FORM 10-KSB
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

          [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                     For Fiscal Year Ended December 31, 1998


                         Commission File Number: 0-24058

                           WESTERN COUNTRY CLUBS, INC.
             (Exact name of registrant as specified in its charter)
            Colorado                                  84-1131343
(State or other jurisdiction of            (IRS Employer Identification No.)
incorporation or organization)

                        1601 N.W. Expressway, Suite 1610
                          Oklahoma City, Oklahoma 73118
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:    (405) 848-0996

Securities to be registered under Section 12(b) of the Act:     None

Securities registered pursuant to Section 12(g) of the Act:
   Common Stock, $.01 par value

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

Check if there is no  disclosure of  delinquent  filers  pursuant to Item 405 of
Regulation  S-B  contained  herein,  and will not 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. [ ]

Revenues of registrant for year ended December 31, 1998:         $5,278,924

Aggregate market value of voting stock held by
non-affiliates as of April 9, 1999                               $2,731,721

Shares of Common Stock, $.01 par value, outstanding
as of April 9, 1999:                                              3,789,721

                       DOCUMENTS INCORPORATED BY REFERENCE

The Company's  definitive  proxy statement in connection with the Annual Meeting
of Shareholders  to be filed with the Commission  pursuant to Regulation 14A, is
incorporated by reference into Part III of this report.



<PAGE>




                           WESTERN COUNTRY CLUBS, INC.

                         1998 Form 10-KSB Annual Report

                                Table of Contents

     Item

                                     Part I

           Special Note Regarding Forward Looking Statements

       1.  Description of Business

       2.  Description of Properties

       3.  Legal Proceedings

       4.  Submission of Matters to a Vote of Security Holders

                                     Part II

       5.  Market for Common Equity and Related Stockholder Matters

       6.  Management's Discussion and Analysis

       7.  Financial Statements and Supplementary Data

       8.  Changes In and Disagreements With Accountants on Accounting and
           Financial Disclosure

                                    Part III

       9.  Directors,   Executive  Officers,   Promoters  and  Control  Persons:
           Compliance with Section 16(a) of the Exchange Act

       10. Executive Compensation

       11. Security Ownership of Certain Beneficial Owners and Management

       12. Certain Relationships and Related Transactions

       13. Exhibits and Reports on Form 8-K

           Signatures


<PAGE>



                                     PART I

Special Note Regarding Forward-Looking Statements

     Certain  statements  in this Form  10-KSB  under  "Item 1.  Description  of
Business",  "Item 3. Legal  Proceedings",  "Item 6. Management's  Discussion and
Analysis"  and  elsewhere  constitute  "forward-looking  statements"  within the
meaning of the Private  Securities  Litigation  Reform Act of 1995 (the  "Reform
Act").  Such  forward-looking   statements  involve  known  and  unknown  risks,
uncertainties and other facts which may cause the actual results, performance or
achievements of Western Country Clubs, Inc. (the "Company") and its subsidiaries
and affiliated  partnerships to be materially different from any future results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements. Such factors include, among others, the following:  general economic
and  business  conditions;   competition;   success  of  operating  initiatives;
development and operating costs;  advertising and promotional  efforts;  adverse
publicity;  customer  appeal and loyalty;  availability,  locations and terms of
sites  for  nightclub  development;  the  development  of the  "Atomic  Burrito"
concept;   changes  in  business  strategy  or  development  plans;  quality  of
management;  availability,  terms and development of capital; business abilities
and judgment of personnel;  availability of qualified personnel; food, labor and
employee  benefit  costs;  changes in, or the failure to comply with  government
regulations;  regional weather  conditions;  construction  schedules;  and other
factors referenced in the Form 10-KSB. The use in this Form 10-KSB of such words
as "believes",  "anticipates",  "expects", "intends" and similar expressions are
intended to identify forward-looking statements, but are not the exclusive means
of identifying such  statements.  The success of the Company is dependent on the
efforts of the Company and its  management and personnel and the manner in which
they operate and develop stores.

Item 1.  Description of Business

General

     Western Country Clubs, Inc. (the "Company") was organized under the laws of
the State of Colorado in December 1989, but had no operations  until April 1993.
The Company  completed its initial  public  offering in May 1994,  from which it
received  net  proceeds of  approximately  $1.9 million from the sale of 460,000
shares of Common  Stock.  In late 1996,  a change of control  took place,  which
resulted in the  replacement  of senior  management and changes in the Company's
operating and growth strategies.  The Company's prior strategies focused heavily
on cost  reduction  as the  preferred  means of  improving  profitability.  Such
strategies  resulted  in lean  Club-level  management  and  loss of  experienced
personnel,  low levels of physical facility  maintenance and  reinvestment,  and
reduced levels of  advertising,  promotion and  entertainment  expense.  Current
management has replaced much of the Club-level  management with more experienced
personnel,  instituted  management  training  procedures,   implemented  a  cost
management  system which  includes  daily  unit-level  accounting and reporting,
improved the sound,  light and video  systems,  increased  radio buys within the
local markets,  and implemented new advertising and in-store  promotions.  These
changes reflect current  management's belief that long-term strategies involving
greater investment in personnel and physical  facilities will produce a superior
financial performance. See Item 6."Management's Discussion and Analysis."

     During 1998, after months of searching for a viable  restaurant  concept to
acquire or merge with, the Company developed its own restaurant  concept "Atomic
Burrito",  a "Fresh-Mex"  restaurant  featuring a Mexican menu emphasizing fresh
ingredients and made-to-order burritos.  Utilizing senior management's extensive
background in the Mexican segment of the restaurant industry, the Company formed
a wholly-owned subsidiary  corporation,  "Atomic Burrito, Inc.", and developed a
prototype for the concept,  including menus, recipes,  design, layout, equipment
specifications and other items such as signage,  logos, and an operations manual
of operating  procedures.  The Company then entered into two License  Agreements
with  an  experienced  food  service  operator  who  opened two "Atomic Burrito"
restaurants in Stillwater,  Oklahoma and in Norman,  Oklahoma during the fall of
1998. The Company later entered into another License  Agreement with a different
operator for the  development  of an "Atomic  Burrito"  restaurant  in Longview,
Washington.  In  December  of 1998,  the Company  entered  into a joint  venture
agreement with a publicly owned company,  New York Bagel Enterprises, Inc. ("New
York  Bagel")  for  the  joint   development  of  additional   "Atomic  Burrito"
restaurants.  Subject to available financing, the Company intends to develop the
"Atomic   Burrito"  concept  through  both   company-owned   and  joint  venture
restaurants, as well as through additional licensed restaurants.  See additional
discussion in Item I, "Atomic Burrito Restaurants".

The Company

     The Company  currently  operates  two  "country-western"  theme  nightclubs
located in St. Louis, Missouri (the "St. Louis Club") and Wichita,  Kansas, (the
"Wichita Club"). Each Club combines live entertainment, dancing, bar and food in
a country-western  atmosphere. The Wichita Club has operated as In Cahoots since
its  inception  in 1994,  and the St. Louis Club was changed to an In Cahoots in
1996, having previously  operated as A Little Bit of Texas. The Company acquired
its  interest  in the Wichita  Club,  an 80% general  partnership  interest,  in
December 1996 from a corporation  affiliated  with James E. Blacketer and Joe R.
Love,  Directors  of the  Company.  During  1997,  the Company  sold a nightclub
located in Tucson, Arizona (the "Tucson Club").  Additionally,  the Company also
operated a nightclub in Indianapolis,  Indiana (the "Indy Club") until December,
1997 when the club was closed in  anticipation  of its sale in early  1998.  See
Item 6. "Management's Discussion and Analysis."

     The Company is taking a cautious approach toward expansion of its nightclub
business. The Company has closed and sold two of its clubs in 1997 and 1998, and
sold its  partnership  interest  in  another  club in 1997.  With the  Company's
current focus on development of its "Atomic Burrito"  restaurant  concept, it is
anticipated that most of the Company's  resources in the future will be utilized
for the development and expansion of the "Atomic  Burrito"  restaurant  concept,
rather than for the development of additional nightclubs.

The St. Louis Club

     The St.  Louis Club is  located on the I-70  corridor  between  St.  Louis,
Missouri  and Kansas  City,  Kansas.  The Club  occupies  roughly  one-half of a
building which previously housed a Sam's Club wholesale  warehouse operation and
is in excess of 56,000 square feet making it the largest  nightclub in Missouri.
This mammoth nightclub  operates under the name In Cahoots and features a design
with the look and feel of an authentic  rustic  western town.  The Club,  with a
capacity  of almost  3,000,  houses a huge dance  floor,  performance  stage,  a
billiards  and video arcade area and several  retail stores  including  Sundance
Silver & Hide,  which sells wardrobe  items,  including hats and boots,  and the
Homestead  Store which sells Indian  artifacts,  clothing and jewelry.  Sundance
Silver & Hide  occupies  approximately 800 square feet of the Club, for which it
pays  $1,200 per month  pursuant  to an oral  agreement  with the  Company.  The
Homestead Store occupies approximately 600 square feet of the Club, for which it
pays $300 plus 10% of sales per month  pursuant  to an oral  agreement  with the
Company.  The Club also features a walk-up restaurant selling various food items
in  addition to its  extensive  drink  offerings.  The St.  Louis Club  featured
numerous  nationally  known  entertainers  during the past year,  including such
performers as Tracy Lawrence, Lone Star, Chris LeDoux and Blackhawk.

     The St. Louis Club opened for business as a non-alcoholic club on April 22,
1994. It began marketing  alcoholic  beverages on May 19, 1994 upon receipt of a
liquor  license from the  Supervisor of Liquor Control of the State of Missouri.
The  customer's  average  expenditure,  exclusive  of  food  and  souvenirs,  is
approximately $11.00.

The Wichita Club

     The  Wichita  Club  opened in  February  1994,  and has been  voted the top
country-western  club in Wichita  since  opening.  It consists of  approximately
30,000 square feet and has parking for 900 cars. The Wichita Club is designed to
appeal to rodeo cowboys as well as the casual  country  western music lover.  It
blends high tech,  state-of-the-art,  and "good old country boy"  entertainment.
The high tech  presentation  includes  giant 20 foot  video  screens,  double CD
players,  a roll up lighted  American flag,  neon lighting and the capability to
include a live band's sound  throughout the house speaker system.  A comfortable
ambiance is achieved through rustic wooden floors, old west photographs, antique
back  bars,  and a huge,  hand-painted  mural of past and  present  Country  and
Western entertainers. The showcase of the Club is the circular, race track style
dance floor, complete with a bar in the center allowing for more dancing room.

     The Company acquired its interest in the Wichita Club on December 16, 1996,
when it acquired  Entertainment  Wichita,  Inc. ("EWI"), the general partner and
80% owner of In Cahoots, Limited Partnership,  a Kansas limited partnership.  In
exchange for the 80% interest,  the Company  issued 400,000 shares of its Common
Stock and assumed $150,000 in debt through a merger  transaction.  EWI was owned
45.5% by Shane Investments,  L.C. ("Shane Investments"),  a corporation which is
solely owned and  controlled  by Joe Robert  Love,  Jr., the adult son of Joe R.
Love, a Director of the Company.  Shane  Investments  received 250,500 shares of
the Company's Common Stock upon completion of the transaction in December 1996.

Entertainment

     The  Company  seeks  to  book  nationally  known  entertainers  as  well as
regionally-known  entertainers  and/or  bands  which  do not yet  have  national
recognition.  National name entertainers such as Willie Nelson, Jerry Lee Lewis,
Tracy Byrd and Blackhawk  have  performed at one or more of the Company's  clubs
during 1998.  The Company  currently  has Toby Keith and Chris Ledoux booked for
engagements  in 1999.  The  Company  utilizes  these  performers  to enhance its
customer  traffic and revenues in what would otherwise be less busy time periods
in the nightclub business.  Typically,  the Company charges admission fees which
approximate  the fee payable to the performers and realizes the benefit from the
increased  sales which are  generated  due to the large  numbers of customers in
attendance.

Atomic Burrito Restaurants

     During  late 1997 and the first  half of 1998,  the  Company  conducted  an
extensive search for a viable  restaurant  concept to acquire and/or merge with.
Management's  belief  was  that  expansion  of a  restaurant  concept  had  many
advantages to the Company compared to expansion of its nightclub business. Under
the guidance and  direction of Company  President and Chief  Executive  Officer,
James E. Blacketer,  and Vice-President of Operations,  Dominic W. Grimmett, the
Company decided to develop its own restaurant concept during the summer of 1998.
Blacketer and Grimmett had extensive  backgrounds in the Mexican  segment of the
restaurant  industry and they  developed a "Fresh-Mex"  burrito  concept,  which
features  fresh  ingredients  and  made-to-order  burritos.  The menu contains a
variety of Mexican items with the burrito being the featured  entre,  and with a
focus on lunch  and  dinner  business.  While  the  concept emphasizes  a family
atmosphere,  alcoholic  beverages will be an option  depending on the particular
location.

