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, 1997
                                       OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    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             (I.R.S. Employer Identification No.)
 of 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
                 NONE                                     NONE
          -------------------                    ---------------------

         SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
                          COMMON STOCK, $.001 PAR VALUE
                          -----------------------------
                                (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. / /

The issuer's revenues for its most recent fiscal year were $25,150,931.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant at April 21, 1997 was $9,113,775.

The number of shares of Common Stock, $.001 par value, outstanding as of 
April 21, 1997:  4,384,848

DOCUMENTS INCORPORATED BY REFERENCE:

The following  documents are  incorporated  by reference,  in this report in the
Part(s) indicated: Information Statement for 1997 Annual Meeting of Stockholders
- Part III.

<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 (together with its subsidiaries the "Company"
or "BOWLIN") and the notes  thereto.  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  herein.  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 and
one free-standing  Dairy  Queen/Brazier  restaurant along interstate highways in
Arizona and New Mexico where there are generally  few gas stations,  convenience
stores or  restaurants.  The Company  advertises  its travel  centers  through a
network of over 350 outdoor  advertising display faces. In addition to a variety
of unique  Southwestern  merchandise,  the Company's  travel centers offer brand
name food and gasoline to the traveling  public.  The Company  believes that its
"co-branding"  strategy of offering  complementary  brand name food and gasoline
products  results in  increased  customer  traffic and it intends to continue to
actively pursue additional co-branding opportunities.

     In  addition  to its  travel  centers,  the  Company  operates  over  1,780
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 along interstate highways primarily in Arizona
and New Mexico,  and, to a lesser extent,  in Colorado,  Oklahoma and Texas.  In
addition  to  the  leasing  of  advertising   space,   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.

     The Company was incorporated in New Mexico in 1953 and reincorporated under
the laws of Nevada in 1996. In December 1996,  the Company  completed an initial
public offering ("IPO") for the sale of 1,100,000 shares of common stock,  $.001
par value,  at a price of $8.00 per share.  The net  proceeds  from the IPO were
used to reduce a portion of the Company's  outstanding  indebtedness and will be
used for general corporate purposes,  including,  but limited to, funding future
expansion of its outdoor advertising and travel center operations.
                                       2

<PAGE>
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.  Brian  McCarty,  a member of the
company's  Board  of  Directors,  is the  majority  shareholder  of The  McCarty
Company.  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 working  capital ($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.

INDUSTRY OVERVIEW

     Outdoor Advertising Industry.  According to recent estimates by the Outdoor
Advertising Association of America ("OAAA"), outdoor advertising generated total
revenues  of  approximately  $1.8  billion  in  1995,   representing  growth  of
approximately  8.2% over 1994.  Although  outdoor  advertising  represents  only
slightly over 1% of total U.S. advertising expenditures, this segment is growing
at a faster rate than such traditional  advertising  media as radio,  television
and newspaper, which increased by 7.7%, 6.1% and 5.7%, respectively,  during the
same period.  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.  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.  The OAAA  estimates  that total
out-of-home  advertising revenues,  including traditional billboard advertising,
exceeded $3.5 billion in 1995.

     Outdoor  advertising  provides  advertisers  with a cost effective means of
reaching  large  audiences and is often used by businesses as part of an overall
multimedia  advertising campaign to reach their target geographic or demographic
markets. In addition to its low cost-per-thousand  impressions,  because outdoor
advertising reaches potential customers close to the point-of-sale, restaurants,
motels,  service  stations  and  similar  businesses  find  outdoor  advertising
particularly  effective.  In addition,  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.

     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  DMAs 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.  The OAAA estimates that there are
                                       3
<PAGE>
approximately 1,000 companies in the industry operating a total of approximately
396,000  displays.  There has been a trend toward  consolidation  in the outdoor
advertising  industry  in recent  years and the  Company  expects  this trend to
continue.

     Travel Services Industry. The travel services industry in which the Company
competes includes  convenience  stores which 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.

     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.  In 1995, the convenience store industry sold $46.8 billion
worth of merchandise and services and $66.3 billion worth of 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.  In  addition,   smaller  quick-service
restaurant  chains and  franchise  operations  are  focusing  on brand and image
enhancement and co-branding strategies.

BUSINESS STRATEGY

     Travel  Services  Business  Strategy.  The Company  opened its first travel
center  in 1953 and has  since  expanded  to  fourteen  travel  centers  and one
free-standing Dairy Queen/Brazier  restaurant.  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.  Each of the  Company's  travel  centers has a unique  Southwestern
theme,  and extensive  theme-oriented  billboard  advertising is used to attract
customers to stop and take advantage of their services.

     Most of the Company's travel centers offer food and beverages, ranging form
ice cream and snack  foods at some  locations  to  full-service  restaurants  at
others.  In addition to the  Company's  one  free-standing  Dairy  Queen/Brazier
restaurant,  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.

     The Dairy Queen and Dairy  Queen/Brazier  restaurants feature the signature
Dairy Queen  treat line of soft serve dairy  products.  In  addition,  the Dairy
Queen/Brazier restaurants offer a full line of hamburger combinations as well as
specialty chicken, fish and barbecue sandwiches.

     The Company's travel centers also offer brand name gasolines such as CITGO,
Conoco,  Chevron,  Texaco 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  six of its  existing  locations  to CITGO
"superpumper"  stations.  The  Company  also  intends to actively  market  CITGO
products to other retailers in Arizona and New Mexico.

     In addition to offering  food and gasoline,  each of the  Company's  travel
center gift shops offers an extensive  variety of  Southwestern  merchandise and
collectibles.  Four of the Company's  travel centers operate under the Stuckey's
                                       4
<PAGE>
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 billboard  advertising for its travel centers emphasizes this
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.  Some  stores  offer  special  categories  of
collectibles, such as dolls and music boxes.

     Outdoor  Advertising  Business  Strategy.  The Company  operates over 1,780
revenue-generating  advertising  display  faces,  primarily  in Arizona  and New
Mexico and, to a lesser extent, in Colorado,  Oklahoma and Texas.  Approximately
93% of these display faces are  traditional  bulletin  style and 7% 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  printing  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 and, in 1995, the Company was ranked by the
OAAA as one of the top 40 outdoor advertising  companies in the United States in
terms of gross revenues.

     Most of the Company's advertising displays are travel and tourism oriented.
According to the U.S.  Travel Data Center in Washington,  D.C.,  nine out of ten
automobile travelers rely on billboards to locate gas, food, lodging and tourist
attractions.  In addition,  approximately two-thirds of rural market advertisers
are  engaged in the  travel-tourism  industry  and rely on  billboards  as their
primary means of advertising to the traveling public.
                                       5

<PAGE>

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 that 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 new
full service  travel  centers with CITGO  superpumper  dispensing  facilities at
Picacho  Peak,  Arizona and near  Albuquerque,  New Mexico,  and expects both of
these centers to be operational by the end of fiscal 1998.

+    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 the 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.   Management  believes  that  gasoline  wholesaling
operations represent a potentially  significant additional source of revenues to
the  Company.  The  Company was granted a  distributorship  by CITGO,  effective
October 1, 1995.  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 Company has converted several of the fuel supply facilities at its
existing travel centers to CITGO  superpumpers and, as a wholesaler,  intends to
continue to actively  market CITGO products to other retailers in New Mexico and
Arizona.  The Company intends to target dealerships with annual sales volumes of
600,000 to 1.2 million gallons of gasoline per year.

     In October 1995, the Company hired a Petroleum manager to create a plan for
marketing the Company's  wholesale  gasoline  products.  In February  1997,  the
Company  established its first CITGO gasoline products  wholesale  relationship.
The Company believes that its existing  operations and personnel are adequate to
support  its  gasoline  wholesaling  operations  for at least  the next 12 to 18
months. The Company intends to enter into additional agreements with third party
retailers  upon  terms  customary  in  the  wholesale  gasoline  industry.  Such
agreements  generally  require that retailers  purchase  gasoline products on an
exclusive  basis for a limited term,  although  either party may terminate  such
agreements upon 30 to 60 days written  notice.  The Company intends to offer its
wholesale  gasoline  products at a price equal to a certain  percentage over the
then current price at which it purchases gasoline products from CITGO.

     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 which 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. Pursuant to the terms
of the  distribution  agreement,  the Company is  required  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.
                                       6
<PAGE>
     Outdoor  Advertising.  As in the case of its travel  centers,  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 87 and 85, respectively,  in fiscal years 1997 and 1996.
The Company plans to add new billboard  structures at a higher  incremental rate
each year after 1997,  and, by 2001,  the  Company  anticipates  that it will be
adding  approximately  250 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 and small to medium-sized outdoor advertising operators (such
as the Company's  acquisition  of Pony Panels) when  appropriate.  In accordance
with this growth  strategy,  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,  the receipt by the Company of unqualified audited financial
statements,   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 DMAs. The Company  believes
that  expansion  along  interstate  highways and in smaller  metropolitan  areas
permits the Company to expand into areas where competition for site acquisitions
is less intense,  purchase prices are more favorable and government  regulations
are  generally  less  onerous.  Marketing  efforts in these areas are focused on
local and  regional  advertisers,  thereby  allowing  the  Company to maintain a
diverse  client  base and  limiting  reliance on  national  accounts,  including
tobacco advertisers.
                                       7

<PAGE>


     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, 1997, and the respective  percentages of such net
revenues. The top three business categories accounted for approximately 64.1% of
the Company's total outdoor  advertising net revenues and approximately  9.2% of
the  Company's  total  revenues in the year ended  January 31,  1997.  No single
advertiser  accounted  for  more  than  2.0%  of  the  Company's  total  outdoor
advertising net revenues in such period.


