended January 31, 1998,  the Company  developed a plan
               to deal  with the Year 2000  problem  and  began  converting  its
               computer systems to be Year 2000 compliant. The plan provides for
               the  conversion  efforts to be  completed  by the end of calendar
               1998.  The Year 2000  problem is the result of computer  programs
               being  written  using two digits  rather  than four to define the
               applicable  year.  The total cost of the project is not projected
               to be material to the financial  statements of the Company and is
               being  funded  through  operating  cash  flows.  The  Company  is
               expensing all costs  associated with these systems changes as the
               costs are incurred.






                                                                     (Continued)

                                       31
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


     (k)  Stock-based Compensation

          Effective  February  1,  1996,  the  Company  adopted  the  disclosure
               provisions  of  SFAS  No.  123,   "Accounting   for   Stock-Based
               Compensation,"  which requires pro forma disclosure of net income
               and  earnings  per share as if the SFAS No. 123 fair value method
               had been applied.  The Company  continues to apply the provisions
               of Accounting  Principles Board (APB) Opinion No. 25, "Accounting
               for Stock Issued to Employees,"  for the preparation of its basic
               consolidated financial statements.

     (l)  Impairment of Long-lived  Assets and Long-lived  Assets to Be Disposed
          Of

          The  Company  adopted the provisions of SFAS No. 121,  "Accounting for
               the Impairment of Long-lived  Assets and for Long-lived Assets to
               Be Disposed  Of," on February 1, 1996.  This  statement  requires
               that long-lived  assets and certain  identifiable  intangibles be
               reviewed   for   impairment   whenever   events  or   changes  in
               circumstances  indicate that the carrying  amount of an asset may
               not be recoverable.  Recoverability of assets to be held and used
               is measured by a comparison of the carrying amount of an asset to
               future net cash flows  expected to be generated by the asset.  If
               such assets are  considered to be impaired,  the impairment to be
               recognized is measured by the amount by which the carrying amount
               of the assets exceeds the fair value of the assets.  Assets to be
               disposed of are reported at the lower of the  carrying  amount of
               fair value less costs to sell. Adoption of this statement did not
               have a  material  impact  on the  Company's  financial  position,
               results of operations, or liquidity.

     (m)  Financial Instruments

          Statement  of   Financial   Accounting   Standards   No.  107  (SFAS),
               "Disclosures About Fair Value of Financial Instruments," requires
               the  fair  value  of  financial  instruments  be  disclosed.  The
               Company's  financial  instruments are cash and cash  equivalents,
               accounts   receivable,   notes   receivable,   accounts  payable,
               short-term  borrowings,  and long-term debt. The carrying amounts
               of  cash  and  cash  equivalents,   accounts  receivable,   notes
               receivable,  accounts payable,  accrued  liabilities,  short-term
               borrowings, and long-term debt approximate fair value.

     (n)  Use of Estimates

          Management  of  the  Company  has  made  a  number  of  estimates  and
               assumptions  relating to the reporting of assets and  liabilities
               and the  disclosure  of  contingent  assets  and  liabilities  to
               prepare  these  consolidated  financial  statements in conformity
               with generally  accepted  accounting  principles.  Actual results
               could differ from those estimates.

                                                                     (Continued)

                                       32
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


     (o)  Reclassification

          Certain  reclassifications  have been made to the prior year financial
               statements to conform to the current year presentation.

     (p)  Earnings Per Share

          In   February  1997,  SFAS No. 128,  "Earnings  per Share," was issued
               which requires the presentation of basic and diluted earnings per
               share for each period  presented  in the  consolidated  financial
               statements and retroactive adjustment of all per share amounts in
               the Company's consolidated  financial statements.  Basic earnings
               per share of common  stock is computed by dividing  net income by
               the  weighted-average  number of common shares outstanding during
               the period.  Diluted earnings per share is calculated in the same
               manner as basic earnings per share except that the denominator is
               increased to include the number of additional  common shares that
               would  have  been  outstanding,  assuming  the  exercise  of  all
               employee  stock options that would have had a dilutive  effect on
               earnings per share. A reconciliation of the number of shares used
               in the  calculation  of basic and diluted  earnings per share for
               the years ended January 31, 1998 and 1997 follows:


                                                            1998
                                           -------------------------------------
                                             Income        Shares      Per-share
                                           (numerator)  (denominator)   amount
                                           -----------  -------------   ------
          Basic EPS - income available
               to common stockholders      $ 1,069,188    4,384,848      $ .24
                                                                         =====  
          Effect of dilutive securities -
               stock options                    --            --
                                           -----------    ---------
          Diluted EPS - income available
               to common stockholders plus  
               assumed conversions         $ 1,069,188    4,384,848      $ .24
                                           ===========    =========      =====







                                                                     (Continued)

                                       33
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


                                                            1997
                                           -------------------------------------
                                             Income        Shares      Per-share
                                           (numerator)  (denominator)   amount
                                           -----------  -------------   ------
          Basic EPS - income available
               to common stockholders       $ 905,213     3,440,557      $ .26
                                                                         =====
          Effect of dilutive securities -
               stock options                    --            --

          Diluted EPS - income available
               to common stockholders plus
               assumed conversions          $ 905,213     3,440,557      $ .26
                                            =========     =========      =====


          Options to purchase  301,500  shares of common stock were  outstanding
               during the year ended  January 31, 1998 and the last month of the
               year  ended  January  31,  1997,  but  were not  included  in the
               computation  of diluted EPS because the options'  exercise  price
               was greater than the average  market price of the common  shares.
               The options,  which expire December 2006, were still  outstanding
               at the end of the year ended January 31, 1998.

     (q)  New Accounting Standards

          In   June 1997, the Financial  Accounting  Standards Board issued SFAS
               130,  "Reporting  Comprehensive  Income".  SFAS  130  establishes
               standards for reporting and display of  comprehensive  income and
               its components (revenues,  expenses, gains, and losses) in a full
               set of general purpose financial statements.  Specifically,  SFAS
               130  requires  that  all  items  that  meet  the   definition  of
               components  of  comprehensive  income be  reported in a financial
               statement for the period in which they are  recognized.  However,
               SFAS 130 does not specify when to recognize or how to measure the
               items that make up  comprehensive  income.  SFAS 130 is effective
               for fiscal  years  beginning  after  December  15, 1997 and early
               application is permitted.  Management believes the application of
               SFAS 130 will not have a material effect on the Company's  future
               consolidated financial statements.

          In   June 1997, the Financial  Accounting  Standards Board issued SFAS
               131, "Financial Reporting for Segments of a Business Enterprise."
               SFAS 131  establishes  standards for the way that public business
               enterprises report information about segments in annual financial
               statements and requires that those  enterprises  report  selected
               information about operating segments in interim financial reports
               issued  to  shareholders.   SFAS  131  supersedes  the  "industry
               segment" concept of SFAS 14 with a "management  approach" concept
               as the basis for  identifying  reportable  segments.  SFAS 131 is
               effective for fiscal years  beginning after December 15, 1997 and
               early   application   is  permitted.   Management   believes  the
               application  of SFAS 131 will not have a  material  effect on the
               Company's future consolidated financial statements.