     The Company formed a wholly-owned  subsidiary,  "Atomic Burrito,  Inc.", an
Oklahoma  corporation,  in the  summer  of  1998,  for  development  of its  new
restaurant  concept.  Because of its limited  financial  resources,  the Company
opted to develop its prototype restaurants through a "license agreement" whereby
an experienced  restaurant operator would own and operate the restaurant,  using
the "Atomic Burrito" name, menu, recipes, logo, layout and design, and utilizing
the "Atomic Burrito"  operations manual developed by the Company. In return, the
licensee would pay the Company's  subsidiary  (licensor) an initial  license fee
and an ongoing royalty fee.

     The prototype  restaurants,  as developed by the Company, are planned to be
located in leased  premises of  approximately  3,000  square  feet.  Remodeling,
construction  and equipment costs are estimated at $250,000 to $300,000,  though
it may be possible  to convert an existing  restaurant  location  for less.  The
restaurants  are expected to be open from 11:00 a.m.  until 10:00 p.m., and will
serve a variety of Mexican menu items,  centered  around the  burrito.  The food
will be prepared on a serving  line,  made-to-order  as the customer  progresses
along the line.  Some units may offer  alcoholic  beverages  in addition to soft
drinks.

     The first two "Atomic  Burrito"  restaurants  were opened in Stillwater and
Norman,  Oklahoma in the fall of 1998 under  license  agreements.  Subsequent to
fiscal year end 1998, the Company entered into an additional  license  agreement
of an "Atomic  Burrito"  restaurant  to be opened in  Longview,  Washington.  In
addition,  in  October  of  1998,  the  Company  entered  into a  joint  venture
agreement  with New York Bagel  Enterprises,  Inc.  ("New York Bagel"),  for the
joint  development  of up to  eight  "Atomic  Burrito"  restaurants.  Under  the
agreement,  New York  Bagel is to  contribute  the leased  premises,  the lease,
leasehold  improvements  and  equipment  in  certain  existing  New  York  Bagel
restaurants  and the Company is to contribute  up to $150,000 per  restaurant to
pay for conversion costs and additional  equipment.  According to the agreement,
the Company would own a 60% interest in the  restaurant and New York Bagel would
own a 40%  interest in the  restaurant.  The  agreement  also  provides  for the
development of additional "Atomic Burrito"  restaurants over an 18-month period.
The first joint venture  restaurant  under the agreement opened in March 1999 in
Tulsa,  Oklahoma,  with a second  restaurant  scheduled to open in April 1999 in
Wichita,  Kansas.  After the end of fiscal 1998, the Company also entered into a
separate  agreement  with  another  operator for the  development  of an "Atomic
Burrito" restaurant in Houston, Texas with an expected opening in June of 1999.

Expansion Strategy

     The Company  intends to grow primarily by developing  its "Atomic  Burrito"
concept,  through license agreements,  joint venture  developments,  and through
company-owned  restaurants.  Additional  restaurants may be financed through the
formation of limited  partnerships,  internal funding, bank financing or private
and/or public equity or debt offerings,  or a combination of the foregoing.  The
Company may also  purchase  existing  operations,  which may be  converted  into
"Atomic Burrito" restaurants through transactions  involving the issuance of the
Company's  stock and/or cash.  Several  locations  for future  "Atomic  Burrito"
restaurants  have  been  identified  by  management,   including   locations  in
Nashville, Tennessee; Dallas, Austin, San Antonio and Lubbock, Texas; and Kansas
City and St. Louis, Missouri.

Government Regulation

     The  Company's  business is subject to extensive  federal,  state and local
government  regulations,  including  regulations  relating to alcoholic beverage
control,  public  health and safety,  zoning and fire codes.  In addition,  each
nightclub  restaurant  and "Atomic  Burrito"  restaurant  must have food service
licenses from local health authorities.

     Alcoholic  beverage  control  regulations  require  each of the  nightclubs
and/or  restaurants to apply to a state  authority,  and, in certain  locations,
county  or  municipal  authorities  for a license  or  permit to sell  alcoholic
beverages  on the  premises  and to provide  service for  extended  hours and on
Sundays.

     Alcoholic  beverage control  regulations  relate to numerous aspects of the
daily operation including advertising,  wholesale purchasing,  inventory control
and handling,  storage and dispensing of alcoholic  beverages.  Licenses to sell
alcoholic  beverages  must be renewed  annually and are subject to suspension or
revocation for cause, including violation by the Company or its employees of any
law or  regulation  pertaining  to  alcoholic  beverage  control,  such as those
regulating  the  minimum  age of patrons or  employees,  advertising,  wholesale
purchasing,  and inventory control,  handling and storage. Each nightclub and/or
restaurant  is operated in  accordance  with  stringent  procedures  designed to
assure compliance with all applicable codes and regulations.

     In recent years,  certain states have enacted "dram-shop"  statutes,  which
generally provide a person injured by an intoxicated person the right to recover
damages from an establishment,  which wrongfully  served alcoholic  beverages to
such person. Presently,  Missouri, Kansas, and Oklahoma, the states in which the
Company operates, do not have dram-shop statutes.  However,  should these states
enact such statutes, the Company would be subject to additional exposure in such
cases where judgments for damages exceeded its insurance coverage.

     The  development  and   construction   of  additional   nightclubs   and/or
restaurants will be subject to compliance with applicable  zoning,  land use and
environmental   regulations.   Management   believes   that  federal  and  state
environmental  regulations  have  not had a  material  effect  on the  Company's
operations,  but more stringent and varied  requirements  of local  governmental
bodies with respect to zoning,  land use and  environmental  factors could delay
construction of new nightclubs and/or restaurants and add to their cost.

     The  Company  is  also  subject  to  the  Fair  Labor  Standards  Act,  the
Immigration Reform and Control Act of 1986 and various state laws governing such
matters as minimum wages, overtime, tip credits and other working conditions.  A
significant  number of the Company's hourly personnel are paid at rates relating
to the federal minimum wage and,  accordingly,  increases in the minimum wage or
decrease in the allowable tip credit will increase the Company's labor cost. The
Company may also incur  labor cost  increases  as a result of certain  mandatory
medical and parental  leave  benefits  legislation  enacted by the United States
Congress.

     The Americans With Disabilities Act prohibits  discrimination in employment
and public accommodations,  such as restaurants and nightclubs,  on the basis of
disability.  Under the Act,  the Company is  required to provide  service to, or
make usable accommodations for the employment and service of, disabled persons.

Competition

     The nightclub business is highly competitive.  Most of the companies, which
own and/or operate  nightclubs are  substantially  larger than the Company,  and
have greater resources,  operating  histories and experience.  They include many
national,  regional and local chains with more locations and larger  advertising
budgets.  Nightclub  and theme  entertainment  businesses  are also  affected by
changing  customer  tastes,  local and national  economic  conditions  affecting
spending habits,  population  shifts and traffic  patterns.  Quality of service,
attractiveness  of facilities,  popularity of  entertainment  and price are also
important factors.

     The  restaurant  business  is even  more  competitive  than  the  nightclub
business,  with  restaurants  literally  on most every corner in most cities and
with new  restaurants opening every week.  The industry has many large and small
operators,  with most having greater financial  resources than the Company,  and
with many having more experience in restaurant operations. Restaurant customers'
tastes are even more fickle than those of nightclub  customers,  and most of the
same factors discussed above with regard to nightclubs and their competition are
also applicable to restaurants.  The Company, however, believes that its "Atomic
Burrito" concept will be well received and will be able to successfully  compete
in the highly competitive  restaurant industry, and believes that the experience
of senior management will give the Company more opportunity for success,  though
there are no assurances that this will be the case.

Trademarks

     The Company uses the trademark In Cahoots in the operation of its business.
This  mark is used by others  in the  operation  of  businesses  throughout  the
country, including other nightclub operators. Because of these uses, the Company
believes  that it cannot,  nor can its  competitors,  register the mark with the
United States Patent and Trademark office to obtain exclusive, nationwide rights
to the mark. The Company believes,  however,  that it has enforceable common law
rights  to its mark for use in the  immediate  trade  areas in which  the  Clubs
operate,  and it has  encountered  no claims of trademark  infringement.  As the
Company expands, it may encounter claims of trademark infringement requiring the
Company  to  negotiate  license  agreements  with the prior user or to use other
non-infringing trademarks for nightclubs in the affected areas.

     The Company has,  however,  filed  trademark  applications  with the United
States Patent and Trademark  Office for the name "Atomic Burrito" and the phrase
"Out of this World!." While the applications are currently pending, and there is
no way to determine in advance the final  decision,  the Company  believes  that
there are few,  if any,  other users of the name and  expects to  eventually  be
granted the trademarks applied for.

Employees and Consultants

     As of April 9,  1999,  the  Company  had four  full time  employees  in the
corporate  office,  including James E. Blacketer,  President and Chief Executive
Officer, and Dominic W. Grimmett, Vice-President of Operations. The Company also
had  approximately  120 employees in the two nightclubs,  and  approximately  35
employees in the joint venture "Atomic Burrito" restaurant in Tulsa, Oklahoma.

Year 2000 Compliance

     The  Company  is  aware  of  the  potential  for   industry-wide   business
disruption,  which could occur due to problems related to the "Year 2000 Issue".
It is the belief of the Company that a prudent plan is in place to address these
issues. The components of the Company's plan include:  an assessment of internal
systems for modification and/or replacement; communication with external vendors
to determine  their state of readiness  to maintain an  uninterrupted  supply of
goods and services to the Company;  an evaluation of the Company's  equipment as
to its ability to function properly after the turn of the century; an evaluation
of facility related issues; and the development of a contingency plan.

     The Company has developed a comprehensive plan to reduce the probability of
operational  difficulties  due to Year 2000  related  failures.  While much work
remains,  the Company believes that it is approximately 75% complete with regard
to the identification and remediation of Year 2000 issues.

     The process the Company is following to achieve  Year 2000  compliance  for
internal  systems  is as  set  forth  herein.  All of  the  Company's  financial
accounting is outsourced,  so no issues exist for the Company with regard to its
financial  accounting  at all  of  its  locations,  and  is in  the  process  of
programming  these  systems so that they will all roll over to the Year 2000. It
is expected that all restaurant  and club  operating  systems and cash registers
will be  compliant  by the end of the  third  quarter  of  1999.  Testing  being
currently conducted have identified no unsolvable issues.

     The  Company  is  communicating  with  its  external  vendors  to  gain  an
understanding of their state of readiness to maintain an uninterrupted supply of
goods and services to the Company, and their ability to satisfactorily deal with
their own Year 2000 issues.  Most all major  suppliers  and vendors have assured
the  Company  that  there will be no  disruption  of the  delivery  of goods and
services at the turn of the century.

     The Company is in the process of completing an inventory of currently  used
equipment, and will determine the Year 2000 readiness through communication with
the  equipment  manufacturers  and testing where  appropriate.  At this time the
Company is not aware of any  equipment  which is affected by the Year 2000 issue
which will not be repaired or replaced  prior to year end.  The Company  remains
aware of the potential for imbedded logic within  microchips to cause  equipment
failure.  The  Company  believes  that its plan of  action  provides  a  prudent
approach  toward  evaluating  equipment,  though  some  equipment  may prove not
feasible or possible to test.

     The Company is in the process of  completing  an inventory  and  evaluating
facilities  related equipment with the potential for Year 2000 related failures.
The  same  action  as set  forth  in the  preceding  paragraph  will be used for
evaluating facilities related equipment.

     The Company is evaluating the total cost of Year 2000  compliance.  At this
time,  primarily  because  the  Company  outsources  so  much  of  its  internal
functions, including its financial accounting functions, the Company expects the
total cost of year 2000 compliance to be less than $50,000.

     At this time the Company is not aware of any  internal  systems or external
vendor issues  related to the Year 2000 which would prevent or seriously  impact
the Company from continuing  operations before,  during or after the turn of the
century.  Although the Company  believes it is taking  prudent action related to
the  identification  and resolution of issues related to the Year 2000, there is
no  certainty  that  certain key vendors are  compliant,  and there are possibly
technical  vagaries  to logic  imbedded  within  microchips  which may prove not
feasible or impossible to test. The Company  continues the risks associated with
potential Year 2000 related failures. The Company is working to develop a formal
contingency plan to alleviate the impact of high potential or serious  failures.
The Company  anticipates having this contingency plan outlined by the end of the
second quarter of 1999.