                                PERCENTAGE OF NET
                        ADVERTISING REVENUES BY CATEGORY

                        Hotels and Motels     27.0%
                              Restaurants     24.0
                 Retail/Consumer Products     13.0
                   Travel & Entertainment     13.9
                               Government      7.7
                               Automotive      4.1
                                 Services      2.6
                                  Alcohol      0.5
                                  Tobacco        *
                                    Other      7.2
                                    -----    -----
                                    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
          and small to medium-sized  outdoor advertising  operations in the less
          populated  areas of the United States with the objective of becoming a
          leader in this niche market.

BUSINESS OPERATIONS

     Travel Center Operations.  The Company sells food, gasoline and merchandise
through its fourteen travel centers and one  free-standing  Dairy  Queen/Brazier
restaurant 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.

     Each of the Company's travel centers  maintains a distinct,  theme-oriented
atmosphere. In addition to the Southwestern merchandise it purchases from Native
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
                                       8
<PAGE>

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.
Pursuant to the terms of its  agreements  with  Stuckey's  and Dairy queen,  the
company is obligated to pay these  franchisors  a franchise  royalty and in some
instances a promotion  fee, each equal to a percentage  of gross sales  revenues
derived by the Company from products sold pursuant to such  agreements,  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.

     The Company has recently  implemented a central warehouse  operation in Las
Cruces, New Mexico, with approximately  27,000 square feet of useable space. The
new warehouse  facility will allow the Company to increase volume  purchases and
the related discounts,  reduce  transportation  costs and improve inventory turn
over and control. In addition,  improved data systems will enable the Company to
more  effectively  monitor  and respond to the  inventory  demands of its travel
centers.

     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.  In addition,  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 local account representatives,
sells  advertising  space to the  Company's  clients from its  inventory of over
1,780  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 75% 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  it
sprinting and installing the design displays.  Billboards have historically been
composed of several painted plywood sheets,  but recently vinyl facing has begun
to  replace  plywood in  national  or  regional  campaigns  using  substantially
identical  advertisements or requiring high graphics  resolution.  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.
                                       9

<PAGE>


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
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  which  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 3M Media (a division of Minnesota Mining and
Manufacturing   Company),   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 DMAs 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, 1997, the Company had approximately 142 full-time and 113
part-time  employees,  50 of which were located in Arizona and 205 of which were
located in New Mexico.  As of January 31, 1997,  108 of the Company's  employees
were employed in store/retail sales, 74 employees were employed in the Company's
restaurant  operations,  29 employees  were  employed in the  Company's  outdoor
advertising   operations,   11  employees   performed  certain  warehousing  and
distribution  services for the Company and 33 employees provided  managerial and
administrative  services to the Company.  None of the  Company's  employees  are
covered by a  collective  bargaining  agreement  and the  Company  believes  its
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  its   operations  at  its  fourteen   travel   centers  and  one
free-standing  Dairy  Queen/Brazier  restaurant  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  ("USTs").   These  costs  include  assessment,
compliance  and   remediation   costs,   as  well  as  certain  ongoing  capital
                                       10
<PAGE>
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 USTs 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  adopted a policy of  replacing  its USTs with
above-ground  storage tanks to minimize the costs associated with leak detection
and compliance with other regulatory programs. Such tanks have been installed at
all but three of the  Company's  travel  centers,  and the  Company  intends  to
complete the  installation of above-ground  storage tanks at all of its existing
travel centers by the end of fiscal 1998.

     The Company  incurred  approximately  $202,000 in capital  expenditures  in
fiscal 1997, and estimates that it will be required to make  additional  capital
expenditures  of  approximately  $180,000 in the  aggregate by December  1998 to
comply with current federal and state UST regulations.  The Company's  estimates
of costs to be incurred for  environmental  assessment and  remediation  and for
other   regulatory   compliance  are  based  on  present  and  estimated  future
remediation  costs and  results at UST sites.  As certain of these  factors  and
assumptions  could change due to  modifications  of regulatory  requirements  at
either federal, state or local levels, detection of unanticipated  environmental
conditions,  or other  unexpected  circumstances,  the actual costs incurred may
vary  significantly  from these estimates noted above and may vary significantly
from year to year.

     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
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.  In May,  June and July of 1996,  the State of New
Mexico  issued a temporary  ban on the sale of fireworks  because of the extreme
fire hazard caused by drought  conditions in that state. As a result of the ban,
the  Company's  revenues  at its  travel  centers  from  the  sale of  fireworks
decreased by approximately $140,000 during the period of the ban, as compared to
the same period of the prior fiscal year. Although such a ban was unprecedented,
similar bans could be imposed in the future.

     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  the  prohibition  on  the
construction  of new  billboards  adjacent to  federally-aided  highways and the
removal at the owner's expense and without any compensation of any illegal signs
on such  highways.  The  Beautification  Act,  and the  various  state  statutes
implementing it, require 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
                                       11
<PAGE>
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.  No bills have become law at the federal level
except those  requiring  health  hazard  warnings  similar to those on cigarette
packages  and  print   advertisements.   It  is  uncertain  whether   additional
legislation  of this type will be enacted on the national or on a local level in
any of the Company's markets.  Revenues from tobacco  advertisers  accounted for
less than 1% of the Company's total advertising revenues in fiscal 1997.

     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.

ITEM 2. DESCRIPTION OF PROPERTY

     As of January 31, 1997, the Company  operated  fourteen  travel centers and
one free-standing  Dairy Queen restaurant.  The Company owns the real estate and
improvements at which five of its travel centers and its one free-standing Dairy
Queen/Brazier restaurant are located, as well as real estate and improvements at
three  additional  locations,  two of which the Company is currently  developing
into  travel  centers  and one of which is  leased to a third  party  restaurant
operator. The property 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 one of its travel  centers  under  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.
                                       12

<PAGE>



     The Company  operated over 1,780 revenue  generating  outdoor display faces
throughout the Southwest, as of January 31, 1997. 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, 1997, 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  and  one
free-standing Dairy Queen/Brazier restaurant.  Listed below are the locations of
the Company's  inventory of  revenue-generating  display faces as of January 31,
1997.

                BILLBOARDS    30-SHEET POSTERS    8-SHEET POSTERS    TOTAL
                ----------    ----------------    ---------------    -----
      Arizona      136                --                 --            136
     Colorado       12                --                 --             12
   New Mexico    1,429                62                 64          1,555
     Oklahoma        4                --                 --              4
        Texas       81                --                 --             81
                 -----              ----               ----          -----   
        TOTAL    1,662                62                 64          1,788
                 =====              ====               ====          =====

     The Company's  principal  executive  offices  occupy  approximately  10,000
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  accrues  interest at the
respective  bank's  prime rate (8.25% at January 31,  1997).  In  addition,  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  thereof  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  general and limited  partnership  interests  in two New
Mexico limited  partnerships,  and owns a pecan orchard. One of the partnerships
owns and  operates an  apartment  building in Las  Cruces,  New Mexico,  and the
second  partnership  owns an  unencumbered  parcel of  undeveloped  land located
outside of Las Cruces,  New Mexico held primarily for investment  purposes.  The
apartment  building is subject to a 35-year  mortgage which matures in 2031, has
an outstanding  principal  amount of  approximately  $1.1 million at January 31,
1997,  and accrues  interest at a rate of 8.125% per annum.  Subsequent  to year
end, the  operations  of the pecan  orchard  were leased to an  unrelated  third
party.  None of these  investments  has had a material  effect on the  Company's
business or results of operations and the Company's  management  does not expect
them to have such effect in the future. Until recently, the Company also owned a
majority of the voting stock of Dragoon Water  Company,  an Arizona  corporation
("Dragoon").  The voting stock of Dragoon was  purchased by the Company in order
to ensure the  provision  of water  utilities  to one of the  Company's  largest
travel centers. The Company sold its shares of stock in Dragoon as of October 1,
1996,  pursuant  to an  agreement  which  ensures  the  continued  provision  of
necessary water utilities following the sale. Neither the sale nor the operation
of Dragoon were material to the Company.
                                       13

<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 1997.


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's  Common Stock is quoted on the NASDAQ  National  Market under
the symbol  "BWLN." On April 21, 1997,  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,
mark-downs 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

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

     The Company  paid cash  dividends of  approximately  $50,600 and $60,300 in
fiscal years 1997 and 1996,  respectively.  However, since the completion of its
IPO in December,  1996,  the Company has not declared or paid any cash dividends
on its Common  Stock,  and the present  policy of the Board of  Directors  is to
retain  any  earnings  to  provide  for  the   Company's   growth.   Any  future
determination  to pay  dividends  will  be at the  discretion  of the  Board  of
Directors,  and dependent  upon the Company's  financial  condition,  results of
operation, capital requirements and such other factors as the Board of Directors
deems relevant.


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, 1997 and 1996.  This discussion  should be read in conjunction  with
the  Consolidated  Financial  Statements  of the Company  and the related  Notes
thereto included  elsewhere in this Form 10-KSB.  References  herein 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
                                       14
<PAGE>
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.