                                                                     (Continued)

                                       34
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


(2)  Notes Receivable

     Notes receivable consist of the following at January 31:

<TABLE>
<S>                                                                                   <C>              <C>   
                                                                                        1998            1997
                                                                                        ----            ----

         Related parties:
              Stockholder, due April 1997, plus interest at 7%, unsecured             $ 10,012         10,012
              Employees, receivable in annual installments totaling
                 $10,008 plus interest at 10%, unsecured                                40,033         40,033
                                                                                      --------         ------
                               Subtotal                                                 50,045         50,045
              Less current maturities                                                   30,029         20,021
                                                                                      --------         ------

                                                                                      $ 20,016         30,024
                                                                                      ========         ======

         Other:
              Individuals, receivable in monthly installments from $350 to $694,
                 including interest ranging from 9% to
                 10%, secured by land                                                 $ 65,954         72,122
              Less current maturities                                                    6,781          6,169
                                                                                      --------         ------

                                                                                      $ 59,173         65,953
                                                                                      ========         ======
</TABLE>

(3)  Property and Equipment

     Property and equipment consist of the following at January 31:

<TABLE>
<S>                                                         <C>              <C>               <C> 
                                                              Estimated   
                                                            life (years)         1998              1997         
                                                            ------------         ----              ----         
                                                                                                            
                  Land                                            -          $  2,208,459        1,984,312                  
                  Buildings and improvements                   10 - 40          5,851,210        6,764,809    
                  Machinery and equipment                       3 - 10          5,390,278        4,813,546    
                  Autos, trucks and mobile homes                3 - 10          1,739,926        1,527,401    
                  Billboards on operating leases               15 - 20         10,835,449        4,657,590    
                  Billboards                                   15 - 20            817,819          787,714    
                                                               =======       ------------       ----------    
                               Subtotal, at cost                               26,843,141       20,535,372    
                  Less accumulated depreciation                               (11,476,469)     (10,889,102)   
                  Construction in progress                                        361,571          324,276    
                                                                             ------------       ----------    
                                                                                                           
                                    Total property and equipment             $ 15,728,243        9,970,546    
                                                                             ============       ==========    
                                                                                                 
</TABLE>

                                                                     (Continued)

                                       35
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


     During the year ended January 31, 1998,  the Company  determined the actual
          lives  for  approximately  $214,100  of  billboard  expenditures  were
          generally   longer  than  the   estimated   useful  lives   previously
          established for depreciation purposes.  Therefore,  effective February
          1, 1997,  the Company  extended  the  estimated  useful lives of those
          assets up to 7 years. The effect of this change in accounting estimate
          increased net income by $105,400 ($.02 per basic and diluted share).

     During the year ended January 31, 1997,  the Company  determined the actual
          lives for  approximately  $467,000 of equipment were generally  longer
          than  the   estimated   useful  lives   previously   established   for
          depreciation  purposes.  Therefore,  effective  February 1, 1996,  the
          Company extended the estimated useful lives of those assets, which are
          depreciated using the straight-line  method, from 5 years to 15 years.
          The effect of this change in accounting  estimate increased net income
          by  $34,200  ($.01 per basic and  diluted  share)  for the year  ended
          January 31, 1997.

     Additionally,  depreciation  of all property and equipment  acquired during
          the  year  ended  January  31,  1997  has  been  computed   using  the
          straight-line method.  Depreciation of property and equipment acquired
          in prior years was computed primarily using accelerated  methods.  The
          effect of this change  increased net income by $67,300 ($.02 per basic
          and diluted share) for the year ended January 31, 1997.

(4)  Intangible Assets

     Intangible assets, at cost, consist of the following at January 31:

                                                        1998          1997
                                                        ----          ----
           Excess of purchase price over fair 
                value of assets acquired            $   863,000        --
           Covenants not-to-compete                     294,763        --
           Franchise fees                               209,500     209,500
           Other                                         --          83,888
                                                    -----------     -------
                                                      1,367,263     293,388
           Less accumulated amortization               (166,961)   (108,255)
                                                    -----------     -------

           Intangible assets, net                   $ 1,200,302     185,133
                                                    ===========     =======




                                                                     (Continued)

                                       36
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


(5)  Billboard Rental Income

     Included in property and equipment in the  consolidated  balance  sheets of
          the Company are  billboards on operating  leases.  The  billboards are
          owned by the  Company and the  advertising  space is leased to others.
          See note 12  regarding  land  leased  from  others by the  Company for
          billboard use.

     Minimum future rental income on noncancelable billboard leases in effect as
          of January 31, 1998 are as follows:

               Year ending January 31
               ----------------------
                        1999                    $ 5,531,624
                        2000                      2,209,834
                        2001                        201,294
                        2002                          3,900
                                                -----------
                                    Total       $ 7,946,652
                                                ===========

(6)  Short-term Borrowing, Bank

     In   May 1997, the Company entered into an available billboard construction
          bank line of credit arrangement totaling $1,000,000,  which matures in
          May 1998. Interest is payable monthly at the prime rate plus 1 percent
          (8.50 percent at January 31, 1998). The Company had drawn $745,000 and
          none as of January 31, 1998 and 1997,  respectively.  Borrowings under
          this line of credit are  limited to six times the  trailing  cash flow
          from  existing  billboards  not  financed  by this  facility  less the
          balance  outstanding  on another note to the bank. The line is secured
          by billboards and inventory. Under this line of credit, the Company is
          required to maintain specific ratios. At January 31, 1998, the Company
          was in compliance with all covenants.

     In   November 1997, the Company  entered into a financing  agreement with a
          bank that permits the Company to borrow for a period of two years,  up
          to $10.5 million at terms established upon execution of the agreement.
          As of January 31, 1998,  there were no amounts drawn on this financing
          agreement.  The credit agreement is comprised of three different lines
          as follows:

          (1)  The  "facility  line"  of  $8  million  is  to be  used  to  fund
               acquisition or  construction of new travel centers and to finance
               the purchase of new vehicles,  fuel  dispensing and other related
               equipment,  computer  systems and other  furniture,  fixtures and
               equipment.  The  Company  must pay a fee of 35 basis  points (.35
               percent)  of  the  maximum  note  amount  for   construction   or
               acquisitions.  The Company must pay a fee of 25 basis points (.25
               percent) of the maximum note amount for  purchases of  equipment,
               computers or furniture, fixtures and equipment.

                                                                     (Continued)

                                       37
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


          (2)  The "leasing line" of $2 million is to be used to fund individual
               leases by the bank to the Company.  The Company must pay a fee of
               one-half  percent (.005  percent) of the net interest  balance on
               each lease.

          (3)  The "working  capital line" of $500,000 is to be used to fund the
               Company's  short-term working capital needs. The Company must pay
               a fee of 25 basis  points  (.25  percent)  of the  $500,000  face
               amount of the working capital note.

(7)  Long-term Debt

     Long-term debt is as follows:

<TABLE>
<S>                                                                                   <C>                <C>
                                                                                          1998              1997
                                                                                          ----              ----

          Due  bank, maturity April 2007, variable interest at index rate (8.50%                                      
               at January 31, 1997), monthly installments of $31,164, secured by                                      
               mortgage and deed of trust                                             $ 2,363,929            --             
          Due  bank,  maturity January 2006,  variable  interest at base lending                                      
               rate  (8.25%  at  January  31,  1998),  monthly  installments  of                                      
               $21,724, secured by mortgage and deed of trust                           1,463,808        1,588,087    
          Due  bank,  maturity  May 2005,  variable  interest at bank index rate                                      
               (8.50% at January 31,  1998),  monthly  installments  of $15,836,                                      
               secured by billboards                                                    1,000,000            --      
          Due  bank,  maturity February 2003,  variable interest at base lending                                      
               rate  (8.25%  at  January  31,  1998),  monthly  installments  of                                      
               $15,755, secured by billboards                                             784,327          902,136    
          Due  bank,  maturity  January  2000,  variable  interest at index rate                                      
               (8.50% at  January  31,  1998),  monthly  installments  of $6,883                                      
               secured by buildings and equipment                                         717,876          737,968    
          Due  bank, maturity January 2000, variable interest at index rate plus                                      
               .5 (9.00% at January 31, 1998),  monthly  installments of $8,614,                                      
               secured by buildings and equipment                                         810,571          843,049    
          Due  banks and other financing companies,  with maturity dates ranging                                      
               from 1998 to 2002. Most bear interest at adjustable rates ranging                                      
               from 8.25% to 9.75%,  with certain  fixed rate notes ranging from                                      
               8.00% to 10.25%.  Monthly payments totaling  $14,995.  Secured by                                      
               land, buildings, equipment, billboards, and inventories                    592,156        1,813,699    
                                                                                      ===========        =========    
                                                                                     