     The  failure to correct a material  Year 2000  problem  could  result in an
interruption  in,  or a  failure  of,  certain  normal  business  activities  or
operations.  Such failures could  materially and adversely  affect the Company's
results of  operations,  liquidity and financial  condition.  Due to the general
uncertainty  inherent  in the Year  2000  problem,  resulting  in part  from the
uncertainty of the Year 2000 readiness of third-party suppliers,  the Company is
unable to determine at this time whether the  consequences of Year 2000 failures
will have a material impact on the Company's results of operations, liquidity or
financial  condition.  The Year 2000 Project is uncertainty  about the Year 2000
problem, and in particular,  about the Year 2000 compliance and readiness of its
material external agents.  The Company believes that with the  implementation of
new business systems and completion of the Project as scheduled, the possibility
of significant interruptions of normal operations should be reduced.

Item 2.  Description of Properties

     The Company's principal offices are located at 1601 N. W. Expressway, Suite
1610, Oklahoma City, Oklahoma, 73118. The Company's offices occupy approximately
2,460 square feet, for which it pays $3,075 per month pursuant to a lease, which
expires in June 2001.

     In August 1993, the Company entered into a lease for nightclub space in St.
Louis,  Missouri.  The lease,  which  expires in August  2003,  is for a 10 acre
parcel of land housing a 106,744  square foot  building and parking  facilities.
The rental for the first five years is $22,238 per month,  escalating to $26,686
per month for the second  five  years.  The  Company has the right to extend the
lease for two additional five year periods at increased  rental rates. The lease
is  guaranteed  by  International  Entertainment  Consultants,  Inc.,  a company
affiliated with Mr. Troy Lowrie. The Company subleases approximately 50,000 feet
of this  facility  for which it  receives  $14,000  per  month  under a two year
sublease which expires in August, 1999.

     The Wichita Club is leased from Boots,  Inc., a 20% limited  partner in the
In Cahoots Limited Partnership but otherwise  unaffiliated with the Company. The
lease is for a  ten-year  term,  expiring  in the year  2003,  with an option to
extend the term for two, five-year periods, and requires monthly payments of the
greater of $12,500 or 6% of gross sales.

     On  January 1, 1999,  the  Company  entered  into a lease  agreement  for a
building in Tulsa,  Oklahoma,  for the joint  development of an "Atomic Burrito"
restaurant  with New York Bagel.  The lease is for five years with  three,  five
year options, with the rental payments being $4,600 per month during the initial
term of the lease, and with increases for the three option periods.

     The Company carries general  liability  insurance for the St. Louis Club in
the amount of $2,000,000 and $850,000 in property liability coverage. In Cahoots
Limited  Partnership,  owner of the Wichita  Club,  carries  $2,000,000  general
liability  insurance and building and property  insurance coverage in the amount
of  $1,200,000  and  $450,000,  respectively.  The joint  venture  for the Tulsa
"Atomic Burrito"  restaurant  carries general liability  insurance of $1,000,000
and  building  and  property  insurance  coverage in the amounts of $400,000 and
$300,000, respectively.

     The Company maintains  $1,000,000 in liquor liability insurance coverage at
each of its  nightclubs,  including  coverage  for assault and battery and other
risks associated with the nightclub business.

Item 3.  Legal Proceedings

     Special  Note:  Certain  statements  set forth  below  under  this  caption
constitute  "forward-looking  statements"  within the meaning of the Reform Act.
See "Special Note Regarding  Forward-Looking  Statements" for additional factors
relating to such statements.

     The Company is involved in various legal actions associated with the normal
conduct of its business operations.  No such actions involve known material gain
or loss contingencies not reflected in the consolidated  financial statements of
the Company.

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

     During the recently  completed  fiscal year, the Company did not submit any
matter to a vote of its shareholders.



                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

Market Information

     On April 9, 1999, there were approximately 88 shareholders of record of the
Company's Common Stock. Based upon information  received from brokers and others
in  fiduciary  capacity,   the  Company  estimates  that  the  total  number  of
shareholders  of the  Company's  Common Stock  exceeds 500 as of that date.  The
Company's Common Stock was approved for listing on the NASDAQ SmallCap MarketSM,
effective May 18, 1994, under the symbol "WCCI." Prior to listing on NASDAQ, the
Company's Common Stock briefly traded in the pink sheets.

     The following  table sets forth,  for the periods  indicated,  the range of
high and low closing bid quotations for the Company's  Common Stock, as reported
by NASDAQ:
<TABLE>
<CAPTION>

         1998 Fiscal Year                        High Bid ($)       Low Bid ($)
         -----------------                       ------------       -----------
<S>                                                  <C>                <C> 
         First Quarter                               1.125              .625
         Second Quarter                              1.125              .5625
         Third Quarter                                .9375             .50
         Fourth Quarter                              1.375              .5625

         1997 Fiscal Year
         -----------------
         First Quarter                               2.25              1.375
         Second Quarter                              1.125             1.00
         Third Quarter                               1.125              .625
         Fourth Quarter                              1.0625             .50
</TABLE>

         On December  31, 1998,  the last  reported bid and asked prices for the
     Common Stock were $.6875 and $1.00, respectively.

Revised NASDAQ Listing Requirements

     Effective February 23, 1998, the NASDAQ SmallCap Market implemented revised
listing  requirements  for  companies  wishing to continue  their listing on the
exchange.  These revised requirements  included provisions that listed companies
maintain  net tangible  assets of at least $2 million,  public float of at least
500,000  shares with a market  value of at least $1  million,  and a minimum bid
price for the Company's stock of $1 per share.  While the Company has maintained
compliance during 1998 with all other requirements, it was notified by NASDAQ in
late 1998 that the  Company  was not in  compliance  with the  minimum bid price
requirement of $1.00 per share.  The Company then requested a hearing before the
NASDAQ Listing  Qualifications Panel and a hearing was held on February 4, 1999.
On February 18, 1999, the Panel notified the Company that it had until April 15,
1999 to comply with the minimum bid price  requirement  or be delisted  from the
NASDAQ SmallCap Market. As of March 31, 1999, the Company had been in compliance
with the minimum bid price  requirement  for twenty  consecutive  days and fully
expects to be allowed continued listing of its common stock.

Dividends

     The Company has never  declared a cash  dividend with respect to its Common
Stock and intends to retain  future  earnings to support the  Company's  growth.
There are no contractual restrictions on the Company's present or future ability
to pay  dividends.  Future  dividend  policy is subject to the discretion of the
Board of Directors and is dependent upon a number of factors,  including  future
earnings,  capital  requirements and the financial condition of the Company. The
Company  declared  dividends on its preferred stock totaling  $56,350 during the
year ended December 31, 1998.

Item 6.  Management's Discussion and Analysis

     Special  Note:  Certain  statements  set forth  below  under  this  caption
constitute  "forward-looking  statements"  within the meaning of the Reform Act.
See "Special Note Regarding  Forward-Looking  Statements" for additional factors
relating to such statements.

     The following  discussion and analysis  should be read in conjunction  with
the Company's  Consolidated  Financial  Statements  and Notes thereto  appearing
elsewhere in this Report.

General

     The  Company  commenced  operations  in April  1993 with a  country-western
nightclub in Indianapolis, Indiana (the "Indy Club"). In April 1994, the Company
opened a nightclub in a suburb of St. Louis,  Missouri  (the "St.  Louis Club").
The Company  financed these clubs through  limited  partnerships in which it was
the general  partner.  In May 1994,  the Company  completed  its initial  public
offering of securities  receiving net proceeds of approximately $1.9 million. In
November 1994, the Company purchased a nightclub in Tucson, Arizona (the "Tucson
Club").  At this time, the Company also increased its ownership  interest in the
Indy Club to 80% and acquired 100% of the St. Louis Club.

     In June  1995,  the  Company  participated  as a 50%  limited  partner in a
partnership  formed to acquire a nightclub  in Atlanta,  Georgia  (the  "Atlanta
Club").  The  Company  contributed  $500 in  partnership  capital  and loaned an
additional  $638,822 to the partnership.  Due to continuing  losses, the Company
wrote off its interest in the Atlanta  Club  effective  December  31,  1995.  On
January 9, 1998, the Company sold its interest in the Atlanta Club for $220,000.
Details of the sale are described more fully below.

     In September 1996, Troy H. Lowrie,  then President and largest  shareholder
of the Company,  entered into a Stock Purchase  Agreement  whereby (i) Red River
Concepts,  Inc., a Delaware  corporation  ("Red River"),  or its designees would
acquire in three  installments  1,300,000  shares of Mr.  Lowrie's Common Stock;
(ii) new management assumed control of the operations of the Company;  and (iii)
James E.  Blacketer and Joe R. Love,  directors of Red River,  were appointed to
the  Company's  Board of  Directors.  The change of control  occurred in October
1996.

     Subsequently,  on December 16, 1996, new management acquired a nightclub in
Wichita,  Kansas (the "Wichita Club") for 400,000 shares of the Company's Common
Stock and  assumption of $150,000 in debt. The Wichita Club was owned in part by
entities  affiliated  with James E. Blacketer and Joe R. Love,  directors of the
Company. See Item 12, "Certain Relationships And Related Transactions."

     New management also undertook steps to improve the financial performance of
the Tucson Club, which was hampered by high acquisition, leasehold and operating
costs and declining  revenues.  During October 1996, the Club was remodeled into
two  entertainment  venues in order to attract new customers and revenues,  cost
cutting measures were instituted,  and new unit-level  management was installed.
Despite these measures,  based on the Club's continuing  decline in performance,
high  overhead and occupancy  costs,  the Tucson Club's assets were deemed to be
impaired  and were  written off as of December  31,  1996.  The Company sold the
Tucson  Club's  assets in May 1997 and  completed  an  agreement  to settle  the
leasehold  obligations in August 1997.  Details of the sale and lease settlement
are described more fully below.

     In February 1997,  the Company filed a registration  statement for a public
offering of up to 460,000 shares of preferred stock and up to 1,150,000 warrants
to purchase the  Company's  Common Stock (the  "Public  Offering").  The Company
cleared all  regulatory  requirements  concerning  the Public  Offering  but the
Company's  underwriter  was not  successful  in placing  the  preferred  shares.
Therefore,  costs associated with the Public Offering, which had previously been
capitalized were written off at December 31, 1997.

     During the fourth  quarter of 1997, the Stock  Purchase  Agreement  between
Troy H.  Lowrie and Red River  Concepts,  Inc.  was amended  whereby Mr.  Lowrie
retained 430,000 of the shares which were originally to be sold to Red River.

     In June 1998, the Company formed a subsidiary corporation,  Atomic Burrito,
Inc., through which to develop a new restaurant  concept.  Subsequently,  Atomic
Burrito,   Inc.  entered  into  license  agreements  for  two  "Atomic  Burrito"
restaurants to be located in Stillwater and Norman, Oklahoma, and entered into a
third license agreement for a restaurant in Longview,  Washington.  In addition,
in October 1998,  the Company  entered into a joint venture  agreement  with New
York Bagel  Enterprises,  Inc., ("New York Bagel") for the joint  development of
"Atomic  Burrito"  restaurants.  The  agreement  provides  for New York Bagel to
contribute  certain of its restaurant  locations,  including  leases,  leasehold
improvements,  and  equipment  for a 40%  interest in the  operation,  while the
Company would contribute up to $150,000 for the remodel and conversion costs, as
well as for  additional  equipment.  The  agreement  also provides for the joint
development  of a minimum of four and maximum of eight  "Atomic  Burrito"  units
over an 18 month period. The first unit opened in March 1999 in Tulsa, Oklahoma,
while the second unit is scheduled to open in late April 1999.

Liquidity and Capital Resources

Historically,  the Company has funded its capital needs through a combination of
cash  flows  from  operations,  proceeds  from  public  and  private  securities
issuances,  and loans from commercial banks,  principal  shareholders or related
persons or  entities.  During  1998,  the  Company  had no  borrowings  from any
sources, and raised no capital through issuing any securities or otherwise.  The
Company  did  recognize  $1,345,534  from the sale of  property  and  equipment,
primarily  from  the  sale of the  Indy  Club,  and  received  payment  on notes
receivable during the year of $144,570. Net cash used in operating activities by
the Company  increased  to $108,620  compared  with a deficit of $94,785  during
1997. The Company invested $18,004 in capital  expenditures during 1998, accrued
$56,350 in dividends on its preferred stock, and repaid notes payable of $66,270
and  $108,790.  The Company's  net cash  increased  during 1998 by $119,462 from
$85,949 to $205,411,  primarily due to improved  efficiencies  in operations and
increased  profitability of the two nightclubs.  See "Consolidated  Statement of
Cash Flows."

     During the first quarter of 1998,  two note holders agreed to convert their
notes  amounting  to $560,000  due from the Company into new issues of preferred
stock.  Specifically,  Mr.  Lowrie will  receive  40,000  shares of Series A 10%
Cumulative  Convertible  Preferred  Stock in exchange for the Company's note and
accrued  interest of $400,000  owing at December 31,  1997.  Ceres,  L.L.C.,  an
Oklahoma limited liability  company,  will exchange its $160,000 note for 16,000
shares of Series B 12% Cumulative Convertible Preferred Stock.