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:

                                           1997           1996     % incr/(decr)
                                           ----           ----     -------------

TRAVEL CENTERS
  Gross revenues                      $ 21,691,899   $ 20,467,455         6.0%
  Discounts on sales                       303,000        292,484         3.6%
                                           -------        -------
  Net revenues                          21,388,899     20,174,971         6.0%
  Cost of sales                         14,234,760     12,995,314         9.5%
                                        ----------     ----------
                                         7,154,139      7,179,657        (0.4%)
  General & administrative expenses      5,280,954      5,462,067        (3.3%)
  Depreciation and amortization            362,803        434,195       (16.4%)
                                           -------        -------
  Operating income                       1,510,382      1,283,395        17.7%

OUTDOOR ADVERTISING
  Revenues                               3,459,032      2,769,713        24.9%
  Operating expenses:
  Direct operating expenses              2,105,615      2,007,422         4.9%
  General & administrative expenses        368,564        344,030         7.1%
  Depreciation and amortization            281,899        261,413         7.8%
                                           -------        -------
  Operating income                         702,954        156,848       348.2%

CORPORATE AND OTHER
  General & administrative expenses       (410,153)      (601,639)      (31.8%)
  Depreciation and amortization           (134,869)      (161,000)      (16.2%)
  Interest expense                        (677,746)      (611,590)       10.8%
  Other income, net                        518,113        570,422        (9.2%)
                                           -------        -------

INCOME BEFORE TAXES                      1,508,681        636,436       137.1%

INCOME TAXES                               603,472        252,817       138.7%
                                           -------        -------

NET INCOME                               $ 905,209      $ 383,619       136.0%
                                         =========      =========

                                       15

<PAGE>

COMPARISON OF THE FISCAL YEARS ENDED JANUARY 31, 1997 AND JANUARY 31, 1996.

     TRAVEL CENTERS.  Gross sales at the Company's travel centers increased 6.0%
to $21.7  million  for fiscal  1997 from $20.5  million  for fiscal  1996.  This
increase  includes a 19.1% increase in gasoline sales to $11.6 million in fiscal
1997 from $9.7  million in fiscal 1996 as a result of  increases in sales volume
and retail prices. This increase was partially offset by declines in merchandise
and restaurant sales of 6.8% and 8.2%, respectively.  The decline of merchandise
was  attributable  in part to a statewide  ban on the sale of  fireworks  in the
State of New Mexico from May 23, 1996, to July 2, 1996. During the period of the
ban,  fireworks sales declined by $140,000 as compared to the same fiscal period
in 1996. The ban also contributed to the decline in other  merchandise areas and
restaurant  sales.  The decrease in restaurant sales also reflects the Company's
decision in July 1995 to close its Lordsburg,  New Mexico,  restaurant and lease
the  facility  to an  unrelated  third  party.  Sales  for the  restaurant  were
approximately  $105,000 for the period in fiscal 1996 when such  restaurant  was
open. In March of 1997, the  legislature  of the State of New Mexico  approved a
bill  that  removed  the  State's  authority  to enact  future  bans on sales of
fireworks by passing such authority to local municipalities.

     In addition,  the Company  believes that  merchandise and restaurant  sales
were adversely  affected by  construction  of new canopies and above ground tank
storage facilities to meet federally mandated  regulations for 1998. The Company
has  completed  all but three of such  conversions  and looks  forward  to sales
returning to normal levels at the completed facilities.

     Cost of goods sold for the travel  centers  increased 9.5% to $14.2 million
in fiscal 1997 from $13.0  million for fiscal  1996.  As a  percentage  of gross
sales,  cost of goods sold  increased  to 65.6% from 63.5%,  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
decreased  3.3% to $5.3 million for the fiscal year ended  January 31, 1997 from
$5.5  million  for the fiscal  year ended  January  31,  1996.  The  decrease is
primarily  attributable to the Company's  decision not to pay discretionary cash
bonuses to  management  in fiscal  1997,  resulting  in the  absence of any cash
bonuses accrued for the year ended January 31, 1997. In comparison,  the Company
accrued  $300,000 during the same period in fiscal 1996 for  discretionary  cash
bonuses paid to management.

     Other increases in general and  administrative  expenses for travel centers
were  attributable to an overall increase in hourly wage rates for travel center
personnel and certain costs related to image upgrades that were not  capitalized
as  building  improvements.   In  addition,  the  Company  expanded  its  middle
management team to include three Area supervisors and a Petroleum Manager.

     Depreciation  and amortization  expense  decreased by 16.4% to $363,000 for
the fiscal year ended  January 31, 1997 from  $434,000 for the fiscal year ended
January 31, 1996.  The  decrease was  primarily  attributable  to the  Company's
decision to  depreciate  certain  assets on a straight line basis rather than by
accelerated methods used previously. In addition, during fiscal 1997, management
extended the useful lives of certain existing assets.

     The above factors  contributed  to an increase in travel  center  operating
income of 17.7% to $1.5  million for the fiscal  year ended  January 31, 1997 as
compared to $1.3 million for the fiscal year ended January 31, 1996.

     OUTDOOR  ADVERTISING.  Gross income from the Company's outdoor  advertising
increased  24.9% to $3.5  million  for fiscal  1997 from $2.8  million in fiscal
1996.  The increase was  primarily  attributable  to increased  construction  of
advertising  displays,  increases  in rates and small  acquisitions  of  outdoor
advertising displays in New Mexico.
                                       16
<PAGE>
     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,  materials  and repairs and
maintenance of  advertising  displays.  Selling  expenses  consist  primarily of
salaries and commissions for salespersons and travel and  entertainment  related
to sales.  Direct  operating costs increased 4.9% to $2.1 million for the fiscal
year ended  January  31,  1997 from $2.0  million  for the same period in fiscal
1996,  principally  due to the addition of sales and  production  personnel  and
repairs and maintenance of advertising displays.

     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  operating  expenses.
General and  administrative  expenses  increased 7.1% to $369,000 for the fiscal
year ended  January 31, 1997 from  $344,000  for fiscal  1996.  The increase was
primarily attributable to increases in administrative  personnel,  insurance and
legal fees. The overall  increase was partially  offset by a decrease in general
and  administrative  expenses of $45,000 as a result of the  decision not to pay
discretionary cash bonuses to management in fiscal 1997.

     Depreciation  and amortization  expense  increased 7.8% to $282,000 for the
fiscal year ended January 31, 1997 from $261,000 for fiscal 1996, as a result of
scheduled  depreciation  of  additional  display  structures  and  machinery and
equipment.  Increases in depreciation  expense were also partially offset by the
Company's decision to depreciate certain assets on a straight-line  basis rather
than accelerated methods used previously.

     The above  factors  contributed  to the  increase  in  outdoor  advertising
operating  income of 348.2% to $703,000  for the fiscal  year ended  January 31,
1997 as compared to $157,000 for the fiscal year ended January 31, 1996.

     CORPORATE AND OTHER. General and administrative  expenses for corporate and
other   operations   of  the  Company   consist   primarily  of  executive   and
administrative  compensation and benefits and accounting and legal fees. General
and  administrative  expenses  decreased  31.8% to $410,000  for the fiscal year
ended January 31, 1997 from $602,000 for the fiscal year ended January 31, 1996,
primarily as a result of  management's  decision not to pay  discretionary  cash
bonuses for the fiscal  year ended  January 31,  1997.  As such,  no accrual for
discretionary  cash bonuses has been  accounted for during the fiscal year ended
January 31, 1997. Of the $602,000 of general and administrative expenses for the
year ended  January  31,  1996,  $155,000  was accrued  for  discretionary  cash
bonuses.

     In addition,  for the fiscal year ending  January 31, 1998,  the  Company's
President  and its Chief  Operating  Officer have elected to accept  annual base
salaries of $127,530 and $91,000, respectively, which salaries are less than the
$195,000  and $145,000  salaries  provided  for in their  respective  employment
agreements, which agreements became effective February 1, 1997.

     Depreciation  and  amortization  expenses for the  Company's  corporate and
other  operations   consist  of  depreciation   associated  with  the  corporate
headquarters,  furniture  and  fixtures  related  thereto  and  its  subsidiary.
Depreciation  and  amortization  decreased  16.2% to $135,000 for fiscal 1997 as
compared to $161,000 for fiscal 1996. The decrease is primarily  attributable to
the Company's  decision to depreciate  certain assets on a  straight-line  basis
rather than by  accelerated  methods used  previously.  Decreases were offset by
scheduled depreciation of fixed assets.

     Interest  expense  increased  10.8% to  $678,000  for the fiscal year ended
January 31, 1997 from  $612,000 for the fiscal year ended January 31, 1996, as a
result of borrowings to fund outdoor advertising expansion and the conversion of
travel centers to gasoline dispensing equipment to CITGO stations.
                                       17
<PAGE>
     Income  before taxes  increased  137.1% to $1.5 million for the fiscal year
ended January 31, 1997 from $636,000 for the fiscal year ended January 31, 1996.
As a percentage of gross revenues, income before taxes increased to 6.0% for the
fiscal year ended 1997 from 2.7% for the same fiscal period 1996.

     Income taxes were  $603,000  for the fiscal year ended  January 31, 1997 as
compared to $253,000 for the fiscal year ended  January 31, 1996, as a result of
higher pre-tax income.