</TABLE>

                                                                     (Continued)

                                       38
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

<TABLE>
<S>                                                                                   <C>                <C>    
                                                                                          1998              1997
                                                                                          ----              ----
          Due  individuals,   various  payment  schedules  with  maturity  dates                                  
               ranging from 1998 to 2004,  including interest ranging from 8.00%                                  
               to 12.00%.  Monthly payments totaling  $12,792.  Secured by land,                                  
               buildings, and billboards                                              $   925,485          809,653
          Due  individuals,  maturity dates in 2008,  including imputed interest                                  
               at 8.50%, annual payments totaling $40,000; unsecured                      244,763            --      
                                                                                      -----------        ---------      
                                                                                        8,902,915        6,694,592
          Less current maturities                                                         779,179          576,186
                                                                                      -----------        ---------
                                                                                                                  
                                                                                      $ 8,123,736        6,118,406
                                                                                      ===========        =========

</TABLE>
                                                                                
     Future maturities of long-term debt are as follows:

               1999                            $   779,179                      
               2000                                983,819                      
               2001                              2,292,284                      
               2002                                852,554                      
               2003                                919,527                      
               Thereafter                        3,075,552                      
                                               -----------                      
                              Total            $ 8,902,915                      
                                               ===========                      
                                              
     On   February  5, 1996,  the  Company  entered  into a  consolidating  note
          agreement  with  a  financial  institution.  The  new  note  agreement
          consolidated  approximately  $1,700,000 of the Company's existing debt
          and provided  $1,000,000 of new debt. This debt was used primarily for
          the  expansion of the Company's  outdoor  advertising  operations  and
          improvements to existing travel centers.

(8)  Stockholders' Equity

     In   December  1996, the Company  completed an initial  public  offering of
          1,100,000 shares of common stock at $8.00 per share. Proceeds from the
          offering,  net of  underwriter  discounts  and  commissions  and other
          offering  expenses,  totaled  approximately  $7,300,000.  The  Company
          utilized a portion of the net proceeds of the initial public  offering
          to repay certain  indebtedness of the Company and plans to utilize the
          remaining  balance  for  general  corporate  purposes,  including  the
          acquisition or  development  of additional  travel centers and outdoor
          advertising operations.





                                                                     (Continued)

                                       39
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


     Concurrent with the closing of the  initial  public  offering,  the Company
          issued a  five-year  nonredeemable  option  to  purchase  up to 93,500
          shares of common  stock at an  exercise  price equal to 120 percent of
          the offering price, or $9.60 per share to the underwriter.  The option
          became  exercisable  in December  1997.  As of January 31,  1998,  the
          option has not been exercised.

     On   November 12,  1996,  the Company  entered  into an  agreement  with an
          outside  consultant  whereby 98,537 shares of outstanding common stock
          were  returned to the  Company  without  consideration,  and the stock
          certificates were canceled.  The shares had been issued in April 1996,
          in  exchange  for  services  rendered in  connection  with the initial
          public offering.

(9)  Stock Option Plan

     On   September  27,  1996,  the Company  adopted the 1996 Stock Option Plan
          (the Plan)  pursuant to which the  Company's  board of  directors  may
          grant stock options to officers and key employees. The Plan authorizes
          grants of options to purchase shares of authorized but unissued common
          stock up to an amount  equal to ten percent of issued and  outstanding
          shares of common stock (438,485 shares as of January 31, 1998).  Stock
          options are granted  with an exercise  price equal to the stock's fair
          market  value at the date of grant.  All stock  options  expire in ten
          years and vest,  and become fully  exercisable  as  determined  by the
          board at time of grant.

     On   September  27, 1996,  the board of  directors  of the Company  granted
          options to purchase an aggregate of 338,000  shares of common stock to
          62  employees  and  officers,  and  6,000  shares  to each of its four
          nonemployee  directors,  effective  as of the  closing of the  initial
          public  offering.  All of the options granted provide for a three-year
          vesting  period and have an exercise  price equal to or at 110 percent
          of the  initial  public  offering  price  of $8.00  (weighted  average
          exercise price of $8.22).

     At   January 31, 1998, there were 136,985  additional  shares available for
          grant  under the Plan.  The per share  weighted-average  fair value of
          stock options granted during 1997 was $3.03 on the date of grant using
          the   Black   Scholes   option-pricing   model   with  the   following
          weighted-average  assumptions:  expected  dividend  yield 0.0 percent,
          expected  volatility  of 30 percent,  risk-free  interest rate of 6.15
          percent, and an expected life of 5 years.






                                                                     (Continued)

                                       40
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


     The  Company  applies APB Opinion  No. 25 in  accounting  for its Plan and,
          accordingly,  no  compensation  cost has been recognized for its stock
          options in the  consolidated  financial  statements.  Had the  Company
          determined compensation cost based on the fair value at the grant date
          for its stock  options  under SFAS No. 123, the  Company's  net income
          would have been reduced to the pro forma amounts  indicated  below for
          the years ended January 31, 1998 and 1997:

                                                           1998           1997
                                                           ----           ----

               Net income             As reported      $ 1,069,188      905,209
                                      Pro forma            764,626      707,557
                                                       ===========      =======
                                                 
               Earnings per share     As reported              .24          .26
                                                       ===========      =======
                                      Pro forma                .17          .21
                                                       ===========      =======

     Pro  forma net  income  reflects  only  options  granted  in the year ended
          January 31, 1997.

     During the year ended January 31, 1998, no options were granted,  exercised
          or expired,  however,  60,500 options were  forfeited.  Thus,  301,500
          options are outstanding as of January 31, 1998.  During the year ended
          January 31, 1997, no options were exercised, forfeited or expired.

     At   January 31, 1998,  the range of exercise  prices and  weighted-average
          remaining  contractual  life of outstanding  options was $8.00 - $8.80
          and 8.88 years, respectively.

     At   January 31, 1998, 8,000 of the options granted are exercisable.

(10) Income Taxes

     Income taxes from  continuing  operations  consist of the following for the
          years ended January 31:

                                       Current      Deferred        Total
                                       -------      --------        -----
     Years ended January 31, 1998:  
          U.S. federal                $ 452,800      112,200       565,000
          State and local                90,700       22,500       113,200
                                      ---------      -------       -------
                                    
                                      $ 543,500      134,700       678,200
                                      =========      =======       =======
     Years ended January 31, 1997:  
          U.S. federal                $ 472,072       35,500       507,572
          State and local                88,800        7,100        95,900
                                      ---------      -------       -------
                                    
                                      $ 560,872       42,600       603,472
                                      =========      =======       =======
                                  
                                                                     (Continued)

                                       41
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


     Income tax expense  differed from the amounts computed by applying the U.S.
          federal income tax rate of 34 percent to pretax income from continuing
          operations as a result of the following factors:

                                                       January 31,              
                                               --------------------------       
                                                  1998              1997        
                                                  ----              ----        
          Computed "expected" tax              $ 594,112          512,951       
          State income taxes, net of                                           
               federal tax benefit                74,682           64,446       
          Other                                    9,406           26,075       
                                               ---------          -------       
                                                                               
                               Total           $ 678,200          603,472       
                                               =========          =======       
                                                    