     As of  December  31,  1998,  the Company  had cash of  $205,411,  which was
generated  from  operating   activities,   investing  activities  and  financing
activities,  and which was an increase from $85,949 at the end of 1997.  For the
year ended  December 31, 1998,  the Company  generated a positive cash flow from
operations of $108,620,  a  substantial  increase from the negative cash flow of
$94,785 for the prior year. This increase in cash flow from operating activities
is not the  result  of any  particular  event,  but  rather  reflects  a general
strengthening of the Company's overall operations and financial position.

     At December 31, 1998,  the  Company's  working  capital  position  (current
assets  minus  current  liabilities)  was a positive  $126,983  compared  with a
negative $833,348 at the end of 1997, or an increase of $960,331.  This increase
in working capital  position  resulted from an increase in cash of $119,462,  an
increase in notes  receivable  of  $232,515  (mostly due to the sale of the Indy
Club),  a decrease in accounts  payable and accrued  liabilities of $350,898 and
decreases in the current  portion of notes  payable of $314,570 and decreases in
the current  portion of  long-term  debt of  $182,032.  Management  believes its
improved working capital position reflects positive changes  implemented  during
1998  as  well  as  the  increased  profitability  of  the  Company's  business.
Management also expects this positive trend to continue in 1999.

     Property and equipment is primarily made up of assets  required to open and
operate  the  St.  Louis  and  Wichita  Clubs.   Leasehold   improvements  total
$1,519,862;  equipment,  furniture  and  fixtures  are  $668,315;  and  land and
improvements are $77,011. These figures have decreased from 1997, reflecting the
sale of the Indy Club in early 1998.  Goodwill decreased from $25,970 to $11,130
due to amortization during 1998.

     The deferred  income tax asset  decreased by $49,670 to $367,740 due to the
utilization  of this asset by the Company  because of its  profitable  1998. The
asset  resulted from the net operating loss  carryforwards  from the loss on the
write-off of the Tucson assets in a prior year. Future realization of this asset
is  dependent  upon the Company  generating  sufficient  future  taxable  income
against which its loss  carryforwards can be offset.  The amount of the deferred
tax asset at December 31, 1998 does not include  $827,807 reserved as a deferred
income tax valuation allowance, due to the uncertainty of the Company being able
to realize the benefit from such losses in future periods. However, based on the
profitable  earnings  realized  in  1998,  and the  positive  activities  of the
Company,  management  expects to receive  benefit  from the amount  reserved  in
future periods.

     The  Company's  current   liabilities  reflect  a  reduction  of  $824,600,
primarily  attributable to a $314,570  reduction in the current portion of notes
payable and a $182,032  reduction in the current  portion of long-term  debt, as
well as  reductions  in accounts  payable of $104,387 and  reductions in accrued
liabilities of $246,511.  These  reductions came about because of the conversion
of $560,000 of Company debt to preferred stock during the first quarter of 1998,
as well as because of the Company's improved  profitability  during 1998 and the
resulting use of cash to reduce payables and accrued liabilities.  Notes payable
reduced by $106,187 to $20,438 and long-term debt reduced by $429,241 to $7,843,
also because of the conversion of debt to preferred stock.

     The Company has developed a new restaurant concept,  "Atomic Burrito",  and
is planning  aggressive  expansion of this concept  during 1999.  This expansion
strategy will increase the need for additional  financing for the Company during
1999. The Company plans to explore  various methods and strategies for obtaining
necessary capital for expansion,  including traditional bank financing,  capital
raising through formation of limited partnerships,  private and/or public equity
or debt  offerings,  internal  funding,  or a combination of the foregoing.  The
initial  fees  received  from  licensees  of the "Atomic  Burrito"  concept will
provide  additional  operating  funds for the Company,  as well as the operating
profits from the restaurants  developed by the Company.  Management believes its
current  operations  will generate  sufficient cash flow to operate the Company,
but believes that  additional  sources of financing  will be necessary to expand
the new  restaurant  concept.  While the  success  of the new  restaurants  will
dictate in part the Company's  ability to obtain  financing for such  expansion,
management  believes  that  the  "Atomic  Burrito"  concept  will  be  a  viable
investment vehicle for the Company in the future.

Results of Operations - Year Ended  December 31, 1998 Compared to the Year Ended
December 31, 1997

     The Company's revenues from club operations decreased in 1998 by $1,837,853
or 26% to  $5,278,924,  reflecting  a  decline  in  beverage  and food  sales of
$1,092,250  or 25% and a decline in  admission  fees of $720,238  or 34%.  These
declines  resulted from the close of the Indy Club at the end of 1997, with 1998
figures  reflecting an entire year without the Indy Club's  revenues.  The lower
levels of revenues are not cause of concern because management believes its 1998
results show that the Company can operate profitably with the reduced revenues.

     Total  costs  and  expenses  in  1998  decreased  by  $3,387,208  or 40% to
$4,834,083,  with  corresponding  decreases  of  $1,283,401  or 52% in  cost  of
products  and  services  to  $1,210,405,  of  $1,022,904  or 24%in  general  and
administrative  expense to  $3,238,189,  of  $196,488,42%  in  depreciation  and
amortization to $270,633 and interest  expense of $86,853,55% to $71,968.  These
reductions  also  reflect  the  closing  of the Indy  Club in late  1997 and the
comparative  impact of three  operating clubs in 1997 versus two operating clubs
in 1998.  The  reduction  in total  costs and  expenses  in 1998  also  reflects
non-recurring write-offs in 1997 of acquisition goodwill of $75,687,  impairment
of long-lived  assets of $250,272,  write-off of offering  costs of $374,653 and
litigation losses of $216,808. These one-time charges in 1997 were significantly
larger than the $62,458 litigation expense in 1998.

     For the  year  ended  1998,  the  Company  made a  consolidated  profit  of
$275,707,  compared with a consolidated loss of $987,376 in 1997. The profitable
year was the first for the Company  since going  public in 1994.  While the 1998
results  constitute  a  considerable  improvement  from  1997 and  prior  years,
management  believes  that 1998  earnings  were  negatively  impacted by several
non-recurring  transactions  and/or write-offs which related to transactions and
events which  occurred  prior to present  management  taking over the  Company's
operations in late 1996.  These items include the write-down of an investment of
$57,400,  the write-off of a note  receivable of $55,000,  a litigation  cost of
$62,458,  as well as additional  provisions for losses on the sale of the Tucson
Club of $36,212 and on the sale of the Indy Club of  $25,661.  Inasmuch as these
items are all  non-cash,  non-recurring  charges to  earnings  in 1998,  and all
resulted from transactions entered into by prior management,  present management
believes  that the total of these  items in the amount of  $236,731  have unduly
impacted the earnings generated by the Company's operations. Management believes
that in the future,  without the expense and the drain of these old charges, the
Company's  profits will continue to improve.  Management  believes that the 1998
results  are the first step for the  Company  toward a future of  profitability.
Management  also  believes  that  the  expansion  of its  new  "Atomic  Burrito"
restaurant  concept will also contribute to continued  profitability in 1999 and
in future years.

Item 7.  Financial Statements and Supplementary Data

     The Company's  audited  financial  statements,  together with the report of
auditors, are included in the report after the signature page.

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

     On January 20, 1999, the Company dismissed the auditing and accounting firm
of Gross, Collins + Cress, P.C., Atlanta,  Georgia, who have acted as certifying
accountants for the Company for the years ended December 31, 1996, and 1997  and
engaged the auditing and  accounting  firm of Gray & Northcutt,  Inc.,  Oklahoma
City, Oklahoma, to act as certifying accountants for the year ended December 31,
1998. The Company is not aware of any disagreements  with the prior accountants,
and the  decision to change  accountants  was not based upon any  question as to
accounting  treatment of any  transaction or type of audit opinion that might be
issued.  Rather,  the Company believed that the change in accounting firms would
be beneficial to the Company's planned expansion over the next several years, as
well as  resulting in cost  savings and having the added  convenience  of a firm
based in the same city as the Company.


                                    PART III

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

     The information required in response to this Item is incorporated herein by
reference to the Company's  proxy  statement to be filed with the Securities and
Exchange  Commission  pursuant to Regulation  14A, not later than 120 days after
the end of the fiscal year covered by this report.

Item 10. Executive Compensation

     The information required in response to this Item is incorporated herein by
reference to the Company's  proxy  statement to be filed with the Securities and
Exchange  Commission  pursuant to Regulation  14A, not later than 120 days after
the end of the fiscal year covered by this report.

Item 11. Security Ownership Of Certain Beneficial Owners And Management

     The information required in response to this Item is incorporated herein by
reference to the Company's  proxy  statement to be filed with the Securities and
Exchange  Commission  pursuant to Regulation  14A, not later than 120 days after
the end of the fiscal year covered by this report.

Item 12. Certain Relationships And Related Transactions

     The information required in response to this Item is incorporated herein by
reference to the Company's  proxy  statement to be filed with the Securities and
Exchange  Commission  pursuant to Regulation  14A, not later than 120 days after
the end of the fiscal year covered by this report.

Item 13.  Exhibits and Reports on Form 8-K

(a) The following documents are filed as part of this report:

     1.  Financial  statements:  See index to consolidated  financial statements
         immediately following the signature page of this report.

     2.  Financial statement schedules:  Financial statement schedules have been
         omitted because they are not required or the information is included in
         the financial statements and notes thereto.

     3.  Exhibits:  Exhibits  required  to be filed  with this Form  10-KSB  are
         identified by the numbers indicated,  and, except where incorporated by
         reference, immediately follow the financial statements.



     Number                            Description

     3.1     Articles of Incorporation, dated December 20, 1989 (1)

     3.2     Amendment to Articles of Incorporation, dated November 30, 1993 (1)

     3.2     Bylaws of Western Country Clubs, Inc. (1)

     4.0     Agreement  to  convert  notes  to  Series  A Preferred  Stock dated
             January 1, 1998 between Troy H. Lowrie and  Western  Country Clubs,
             Inc. (12)

     4.1     Agreement  to  convert  note  to  Series  B  Preferred Stock  dated
             February 18, 1998 between Ceres, L.L.C.  and Western Country Clubs,
             Inc. (12)

     9.0     Voting Trust Agreement, dated September 20, 1996, between Red River
             Concepts, Inc. and Troy H. Lowrie (7)

     10.1    Lease  Agreement, dated  August  26, 1993, between Wal-Mart Stores,
             Inc. and Inc. and Western Country Clubs, Inc. (1)

     10.2    License Agreement, dated  January 20, 1993, between Western Country
             Clubs, Inc. and Western Country Club I, Ltd. (1)

     10.3    Option for Limited Partnership Interest,  dated September 23, 1993,
             between Western Country Clubs, Inc. and Merrill E. Roberts (1)

     10.4    Stock Option Agreement, dated December 16, 1993 (1)

     10.5    Lease with Option to Purchase, dated December 26, 1993, between and
             among Edward L. and Barbara L. Benshoof and Western Country  Clubs,
             Inc. (1)

     10.6    Agreement  to  Purchase  and  Sale  of  Business  and  Assets, with
             exhibits, dated November 1, 1994 (2)

     10.7    Bill  of  Sale, dated  November  1, 1994, transferring  Arizona Bar
             Liquor License No. 06100208 to Western (2)

     10.8    Amendment to Covenant Not To Compete,  updated, between Western and
             Clarance O. Bond, Jack E. McMurrough and Ada L. Bond (9)

     10.9    Agreement and Plan of  Merger,  dated  October  10,  1995,  between
             Western  Country Clubs,  Inc.,  Western  Newco,  Inc., and  Cowboys
             Concert Hall - Arlington, Inc. (6)

     10.10   Lease with Option to Purchase, dated October 14, 1992, between Expo
             Bowl, Inc. and Texas of Indy, Inc. (1)

     10.11   Guaranty  of Lease with Option to Purchase, dated October 14, 1992,
             by Troy H. Lowrie (1)

     10.12   First Amendment to Lease with Option to Purchase, dated January 20,
             1993, between Expo Bowl Inc. and Texas of Indy, Inc. (1)

     10.13   Warranty Deed, dated February 28, 1993,  in  the  name  of  Western
             Country Club I, Ltd. (1)

     10.14   State of Indiana,  Certificate of Trade  Mark  Registration,  dated
             August 18, 1993, in  the  name of Texas of Indy, Inc. for "A Little
              Bit of Texas" and Design (1)

     10.15   Lease, dated  April 2, 1993, between  Texas of Indy, Inc. and Great
             Western Boot Company (1)

     10.16   Operating  Agreement  dated  March 17, 1993, between Texas of Indy,
             Inc. and Taco Bell Corp. (1)

     10.17   Option Agreement, dated January 20, 1993, between and among Western
             Country Club I, Ltd.,  Troy H. Lowrie and Merrill Roberts (1)