     The foregoing factors  contributed to the Company's  increase in net income
for the fiscal  year ended  January 31, 1997 to $905,000 as compared to $384,000
for the fiscal year ended January 31, 1996.

LIQUIDITY AND CAPITAL RESOURCES

     At January 31, 1997, the Company had working  capital of $9.3 million and a
current  ratio of 5.00:1,  compared  to working  capital of $1.8  million  and a
current ratio of 1.65:1 at January 31, 1996.  The net cash provided by operating
activities  decreased  to $440,000  from  $1,242,000  for the fiscal years ended
January 31, 1997 and 1996,  respectively.  The decrease was due  primarily to an
increase in inventory  levels of $800,000 and a decrease in accounts payable and
accrued liabilities of $245,000. The increase in inventory levels in fiscal 1997
was  primarily  attributable  to the  relocation  and expansion of the Company's
warehouse  facility  in Las  Cruces,  New  Mexico.  The  Company  increased  its
warehouse space approximately  four-fold and therefore,  improved its ability to
provide  goods  to its  travel  center  operations  in a more  timely  and  cost
efficient  manner.  These  changes were  partially  offset by an increase in net
income of $522,000 for the fiscal year ended January 31, 1997.

     Net cash used in investing  activities  increased to  $1,856,000  in fiscal
1997 from  $1,453,000  in fiscal  1996.  The  increase  is due  primarily  to an
increase in  purchases of property  and  equipment of $655,000  over that of the
prior fiscal year and net  disbursements on notes  receivable of $97,000.  These
increases were offset by an increase in proceeds from the sale of certain assets
of $353,000.

     Net cash provided by financing activities increased to $7,333,000 in fiscal
1997 from  $428,000 in fiscal 1996.  The  increase is  primarily  due to the net
proceeds from the Company's IPO in December 1996 of $7,431,000. 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.
Following  the IPO,  the Company  paid down  approximately  $1.5  million of its
existing debt. Other increases in the Company's  long-term debt were a result of
the Company's continued expansion of its outdoor advertising  operations through
development  and  acquisition  and  the  financing  of  property  and  equipment
purchases prior to the IPO.

     As of January  31,  1997,  the Company  was  indebted to various  banks and
individuals in an aggregate principal amount of approximately $6.7 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 June 5, 1997 to
September  30, 2031 and accrue  interest at rates ranging from 8.125% to 12% per
annum.  At January 31, 1997, the Company had two revolving  lines of credit with
aggregate principal commitments of $1,000,000 and $150,000,  respectively. As of
January 31, 1997, none was outstanding under either commitment. In August, 1996,
the Company borrowed  approximately $535,000 to refinance certain loans from its
stockholders. The loan was paid off in its entirety as of January 31, 1997.

     The Company made capital  expenditures  of  approximately  $2.1 million and
$1.5  million  during  fiscal  years  ended 1997 and 1996,  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 $2.4 million related
                                       18
<PAGE>
to travel  center  operations.  Included  in the $2.4  million is  approximately
$280,000 for the removal and replacement of underground fuel storage facilities,
$1.75  million to remodel two existing  facilities  and develop one new facility
and  approximately  $330,000  for  upgrades and  improvements  to several  other
existing  travel centers.  With regard to outdoor  advertising  operations,  the
Company has plans to build 150 new billboard  structures  during the fiscal year
ending January 31, 1998, at a cost of approximately $900,000.

     As of January 31, 1997,  approximately  $4.3 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
at  variable  rates  which  could  impact the  Company's  ability to  consummate
significant acquisitions in the future.

     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 of cash. The  consideration  paid by the
Company was funded by working  capital  ($1.7  million of IPO proceeds) and $2.5
million 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 April 2, 2007.  The bank debt is subject to certain  financial and other
restrictive covenants.

     The Company is  currently  negotiating  with its primary  lenders to secure
additional lines of credit at amounts greater than its current  capacities.  The
Company  believes  that the  remaining  net  proceeds  from the IPO,  internally
generated  funds and funds  available  under  current and future lines of credit
will be  sufficient  to satisfy  all debt  service  obligations  and finance its
current  operations and anticipated  capital  expenditures for at least the next
twelve months.

     Although the Company does not have any agreements in place, it is currently
negotiating  with  three  independent  parties  for the  acquisition  of outdoor
advertising  assets and one  independent  party for the purchase of three travel
centers.  The  Company  does not  believe  that any of  these  acquisitions  are
probable and 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,  receipt by the Company of  unqualified  audited  financial
statements,   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 February 1997, the Financial Accounting Standards Board issued Statement
of Financial  Accounting  Standards No. 128,  "Earnings Per Share" ("SFAS 128").
SFAS 128  establishes  new standards for computing and  presenting  earnings per
share  ("EPS").   Specifically,   SFAS  128  replaces  the  currently   required
presentation  of primary EPS with a  presentation  of basic EPS,  requires  dual
presentation  of basic and diluted EPS on the face of the income  statement  for
all entities with complex capital  structures and requires a  reconciliation  of
the numerator and  denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation.  SFAS 128 is effective for financial
statements   issued  for  periods  ending  after  December  15,  1997;   earlier
                                       19
<PAGE>
application is not  permitted.  Pro forma EPS computed under SFAS 128 would have
been the same as  reported  in the  Financial  Statements  included  herein  and
management  believes the application of SFAS 128 will not have a material effect
on the Company's future financial statements.

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  consents 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  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,  the continuing  profitability of existing operations,
the  successful  management of planned  growth and the ability of the Company to
operate new travel centers and outdoor advertising  operations and implement its
new gasoline  wholesaling  activities  in a profitable  manner.  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. Based on the Company's past history, the Company has been
able  to  secure  financing  for  the  acquisition  of  additional  assets  form
commercial  lenders in amounts  ranging  from 75% 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.  In addition the Company anticipates
that any financing  which it does secure may impose certain  financial and other
restrictive  covenants upon the Company and its operations.  Furthermore,  there
can be no assurance that the Company will be able to integrate  successfully 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.  Moreover,  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 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  pursuant to which it offers brand name and
other products at its travel centers. These brand name relationships include the
                                       20
<PAGE>
Company's  distributorship  relationship  with  CITGO,  as well as 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. In addition,  several of
these  agreements  contain  provisions  that  prohibit the Company from offering
additional products or services which 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 these 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.  In May,  June and July of 1996,  the state of New
Mexico  issued a temporary  ban on the sale of fireworks  because of the extreme
fire hazard caused by drought  conditions in that state. As a result of the ban,
the Company's  revenues from its travel center  operations  decreased.  Although
such a ban was  unprecedented,  similar bans could be imposed in the future.  In
March  1997,  the  legislature  of the State of New Mexico  approved a bill that
removed the state's  authority  to enact  future bans on sales of  fireworks  by
passing such authority to local  municipalities.  The Company  believes that its
operations  at  its  fourteen  travel  centers  and  one   free-standing   Dairy
Queen/Brazier  restaurant  comply in all material  respects with all  applicable
licensing  and  regulatory  requirements.  However,  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."                           21
<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  substantially  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.  In addition,  the Company  could be required to incur
significant costs to comply with environmental laws and regulations which 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.

                                       22
<PAGE>







                                     BOWLIN

                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

                            January 31, 1997 and 1996

                   (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,
1997 and 1996, 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,
1997 and 1996,  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
March 28, 1997

                                       24
<PAGE>

<TABLE>
<CAPTION>
<S>  <C>
                                                       BOWLIN                         
                                        OUTDOOR ADVERTISING & TRAVEL CENTERS          
                                            INCORPORATED AND SUBSIDIARIES             
                                                                                               
                                             Consolidated Balance Sheets              
                                                                                               
                                              January 31, 1997 and 1996               
                                                    
                         Assets                                                   1997              1996
                         ------                                                   ----              ----
Current assets:                                                                               
     Cash and cash equivalents                                               $  7,518,971         1,601,830
     Accounts receivable, net                                                     365,424           193,982
     Notes receivable - related parties, current maturities (note 2)               20,021            10,012
     Notes receivable, current maturities (note 2)                                  6,169             2,762
     Inventories                                                                3,202,191         2,403,020
     Prepaid expenses                                                             417,375           328,576
     Other current assets                                                          48,147             6,288
                                                                             ------------      ------------
                      Total current assets                                     11,578,298         4,546,470
                                                                             ------------      ------------ 
Investment and long-term receivables:
     Investment in partnership                                                     12,763            16,259
     Notes receivable - related parties, less current maturities (note 2)          30,024             -
     Notes receivable, less current maturities (note 2)                            65,953            12,838
                                                                             ------------      ------------    
                      Total investment and long-term receivables                  108,740            29,097

Property and equipment, net (notes 3, 5 and 6)                                  9,970,546         8,910,470
                                                                                              
Deferred charges, net                                                              83,888             -
                                                                                              
Franchise fees, at cost less accumulated amortization of $108,255 and                         
     $97,691 at January 31, 1997 and 1996, respectively                           101,245           111,809
                                                                             ------------      ------------          
                      Total assets                                           $ 21,842,717        13,597,846
                                                                             ============      ============
                                                                                            