     The  tax effects of  temporary  differences  that give rise to  significant
          portions of the deferred tax assets and deferred tax  liabilities  are
          as follows at January 31:

                                                         1998           1997    
                                                         ----           ----    
          Deferred tax assets:                                                  
             Compensated absences, principally 
                due to accrual for financial 
                reporting purposes                    $   24,824       17,258   
              Other                                       11,700       12,000   
                                                      ----------       ------   
                   Total gross deferred tax assets        36,524       29,258   
          Less valuation allowance                          -            -      
                   Net deferred tax assets                36,524       29,258   
                                                      ----------       ------   
                                                                                
          Deferred tax liabilities:                                             
             Property and equipment, principally 
                due to differences in depreciation      (211,824)     (67,712)  
             Other                                        (2,000)      (4,146)  
                                                      ----------       ------   
                   Total gross deferred liabilities     (213,824)     (71,858)  
                                                      ----------       ------   
                                                                                
                   Net deferred tax liability         $ (177,300)     (42,600)  
                                                      ==========       ======   
         
     There was no valuation allowance  for deferred tax assets as of February 1,
          1997 or 1996.  Based upon the level of historical  taxable  income and
          projections  for future  taxable  income over the periods in which the
          deferred  tax assets are  deductible,  management  believes it is more
          likely  than  not the  Company  will  realize  the  benefits  of these
          deductible differences.





                                                                     (Continued)

                                       42
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


(11) Profit Sharing Plan

     The  Company maintains a qualified defined contribution profit sharing plan
          that covers substantially all employees. The plan year end is December
          31. The elected  salary  reduction  is subject to limits as defined by
          the  Internal   Revenue   Code.   The  Company   provides  a  matching
          contribution and additional discretionary  contributions as determined
          by resolution of the board of directors. Legal and accounting expenses
          related to the plan are absorbed by the Company and were approximately
          $12,965  and  $15,745  for  fiscal  1998 and 1997,  respectively.  The
          Company's  contributions  to the profit  sharing  plan were $56,974 in
          fiscal 1998 and $49,520 in fiscal 1997.

(12) Commitments and Contingencies

     The  Company  leases  land at several of its  retail  operating  locations.
          Included in general and  administrative  expenses in the  accompanying
          consolidated  statements  of income is rental  expense  for these land
          leases of $306,283 and  $286,752 for the years ended  January 31, 1998
          and 1997, respectively.

     The  leasing  agreements for the various locations include 5-35 year leases
          with remaining lives on those leases ranging from  approximately  5-25
          years  at  January  31,  1998.  Renewal  options  vary,  with the most
          extensive  including three 5-year renewal options.  Contingent rentals
          are  generally  based on  percentages  of  specified  gross  receipts.
          Several  leases  include terms for  computation of rent expense as the
          greater of a percent of gross  receipts  or a percent of land value as
          defined by the lease.  In most cases,  the Company is responsible  for
          certain repairs and maintenance, insurance, property taxes or property
          tax increases, and utilities.

     Future minimum rental payments under these leases are as follows:

                1999                          $ 129,175                  
                2000                            110,600                  
                2001                             81,535                  
                2002                             60,600                  
                2003                             60,600                  
                Thereafter                      446,633                  
                                              ---------                  
                                                       
                              Total           $ 889,143                  
                                              =========                  
                                          




                                                                     (Continued)

                                       43
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


     The  Company has entered into various land  operating  leases for billboard
          space.  These leases  require  minimum  annual  rentals and range from
          terms of 1-5 years.  Rent  expense was  $753,926  and $519,314 for the
          years ended  January 31, 1998 and 1997,  respectively.  At January 31,
          1998 and 1997,  the Company had prepaid on these leases in the amounts
          of $347,612 and $290,882, respectively. See note 4 regarding billboard
          advertising space leased to others by the Company.

     Minimum future rental payments under these leases are as follows:

        Year ending January 31
        ----------------------
                1999                          $   836,136                       
                2000                              299,810                       
                2001                              220,854                       
                2002                              188,962                       
                2003                              157,268                       
                Thereafter                        237,186                       
                                              -----------                       
                                                            
                                              $ 1,940,216
                                              ===========
                          

(13) Related Party Transactions (See also notes 2 and 7)

     The  following interest transactions took place with related parties during
          the periods presented as follows:

                                                 1998          1997
                                                 ----          ----
               Interest income                 $  4,704        2,027
               Interest expense                   --          33,995
                                               ========       ======

     An individual who is  an officer  and stockholder in the Company is also an
          officer and  stockholder  in Stuckey's  Corporation  (Stuckey's).  The
          Company paid Stuckey's franchise fees for four stores in the amount of
          $35,690 and  $33,468  for  January  31,  1998 and 1997,  respectively.
          Franchise fees are included in general and administrative  expenses in
          the accompanying consolidated statements of income.







                                                                     (Continued)

                                       44
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


     During the year ended  January 31, 1998,  wholesale  gasoline  distribution
          sales  totaling  $916,733  were sold to a Stuckey's  franchise  travel
          center not owned by the  Company.  The  travel  center is owned by the
          daughter of an individual who is a stockholder in the Company.

(14) Industry Segment Information

     The  Company's major operations are in the retail sale of merchandise, food
          and gasoline to the traveling  public (travel center  operations)  and
          outdoor   advertising   operations.    Revenue,    operating   income,
          identifiable  assets,  depreciation  and  amortization,   and  capital
          expenditures  pertaining  to  the  industries  in  which  the  Company
          operates are presented below (in thousands of dollars) for each of the
          fiscal years ended January 31.

<TABLE>
<S>                                                       <C>          <C>           <C>        <C>         <C>  
                                                                                                Depre-
                                                                                                ciation
                                                                                     Identi-      and       Capital
                                                             Net       Operating     fiable     amorti-     expend-
                                                            sales       income       assets     zation      itures
                                                            -----       ------       ------     ------      ------
           1998:
                Travel center operations                  $ 22,303       1,586        9,525        369       1,760
                Outdoor advertising operations               4,856         926       11,023        660       5,227
                Corporate and other                          --           (512)       5,311        121          96
                                                          --------       -----       ------      -----       -----

                                                          $ 27,159       2,000       25,859      1,150       7,083
                                                          ========       =====       ======      =====       =====

           1997:
                Travel center operations                  $ 21,389       1,510        8,277        363       1,015
                Outdoor advertising operations               3,459         703        3,966        282         987
                Corporate and other                          --           (221)       9,600        135         147
                                                          --------       -----       ------      -----       -----

                                                          $ 24,848       1,992       21,843        780       2,149
                                                          ========       =====       ======      =====       =====

</TABLE>

     During 1998,  $916,733  and  $33,606  of net  sales and  operating  income,
          respectively,  related to wholesale  gasoline  distribution  sales are
          included in travel center operations.








                                                                     (Continued)

                                       45
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


(15) Acquisitions

     On April 1, 1997, the Company  acquired all of the  tangible and intangible
          assets and certain liabilities of the outdoor advertising  division of
          The McCarty Company (McCarty) known as Pony Panels for $4.2 million. A
          member of the Company's Board of Directors is the majority shareholder
          of the  McCarty  Company.  The  Company  paid  $1.7  million  from the
          proceeds of the initial public offering and financed $2.5 million with
          bank debt.  Pony Panels owns and  operates  approximately  750 8-sheet
          poster panels in the  Albuquerque,  New Mexico metro area. The Company
          also entered into a non-compete  agreement with the former  principals
          of  McCarty  for  a  period  of  five  years  from  the  date  of  the
          acquisition.   The  acquisition  was  accounted  for  as  a  purchase.
          Accordingly,  the results of Pony Panels operations have been combined
          with the Company's since the date of  acquisition.  The purchase price
          was  allocated to assets  acquired and  liabilities  assumed  based on
          their estimated fair values. The excess of the purchase price over the
          net assets acquired (goodwill) of $863,000 recorded in connection with
          the purchase will be amortized over the estimated benefit period of 15
          years.