     10.18   Amended Limited Partnership Agreement  of  Western  Country Club I,
             Ltd. (1)

     10.19   Consulting  Agreement  dated  January  20,  1993,  between  Western
             Country Club I, Ltd. and Texas of Indy, Inc. (1)

     10.20   Security  Agreement, dated  March 18, 1993, between Western Country
             Club I, Ltd. and Texas of Indy, Inc. (1)

     10.21   Option to Purchase Assets, dated  January 20, 1993, between Western
             Country Club I, Ltd. and Texas of Indy, Inc. (1)

     10.22   Promissory  Note,  dated  January  31, 1994, from  Western  Country
             Club I, Ltd. to Expo Bowl, Inc. in the amount of $150,000 (1)

     10.23   Guaranty, dated January 31, 1994, of Promissory Note to  Expo Bowl,
             Inc. by Troy H. Lowrie (1)

     10.24   Promissory  Note, dated  January  31, 1994,  from  Western  Country
             Club I, Ltd. to Dulaney National Bank (1)

     10.25   Articles of Incorporation of  WCWW  Acquisition  Corporation, dated
             January 20, 1995 (4)

     10.26   Interim Permit, dated February 9, 1995, from the Arizona Department
             of Liquor Licenses and Control for the Wild Wild West nightclub (5)

     10.27   Stock Purchase  Agreement,  dated September 21, 1996,  between  and
             among Troy H. Lowrie,  Western  Country Clubs, Inc. and  Red  River
             Concepts, Inc. (7)

     10.28   Lease  Agreement, dated  July  30, 1993, by and between Boots, Inc.
             and In Cahoots Limited Partnership (9)

     10.29   Agreement  and  Plan of  Merger,  dated  December 16, 1996,  by and
             between  Western Country  Clubs, Inc., Entertainment Wichita, Inc.,
             and WCCI Acquisition Corp. (8)

     10.30   Contract of sale dated December 26, 1997, and note dated January 9,
             1998,   between   Western   Country   Clubs,  Inc.  and   Backstage
             Entertainment. (11)

     10.31   Contract  of  sale  dated  November 25, 1997,  along  with addendum
             numbers  1  through  3  thereto,  and note dated February 19, 1998,
             between Western Country Clubs, Inc. and A Little Bit of Texas, Ltd.
             (11)

     10.32   Agreement and Covenant Not to Execute dated February 18, 1998,
             between In Cahoots Limited Partnership, Western Country Clubs, Inc.
             and Jana Oelkers. (11)

     10.33   Form of License Agreement for Atomic Burrito, Inc. restaurants

     10.34   Joint Venture Agreement between Western Country Clubs, Inc. and New
             York Bagel Enterprises, Inc. dated October 27, 1998

     11      Calculation of Earnings Per Share

     21      Subsidiaries of the Registrant

     27      Financial Data Schedule

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

     (1)     Incorporated  by  reference  from the like numbered  exhibits filed
             with  the  Registrant's  Registration  Statement on Form SB-2,  No.
             33-72942.

     (2)     Incorporated  by  reference from  Western's  Current Report on Form
             8-K,  dated  November 1, 1994,  attached  as Exhibits 10.1 and 10.2
             thereto.

     (3)     Incorporated  by  reference  from  Western's  Annual Report on Form
             10-KSB,  dated February 27, 1995,  attached as Exhibit 21 thereto.

     (4)     Incorporated   by  reference from  Western's  Annual Report on Form
             10-KSB, dated February 27, 1995, attached as Exhibit 28.16 thereto.

     (5)     Incorporated  by  reference  from  Western's  Annual Report on Form
             10-KSB, dated February 27, 1995, attached as Exhibit 28.17 thereto.

     (6)     Incorporated  by  reference  from Western's  Current Report on Form
             8-K, dated October 19, 1995,  attached as Exhibit 10.1 thereto.

     (7)     Incorporated  by  reference  from  Western's Current Report on Form
             8-K, dated October 10, 1996, attached as Exhibit 9 thereto.

     (8)     Incorporated  by reference  from  Western's  Current Report on Form
             8-K, dated October 10, 1996, attached as Exhibit 2 thereto.

     (9)     Incorporated  by reference  from  the like numbered  exhibits filed
             with the Registrant's  Registration  Statement  on Form SB-2, dated
             February 11, 1997, No. 333-21547.

     (10)    Incorporated  by  reference from  Western's  Current Report on Form
             8-K, dated February 6, 1998, attached  as  Exhibits 10.0, 10.1  and
             10.2 thereto.

     (11)    Incorporated  by reference  from the like  numbered  exhibits filed
             with  Western's Current Report on Form 8-K, dated February 6, 1998.

(b)      During  the last  quarter of the period  covered  by this  report,  the
         Company filed no Reports on Form 8-K.

                                   SIGNATURES

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

April 14, 1999

                                    Western Country Clubs, Inc.


                                    By: /s/ James E. Blacketer
                                    -----------------------------    
                                    James E. Blacketer, President


    Pursuant to the  requirements  of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

Name                              Title                               Date

/s/  James E. Blacketer     President, Principal
                            Executive Officer, Principal
                            Financial Officer and Director        April 14, 1999

/s/  Joe R. Love            Director                              April 14, 1999



<PAGE>












                           WESTERN COUNTRY CLUBS, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1998 AND 1997

























<PAGE>



                                TABLE OF CONTENTS


                                                                     Page No.

      INDEPENDENT AUDITORS' REPORT
         ON FINANCIAL STATEMENTS......................................... 1

      FINANCIAL STATEMENTS

         Consolidated Balance Sheets..................................... 3

         Consolidated Statements of Income............................... 5

         Consolidated Statement of Stockholder's Equity...................6
          
         Consolidated Statements of Cash Flows........................... 7

         Notes to Consolidated Financial Statements...................... 9

<PAGE>

                             GRAY & NORTHCUTT, INC.
                         2601 NW EXPRESSWAY, STE. 800E
                            OKLAHOMA CITY, OK 73112






Independent Auditors' Report



To the Board of Directors
Western Country Clubs, Inc.

We have audited the accompanying  consolidated  balance sheet of WESTERN COUNTRY
CLUBS, INC. as of December 31, 1998, and the related consolidated  statements of
income,  stockholders'  equity  and cash  flows for the year then  ended.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits. The financial statements of Western Country Clubs, Inc. for the year
ended December 31, 1997,  were audited by other  auditors whose report  thereon,
dated January 29, 1998, expressed an unqualified opinion.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Western Country Clubs, Inc., as
of December 31, 1998,  and the results of its  operations and its cash flows for
the year ended in conformity with generally accepted accounting principles.



                                             /s/ Gray & Northcutt, Inc.   





February 26, 1999
(except for Note 16, as to which
the date is April 14, 1999)

<PAGE>
HLB Gross Collins, P.C.
Certified Public Accountants and Consultants





                          INDEPENDENT AUDITORS' REPORT





To the Board of Directors and Stockholders of
Western Country Clubs, Inc.


We have audited the accompanying  consolidated  balance sheet of Western Country
Clubs, Inc. as of December 31, 1997, and the related consolidated  statements of
income,  stockholders'  equity  and cash  flows  for the year then ended.  These
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 audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Western  Country
Clubs,  Inc. as of December 31, 1997, the results of its operations and its cash
flows for the year then ended in conformity with generally  accepted  accounting
principles.


                                                 /s/ HLB GROSS COLLINS, P.C.


Atlanta, Georgia
January 29, 1998



2625 Cumberland Parkway, Suite 400, Atlanta,Georgia 30339, USA
Telephone: + 1 770 433 1711, Fax: + 1 770 432 3473.

<PAGE>

                           WESTERN COUNTRY CLUBS, INC.
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997
                                   Page 1 of 2
<TABLE>
<CAPTION>

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

                                     ASSETS
                                                                                     1998                    1997
                                                                              -------------------    -------------------
<S>                                                                           <C>                    <C>               
CURRENT ASSETS:
    Cash                                                                      $          205,411     $           85,949
    Accounts receivable                                                                   67,803                 40,713
    Notes receivable - related parties (Note 3)                                          143,340                 23,000
    Current portion of note due from affiliate (Note 3)                                  120,000                      -
    Current portion of notes and loans receivable (Note 3)                               124,696                132,522
    Inventories                                                                           56,514                 54,897
    Prepaid expenses                                                                     105,546                 31,323
    Deferred income taxes                                                                102,000                309,677
                                                                              -------------------    -------------------

       Total current assets                                                              925,310                678,081
                                                                              -------------------    -------------------

PROPERTY AND EQUIPMENT:  (Note 1)
    Land and improvements                                                                 77,011                298,286
    Building and building improvements                                                         -              1,361,335
    Leasehold improvements                                                             1,519,862              1,510,529
    Equipment                                                                            388,477                677,942
    Furniture and fixtures                                                               279,838                333,330
                                                                              -------------------    -------------------

                                                                                       2,265,188              4,181,422
    Accumulated depreciation and reserve for impairment                               (1,128,236)            (1,749,344)
                                                                              -------------------    -------------------

                                                                                       1,136,952              2,432,078
                                                                              -------------------    -------------------

OTHER ASSETS:
    Note from affiliate, net of current portion shown above (Note 3)                     480,000                      -
    Notes and loans receivable, net of current
       portion shown above (Note 3)                                                      103,542                111,498
    Deferred income taxes (Note 10)                                                      265,740                107,733
    Goodwill, net of accumulated amortization of $69,069
       and $48,229 in 1998 and 1997, respectively                                         11,130                 25,970
    Deposits and other                                                                    41,139                 67,980
    Investment                                                                            57,400                114,800
                                                                              -------------------    -------------------

                                                                                         958,951                427,981
                                                                              -------------------    -------------------

                                                                              $        3,021,213     $        3,538,140
                                                                              ===================    ===================
</TABLE>

   The accompanying notes are an integral part of these financial statements.
<PAGE>

                           WESTERN COUNTRY CLUBS, INC.
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997
                                   Page 2 of 2
<TABLE>
<CAPTION>

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

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                                     1998                    1997
                                                                              -------------------    -------------------
<S>                                                                           <C>                    <C>               
CURRENT LIABILITIES:
    Accounts payable                                                          $          262,084     $          366,471
    Accrued liabilities                                                                  283,439                529,950
    Dividends payable                                                                     22,900                      -
    Current portion of notes payable -
       related parties (Note 6)                                                           55,300                369,870
    Current portion of long-term debt (Note 6)                                           174,604                356,636
                                                                              -------------------    -------------------

       Total current liabilities                                                         798,327              1,622,927
                                                                              -------------------    -------------------

NOTES PAYABLE - related parties, net of current
    portion shown above (Note 6)                                                          20,438                126,625
                                                                              -------------------    -------------------

LONG-TERM DEBT (Note 6)                                                                    7,843                437,084
                                                                              -------------------    -------------------

MINORITY INTERESTS (Note 1)                                                              176,389                147,645
                                                                              -------------------    -------------------

COMMITMENTS AND CONTINGENCIES
                                                                                               -                      -

STOCKHOLDERS' EQUITY:  (Note 8)
    10%convertible  preferred stock, $10 par value,  500,000 shares 
       authorized, 40,000 shares issued and outstanding
       at December 31, 1998 and no shares outstanding                                    400,000                      -
    12% convertible preferred stock, $10 par value, 100,000 shares
       authorized, 16,000 issued and outstanding
       at December 31, 1998 and no shares outstanding                                    145,000                      -
    Common stock, $.01 par value, 25,000,000 shares authorized;
       3,734,721  shares  issued  and  outstanding  at  December  31,  1998  
       and 3,634,721 shares issued and outstanding at December 31, 1997                   37,347                 36,347
    Additional paid-in capital                                                         4,363,739              4,314,739
    Accumulated deficit                                                               (2,927,870)            (3,147,227)
                                                                              -------------------    -------------------

       Total stockholders' equity                                                      2,018,216              1,203,859
                                                                              -------------------    -------------------

                                                                              $        3,021,213     $        3,538,140
                                                                              ===================    ===================
</TABLE>

   The accompanying notes are an integral part of these financial statements.
<PAGE>

                   WESTERN COUNTRY CLUBS, INC.
                CONSOLIDATED STATEMENTS OF INCOME
          FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>

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

                                                                                    1998                    1997
                                                                              -------------------    -------------------
<S>                                                                           <C>                    <C>               
REVENUES:
    Beverage and food sales                                                   $        3,364,637     $        4,456,887
    Admission fees                                                                     1,390,427              2,110,665
    Gain on sale of assets                                                               284,861                210,645
    Sublease income                                                                      168,000                168,000
    Interest income                                                                       32,819                    856
    Other income                                                                          38,180                169,724
                                                                              -------------------    -------------------

                                                                                       5,278,924              7,116,777
                                                                              -------------------    -------------------