                  Liabilities and Stockholders' Equity                                        
                                                                                              
Current liabilities:                                                                          
     Short-term borrowing, bank (note 5)                                     $      -               149,000
     Accounts payable                                                           1,197,428         1,177,878
     Long-term debt, current maturities (note 6)                                  576,186           768,929
     Accrued liabilities                                                          399,223           663,762
     Income taxes payable                                                         145,072             -
                                                                             ------------      ------------
                      Total current liabilities                                 2,317,909         2,759,569
                                                                                              
Deferred income taxes (note 9)                                                     42,600             -
                                                                                              
Long-term debt, less current maturities (note 6)                                6,118,406         5,808,503
                                                                             ------------      ------------
                      Total liabilities                                         8,478,915         8,568,072
                                                                             ------------      ------------      
Minority interest                                                                 205,366           226,591
                                                                             ------------      ------------

                                                         25
<PAGE>

Stockholders' equity:                                                                         
     Common stock, $.001 par value; authorized 100,000,000                                    
        shares; outstanding 4,384,848 and 3,050,427 shares at                                 
        January 31, 1997 and 1996, respectively (note 7)                            4,385             3,051
     Additional paid-in capital                                                11,604,303         3,806,220
     Retained earnings                                                          1,549,748           993,912
                                                                             ------------      ------------
                      Total stockholders' equity                               13,158,436         4,803,183
                                                                                              
Commitments and contingencies (notes 10 and 11)                                               
                                                                             ------------      ------------           
                      Total liabilities and stockholders' equity             $ 21,842,717        13,597,846
                                                                             ============      ============
                                                                                          
See accompanying notes to consolidated financial statements.
                                                         26

<PAGE>


                                                       BOWLIN                
                                        OUTDOOR ADVERTISING & TRAVEL CENTERS 
                                            INCORPORATED AND SUBSIDIARIES    
                                                                             
                                          Consolidated Statements of Income  
                                                                             
                                        Years ended January 31, 1997 and 1996
                                        


                                                                                  1997             1996
                                                                                  ----             ----

Gross sales                                                                  $ 25,150,931        23,237,168

Less discounts on sales                                                           303,000           292,484
                                                                             ------------      ------------
                      Net sales                                                24,847,931        22,944,684
                                                                         
Cost of goods sold                                                             16,340,375        15,002,736
                                                                             ------------      ------------
                      Gross profit                                              8,507,556         7,941,948
                                                                             ------------      ------------
                                                                         
General and administrative expenses                                            (6,115,350)       (6,407,736)
                                                                         
Other income                                                                      379,228           489,653
                                                                         
Depreciation and amortization                                                    (779,571)         (856,608)
                                                                             ------------      ------------
                      Operating income                                          1,991,863         1,167,257
                                                                             ------------      ------------
                                                                         
Other income (expense):                                                  
     Interest income                                                              138,885            85,147
     Gain (loss) on sale of property and equipment                                 55,679            (4,378)
     Interest expense                                                            (677,746)         (611,590)
                                                                             ------------      ------------
                      Total other income (expense), net                          (483,182)         (530,821)
                                                                             ------------      ------------
                      Income before income taxes                                1,508,681           636,436
                                                                         
Income taxes (note 9)                                                             603,472           252,817
                                                                             ------------      ------------
                                                                         
Net income                                                                   $    905,209           383,619
                                                                             ============      ============
                                                                         
Earnings per common and common equivalent share                              $        .26               .11
                                                                             ============      ============
                                                                         
                                                                         
See accompanying notes to consolidated financial statements.             
                                                                         
                                                         27
<PAGE>                                                                  


                                                            BOWLIN
                                             OUTDOOR ADVERTISING & TRAVEL CENTERS
                                                 INCORPORATED AND SUBSIDIARIES

                                        Consolidated Statements of Stockholders' Equity

                                         For the years ended January 31, 1997 and 1996



                                                                    Common    Additional
                                                      Number        stock,     paid-in     Retained
                                                      of shares     at par     capital     earnings       Total
                                                      ---------     ------     -------     --------       ----- 

Balance at January 31, 1995                           2,826,767    $ 2,827    3,451,344    1,038,696    4,492,867

Net Income                                                -           -           -          383,619      383,619
Cash dividends on common
      stock, $.02 per share                               -           -           -          (60,287)     (60,287)
Stock dividends issued on common stock
      and sale of fractional shares                     232,522        233      368,937     (368,116)       1,054
Purchase of 42 shares of common stock                    (8,862)        (9)     (14,061)       -          (14,070)
                                                      ---------    -------    ---------     --------      -------
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 7)        (98,537)       (99)    (154,945)       -         (155,044)
Contributed services                                      -           -         155,044        -          155,044
Initial pubic 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
                                                      =========    =======   ==========    =========   ==========


See accompany notes to consolidated financial statements.

                                                    28


<PAGE>


                                                       BOWLIN                
                                        OUTDOOR ADVERTISING & TRAVEL CENTERS 
                                            INCORPORATED AND SUBSIDIARIES    
                                                                             
                                        Consolidated Statements of Cash Flows
                                                                             
                                        Years ended January 31, 1997 and 1996
                                        
                                                                                  1997             1996
                                                                                  ----             ----
Cash flows from operating activities:
     Net income                                                              $    905,209           383,619
     Adjustments to reconcile net income to                                  
        net cash provided by operating activities:
           Depreciation and amortization                                          779,571           856,608
           Income from partnership investment                                      (9,504)           (1,737)
           Loss (gain) on sale of property and equipment                          (55,679)            4,378
           Deferred income taxes                                                   42,600             -
           Changes in operating assets and liabilities:
               Accounts receivable                                               (171,442)          (65,923)
               Inventories                                                       (799,171)         (379,907)
               Prepaid expenses and other current assets                         (130,658)          (62,579)
               Accounts payable and accrued liabilities                          (244,989)          526,614
               Income taxes payable                                               145,072            (4,997)
               Minority interest                                                  (21,225)          (14,090)
                                                                             ------------      ------------
                   Net cash provided by operating activities                      439,784         1,241,986
                                                                             ------------      ------------
Cash flows from investing activities:
     Capital received from (contributed to) partnership                            13,000              (875)
     Proceeds from sale/condemnation of assets                                    376,973            24,230
     Purchases of property and equipment                                       (2,149,471)       (1,494,717)
     Disbursements on notes receivable                                           (195,813)            -
     Collections on notes receivable                                               99,258            18,746
                                                                             ------------      ------------
                           Net cash used in investing activities               (1,856,053)       (1,452,616)
                                                                             ------------      ------------
Cash flows from financing activities:
     Payments on short-term borrowings                                           (149,000)            -
     Payments on long-term debt                                                (4,660,892)         (805,049)
     Payments for debt issuance costs                                             (84,794)            -
     Proceeds from borrowings                                                   4,778,052         1,306,100
     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             1,054
     Treasury stock acquisition                                                     -               (14,070)
     Dividends paid                                                               (50,600)          (60,287)
     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            7,333,410           427,748
                                                                             ------------      ------------

Net increase in cash and cash equivalents                                       5,917,141           217,118

Cash and cash equivalents at beginning of period                                1,601,830         1,384,712
                                                                             ------------      ------------
Cash and cash equivalents at end of period                                    $ 7,518,971         1,601,830
                                                                             ============      ============
See accompanying notes to consolidated financial statements.
                                                    29
</TABLE>
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                            January 31, 1997 and 1996

(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 incorporated on December 12, 1962, and acquired by
              the Company in 1986.  The Company's  primary reason for purchasing
              Dragoon was to ensure water  utilities would be provided to one of
              its largest retail locations in Arizona. Dragoon's fiscal year end
              is December 31. 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 holds 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.
               
                                       30                            (Continued)
<PAGE>
                                       

                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       (b)     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  financial  statements in conformity with generally
               accepted accounting principles.  Actual results could differ from
               those estimates.

       (c)     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. 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.

       (d)     Cash and Cash Equivalents

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

       (e)     Accounts Receivable and Allowance for Doubtful Accounts

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

       (f)     Financial Instruments

               Statement  of  Financial  Accounting  Standards  (SFAS) No.  107,
               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,   short-term   borrowings,   and
               long-term debt approximate fair value.

       (g)     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.

       (h)     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.

                                       31                            (Continued)

<PAGE>

                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


       (i)     Franchise Fees

               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 15-25 years.

       (j)     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.

       (k)     Stock Option Plan

               The Company accounts for its stock option plan in accordance with
               the provisions of Accounting  Principles  Board (APB) Opinion No.
               25,  Accounting  for  Stock  Issued  to  Employees,  and  related
               interpretations.  As such, compensation expense would be recorded
               on the  date of grant  only if the  current  market  price of the
               underlying  stock  exceeded  the exercise  price.  On February 1,
               1996,   the  Company   adopted  SFAS  No.  123,   Accounting  for
               Stock-Based Compensation,  which permits entities to recognize as
               expense over the vesting period the fair value of all stock-based
               awards on the date of  grant.  Alternatively,  SFAS No.  123 also
               allows  entities  to  continue  to apply  the  provisions  of APB
               Opinion  No. 25 and  provide  proforma  net income  and  proforma
               earnings per share  disclosures  for employee stock option grants
               made in 1997 and future years as if the  fair-value-based  method
               defined in SFAS No. 123 had been applied. The Company has elected
               to  continue  to apply the  provisions  of APB Opinion No. 25 and
               provide the pro forma disclosure provisions of SFAS No.
               123.

       (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.