     On April 26, 1997, the Company  purchased the  outdoor  advertising  assets
          of General  Outdoor  Advertising  (General) for $240,000 in cash.  The
          cash was  provided by the  proceeds of the  Company's  initial  public
          offering in December 1996. General owns and operates  approximately 56
          painted  bulletin  faces in the  Alamogordo,  New Mexico  market.  The
          acquisition was accounted for as a purchase.  Accordingly, the results
          of General's  operations  have been combined with the Company's  since
          the date of  acquisition.  The  purchase  price was  allocated  to the
          assets  acquired based on their  estimated fair values and no goodwill
          was recorded in connection with the purchase.

     On April 29, 1997, the Company  purchased the  outdoor  advertising  assets
          of Mesa  Outdoor  Advertising  (Mesa) for  $150,000 in cash and a note
          payable to the former  owner in the amount of  $275,000.  The cash was
          provided  from proceeds of the Company's  initial  public  offering in
          December 1996. Mesa owns and operates approximately 57 30-sheet poster
          faces in the  Farmington,  New  Mexico  market.  The  acquisition  was
          accounted  for as a  purchase.  Accordingly,  the  results  of  Mesa's
          operations  have been combined  with the  Company's  since the date of
          acquisition.  The purchase price was allocated to the assets  acquired
          based on their  estimated  fair values and no goodwill was recorded in
          connection with the purchase.

     On December  9,  1997,  the  Company  acquired  certain  assets  of  Sweezy
          Outdoor  Advertising  (Sweezy) for  $1,245,000,  of which $945,000 was
          paid at  closing  and  $300,000  was  placed  in escrow  payable  upon
          transfer of title on the outdoor  billboards  acquired to the Company.
          As of January 31, 1998, $100,000 of the escrow balance was outstanding
          and is included in accounts payable in the  accompanying  consolidated

                                                                     (Continued)

                                       46
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


          balance  sheet.  The Company  paid  $245,000  from the proceeds of the
          initial public offering and financed $1 million with bank debt. Sweezy
          owns and  operates  approximately  68  painted  bulletin  faces in the
          Killeen/Fort  Hood area of Texas. The acquisition was accounted for as
          a purchase.  Accordingly, the results of Sweezy's operations have been
          combined  with  the  Company's  since  the  date of  acquisition.  The
          purchase  price was  allocated to the assets  acquired  based on their
          estimated fair values and no goodwill was recorded in connection  with
          the purchase.

     In conjunction  with  the  Sweezy  acquisition,  the Company  entered  into
          non-compete  agreements with the former  principals of Sweezy.  One of
          the  principals  entered into an agreement  for a period of ten years,
          payable by the Company in ten annual installments of $40,000 beginning
          in January 1998.  The note payable,  discounted  for imputed  interest
          costs  computed at 8.5 percent,  is included in long-term  debt in the
          accompanying  consolidated  balance sheet.  Two  principals  were paid
          $5,000  each for a  non-compete  period  of one year  from the date of
          acquisition.

     The  following  unaudited  pro  forma  information  presents  the  combined
          results of  operations  for the years ended January 31, 1998 and 1997,
          as though the  acquisitions  of Pony Panels and Sweezy had occurred on
          February 1, 1996. The unaudited pro forma results do not purport to be
          indicative of what would have occurred had the  acquisitions  actually
          been made as of such date or of results which may occur in the future.


                                                          Year ended January 31
                                                          ---------------------
                                                            1998         1997
                                                            ----         ----
               Dollars in thousands, except per       
                  share amounts                                 (unaudited)
                                                   
               Net sales                                  $ 28,090      26,558
                                                          ========      ======
                                                   
               Net income                                  $ 1,009         869
                                                           =======         ===
                                                   
               Earnings per basic and diluted share          $ .23         .25
                                                             =====         ===

               
     Adjustments  made  in  arriving  at the  pro  forma  unaudited  results  of
          operations  include  increased  interest expense on acquisition  debt,
          depreciation  on fixed assets  acquired,  amortization of goodwill and
          related tax adjustments.

     The  effects of the  Company's  acquisitions  of the assets of General  and
          Mesa are not material to the  combined  results of  operations  of the
          Company for the years ended January 31, 1998 and 1997.



                                                                     (Continued)

                                       47
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


(16) Subsequent Events

     On February 1, 1998, the Company  acquired the  outdoor  advertising assets
          of Big-Tex Outdoor Advertising  (Big-Tex) for $1,559,000.  The Company
          paid  $559,000  from the proceeds of the initial  public  offering and
          financed  $1,000,000  with bank debt.  Big-Tex  owns and  operates 285
          poster and painted bulletin faces in the Brownwood,  Texas metro area.
          The Company also entered into a non-compete  agreement with the former
          principals  of Big-Tex  for a period of ten years from the date of the
          acquisition,  payable in ten annual  installments of $10,000 beginning
          in February 1999.

     The  acquisition  will be  accounted  for as a  purchase  in the year ended
          January 31,  1999.  The  purchase  price will be  allocated  to assets
          acquired  based on their  estimated  fair  values.  The  excess of the
          purchase price over the net assets acquired, if any, will be amortized
          over the estimated  period of benefit.  The purchase price  allocation
          will be  determined  during  the year  ending  January  31,  1999 when
          appraisals and other information become available.

     On March 3, 1998, the Company  acquired the  outdoor  advertising assets of
          Norwood  Outdoor,  Inc.  (Norwood)  for  $1,000,000.  The Company paid
          $350,000 from the proceeds of the initial public offering and financed
          $650,000 with bank debt.  Norwood owns and operates  approximately 140
          poster and painted bulletin faces in the Brady,  Texas metro area. The
          acquisition  will be  accounted  for as a purchase  in the year ending
          January 31,  1999.  The  purchase  price will be  allocated  to assets
          acquired  based on their  estimated  fair  values.  The  excess of the
          purchase price over the net assets acquired, if any, will be amortized
          over the estimated  period of benefit.  The purchase price  allocation
          will be  determined  during  the year  ending  January  31,  1999 when
          appraisals and other information become available.



                                       48
<PAGE>



ITEM 8.   CHANGES IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

     None.

                                    PART III


ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     Information  concerning  the  Company's  current  Directors  and  executive
officers is set forth below.  A summary of the background and experience of each
of these individuals is set forth after the table.


Name                          Age    Position                       
----                          ---    --------                       
Michael L. Bowlin (1)(2)      55     Chairman of the Board, President and Chief 
                                     Executive Officer                          
C. Christopher Bess           51     Executive Vice President, Chief Operating  
                                     Officer and Director                       
William J. McCabe             47     Senior Vice President -Management          
                                     Information Systems                        
Anita J. Vachon               48     Senior Vice President - Travel Center      
                                     Operations                                 
Nina J. Pratz                 46     Senior Vice President, Chief Financial     
                                     Officer, Treasurer, Secretary, and Director
Michael Mons                  43     Senior Vice President-Bowlin Advertising   
                                     Services                                   
Robert L. Beckett (1)         72     Director                                   
Harold Van Tongeren (2)       74     Director                                   
Brian McCarty (2)             61     Director                                   
James A. Clark (1)            67     Director                                   
                              

(1) Member of Audit Committee
(2) Member of Compensation Committee

     Michael L. Bowlin. Mr. Bowlin has served as Chairman of the board and Chief
Executive  Officer of BOWLIN since 1991 and as President  since 1983. Mr. Bowlin
has been employed by BOWLIN since 1968. Mr. Bowlin's  father,  Claude M. Bowlin,
Sr.,  founded the  business in 1912.  Michael L.  Bowlin is the  immediate  past
Chairman  of the  Board for the OAAA and  serves  on the Board for the  American
Council of Highway Advertisers. Mr. Bowlin also serves as President and a member
of the Board of Directors of Stuckey's Incorporated,  a restaurant and specialty
store  franchisor  (including  specialty stores located at four of the Company's
travel centers); however, substantially all of Mr. Bowlin's professional time is
devoted to his duties at the Company.  Mr.  Bowlin holds a Bachelor's  degree in
Business Administration from Arizona State University.