COSTS AND EXPENSES:
    Cost of products and services                                                      1,210,405              2,493,806
    General and administrative expense                                                 3,238,189              4,261,093
    Depreciation and amortization                                                        270,633                467,121
    Interest expense                                                                      71,968                158,821
    Write-down of investments                                                             57,400                      -
    Impairment of long-lived assets                                                            -                250,272
    Write-off of acquisition goodwill                                                          -                 75,687
    Litigation loss (Note 8)                                                              62,458                216,808
    Offering costs                                                                             -                374,653
                                                                              -------------------    -------------------

                                                                                       4,911,053              8,298,261
                                                                              -------------------    -------------------

INCOME (LOSS) BEFORE INCOME TAXES
    AND MINORITY INTERESTS                                                               367,871             (1,181,484)

INCOME TAX (EXPENSE) BENEFIT (Note 9)                                                    (49,670)                83,789
                                                                              -------------------    -------------------

INCOME (LOSS) BEFORE MINORITY INTERESTS                                                  318,201             (1,097,695)

MINORITY INTERESTS IN (INCOME) LOSS OF
    CONSOLIDATED SUBSIDIARIES                                                            (42,494)               110,319
                                                                              -------------------    -------------------

NET INCOME (LOSS)                                                                        275,707               (987,376)

PREFERRED STOCK DIVIDENDS                                                                (56,350)                     -
                                                                              -------------------    -------------------

NET INCOME (LOSS) APPLICABLE TO COMMON STOCK                                  $          219,357     $         (987,376)
                                                                              ===================    ===================

BASIC EARNINGS PER SHARE                                                      $             0.07     $            (0.27)
                                                                              ===================    ===================
DILUTED EARNINGS PER SHARE                                                    $             0.05     $                -
                                                                              ===================    ===================
AVERAGE COMMON AND COMMON EQUIVALENT:
    BASIC SHARES                                                                       3,775,522              3,619,162
                                                                              ===================    ===================
    DILUTED SHARES                                                                     5,427,522                      -
                                                                              ===================    ===================

</TABLE>

   The accompanying notes are an integral part of these financial statements.


<PAGE>



                           WESTERN COUNTRY CLUBS, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>

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

                         10% Convertible     12% Convertible
                         Preferred Stock     Preferred Stock       Common Stock
                       -------------------------------------------------------------
                        Number    Value     Number    Value      Number     $0.01    Additional                   Total
                          of        of        of        of         of        par      Paid-In    Accumulated   Stockholders'
                        Shares    Shares    Shares    Shares     Shares     Value     Capital      Deficit       Equity
                       ----------------------------------------------------------------------------------------------------
Balance,
<S>                    <C>        <C>       <C>       <C>       <C>         <C>      <C>          <C>          <C>        
   December 31, 1996          -   $      -        -   $      -  3,519,921   $35,199  $4,201,087   $(2,159,851) $ 2,076,435

Common stock
   issued for
   investment                 -          -        -          -    114,800     1,148     113,652             -      114,800

Net loss for the
   year ended
   December 31, 1997          -          -        -          -          -         -           -      (987,376)    (987,376)
                       ----------------------------------------------------------------------------------------------------

Balance,
   December 31, 1997          -          -        -          -  3,634,721    36,347   4,314,739    (3,147,227)   1,203,859

Preferred stock issued
   for note payable      40,000    400,000        -          -          -         -           -             -      400,000

Preferred stock issued
   for note payable           -          -   16,000    160,000          -         -           -             -      160,000

Common stock issued
   in settlement
   of litigation              -          -        -          -    100,000     1,000      49,000             -       50,000

Redemption of
   preferred stock            -          -   (1,500)   (15,000)         -         -           -             -      (15,000)

Cash dividends:
   Preferred -
     $1 per share             -          -        -          -          -         -           -       (40,000)     (40,000)
     $1.20 per share          -          -        -          -          -         -           -       (16,350)     (16,350)

Net income for the
   year ended
   December 31, 1998          -          -        -          -          -         -           -       275,707      275,707
                       ----------------------------------------------------------------------------------------------------

Balance,
   December 31, 1998     40,000   $400,000   14,500   $145,000  3,734,721   $37,347  $4,363,739   $(2,927,870) $ 2,018,216
                       ====================================================================================================
</TABLE>


   The accompanying notes are an integral part of these financial statements.


<PAGE>




                        WESTERN COUNTRY CLUBS, INC.
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
                                  Page 1 of 2
<TABLE>
<CAPTION>

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

                                                                                   1998            1997
                                                                              --------------  -------------
<S>                                                                           <C>              <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                  $     275,707    $  (987,376)
    Adjustments to reconcile net loss to net cash
      provided by operating activities -
      Depreciation and amortization                                                 267,297        467,121
      Write-off of note receivable                                                   55,000         17,978
      Write-down of investment                                                       57,400              -
      Write-off of acquisition goodwill                                                   -         75,687
      Loss from impairment of assets                                                      -        250,272
      Gain on sale of assets                                                       (284,861)      (210,645)
      Minority interests in earnings of subsidiaries                                 42,494       (110,319)
      Settlement of litigation                                                       50,000
      Deferred tax provisions                                                        49,670        (83,789)
      Changes in assets (increase) decrease -
         Decrease in accounts receivable                                            (27,090)         4,023
         Decrease in inventories                                                     (1,617)        24,733
         Decrease in prepaid expenses                                               (74,223)        37,566
         Decrease in refundable income taxes                                              -          7,269
         Decrease in capitalized offering costs                                           -        142,857
         Decrease in deposits and other assets                                       26,841          8,290
      Changes in liabilities increase (decrease) -
         Increase in accounts payable                                              (104,387)        40,649
         Increase in accrued expenses                                              (246,511)       220,899
         Increase in dividends payable                                               22,900              -
                                                                              --------------  -------------

           Net cash provided by (used in) operating activities                      108,620        (94,785)
                                                                              --------------  -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Restricted certificate of deposit                                                     -        200,000
    Sale of property and equipment                                                  255,109        100,000
    Notes and loans receivable                                                     (304,129)        (3,000)
    Repayments of notes receivable                                                  144,570         13,002
    Acquisition of property and equipment                                           (18,004)       (13,571)
                                                                              --------------  -------------

      Net cash provided by (used in) investing activities                            77,546        296,431
                                                                              --------------  -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Partnership distributions to minority interests                                 (13,750)        (7,750)
    Payments of dividends                                                           (56,350)             -
    Borrowings under notes payable                                                        -        190,000
    Repayments of notes payable                                                     (66,270)      (605,687)
    Borrowings under notes payable, related parties                                 178,456        278,276
    Repayments of notes payable, related parties                                   (108,790)      (161,160)
                                                                              --------------  -------------

      Net cash provided by (used in) financing activities                           (66,704)      (306,321)
                                                                              --------------  -------------

NET INCREASE (DECREASE) IN CASH                                                     119,462       (104,675)

CASH, BEGINNING OF YEAR                                                              85,949        190,624
                                                                              --------------  -------------

CASH, END OF YEAR                                                             $     205,411   $     85,949
                                                                              ==============  =============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

<PAGE>

                        WESTERN COUNTRY CLUBS, INC.
                 CONSOLIDATED STATEMENTS OF CASH FLOWS+A24
              FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
                                  Page 2 of 2
<TABLE>
<CAPTION>

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

                                                                                   1998            1997
                                                                              --------------  -------------
<S>                                                                           <C>             <C>         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
    Cash paid for interest                                                    $      71,638   $    179,174
                                                                              ==============  =============
  
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
    On February 6, 1997, the Company exchanged 114,800 share of its common   
    stock for  57,400  shares  and 57,400  purchase  warrants  of the stock 
    of Cowboys Concert Hall-Arlington, Inc.

    The Company sold the Tucson club in May 1997 for $325,000.  Assets and 
    liabilities exchanged were as follows:

      Working capital and other than cash                                                     $    (56,722)
      Fixed assets, intangibles, and other assets                                                  381,722
                                                                                              -------------

         Net assets exchanged                                                                      325,000
      Less note receivable                                                                         225,000
                                                                                              -------------

         Cash proceeds on sale of club                                                        $    100,000
                                                                                              =============
</TABLE>

    The Company  issued a note  payable in May 1997 in the amount of $93,407 for
    unpaid rent expenses of the Tucson club. In September,  upon finalization of
    the agreement to sell the Tucson club,  this note was reissued in the amount
    of $133,000,  and a second note was issued in the amount of $4,800. The note
    receivable was reduced to $195,000.

    On January 1, 1998,  two notes  payable  from a major  stockholder  totaling
    $378,276 with accrued interest of $21,725 were converted to 40,000 shares of
    the Company's Series A 10% cumulative convertible preferred stock (Note 8).

    On February 18,  1998,  a note  payable of $160,000 was  converted to 16,000
    shares of the Company's Series B 12% cumulative  convertible preferred stock
    (Note 8).

    On February 19, 1998,  the Company  issued 100,000 shares of common stock in
    settlement of an obligation of $50,000.

    During 1998, the Indianapolis club was sold to an affiliated partnership for
    a $600,000 note receivable. Also, the the affiliated partnership assumed two
    notes payable totaling $490,425.





   The accompanying notes are an integral part of these financial statements.



    

<PAGE>


                           WESTERN COUNTRY CLUBS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997


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


(1)      DESCRIPTION OF BUSINESS

              Western Country Clubs,  Inc. (the "Company") was  incorporated  in
         Colorado on December 19, 1989, and commenced  operations  in  1993. The
         Company's  operations have  consisted primarily of owning and operating
         "country-western"  theme  nightclubs.  The Company's  subsidiaries  and
         divisions are as follows:

                    Western   Country  Club  1,  Ltd.   ("Indy")  is  a  limited
               partnership formed on January 19, 1993. Western 1, Ltd. owned and
               operated a nightclub in Indianapolis,  Indiana. The operations of
               the nightclub  began on April 14, 1993.  This club was sold to an
               affiliated  partnership  on February 16, 1998. See Notes 9 and 16
               for further details.
               
                    The St.  Louis  division  of the  company  was  acquired  on
               October 7, 1994. This division operates a nightclub in St. Louis,
               Missouri.

                    Entertainment   Wichita,   Inc.  ("EWI"),   a  wholly  owned
               subsidiary,  owns  an  80%  interest  in In  Cahoots,  Ltd.  ("In
               Cahoots").  In  Cahoots  is a limited  partnership  that owns and
               operated a nightclub in Wichita, Kansas (Notes 6).

                    Atomic Burrito, Inc. ("Atomic"),  a wholly-owned  subsidiary
               formed in 1998 to develop a  "Fresh-Mex"  restaurant  featuring a
               Mexican menu  emphasizing  fresh  ingredients  and  made-to-order
               burritos (Note 11).

                    In addition to these subsidiaries and divisions, the Company
               held a 50%  interest in a nightclub  in  Atlanta,  Georgia  until
               December 1997 (Note 7).

(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

               The  following is a summary of  significant  accounting  policies
          followed by the Company:

                         Cash and cash  equivalents - The company  considers all
                    highly liquid investments with original  maturities of three
                    months or less to be cash equivalents.

                         Estimates - The preparation of financial  statements in
                    conformity  with generally  accepted  accounting  principles
                    requires  management to make estimates and assumptions  that
                    affect the reported  amounts of assets and  liabilities  and
                    disclosure of contingent  assets and liabilities at the date
                    of the  financial  statements  and the  reported  amounts or
                    revenues and expenses  during the reporting  period.  Actual
                    results could differ from these estimates.

                         Consolidation - The consolidated  financial  statements
                    include   the   accounts   of  the   Company,   two  limited
                    partnerships  over which the Company has financial  control,
                    and  two  wholly   owned   subsidiaries.   All   significant
                    intercompany  accounts and transactions have been eliminated
                    in consolidation.

                         Investments  -  Investments  in  companies in which the
                    Company  has less than a 20%  interest  are  carried at cost
                    reduced by any permanent  impairment  in value.  At December
                    31, 1998 and 1997,  the Company held 57,400  shares of stock
                    in Cowboy's Concert Hall Arlington,  Inc. in which it had an
                    original cost basis of $114,800.  During 1998,  the value of
                    this  investment  was  determined  to be  impaired  and  its
                    carrying  value  was  reduced  to  $57,400.  See  Note 8 for
                    further details.

                         Inventories  -  Inventories  consist of  liquor,  wine,
                    beer,  and  boutique  items.  Inventories  are stated at the
                    lower of cost (first-in, first-out) or market.

                         Depreciation  and amortization - Property and equipment
                    are  stated  at cost.  Depreciation  is  provided  using the
                    straight-line method over the assets' estimated useful lives
                    as follows:  land  improvements,  10-15 years;  building and
                    improvements,  10-30  years;  leasehold  improvements,  7-10
                    years;  equipment,  7-10 years; furniture and fixtures, 7-10
                    years.