                                       32                            (Continued)
<PAGE>

                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


        (m)    Reclassification

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

        (n)    Earnings Per Common and Common Equivalent Share

               Earnings per common and common  equivalent  share are computed by
               dividing net income by the weighted  average number of common and
               common equivalent shares outstanding during the period presented.

               The number of shares used in the earnings per share  computations
               are as follows for the years ended January 31:

                                                          1997           1996
                                                          ----           ----
               Weighted average common and common                
                    equivalent shares outstanding       3,440,557      3,360,599
                                                        =========      =========
                                                        
(2)    Notes Receivable

       Notes receivable consist of the following at January 31:

<TABLE>
<CAPTION>
<S> <C>
                                                                                                1997       1996
                                                                                               ------     ------
       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        -
                                                                                               ------      -----
                           Subtotal                                                            50,045     10,012
              Less current maturities                                                          20,021     10,012
                                                                                               ------     ------

                                                                                             $ 30,024        -
                                                                                               ======     ======
       Other:
              Individuals, receivable in monthly installments from $350 to $694,
                 including interest ranging from 9% to
                 10%, secured by land                                                        $ 72,122     15,600
              Less current maturities                                                           6,169      2,762
                                                                                              -------    -------

                                                                                             $ 65,953     12,838
                                                                                               ======     ======

</TABLE>




                                       33                            (Continued)
<PAGE>

                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


(3)    Property and Equipment

       Property and equipment consist of the following at January 31:

<TABLE>
<CAPTION>
<S> <C>
                                                             Estimated
                                                            life (years)               1997             1996
                                                            ------------               ----             ----

       Land                                                       -                $   1,984,312       2,020,130
       Buildings and improvements                              10 - 40                 6,764,809       6,892,891
       Machinery and equipment                                  3 - 10                 4,813,546       4,110,231
       Autos, trucks and mobile homes                           3 - 10                 1,527,401       1,517,111
       Billboards on operating leases                          15 - 20                 4,657,590       3,696,682
       Billboards                                              15 - 20                   787,714         774,349
                                                               =======               -----------     -----------
                                    Subtotal, at cost                                 20,535,372      19,011,394
       Less accumulated depreciation                                                 (10,889,102)    (10,287,215)
       Construction in progress                                                          324,276         186,291
                                                                                     -----------     -----------

                                    Total property and equipment                   $   9,970,546       8,910,470
                                                                                     ===========     ===========
</TABLE>

       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 reduced  depreciation  expense for the year ended
       January 31, 1997 by $57,100 and increased net income by $34,200 ($.01 per
       share).

       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 reduced  depreciation expense by $112,200 and increased net income
       by $67,300 ($.02 per share) for the year ended January 31, 1997.

 (4)   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 11
       regarding land leased from others by the Company for billboard use.





                                       34                            (Continued)
<PAGE>

                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


       Minimum future rental income on noncancelable  billboard leases in effect
       as of January 31, 1997 are as follows:

                   Year ending January 31

                           1998                     $ 3,767,791
                           1999                       1,852,714
                           2000                         171,372
                           2001                          10,080
                                                    -----------

                           Total                    $ 5,801,957
                                                      =========


 (5)   Short-term Borrowing, Bank

       Short-term borrowing, bank is as follows:
<TABLE>
<CAPTION>
<S> <C>
                                                                                           1997            1996
                                                                                           ----            ----

       $150,000 line of credit with bank,  variable  interest payable monthly at
              prime rate plus 1% (8.25% at January 31,
              1997), balance due June 1997; unsecured                                  $    -            149,000
       $1,000,000 line of credit with bank, variable interest
              payable  monthly,  at prime  rate plus 1% (8.25%  at  January  31,
              1997), balance due June 1997; secured by
              billboards and inventory                                                      -                -
                                                                                         -------         ------- 
                               Total short-term borrowing, bank                        $    -            149,000
                                                                                         =======         =======
</TABLE>

       The average balance  outstanding on the lines of credit was approximately
       $166,160 and $114,000  during the fiscal years ended January 31, 1997 and
       1996,  respectively.  The highest  balances  outstanding  during the same
       periods were  $951,500 and  $149,000  and the average  interest  rate for
       outstanding borrowings was 9.25 and 9.75 percent, respectively.














                                       35                            (Continued)
<PAGE>

                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
<S> <C>
(6)    Long-term Debt

       Long-term debt is as follows:

                                                                                          1997             1996
                                                                                          ----             ----
       Due    bank, maturity June 2000, variable interest at prime plus 1% (9.5%
              at January 31, 1996), monthly installments of $28,831,  secured by
              buildings, equipment, billboards
              and inventories                                                         $     -            1,356,921
       Due bank, maturity January 2006, variable interest at base
              lending rate (8.25% at January 31, 1997), monthly
              installments of $21,724, secured by mortgage and deed
              of trust                                                                  1,588,087            -
       Due bank, maturity February 2003, variable interest at base
              lending rate (8.25% at January 31, 1997), monthly
              installments of $15,755, secured by billboards                              902,136            -
       Due bank, maturity January 2000, variable interest
              interest at index rate (8.25 at January 31, 1997),
              monthly installments of $6,883 secured by buildings
              and equipment                                                               737,968          785,903
       Due bank, maturity January 2000, variable interest at
              index rate plus .5 (8.25% at January 31, 1997),
              monthly installments of $8,614, secured by
              buildings and equipment                                                     843,049          866,370
       Due banks and other financing companies, with maturity
              dates ranging from 1997 to 2031.  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 $23,757.
              Secured by land, buildings, equipment, billboard, inventories,
              and a mortgage note                                                       1,813,699        1,845,497
       Due individuals, various payment schedules with maturity
              dates ranging from 1997 to 2004, including interest
              ranging from 8.00% to 12.00%.  Monthly payments
              totaling $12,792.  Secured by land, buildings, and
              billboards                                                                  809,653          996,013
       Due stockholders and related individuals                                              -             559,981
       Other                                                                                 -             166,747
                                                                                       ----------       ----------
                                                                                        6,694,592        6,577,432
       Less current maturities                                                            576,186          768,929
                                                                                       ----------       ----------

                                                                                      $ 6,118,406        5,808,503
                                                                                       ==========       ==========
</TABLE>


                                       36                            (Continued)


<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


       Future maturities of long-term debt are as follows:

                           1998                                $    576,186
                           1999                                     518,775
                           2000                                     663,254
                           2001                                   1,928,748
                           2002                                     464,441
                           Thereafter                             2,543,188
                                                                  ---------

                                            Total               $ 6,694,592
                                                                  =========

       Due banks and other  financing  companies  includes a note payable of Los
       Cuatros  which has an  outstanding  balance  as of  January  31,  1997 of
       $1,093,846 (8.125 percent) and matures in 2031.

       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.

       During the year ended  January 31,  1997,  the  Company  paid in full its
       indebtedness to stockholders and officers of the Company. The balance was
       approximately  $535,000  at the date of payoff  ($560,000  at January 31,
       1996). In order to pay its stockholders and officers, the Company secured
       a note  payable  with a financial  institution  in the amount of $535,000
       with a variable interest rate of prime plus 1 percent.

(7)    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.

       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 is exercisable
       beginning one year from the effective date of the offering. As of January
       31, 1997, the option is not exercisable.

       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.
                                       37                            (Continued)
<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


(8)    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, 1997).  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.

       At January 31, 1997,  there were 76,485  additional  shares available for
       grant under the Plan. The per share  weighted-average fair value of stock
       options  granted  during  1997 was  $0.91 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.

       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  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 year  ended
       January 31, 1997:

                      Net income                      As reported    $ 905,209
                                                      Pro forma        707,557
                                                                       =======
                      Earnings per common and
                           common equivalent share    As reported    $     .26
                                                      Pro forma            .21
                                                                       =======

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








                                       38                            (Continued)


<PAGE>


                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                    Notes to Consolidated Financial Statements

       Stock option activity during the periods indicated is as follows:

                                              Number of       Weighted-average
                                                shares         exercise price

       Balance at January 31, 1996                -              $  -
                  Granted                      362,000             8.22
                  Exercised                       -                 -
                  Forfeited                       -                 -
                  Expired                         -                 -
                                               -------             ----

       Balance at January 31, 1997             362,000           $ 8.22
                                               =======             ====

       At January 31, 1997,  the range of exercise  prices and  weighted-average
       remaining  contractual life of outstanding  options was $8.00 - $8.80 and
       9.88  years,  respectively.  At January  31,  1997,  none of the  options
       granted are exercisable.

(9)    Income Taxes

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

                                        Current        Deferred           Total
                                        -------        --------           -----
       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
                                        =======          ======          =======
       Years ended January 31, 1996:
           U.S. federal               $ 214,780            -             214,780
           State and local               38,037            -              38,037
                                        -------          ------          -------

                                      $ 252,817            -             252,817
                                        =======          ======          =======













                                       39                            (Continued)


<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,
                                                          -----------        
                                                     1997             1996
                                                     ----             ----
       Computed "expected" tax                    $ 512,951          216,388
       State income taxes, net of federal
                      tax benefit                    64,446           25,104
       Other                                         26,075           11,325
                                                    -------          -------
                                    Total         $ 603,472          252,817
                                                    =======          =======

       The tax effects of temporary  differences  that give rise to  significant
       portions of the  deferred  tax assets and  deferred  tax  liabilities  at
       January 31, 1997 are as follows:

       Deferred tax assets:
                  Compensated absences, principally due to
                     accrual for financial reporting purposes       $ 17,258
                  Other                                               12,000
                                                                      ------
                               Total gross deferred tax assets        29,258
       Less valuation allowance                                         -
                               Net deferred tax assets                29,258
                                                                      ------  
       Deferred tax liabilities:                                 
                  Property and equipment, principally due to     
                     differences in depreciation                     (67,712)
                  Other                                               (4,146)
                                                                      ------   
                               Total gross deferred liabilities      (71,858)
                                                                      ------   
                               Net deferred tax liability           $(42,600)
                                                                      ====== 
  
       There was no valuation  allowance  for deferred tax assets as of February
       1, 1996 or 1995.  Based upon the level of historical  taxable  income and
       projections for future taxable income over the periods 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.