                                       49
<PAGE>

     C.  Christopher  Bess. Mr. Bess has served as the Company's  Executive Vice
President  and Chief  Operating  Officer  since  1983.  Mr. Bess has served as a
member of the Company's Board of Directors since 1974.  During his 24 years with
the Company,  Mr. Bess has also served in such  capacities as internal  auditor,
Merchandiser for Travel Center Operations,  Travel Center Operations Manager and
as Development  Manager.  Mr. Bess is a certified public  accountant and holds a
Bachelor's degree in Business Administration from the University of New Mexico.

     William J.  McCabe.  Mr.  McCabe has served as the  Company's  Senior  Vice
President -Management  Information Systems since 1997 and as Assistant Secretary
since 1996.  Mr. McCabe  served as a member of the Board of Directors  from 1983
until August 1996.  Prior to 1997,  Mr. McCabe served as Senior Vice President -
Advertising  Services from 1993, Vice President of Outdoor  Operations from 1988
and as Vice  President  of  Accounting  from 1984 to 1987.  Mr.  McCabe has been
employed  by  BOWLIN  since  1976  in  such  additional  capacities  as a  Staff
accountant  and  Controller.  Mr.  McCabe holds a Bachelor's  degree in Business
Administration from New Mexico State University.

     Anita J.  Vachon.  Ms.  Vachon  has  served as the  Company's  Senior  Vice
President - Travel Center Operations since 1993 and was a member of the Board of
Directors from 1991 until August 1996.  Since 1982, Ms. Vachon has been employed
by the Company in such  positions  as staff  accountant,  Purchasing  Department
Manager and Vice  President of  Merchandising.  Ms. Vachon holds an  Associate's
degree in Accounting.

     Nina J. Pratz.  Ms. Pratz has served as the Company's Senior Vice President
- Chief Financial Officer since 1997 and  Treasurer/Secretary  since 1977. Prior
to 1997,  Ms.  Pratz  served as Chief  Administrative  Officer  since  1988.  In
addition,  Ms. Pratz has served as a member of the Company's  Board of Directors
since 1976.  She has been  employed by the Company for over 20 years.  Ms. Pratz
holds a  Bachelor's  degree in  Business  Administration  from New Mexico  State
University.

     Michael Mons.  Mr. Mons has served as the company's  Senior Vice  President
for  Advertising  Services since  December of 1997.  Prior to December 1997, Mr.
Mons served as Sales Manager for the outdoor  division for three years. Mr. Mons
has over eleven years  experience  in the all facets of the outdoor  advertising
industry  with  emphasis in directing  the start up and growth phases of outdoor
plants. Mr. Mons holds a Bachelor's degree in Business  Administration  from the
University of Arizona.

     Harold Van  Tongeren.  Mr. Van Tongeren has served as a member of the Board
of Directors of BOWLIN since 1988.  Mr. Van Tongeren has also served as Chairman
of the Board of Directors and President of Herk and Associates, a representative
of domestic  gift and jewelry  wholesalers,  since 1952.  In  addition,  Mr. Van
Tongeren serves as a key contact to the Company regarding potential  acquisition
opportunities in the travel and tourism industry. Mr. Van Tongeren attended Hope
College and Dennison University.

     Robert  L.  Beckett.  Mr.  Beckett  has  served as a member of the Board of
Directors  of BOWLIN  since  1974.  Mr.  Beckett has also been  President  and a
Director of The Cooper  Agency,  Inc., a consumer loan  company,  since 1964. In
addition  to serving  as a Director  and  executive  officer of various  private
entities,  Mr.  Beckett  formerly  served  as Mayor of the City of  Deming,  New
Mexico.

     Brian  McCarty.  Mr. McCarty became a Director upon the closing of the IPO.
Mr.  McCarty has served since 1994 as Chairman of the Board and Chief  executive
Officer of Business Location Research,  a company specializing in the design and
development of advanced geographic  information systems.  From 1990 to 1993, Mr.
McCarty  served as  President  and Chief  Executive  Officer of Naegele  Outdoor
Advertising ("Naegele").  Prior to his employment at Naegele, Mr. McCarty served
as President of Ackerley  Communications,  a publicly  traded company engaged in

                                       50
<PAGE>

the  operation  of  outdoor  advertising,   radio  and  television  broadcasting
properties.  Mr.  McCarty  holds a  Bachelor's  degree in  Marketing  from Lewis
University.

     James A. Clark. Mr. Clark became a Director of the Company upon the closing
of the IPO. Mr. Clark is currently retired from full-time employment.  Mr. Clark
served as President  and Chief  Executive  Officer of First  Interstate  Bank of
Albuquerque  from 1985 to 1991.  Prior to 1991,  Mr.  Clark  served  in  several
capacities at various banking and financial services entities for over 25 years.
Mr. Clark holds a Certificate of Graduation from the Stonier  Graduate School of
Banking at Rutgers University.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers  and  directors  and  persons  who own  more  than ten  percent  of the
Company's  Common Stock to file  reports of  ownership  and changes in ownership
with the Securities  and Exchange  Commission.  Officers,  directors and greater
than ten-percent  owners are required by the Securities and Exchange  Commission
regulations  to furnish the Company with copies of all Section  16(a) forms they
file.

     Based solely on the Company's  review of the copies of such forms  received
by it, the Company believes that, during the fiscal year ended January 31, 1998,
all filing requirements  applicable to its officers,  directors and greater than
ten-percent owners were complied with.


ITEM 10.  EXECUTIVE COMPENSATION


     The following table summarizes all compensation  paid during the last three
fiscal  years to the  Company's  Chief  Executive  Officer.  No other  executive
officer  received  total  annual  salary  and bonus in excess  of  $100,000  for
services rendered to the Company during fiscal 1998.


<TABLE>
<S>                         <C>   <C>       <C>     <C>         <C>         <C>          <C>   <C>
                                                                   Long Term Compensation
                                                                -----------------------------
                                       Annual Compensation        Awards         Payouts
                                  ----------------------------  ----------  -----------------
                                                       Other                Securities   LTIP
                                  Salary               Annual   Restricted  Underlying   Pay-  All Other
   Name and Principal               ($)     Bonus    Compensa-     Stock     Options/    outs  Compensa-
        Position            Year  (1),(2)   (2)($)    tion ($)    Awards    SARs (2)(#)  ($)   tion ($)
        --------            ----  -------   ------   ---------    ------    -----------  ----  ---------
Michael L. Bowlin           1998  136,000     --    14,535 (6)      --           --       --       --
  Chairman of the Board     1997   93,000     --    16,133 (5)      --         50,000     --       --
  President & CEO           1996   78,000  150,050  14,452 (4)      --           --       --       --

</TABLE>

(1)  Includes  amounts deferred at the election of the officer to be contributed
     to his 401(k) Profit Sharing Plan account

(2)  The Company  decided not to pay  discretionary  cash bonuses in fiscal 1997
     and to grant  stock  options to its  executive  offer in lieu  thereof.  In
     September  27, 1997 Mr.  Bowlin was  granted an option to  purchase  50,000
     shares of Common Stock under the 1996 Stock Option Plan.