                         Intangibles - Organization costs, liquor license costs,
                    and goodwill are amortized over five years. The covenant not
                    to compete is amortized over 15 years..

                         Measurement of impairment - At each balance sheet date,
                    the  Company  reviews  the  amount  of  recorded   goodwill,
                    covenant  not  to  compete  and  related   nightclub  assets
                    (separately  by club)  for  impairment.  Whenever  events or
                    changes in  circumstances  indicate that the carrying amount
                    of the  expected  cash flows from these  assets is less than
                    the  carrying  amount  of these  assets,  the  Company  will
                    recognize an impairment loss in such period in the amount by
                    which the  carrying  amount of the assets  exceeds  the fair
                    value of the assets.

                         Repairs  and  maintenance  - Normal  costs  incurred to
                    repair and maintain  fixed assets are charged to  operations
                    as incurred.  Repairs and betterments  which extend the life
                    of an asset are capitalized and subsequently  depreciated on
                    a straight-line  basis over the remaining useful life of the
                    asset.  When  assets  are  sold or  retired,  the  cost  and
                    accumulated  depreciation  are removed from the accounts and
                    any resulting gain or loss is included in operations.

                         Income  taxes -  Income  taxes  are  provided  based on
                    earnings reported in the financial  statements.  The company
                    follows Statement of Financial  Accounting Standards No. 109
                    whereby  deferred  income  taxes are  provided on  temporary
                    differences    between   reported   earnings   and   taxable
                    income.(See Note 10 for further details.)

                         Concentration  of credit risk -  Financial  instruments
                    which  potentially  subject the Company to concentrations of
                    credit  risk  are   primarily   cash  and   temporary   cash
                    investments.  The  Company  places its cash  investments  in
                    highly rated financial  institutions.  At times, the Company
                    may  have  bank  deposits  in  excess  of  Federal   Deposit
                    Insurance  Commission (FDIC) limits.  At  December 31, 1998,
                    the Comany had uninsured deposits totaling $11,916.

(3)      NOTES AND LOANS RECEIVABLE

               The  Company  had the  following  notes and loans  receivable  at
          December 31, 1998:
<TABLE>
<CAPTION>

                                                                  1998              1997          
                                                                 ------            ------ 
<S>                                                             <C>               <C>     
              8% note  receivable  due from an
              individual,  payable  in monthly
              installments of $7,500, including
              interest, due April 1999                          $ 111,363         $ 189,020

              8% note  receivable  due from a 
              corporation,  payable  in monthly
              installments of $5,000, including
              interest, due                                       153,086                 -

              Non-interest bearing note receivable,
              due from an individual, payable on
              demand                                                   -             55,000
                                                                ---------         ---------
                                                                  264,449           244,020
                  Less current portion                            124,696           132,522
                  Less allowance for doubtful accounts             36,211                 -
                                                                ---------         ---------
                  Noncurrent portion                            $ 103,542         $ 111,498
                                                                =========         =========

              Note receivable due from related party:

              8% note receivable due from an
              affiliated partnership (See Notes
              7 and 16 for further details.)                    $ 600,000         $       -
                  Less current portion                            120,000                 -
                                                                ---------         ---------
                  Noncurrent portion                            $ 480,000         $       -
                                                                =========         =========



</TABLE>

              In  addition,  the  Company  had  a note  receivable  due  from an
         officer of  the company, bearing interest at 6%, totaling $143,340. The
         note  receivable is due December 1999. Management anticipates that this
         not  will be repaid from bonuses  earned by this officer in  connection
         with the opening of new "Atomic Burrito" restaurants.

(4)      FAIR VALUE OF FINANCIAL INSTRUMENTS

              The  carrying  amounts  of  cash,   short-term  notes  receivable,
         commercial  paper and notes payable  approximate  fair value because of
         the short-term maturity of these instruments.

              The fair value of long-term debt,  including  current portion,  is
         estimated  based on quoted market prices for the same or similar issues
         or on the  current  rates  offered to the  Company for debt of the same
         maturities.

(5)      IMPAIRMENT OF LONG-LIVED ASSETS

              In December  1997,  the Company  sold its  Indianapolis  club to a
         stockholder  and former officer and director of the Company.  A reserve
         of $250,272  was  recorded  for  impairment  of the  long-lived  assets
         including land and  improvements,  building and building  improvements,
         furniture and fixtures,  and equipment for the year ended  December 31,
         1997. In addition,  at December 31, 1997, the Company wrote off $75,687
         of  goodwill,   net  of  accumulated   amortization,   related  to  the
         acquisition of the Indianapolis Club.

(6)      NOTES PAYABLE
<TABLE>
<CAPTION>

         Notes payable - related parties consist of the following:

                                                                    1998                1997          
                                                                   ------              ------   
<S>                                                               <C>                <C>      
         10% note payable to a major stockholder 
         and former officer,  payable in
         graduated monthly installments,
         including interest (Note 17)                             $       -          $ 278,276

         12% note payable to a major stockholder
         and former officer, due on demand
         (Notes 9 and 17).                                                 -           100,000

         1% over prime  note  payable to a former
         limited  partner,  payable in monthly 
         installments of $6,250 plus interest, 
         secured by the ownership interest of a 
         stockholder and the guarantee of a
         financial corporation   (Note 9)                           75,738             118,219
                                                                  --------             -------

              Total notes payable - related parties                 75,738             496,495
                  Less current portion                              55,300             369,870
                                                                  --------           ---------
              Noncurrent portion                                  $ 20,438           $ 126,625
                                                                  ========           =========
</TABLE>
<TABLE>
<CAPTION>

         Maturities of notes payable - related parties are as follows:

         Year ending December 31,                                                     Amount
         ------------------------                                                    ---------
<S>           <C>                                                                    <C>     
              1999                                                                   $  20,438
                                                                                     =========
</TABLE>
<TABLE>
<CAPTION>

         Long-term debt consists of the following at December 31, 1998 and 1997:

                                                                    1998               1997          
                                                                  ---------          ---------   
<S>                                                                <C>               <C>      
         12% note payable to a bank, due on
         demand, secured by mortgage of Indy
         (Notes 8 & 16)                                            $      -          $ 160,000

         10% note payable to a limited
         partnership, due in monthly installments
         of $7,500 through June 1999.                                38,900            120,538

         3% over prime note payable to a financial
         institution,  due in monthly installments
         of $8,437, through February 2004, secured
         by real estate (Notes 8 & 16)                                    -            445,662

         10% note payable to an individual,
         due in monthly installments of $5,000,
         plus interest, through May 1999                             52,500                  -

         10% note payable to an individual,
         due in monthly installments of $3,187,
         through January 1999, secured by second 
         mortgage on real estate and the personal
         guarantee of the Company's former
         president (Note 16)                                              -             44,764

         Non-interest  bearing  note  payable to a 
         Corporation,  due in monthly installments
         of $1,000, through July 1999, secured
         by equipment                                                 8,000             20,000

         18%  note   payable  to  a  financial 
         institution, due in monthly installments
         of  $3,744, through March 2000, secured 
         by Wichita-furniture, fixtures,
         inventory and accounts receivable                           47,047                  -

         Non-interest  bearing  note  payable to an
         individual, due in monthly installments of
         $3,000 through December 1999, secured  by
         Wichita-furniture, fixtures and
         equipment                                                   36,000                  -

         20.5% capital lease, due in monthly
         installments of $256, through November
         1998, secured by equipment                                       -              2,756
                                                                   --------          ---------
                  Total long-term debt                              182,447            793,720
                  Less current portion                              174,604            356,636
                                                                   --------          ---------
                  Noncurrent portion                               $  7,843          $ 437,084
                                                                   ========          =========
</TABLE>
<TABLE>
<CAPTION>

         Maturities of long-term debt are as follows:

         Year ending December 31,                                                      Amount
         ------------------------                                                    ---------
<S>               <C>                                                                <C>      
                  1999                                                               $   7,843
                                                                                     =========
</TABLE>

(7)      RELATED PARTY TRANSACTIONS

               On July 3, 1993 In Cahoots signed a ten-year lease. The lessor is
          a 20% limited partner of In Cahoots. Rent expense under this lease for
          the years ended December 31, 1998 and 1997, was $150,000 for each year
          respectively (Note 15).

               On October 1, 1996, EWI assumed $150,000 of debt when it acquired
          control of In Cahoots.  The  remaining  balance of $75,738 at December
          31, 1998 is due to a former  limited  partner of the Company  (Notes 6
          and 8).

               Effective  January 9, 1998,  the Company  sold its  interest in a
          limited  partnership for $10,000 in cash and a $210,000 note. The sale
          resulted in a gain of $192,869, net of the tax effect of $27,131 (Note
          6).

               On February 6, 1998, the Indy  Partnership  sold its Indianapolis
          club to an  affiliated  partnership  in exchange  for a $600,000  note
          receivable  and the  assumption  of  $490,426  of long  term  debt and
          $60,078  of  accrued  interest  and taxes.  The note  receivable  bore
          interest  at the rate of 8% per annum and was due on February 6, 1999.
          This note was collateralized by 732,191 shares of the Company's common
          stock  for which  the  issuer of the note had the right to assign  the
          shares to the partnership in lieu of payment of the note. Furthermore,
          the Indy Partnership  remains  contingently  liable on the $490,426 in
          long term debt assumed by the purchaser.  This sale resulted in a gain
          of  $64,861.  See  Note 16 for  details  regarding  subsequent  events
          associated with this note receivable.

(8)       STOCKHOLDERS' EQUITY

               Stock  options - On  December  16,  1993 the  Company  granted an
          option to  purchase  250,000  shares of the  Company's  $.01 par value
          common  stock at $2.50 per share to an  employee of the  Company.  The
          option expires on December 1, 1998.  During 1995,  20,000 options were
          exercised resulting in proceeds to the Company of $50,000.

               The  underwriter  was issued warrants as compensation to purchase
          40,000 shares of common stock.  The warrants are  exercisable at $6.30
          per share  commencing April 25, 1995 until April 25, 1999. The Company
          has granted the holders of the warrants certain customary registration
          rights.  As of December 31,  1998,  none of these  warrants  have been
          exercised.

               Warrants  granted - Effective July 1, 1994,  the Company  granted
          warrants to  purchase  60,000  shares of the  Company's  common  stock
          exercisable  at $6.00 per share until June 30,  1999,  in exchange for
          consulting  services  to be  performed  over  a  one-year  period.  In
          addition,   stock   appreciation   rights  were  granted  whereby  the
          consultant  could  purchase  shares of common stock for $.01 per share
          representing the increase in value of the 60,000 shares divided by the
          then market price of the stock.  Compensation  will be recorded as the
          price of the Company's stock exceeds the warrant exercise price.

               Stock  compensation  plan - In 1996,  the company  established  a
          stock option  compensation  plan for  employees and  consultants.  The
          aggregate  number of common  shares as to which options and awards may
          be granted shall not exceed 250,000 and the options and awards must be
          granted  within five  years.  At the time of grant,  the Company  will
          determine the exercise price and the vesting  period,  which shall not
          exceed five years.

               During  1996,  the  Company  issued:  (1)  10,000  shares  of the
          Company's  common  stock  to  the  Company's  president  for  services
          rendered and recorded  compensation  of $35,000;  (2) 15,000 shares of
          the Company's  common stock to a consultant as a reduction of accounts
          payable of $46,666; (3) 10,000 shares of the Company's common stock to
          a consultant for services valued at $35,000;  and (4) 45,000 shares of
          the  Company's  common  stock and  145,000  options  to  purchase  the
          Company's  common stock at $3.50 per share for three years in exchange
          for the  cancellation  of 240,000  options to purchase  the  Company's
          common stock at $2.50 per share. Each of the above issuances of common
          stock  was  valued at $3.50 per  share  less the  previously  recorded
          compensation where warrants were returned.

               During 1997, the company  exchanged  114,800 shares of its common
          stock for 57,400 shares and 57,400  purchase  warrants of the stock of
          Cowboys  Concert Hall  Arlington,  Inc.  ("Cowboys").  The  individual
          shareholders  of the  Cowboys'  stock  had  participated  in a private
          placement conducted by Cowboys in Fall 1995 to raise funds for Cowboys
          to pay its  expense  in  connection  with a  proposed  merger  between
          Cowboys and the Company  which did not  occur.(See  Note 2 for further
          details).

               During 1998, the Company  converted its notes payable to a former
          officer of the  Company  and a  shareholder  and the  related  accrued
          interest  in the amount of  $400,000  into  40,000  shares of Series A
          Convertible Preferred Stock. The Series A Preferred Stock provides for
          a par  value  of $10 per  share;  a 10%  cumulative  annual  dividend,
          payable  quarterly;  conversion into the Company's common stock at the
          rate of $1 per share;  and redemption by the Company at the rate of up
          to 10,000 shares annually on each anniversary date for four years.