(10)   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
       $15,745 and $8,250 for fiscal 1997 and 1996, respectively.  The Company's
       contributions  to the profit sharing plan were $49,520 in fiscal 1997 and
       $84,845 in fiscal 1996.
                                       40                            (Continued)
<PAGE>



                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

 (11)  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 $286,752 and  $269,627 for the years ended  January 31, 1997 and 1996,
       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, 1997.  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:

                      1998                         $ 108,046
                      1999                            66,300
                      2000                            51,600
                      2001                            49,538
                      2002                            42,100
                      Thereafter                     391,500
                                                     -------

                      Total                        $ 709,084
                                                     =======

       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 $519,314 and $458,461 for the years ended
       January  31, 1997 and 1996,  respectively.  At January 31, 1997 and 1996,
       the Company had  prepaid on these  leases in the amounts of $290,882  and
       $237,361,  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

                      1998                         $ 578,783
                      1999                           225,365
                      2000                           182,326
                      2001                           131,923
                      2002                           102,671
                      Thereafter                     135,312
                                                     -------

                      Total                      $ 1,356,380 
                                                   =========    

                                       41                            (Continued)

<PAGE>



                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

 (12)  Related Party Transactions (See also notes 2 and 6)
       

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

                                                  1997           1996
                                                  ----           ----

       Interest income                         $  2,027          4,314
       Interest expense                          33,995         65,753
                                                 ======         ======

       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 $33,468
       and $36,612 for January 31, 1997 and 1996,  respectively.  Franchise fees
       are included in general and  administrative  expenses in the accompanying
       consolidated statements of income.


(13)   Cash Flow Disclosures

       Cash paid for interest and income taxes was as follows:

                                                  1997           1996
                                                  ----           ----

       Interest                               $ 678,694        537,163
       Income taxes                             415,800        315,256
                                                =======        =======

       Supplemental  disclosures of noncash  investing and financing  activities
       are as follows:

       The Company  finances a  significant  portion of property and  equipment.
       During  the  years  ending  January  31,  1997  and  1996,  respectively,
       approximately  $1,189,000 and $1,306,000 of additional long-term debt was
       obtained,  most of which can be directly  associated with fixed asset and
       land acquisitions and expansion of the outdoor advertising operations.

       For the year ended January 31, 1997, the Company issued 191,799 shares of
       stock dividends at approximately $1.56 per share, totaling $298,733.  For
       the year ended January 31, 1996,  the Company  issued  232,522  shares of
       stock dividends at approximately $1.59 per share, totaling $368,116.  The
       book value of shares  distributed as stock  dividends  approximates  fair
       market value.








                                       42                            (Continued)

<PAGE>



                                     BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(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>
<CAPTION>
<S> <C>
                                                                                  Depreciation
                                               Net     Operating    Identifiable       and         Capital
                                              sales     income         assets     amortization   expenditures
                                              -----     ------         ------     ------------   ------------
       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
                                           ==================================================================


       1996:
         Travel center operations          $  20,175      1,284         6,008          434            576
         Outdoor advertising operations        2,770        158         3,125          261            691
         Corporate and other                     -         (275)        4,465          162            228
                                           ------------------------------------------------------------------
                                              22,945      1,167        13,598          857          1,495
                                           ==================================================================
</TABLE>


       Other  income   represents   income  from  wholly  and   majority   owned
       subsidiaries,  sales from crops owned by the Company and other immaterial
       items  which  are not  identifiable  to the  travel  centers  or  outdoor
       advertising segments.



                                       43                            (Continued)
<PAGE>
                                      BOWLIN
                      OUTDOOR ADVERTISING & TRAVEL CENTERS
                          INCORPORATED AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(15)   Subsequent Event

       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  will be  accounted  for as a purchase in the year ended
       January 31, 1998. The purchase price will be allocated to assets acquired
       and liabilities  assumed based on their estimated fair values. The excess
       of the purchase price over the net assets acquired will be amortized over
       the  estimated  period of benefit  not to exceed 40 years.  The  purchase
       price  allocation  will be  determined  during the year ended January 31,
       1998 when  appraisals,  other studies and additional  information  become
       available.  Accordingly,  the final allocation may have a material effect
       on the supplemental unaudited pro forma information presented below.

       The  following  unaudited  pro forma  information  presents  the combined
       results of the  operations as though the  acquisition  of Pony Panels had
       occurred on February  1, 1996 and does not  purport to be  indicative  of
       what would have  occurred had the  acquisition  actually  been made as of
       such date or of results which may occur in the future.

                 Net sales                                $ 25,889,169
                 Net income                                    860,754
                                                          ============

                 Earnings per common and
                 common equivalent share                  $        .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.
                                       44
<PAGE>



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

     The Company's  prior change in accountants  was previously  reported in its
Form SB-2 Registration  (file number 333-12957) and is therefore not required to
be  reported  in  this  Form  10-KSB  by  Securities  and  Exchange   Commission
regulations.


                                    PART III

     Additional  information  required  by Part III  (Items 9, 10, 11 and 12) is
incorporated by reference from the registrant's information statement which will
be field with the  Securities  and Exchange  Commission  not later than 120 days
(May 30, 1997) after the end of the fiscal year covered by this Form 10-KSB.


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,
     1997.
                              INDEX TO EXHIBITS
                              -----------------
EXHIBIT                                                   METHOD
NUMBER             DESCRIPTION                           OF FILING           
------             -----------                           ---------

 2.1    Purchase Agreement dated April 1,     (Incorporated by reference;       
        1997 between the Registrant and the   previously filed as Exhibit      
        McCarty Company                       2.1 to the Registrant's Report   
                                              on Form 8-K dated  April 15, 1997)
                                                                      
 3.1    Articles of Incorporation of          (Incorporated by reference;      
        Registrant                            previously filed as Exhibit     
                                              3.1 to the Registrant's Form    
                                              SB-2 Registration Statement,    
                                              File No. 333-12957 (the          
                                              "Form SB-2")                   
                                              
 3.2    By-laws of Registrant                 (Incorporated by reference;
                                              previously filed as Exhibit 
                                              3.2 to the Form SB-2)

 4      Specimen of Common Stock Certificate  (Incorporated by reference;
                                              previously filed as Exhibit 
                                              4 to the Form SB-2)

                                       45
<PAGE>

10.1    Form of Billboard Outdoor             (Incorporated by reference;     
        Advertising Agreement                 previously filed as Exhibit 
                                              10.1 to the Form SB-2)        
                                                                      
10.2    Form of Poster Outdoor Advertising    (Incorporated by reference;  
        Agreement                             previously filed as Exhibit 
                                              10.2 to the Form SB-2)         
                                                                      
10.3    Distributor Franchise Agreement,      (Incorporated by reference; 
        dated as of July 19, 1995,            previously filed as Exhibit  
        between the Registrant and CITGO      10.3 to the Form SB-2)            
        Petroleum Corporation                                         
                                                                      
10.4    Form of Representative's Option       (Incorporated by reference;
                                              previously filed as Exhibit 
                                              10.4 to the Form SB-2)

10.5    Form of Employment Agreement, dated   (Incorporated by reference;  
        as of September 27, 1996, between     previously filed as Exhibit 
        the Registrant and Michael L. Bowlin  10.5 to the Form SB-2)
                
10.6    Form of Employment Agreement, dated   (Incorporated by reference; 
        as of September 27, 1996, between     previously filed as Exhibit 
        the Registrant and                    10.6 to the Form SB-2)          
        C. Christopher Bess                   
                                                                      
10.7    Loan Agreement, dated as of           (Incorporated by reference;  
        January 31, 1995, between the         previously filed as Exhibit 
        Registrant and First Security Bank    10.7 to the Form SB-2)       
        of New Mexico, ("First Security       
        Bank")                                      

10.8    Loan Agreement, dated as of May 16,   (Incorporated by reference; 
        1995, between the Registrant and      previously filed as Exhibit 
        First Security Bank                   10.8 to the Form SB-2)            
                                                                      
10.9    Promissory Note, dated as of May 16,  (Incorporated by reference; 
        1995, payable to First Security Bank  previously filed as Exhibit 
        in the aggregate principal amount of  10.9 to the Form SB-2)            
        $900,000                                                           

10.10   Revolving Promissory Note, dated as   (Incorporated by reference; 
        of June 1, 1996, payable by the       previously filed as Exhibit 
        Registrant to First Security Bank     10.10 to the Form SB-2)           
        in the aggregate principal amount of  
        $150,000                        
        