                                       51
<PAGE>

(3)  On September 27, 1996, the Company entered into an employment contract with
     Mr.  Bowlin that  provides for an annual base salary of $195,000  effective
     February 1, 1997. See "Employment Contracts".

(4)  Includes (I) $5,487 of the Company's  discretionary  matching contributions
     allocated to Mr. Bowlin's  401(k) Profit Sharing Plan account,  (ii) $7,723
     for premiums on term life, auto and disability  insurance policies of which
     Mr..  Bowlin or his wife is the owner and (iii) $1,242 for Mr. Bowlin's use
     of a vehicle owned by the Company.


(5)  Includes (I) $4,750 of the Company's  discretionary  matching contributions
     allocated to Mr. Bowlin's 401(k) Profit Sharing Plan account,  (ii) $10,155
     for premiums on term life, auto and disability  insurance policies of which
     Mr..  Bowlin or his wife is the owner and (iii) $1,228 for Mr. Bowlin's use
     of a vehicle owned by the Company.

(6)  Includes (I) $2,901 of the Company's  discretionary  matching contributions
     allocated to Mr. Bowlin's 401(k) Profit Sharing Plan account,  (ii) $10,426
     for premiums on term life, auto and disability  insurance policies of which
     Mr..  Bowlin or his wife is the owner and (iii) $1,208 for Mr. Bowlin's use
     of a vehicle owned by the Company.

COMPENSATION OF DIRECTORS

     Directors  who are not  employees  of the Company  are  entitled to receive
$1,000 per each meeting of the Board of  Directors,  or any  committee  thereof,
attended plus reimbursement of reasonable expenses.  Non-employee Directors also
receive an option to purchase  6,000 shares of Common Stock upon their  election
to the Board of  Directors  and an annual  grant of 2,000 shares of Common Stock
during each year of service,  all under the  Company's  1996 Stock  Option Plan.
Directors  who are  employees  of the  Company  do not  receive  any  additional
compensation for such services.

EMPLOYMENT CONTRACTS

     On August 23, 1996, the Board of Directors approved  employment  agreements
with  Michael L. Bowlin for  services as  Chairman of the Board,  President  and
Chief Executive  Officer and with C.  Christopher Bess for services as Executive
Vice  president  and  Chief  Operating  Officer  (Messrs.  Bowlin  and  Bess are
sometimes  collectively referred to herein as the "Employee").  These agreements
provide for base annual salaries,  effective as of February 1, 1997, for Messrs.
Bowlin  and Bess of  $195,000  and  $145,000,  respectively,  subject  to annual
increases at the discretion of the Board of Directors, but at least equal to the
corresponding increase in the Consumer Price Index. In addition, the Employee is
entitled  to receive  bonuses at the  discretion  of the Board of  Directors  in
accordance with the Company's bonus plans in effect from time to time.

     Additional  details and other  information  regarding  the  agreements  are
discussed in documents previously filed with the commission and are incorporated
herein by reference.

     For the fiscal year ended January 31, 1998, in the interest of  maintaining
the  Company's  profitability  and  capital,  Messrs.  Bowlin and Bess agreed to
accept base annual salaries of $136,000 and $90,000, respectively.

                                       52
<PAGE>

PROFIT-SHARING 401(k) PLAN

     Under the Company's  401(k) plan,  effective  July 1, 1990, as amended (the
"401(k)  Plan"),   eligible  employees  may  direct  that  a  portion  of  their
compensation,  up to a legally  established  maximum, be withheld by the Company
and contributed to their account.  All 401(k) Plan contributions are placed in a
trust fund and invested by the 401(k) Plan's trustee. It is the Company's policy
that  all of the  401(k)  Plan  funds  be  invested  in a  single  fund  that is
identified by the Plan's trustee or  administrator.  The 401(k) Plan permits the
Company  to  make  discretionary  matching  contributions  in  an  amount  to be
determined  on an annual  basis by the  Company's  Board of  Directors.  Amounts
contributed to participant  accounts are generally not subject to federal income
tax until  distributed to the  participant and may not be withdrawn until death,
retirement or termination of employment.


1996 STOCK OPTION PLAN

     The Company's 1996 Stock Option Plan (the "1996 Plan") authorizes the Board
to grant  options to Directors  and  employees of the Company to purchase in the
aggregate  an amount of shares  of Common  Stock  equal to 10% of the  shares of
common Stock issued and outstanding from time to time.  Directors,  officers and
other  employees of the Company  who, in the opinion of the Board of  Directors,
are  responsible  for the  continued  growth and  development  and the financial
success of the company are eligible to be granted  options  under the 1996 Plan.
Options may be nonqualified options, incentive stock options, or any combination
of the  foregoing.  In  general,  options  granted  under  the 1996 Plan are not
transferable  and  expire  ten  years  after  the date of  grant.  The per share
exercise price of an incentive  stock option granted under the 1996 Plan may not
be less than the fair market  value of the Common Stock on the date of grant and
no options granted under the 1996 plan may have an exercise price per share less
than the initial  public  offering  price.  Incentive  stock options  granted to
persons who have voting control over 10% or more of the Company's  capital stock
are granted at 110% of the fair  market  value of the  underlying  shares on the
date of grant and expire  five years  after the date of grant.  No option may be
granted after August 23, 2006.

     The 1996  Plan  provides  the Board of  Directors  with the  discretion  to
determine when options granted  thereunder will become  exercisable.  Generally,
such options may be exercised  after a period of time  specified by the Board of
Directors  at any time  prior to  expiration,  so long as the  optionee  remains
employed by the Company.  No option granted under the 1996 Plan is  transferable
by the optionee other than by will or the laws of descent and distribution,  and
each  option is  exercisable  during the  lifetime of the  optionee  only by the
optionee.

     The following table  summarizes stock options granted during the last three
fiscal years to the Company's executive officers.


                                Individual Grants
                                -----------------
                                  Number  of   % of Total  
                                  Securities  Options/SARs 
                                  Underlying   Granted to  Exercise of  Expira-
    Name and Principal           Options/SARs Employees in  Base Price   tion 
         Position           Year  Granted(#)   Fiscal Year    ($/sh)     Date  
         --------           ----  ----------   -----------    ------     ---- 
Michael L. Bowlin           1998      --           --           --        --   
  Chairman of the Board     1997    50,000         15%        $8.80      2006 
  President & CEO           1996      --           --           --        --   
                                  

                                       53
<PAGE>
                                                                                
C. Christopher Bess         1998      --           --           --        --  
  Executive Vice President  1997    40,000         12%        $8.80      2006 
  Chief Operating Officer   1996      --           --           --        --  
                                                                              
Anita J. Vachon             1998      --           --           --        --  
  Senior Vice President -   1997    30,000          9%        $8.00      2006
  Travel Center Operations  1996      --           --           --        -- 
                                    
                                                                     

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANGEMENT


     The  following  table sets forth,  as of January 31,  1998,  the number and
percentage of outstanding  shares of Common stock owned by (i) each Director and
Director-Nominee  of the  Company;  (ii)  the  Chief  Executive  Officer  of the
Company;  (iii) all Directors and executive  officers of the Company as a group;
and (iv) all persons  known by the Company to be the  beneficial  owners of more
than 5% of the outstanding shares of Common Stock.