               During 1998,  the Company  agreed to convert the  Company's  note
          payable to a limited partnership in the amount of $160,000 into 16,000
          shares of Series B Cumulative  Convertible Preferred Stock. The Series
          B  Preferred  provides  for  a par  value  of  $10  per  share;  a 12%
          cumulative  annual dividend,  payable  quarterly;  conversion into the
          Company's  common stock at the rate of $1 per share; and redemption of
          the preferred stock funded in the amount of $5,000 monthly.

               During 1998, the Company settled a lawsuit for $92,808 in cash, a
          note payable of $74,000 and 100,000 shares of the Company's
          stock  valued at  $50,000.(See Notes 6 & 14 for further details).
          14).

(9)      INCOME TAXES
<TABLE>
<CAPTION>

              As of  December  31, 1998 and 1997,  the  Company's  deferred  tax
         assets were as follows:

                                                                  1998                1997
                                                                  ----                ----
<S>                                                            <C>                <C>       
              Tax over book basis of fixed and
                intangible assets                              $  209,635         $  280,736
              Impairment of long-lived assets                           -             92,601
              Leases with scheduled rent increases                 48,391             42,787
              Net operating loss carryforwards                    935,972            835,704
              Charitable contribution carryforwards                 1,549              1,656
                                                               ----------         ----------
                                                                1,195,547          1,253,484
              Valuation allowance                                (827,807)          (836,074)
                                                               ----------         ----------
              Net deferred tax asset                              367,740            417,410
              Current asset                                      (102,000)          (309,677)
                                                               ----------         ----------
              Long-term asset                                  $  265,740         $  107,733
                                                               ==========         ==========
</TABLE>

               Realization  of the  deferred  tax  asset is  dependent  upon the
          Company generating  sufficient future taxable income against which its
          loss carryforward and other positive timing differences can be offset.
          Management has determined that it is not more likely than not that the
          Company  will be able to  realize  all the tax  benefits  from the net
          operating loss carryforward and other positive timing  differences and
          has therefore reduced the deferred tax asset by a valuation allowance.
<TABLE>
<CAPTION>

               Deferred income taxes resulting from temporary differences in the
          recognition  of income and expense  from tax and  financial  reporting
          purposes are as follows:

                                                                  1998               1997
                                                                  ----               ----
<S>                                                            <C>                <C>      
              Differences between book and
                 tax depreciation                              $ (71,101)         $  65,387
              Impairment of long-lived assets                    (92,601)          (591,428)
              Leases with scheduled rent increases                 5,604            (10,134)
              Net operating loss carryforwards                   100,268            786,138
              Charitable contribution carryforwards                 (107)             1,656
                                                               ---------          ---------
                                                                 (57,937)           251,619
              Change in valuation allowance                        8,267           (167,830)
                                                               ---------          ---------
              Net deferred tax (expense) benefit               $ (49,670)         $  83,789
                                                               =========          =========
</TABLE>
<TABLE>
<CAPTION>

               Components  of the  provision  for income taxes  attributable  to
          continuing operations are as follows:

                                                                 1998               1997
                                                                 ----               ----
<S>                                                            <C>                <C>     
              Current income tax benefit                       $      -           $      -
              Deferred income tax (expense) benefit             (49,670)            83,789
                                                               --------           --------
                                                               $(49,670)          $ 83,789
                                                               ========           ========
</TABLE>
<TABLE>
<CAPTION>

               The difference  between the Company's  effective  income tax rate
          and the United States statutory rate is reconciled below for the years
          ended December 31, 1998 and 1997:

                                                                  1998                 1997
                                                                  ----                 ----
<S>                                                              <C>                <C>    
              United States statutory rate                       (34.0)%            (34.0)%
              State income taxes, net of federal
                 income tax benefit (cost)                        (3.0)              (3.0)
              Increase (decrease) in valuation
                 Allowance                                        44.5               14.2
              Other                                                (.1)              15.7
                                                                  -----             ------
                                                                   7.4%              (7.1)%
                                                                  =====             ======
</TABLE>


               At  December  31,  1998,  the Company  has a net  operating  loss
          carryforward of approximately $2,855,519,  which commences expiring in
          2012.

(10)      EARNINGS PER SHARE

               Basic  earnings  per  share  amounts  are  computed  based on the
          weighted  average  number of shares  outstanding  plus the shares that
          would be  outstanding  assuming the  conversion  of the Series A and B
          Preferred Stocks, which are considered to be common stock equivalents.
          Net income has been  adjusted for dividends on  convertible  preferred
          stock.  The number of shares used in computing basic earning per share
          were 4,266,022 and 3,619,162 in 1998 and 1997 respectively.

               Diluted  earnings  per share for 1998 was  computed  taking  into
          effect the stock options and warrants outstanding during 1998. Options
          and warrants were not taken into  consideration  in computing  diluted
          earnings per share in 1997 because their effects were antidilutive.

               As of December 31, 1998,  the Company had the  following  options
          and warrants outstanding:

          Stock Options

          55,000 shares exercisable at $2.00 per share through June 30, 1999
          75,000 shares exercisable at $0.75 per share through March 30, 2002
         420,000 shares exercisable at $0.75 per share through December 11, 2002
         127,000 shares exercisable at $0.75 per share through December 30, 2003

          Warrants

          40,000 shares exercisable at $6.60 per share through April 25, 1999
          60,000 shares exercisable at $6.00 per share through June 30, 1999
          75,000 shares exercisable at $0.75 per share through February 16, 2001
         240,000 shares exercisable at $0.75 per share through February 18, 2001
         100,000 shares exercisable at $1.00 per share through February 18, 2001
         440,000 shares exercisable at $0.75 per share through June 30,2003
          20,000 shares exercisable at $0.75 per share through November 15, 2003

               In  total  the  Company  had  options  and  warrants  outstanding
          totaling  677,000  shares and 975,000  shares  respectively.  Thus the
          Company used  5,472,522  shares in computing its diluted  earnings per
          share for 1998.


(11)      ATOMIC BURRITO, INC.

               On June 19, 1998 the Company formed Atomic Burrito, Inc. ("Atomic
          Burrito") as a wholly owned subsidiary. Atomic Burrito will be used to
          develop  its new  restaurant  concept  which  features a Mexican  menu
          emphasizing fresh ingredients and made-to-order burritos.

               During 1998,  Atomic Burrito entered into license  agreements for
          two restaurants to be located in Stillwater and Norman Oklahoma. These
          licensing agreements call for licensing fees of $10,000 per restaurant
          and  royalty  fees of 2% of the  licensee's  gross  receipts  from the
          restaurant.  Although these  restaurants  were opened in 1998, no fees
          were accrued or monies received during 1998.

               Subsequent  to  year  end,  the  Company  entered  into  a  third
          licensing  agreement  for a  restaurant  to be  located  in  Longview,
          Washington.  This licensing  agreement called for a $15,000  licensing
          fee and 3% of the licensee's gross receipts from the restaurant.

               On October 27, 1998,  the company  entered  into a joint  venture
          agreement with New York Bagel  Enterprises,  Inc.("New York Bagel") to
          form a limited liability  company to convert,  own finance and operate
          restaurant facilities.  New York Bagel is to contribute its leases and
          leasehold  improvements  on  each  facility  to be  developed  and the
          Company is to  contribute  funds  sufficient  to cover the  conversion
          costs of the facility along with sufficient funds to cover pre-opening
          expenses,  limited  to  $150,000  per  restaurant,  with any  required
          funding in excess of  $150,000 to be split 60 % to the Company and 40%
          to New York Bagel.  During 1998, no restaurants were opened under this
          joint venture agreement.


(12)      LEASE COMMITMENTS

               On July 30, 1993,  In Cahoots  entered into a building  lease for
          club operations in Wichita,  Kansas,  with a 20% limited partner.  The
          lease term is ten years  commencing  October 15, 1993.  In addition to
          minimum rental payments of $12,500,  In Cahoots is obligated to pay to
          the landlord,  as  additional  rent, a percentage of gross sales after
          deductions for alcohol and sales taxes.  The lease agreement  contains
          two  five-year  renewal  options at the primary lease term rental rate
          (Note 9).

               In December 1993,  the Company  entered into a building lease for
          club  operations in St. Louis,  Missouri.  The lease term is ten years
          with two five-year renewal options.  Minimum rent per month is $22,238
          for years one through five and $26,686 per month for years six through
          ten. The lease requires a $25,000 security deposit,  and is guaranteed
          by an affiliated company.

               On March 15, 1997,  the Company  entered into a 51.5-month  lease
          agreement   for  an  office   building  to  serve  as  the   corporate
          headquarters in Oklahoma City, Oklahoma. From March 15, 1997 to August
          31, 1998,  the base rent will be $36,900 per year.  From  September 1,
          1998 to January 31, 2000, the rent increases to $39,360 per year. From
          February 1, 2000 to June 30, 2001, the base rent will be $41,820.

               Rent  expense  for the years  ended  December  31,  1998 and 1997
          amounted to $513,315 and $614,522, respectively. Rent expense for 1998
          is net of $13,500 for rental income received.
<TABLE>
<CAPTION>
               Minimum  future rental  payments under  non-cancelable  operating
          leases having remaining terms in excess of one year as of December 31,
          1998 for each of the next five years and in the aggregate are:

         Years ending December 31,                                      Amount  
         -------------------------                                      ------
         <S>                                                          <C>       
         1999                                                         $  531,192
         2000                                                            533,447
         2001                                                            533,682
         2002                                                            502,287
         2003                                                            491,832
         Thereafter                                                        5,400
                                                                      ----------
                                                                      $2,597,840
                                                                      ==========
</TABLE>
(13)      Litigation

          The Company is involved in various other claims and legal  proceedings
          of a nature  considered normal to its business,  principally  personal
          injury claims  resulting from  incidents  occurring on the premises of
          the  Company's  nightclubs.  While it is not  feasible  to  predict or
          determine the financial outcome of these proceedings,  management does
          not believe  that they will result in a materially  adverse  effect on
          the Company's financial position, results of operations or liquidity.

(14)      OFFERING COSTS

          In  September  1997,  the Company  terminated  its  agreement  with an
          underwriter   to  offer   preferred   stock  to  the   public  due  to
          nonperformance by the underwriter. The Company's costs associated with
          the offering of $374,653 have been charged to operations.

(15)      RECLASSIFICATIONS

          Certain   amounts  on  the  1997   financial   statements   have  been
          reclassified in order to be consistent with the 1998 presentation.

(16)      SUBSEQUENT EVENTS

          The $600,000 note  receivable  received in connection with the sale of
          the  Indianapolis  Club due on  February 6, 1999,  from an  affiliated
          partnership  was not paid when due.  This note  receivable  was due to
          Western Country Club 1, Ltd., an 80% owned  partnership.  The note was
          collateralized  by 732,191  shares of the  Company's  common stock for
          which  the  borrower  had the right to  assign  the stock  back to the
          partnership  in lieu of  payment of this debt.  On April 14,  1999,  a
          three  party  agreement  was  reached  with the  borrower,  whereby an
          unrelated  third  party  agreed  to  purchase  585,753  shares  of the
          borrowers stock for $480,000  payable in the form of a $480,000 6% per
          annum note due in two years.  The  remaining  146,438  shares of stock
          held as collateral on the original note are to be assigned to the Indy
          Partnership.  The Indy Partnership  agreed to accept the $480,000 note
          from the  unrelated  third party in full  settlement  of the remaining
          $480,000  balance due on the note.  Management of the Indy Partnership
          intends to liquidate the Partnership by distributing 146,438 shares of
          common stock of Western Country Clubs, Inc. to the unrelated  partners
          and  assigning  the $480,000  note from the  unrelated  third party to
          Western Country Clubs, Inc.

          For reporting purposes, $480,000 of this note receivable was reflected
          as long-term as of December 31, 1998.

          On February 24, 1999,  the Company  implemented  a Bonus  Compensation
          Plan.  This plan calls for the  Company to pay a bonus of $10,000  per
          store for all Atomic Burrito stores,  excluding  licensed  operations,
          opened by the Company to Mr. James Blacketer, the Company's president.
          In addition,  Mr.  Blacketer is to receive a bonus of $15,000 for each
          ten Atomic  Burrito units opened by the Company,  whether owned by the
          Company  in full or in part,  or  licensed  by the  Company.  Once the
          Company has fifty units opened, Mr. Blacketer shall receive a bonus of
          $50,000: and if pre-tax earnings exceed $1,000,000, then Mr. Blacketer
          shall receive a bonus of $75,000.

          This  bonus  plan is  effective  for 1999 and 2000  provided  that Mr.
          Blacketer remain as president and CEO of the COmpany during that time.
          All payments to be paid under this bonus plan will first be applied to
          any amounts  owed by Mr.  Blacketer  to the  Company.  At December 31,
          1998, Mr. Blacketer owed the Company $143,340.