10.11   Revision Agreement, dated as of       (Incorporated by reference; 
        May 16, 1995, between the Registrant  previously filed as Exhibit 
        and First Security Bank               10.11 to the Form SB-2)
                                                                      
10.12   Promissory Note, dated as of          (Incorporated by reference;
        February  5, 1996,  payable by the    previously filed as Exhibit
        Registrant to Norwest Bank of         10.12 to the Form SB-2)           
        New Mexico, National Association                                        
        ("Norwest Bank") in the aggregate
        principal amount of $1,700,000

10.13   Business Loan Agreement, dated as of  (Incorporated by reference;      
        February 5, 1996, between the         previously filed as Exhibit 
        Registrant and Norwest Bank           10.13 to the Form SB-2)
                                       46
<PAGE>

10.14   Promissory Note, dated as of          (Incorporated by reference;
        February 5, 1996, payable by the      previously filed as Exhibit
        Registrant to Norwest Bank in the     10.14 to the Form SB-2)    
        aggregate principal amount of         
        $1,000,000                                          

10.15   Promissory Note, dated as of          (Incorporated by reference;
        February 5, 1996, payable by the      previously filed as Exhibit
        Registrant to Norwest Bank in the     10.15 to the Form SB-2)    
        aggregate principal amount of up to   
        $1,000,000                                                    

10.16   [Intentionally omitted]

10.17   Lease, dated as of November 22,       (Incorporated by reference;
        1966, between Clara May Basset        previously filed as Exhibit
        and the Registrant, as amended        10.17 to the Form SB-2)+          
                                                                      
10.18   Lease, dated as of January 12, 1987,  (Incorporated by reference;
        between Janet Prince and the          previously filed as Exhibit
        Registrant                            10.18 to the Form SB-2)+          
                                                                      
10.19   Commercial Lease, dated as of         (Incorporated by reference;
        September 21, 1986, between           previously filed as Exhibit       
        the State of Arizona and the          10.19 to the Form SB-2)    
        Registrant, as amended                   
                                                                      
10.20   Business Lease, dated as of           (Incorporated by reference;
        March 16, 1995, between the New       previously filed as Exhibit
        Mexico Commissioner of Public Lands   10.20 to the Form SB-2)    
        and the Registrant, as amended                                          

10.21   Lease, dated as of June 3, 1974,      (Incorporated by reference;
        between the Registrant and            previously filed as Exhibit       
        Elbert and Ina Jean Roundy, as        10.21 to the Form SB-2)+   
        amended                               
                                                                      
10.22   Lease Agreement, dated as of          (Incorporated by reference;
        June 23, 1989, between the            previously filed as Exhibit
        Registrant and Rex Kipp, Jr., as      10.22 to the Form SB-2)+   
        amended                               
                                                                      
10.23   Lease, dated as of September 29,      (Incorporated by reference;
        1983, between J.T. and Idra M.        previously filed as Exhibit
        Turner and the Registrant             10.23 to the Form SB-2)+          
                                                                      
10.24   Business Lease, dated as of           (Incorporated by reference;
        October 1, 1991, between the          previously filed as Exhibit
        Registrant and the New Mexico         10.24 to the Form SB-2)    
        Commissioner of Public Lands          
                                                                      
10.25   Commercial Lease, dated as of         (Incorporated by reference;
        September 21, 1986, between the       previously filed as Exhibit
        Registrant and the State of Arizona,  10.25 to the Form SB-2)    
        as amended                            
                                                                      
10.26   Commercial Lease, dated as of         (Incorporated by reference;
        June 11, 1986, between the            previously filed as Exhibit
        Registrant and the State of Arizona,  10.26 to the Form SB-2)    
        as amended                            
                                       47
<PAGE>



10.27   1996 Stock Option Plan                (Incorporated by reference;       
                                              previously filed as Exhibit       
                                              10.27 to the Form SB-2)           
                                              
10.28   Profit-Sharing 401(k) Plan and Trust  (Incorporated by reference;       
                                              previously filed as Exhibit       
                                              10.28 to the Form SB-2)           
                                              
10.29   Letter of Agreement, dated as of      (Incorporated by reference;
        April 26, 1996, between the           previously filed as Exhibit
        Registrant and Miller Capital         10.29 to the Form SB-2)    
        Corporation, as amended               
                                                                      
10.30   [Intentionally omitted]

10.31   Commercial Guaranty, dated            (Incorporated by reference;
        August 23, 1996, by Michael L.        previously filed as Exhibit
        Bowlin in favor of Norwest Bank       10.31 to the Form SB-2)    
        New Mexico, National Association                                        
        
10.32   "Dairy Queen" Operating Agreement,    (Incorporated by reference; 
        dated as of March 10, 1983, between   previously filed as Exhibit   
        Interstate Dairy Queen Corporation    10.32 to the Form SB-2)     
        and the Registrant d/b/a DQ/B of      
        Edgewood, NM, together with 
        amendments and ancillary agreements
        related thereto

10.33   "Dairy Queen" Operating Agreement,    (Incorporated by reference;
        dated as of May 1, 1982, between      previously filed as Exhibit
        Interstate Dairy Queen Corporation    10.33 to the Form SB-2)    
        and the Registrant d/b/a DQ/B of      
        Flying C, New Mexico, together with
        amendments and ancillary agreements
        related thereto

10.34   "Dairy Queen" Store Operating         (Incorporated by reference;
        Agreement, dated as of November 18,   previously filed as Exhibit
        1986, between Dairy Queen of          10.34 to the Form SB-2)    
        Southern Arizona, Inc. and the        
        Registrant, together with 
        amendments and ancillary agreements 
        related thereto

10.35   "Dairy Queen" Operating Agreement,    (Incorporated by reference;   
        dated as of September 1, 1982,        previously filed as Exhibit
        between Interstate Dairy Queen        10.35 to the Form SB-2)       
        Corporation and the Registrant        
        d/b/a DQ of Bluewater, New Mexico,
        together with amendments and 
        ancillary agreements related thereto

10.36   "Dairy Queen" Operating Agreement,    (Incorporated by reference;
        dated as of July 29, 1976, between    previously filed as Exhibit
        Richard G. Kassel and G. Leone        10.36 to the Form SB-2)    
        Kassel and the Registrant, as         
        amended                                    
                                       48
<PAGE>

10.37   "Dairy Queen" Store Operating         (Incorporated by reference;
        License Agreement, dated as of        previously filed as Exhibit
        February 1, 1984, between Dairy       10.37 to the Form SB-2)    
        Queen of Arizona, Inc. and the        
        Registrant, together with 
        amendments and ancillary agreements 
        related thereto

10.38   "Dairy Queen" Operating Agreement     (Incorporated by reference;
        dated as of October 30, 1985,         previously filed as Exhibit
        between Interstate Dairy Queen        10.38 to the Form SB-2)    
        Corporation and the Registrant, as    
        amended                                                       

10.39   "Dairy Queen" Operating Agreement,    (Incorporated by reference; 
        dated as of June 7, 1989, between     previously filed as Exhibit
        Interstate Dairy Queen Corporation    10.39 to the Form SB-2)    
        and the Registrant d/b/a "DQ" at      
        Butterfield Station, together with      
        amendments and ancillary agreements
        related thereto

10.40   Letter of Agreement, dated as of      (Incorporated by reference;
        March 1, 1987, between Stuckey's      previously filed as Exhibit
        Corporation and the Registrant        10.40 to the Form SB-2)    
        confirming franchise of Benson,       
        AZ Stuckey's Pecan Shoppe                                     

10.41   Franchise Agreement, dated as of      (Incorporated by reference;
        February 22, 1982, between            previously filed as Exhibit
        Stuckey's, Inc. and the Registrant,   10.41 to the Form SB-2)    
        together with a related Personal      
        Guaranty and Indemnity                                        

10.42   Promissory  Note,  dated as of        Filed  herewith
        April 1,  1997,  payable by the
        Registrant  to Norwest Bank in the  
        aggregate principal amount of 
        $2,500,000

21      List of Subsidiaries                  Filed herewith

27      Financial Data Schedule               Filed herewith

+ Confidential treatment granted as to certain portions of this exhibit.
                                       49


<PAGE>


                                   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:    May 1, 1997

     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                                     May 1, 1997
    -------------------------------------------------
     Michael L. Bowlin, Chairman of the Board,
     President, CEO and Director (Principal
     Executive Officer)

By: /s/ MICHAEL E. RISING                                     May 1, 1997
    -------------------------------------------------
     Michael E. Rising, Chief Financial Officer
     and Chief Accounting Officer (Principal
     Financial Accounting Officer)

By: /s/ C. CHRISTOPHER BESS                                   May 1, 1997
    -------------------------------------------------
     C. Christopher Bess, Director

By: /s/ NINA J. PRATZ                                         May 1, 1997
    -------------------------------------------------
     Nina J. Pratz, Director

By: /s/ ROBERT L. BECKETT                                     May 1, 1997
    -------------------------------------------------
     Robert L. Beckett, Director

By: /s/ JAMES A. CLARK                                        May 1, 1997
  ---------------------------------------------------
     James A. Clark, Director

By: /s/ BRIAN MCCARTY                                         May 1, 1997
    -------------------------------------------------
     Brian McCarty, Director

By: /s/ HAROLD VAN TONGEREN                                   May 1, 1997
    -------------------------------------------------
     Harold Van Tongeren, Director

                                       50