NAME OF BENEFICIAL OWNER (1)     AMOUNT AND NATURE OF BENEFICIAL      PERCENT OF
                                 OWNERSHIP (2)                        CLASS (3)
                                                                
Michael L. Bowlin (4)                                  1,723,513           39.3%
                                                                
C. Christopher Bess (5)                                  508,081           11.6%
                                                                
Anita J. Vachon                                           42,200               *
                                                                
Nina J. Pratz                                            120,802            2.8%
                                                                
William J. McCabe                                         61,190            1.4%
                                                                
Michael Mons                                                 330               *
                                                                
Robert J. Beckett                                        123,646            2.8%
                                                                
Harold Van Tongeren (6)                                   44,099            1.0%
                                                                
Brian McCarty                                                --              --
                                                                
James A. Clark                                             2,000               *
                                                                
Monica A. Bowlin (7)                                   1,723,513           39.3%
                                                                
The Francis W. McClure                                          
and Evelyn Hope McClure                                         
Revocable Trust                                          403,124            9.2%
                                                                
All directors and executive                                     
officers as a group                                             
(10 persons) (4)(5)(6)(7)                              2,625,861           59.9%
                                 
-----------------------------------------
*Less than 1.0%

                                       54
<PAGE>

(1)  All of the holders have an address at c/o the Company,  150  Louisiana  NE,
     Albuquerque, NM, 87108.
(2)  Unless  otherwise  noted and  subject to  community  property  laws,  where
     applicable,  the  persons  named in the table  above  have sole  voting and
     investment  power  with  respect  to all  shares of  common  stock as shown
     beneficially owned by them.
(3)  Number of shares  outstanding  excludes (i) 93,500 shares which are subject
     to the  Representative's  Option,  as  previously  described  in a document
     previously  filed with the Commission and (ii) 301,500 shares  reserved for
     issuance  upon the  exercise of options  granted by the  Company  under the
     Company's 1996 Stock Option Plan.
(4)  Includes  425,687 shares held by Mr.  Bowlin's wife and 171,332 shares held
     by each of three daughters. Mr. Bowlin disclaims beneficial ownership of an
     aggregate  of  342,664  of  such  shares,  which  are  held  by  two of his
     daughters.
(5)  Includes 73,006 shares held by Mr. Bess' wife and 19,623 shares held by Mr.
     Bess' minor daughter.
(6)  All of such 44,099  shares are held by Mr. Van  Tongeren  jointly  with his
     wife.
(7)  Includes  783,830 shares held by Mrs.  Bowlin's  husband and 171,332 shares
     held by each of three daughters. Mrs. Bowlin disclaims beneficial ownership
     of an  aggregate  of 342,664 of such  shares,  which are held by two of her
     daughters.





ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                        
                                                                                
                                                                                
     Michael L. Bowlin is the  President and Chairman of the board of, and a 25%
stockholder in, Stuckey's Corporation ("Stuckey's"), a franchiser of restaurants
and  specialty  stores,  including  specialty  stores  located  at  four  of the
Company's  travel centers.  In fiscal year 1997,  aggregate  franchise and other
related fees paid by the company to Stuckey's equaled approximately $35,690.    
                                                                                
     Michael L. Bowlin and C.  Christopher  Bess each have  perpetual  five-year
employment  agreements  with the Company that provide for an annual base salary,
effective as of February 1, 1997, of $195,000 and $145,000, respectively, during
their terms of  employment,  as well as certain rights to  indemnification.  See
"EXECUTIVE COMPENSATION - Employment Contracts."                                
                                                                                
     On April 1,  1997,  the  Company  entered  into an  agreement  to  purchase
substantially  all of the assets and  certain  liabilities  of a division of The
McCarty  Companies  formally known as "Pony  Panels." The McCarty  Companies are
owned by a director of the Company,  Brian  McCarty.  The purchase  price of the
transaction was $4,200,000, and was financed from a portion of the proceeds from
the Company's IPO and bank debt.  Terms of the financing have been disclosed and
previously  filed with the SEC. See ITEM 1.  DESCRIPTION  OF BUSINESS  under the
heading "Recent Developments".                                                  
                                                                                
ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K                                      
                                                                                
(a)  Exhibits                                                                   
                                                                                
     The exhibits as indexed below are included as part of this Form 10-KSB.    
                                                                                
(b)  Reports on Form 8-K                                                        
                                                                                
     No reports were filed on Form 8-K during the three months ended January 31,
     1998.

                                       55
<PAGE>

                                INDEX TO EXHIBITS
                                -----------------
Exhibit                                                    Method
Number                Description                         of Filing
------                -----------                         ---------

  2.1    Purchase Agreement dated April 1, 1997  (Incorporated by reference;    
         between the Registrant and the McCarty  previously filed as Exhibit 2.1
         Company                                 to the Registrant's Report on
                                                 Form 8-K dated April 15, 1997)
                                                                                
  2.2    Purchase Agreement dated December 9,    (Incorporated by reference;    
         1997 between the Registrant and Sweezy  previously filed as Exhibit 2.2
         Outdoor Advertising, Inc.               to the Registrant's Report on
                                                 Form 10-QSB dated December 15, 
                                                 1997)                          
                                                                                
  2.3    Purchase Agreement dated February 1,    Filed herewith                 
         1998 between the Registrant and Big-                                   
         Tex Outdoor Advertising, Inc.                                          
                                                                                
  2.4    Purchase Agreement dated March 2, 1998  Filed herewith                 
         between the Registrant and Norwood                                     
         Outdoor, Inc.                                                          
                                                 
 10.43   Promissory Note, dated as of May 2,     (Incorporated by reference;    
         1997, payable by the Registrant to      previously filed as Exhibit    
         Norwest Bank in the aggregate amount    10.43 to the Registrant's      
         of $1,000,000                           Report on Form 10-QSB dated    
                                                 June 16, 1997)                 
                                                                                
                                                 
 10.44   Credit Agreement with First Security    (Incorporated by reference;    
         Bank, dated as of November 25, 1997,    previously filed as Exhibit 
         granting the Registrant funds in the    10.44 to the Registrant's
         aggregate principal amount of           Report on Form 10-QSB dated   
         $10,500,000                             December 15, 1997)
                                                                    
                                                 
 27      Financial Data Schedule                 Filed herewith 

                                   SIGNATURES

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

                                                    BOWLIN Outdoor Advertising &
                                                    Travel Centers Incorporated

                                            By: /s/ MICHAEL L. BOWLIN
                                                --------------------------------
                                                Michael L. Bowlin, 
                                                Chairman of the Board, President
                                                and Chief Executive Officer

Date:     April 29, 1998

                                       56
<PAGE>

     In accordance  with the  Securities  Exchange Act of 1934,  this report has
been  signed  by the  following  persons  on behalf  of the  Company  and in the
capacities and on the dates indicated:

                        Signature                                  Date
                        ---------                                  ----


By: /s/ MICHAEL L. BOWLIN                                     April 29, 1998
    ------------------------------------------------------
     Michael L. Bowlin, Chairman of the Board, President, 
     CEO and Director (Principal Executive Officer)


By: /s/ C. CHRISTOPHER BESS                                   April 29, 1998
    ------------------------------------------------------
     C. Christopher Bess, Executive Vice President, Chief
       Operating Officer, and Director


By: /s/ NINA J. PRATZ                                         April 29, 1998
    ------------------------------------------------------
     Nina J. Pratz, Senior Vice President, Chief Financial
     Officer, Treasurer and Secretary, and Director


By: /s/ ROBERT L. BECKETT                                     April 29, 1998
    ------------------------------------------------------
     Robert L. Beckett, Director


By: /s/ JAMES A. CLARK                                        April 29, 1998
  --------------------------------------------------------
     James A. Clark, Director


By: /s/ BRIAN MCCARTY                                         April 29, 1998
    ------------------------------------------------------
     Brian McCarty, Director


By: /s/ HAROLD VAN TONGEREN                                   April 29, 1998
    ------------------------------------------------------
     Harold Van Tongeren, Director



                                       57
<PAGE>