Bowlin Travel Centers 10K/A 2006 Annual report (amended)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 2006

OR

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO _______________

COMMISSION FILE NO. 000-31701

Bowlin Travel Centers, Inc.

(Name of the registrant as specified in its charter)

NEVADA	85-0473277
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

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

Registrant’s telephone number, including area code: 505-266-5985

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

NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:

Title of each class		Name of each exchange on which registered

Common Stock, $.001 Par Value		OTC.BB

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 403 of the Securities Act. Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not 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-K or any amendment to this Form 10-K ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer of a non-accelerated file (as defined in Rule 12b-2 of the Exchange Act):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant at July 31, 2005 was $3,095,668.

The number of shares of Common Stock, $.001 par value, outstanding as of April 28, 2006: 4,583,348

EXPLANATORY NOTE

We are filing this Amendment No. 1 to our Annual Report on Form 10-K for the fiscal year ended January 31, 2006 for the purpose of making certain disclosure changes in response to a comment letter from the Division of Corporate Finance of the Securities and Exchange Commission relating to our 10-K. We have updated Part I, Item 1, “Recent Developments”; Part I, Item 1, “Business Strategy”; Item 1A Risk Factors; Item 2 Properties; Item 7 of Part II, Management Discussion and Analysis of Financial Condition and Results of Operations; Item 7A of Part II, Quantitative And Qualitative Disclosures About Market Risk; Item 9A of Part II relating to Controls and Procedures, Item 12 of Part II, Security Ownership Of Certain Beneficial Owners And Management; and Item 15 of Part IV to give effect to the filing of this Amendment No. 1. We have also filed updated certifications pursuant 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and certifications pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1933.

Other than the changes described in the preceding paragraph, no other information in this Amendment No. 1 has been updated to reflect any subsequent information or events since the original filing of this Form 10-K on April 28, 2006.

Forward-Looking Statements

Certain statements in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and should be read in conjunction with the Financial Statements of Bowlin Travel Centers, Inc., a Nevada corporation (the “Company” or “Bowlin Travel Centers”). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the Company’s actual results to differ materially from those contained in these forward-looking statements, including those set forth under the heading “RISK FACTORS” under ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and the risks and other factors described elsewhere. The cautionary factors, risks and other factors presented should not be construed as exhaustive. The Company assumes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.

PART I

ITEM 1.

BUSINESS

Company Overview

The Company operates travel centers dedicated to serving the traveling public in rural and smaller metropolitan areas of the Southwestern United States. The Company’s tradition of serving the public dates back to 1912, when the founder, Claude M. Bowlin, started trading goods and services with Native Americans in New Mexico. Bowlin Travel Centers currently operates twelve full-service travel centers along interstate highways in Arizona and New Mexico. The Company advertises its travel centers through a network of approximately 300 outdoor advertising display faces. The Company’s travel centers offer brand name food, gasoline and a variety of unique Southwestern merchandise to the traveling public.

The Company was formed on August 8, 2000, as a wholly owned subsidiary of Bowlin Outdoor Advertising and Travel Centers Incorporated (“Bowlin Outdoor”). Pursuant to a Contribution Agreement, dated as of November 1, 2000, Bowlin Outdoor contributed substantially all of the assets and liabilities directly related to its travel centers business to Bowlin Travel Centers.

Prior to August 8, 2000, the Company’s travel centers were owned and operated as a business segment of Bowlin Outdoor. Bowlin Outdoor operated two business segments: travel centers and outdoor advertising. Bowlin Outdoor’s common stock was traded on the American Stock Exchange and was a public reporting company. On January 30, 2001, the Company became an independent company through a spin-off transaction whereby shares of the Company’s common stock were distributed to the shareholders of Bowlin Outdoor.

Recent Developments

On September 1, 2005, the Company sold vacant land located in Alamogordo, New Mexico to Lost River Estates, LLC for $20,000 cash and a note receivable of $100,000. The note receivable has a stated rate of interest of 8%. Interest is payable monthly with principal payable in annual installments of $4,000 for the first year and $24,000 for the following four years. The property sold had a carrying value of $9,002 and the costs incurred to sell the land were $8,831. The gain on the sale of the land was $102,149 of which $17,025 was recognized initially and $85,124 was deferred and will be recognized into income using the installment method as payments are received. The deferred gain is reflected as a reduction to the note receivable in the accompanying balance sheet.

On September 1, 2005, the Company sold vacant land located in Deming, New Mexico to Lazy L, LLC for $10,000 cash and a note receivable of $75,000. The note receivable has a stated rate of interest of 8% and is payable in quarterly installments of $4,587 for five years. The property sold had a carrying value of $47,675 and the costs incurred to sell the land were $1,764. The gain on the sale of the land was $35,561 of which $4,184 was recognized initially and $31,378 was deferred and will be recognized into income using the installment method as payments are received. The deferred gain is reflected as a reduction to the note receivable in the accompanying balance sheet.

On October 21, 2005, the Company sold vacant land located in Benson, Arizona to Devin Fenn dba D. Fenn Enterprises for $10,000 cash and a note receivable of $80,000. The note receivable has a stated rate of interest of 8% and is payable in monthly installments of $1,622 for five years. The property sold had a carrying value of $64,167 and the costs incurred to sell the land were $1,211. The gain on the sale of the land was $24,622 of which $2,735 was recognized initially and $21,886 was deferred and will be recognized into income using the installment method as payments are received. The deferred gain is reflected as a reduction to the note receivable in the accompanying balance sheet.

No land was sold to a related party.

In October 2005, one wholesale gasoline location elected early termination of their wholesale agreement. The agreement was terminated within the original ten year term which resulted in a termination penalty of $100,000 that was offset by the disposal of equipment of approximately $47,194 resulting in an overall non-operating gain of approximately $52,806 as well as gross margin of $12,098 the Company would have received from gasoline sales had the agreement continued for the remainder of the term.

Subsequent Event

Beginning February 1, 2006, the Company began wholesaling gasoline to three new independent wholesale locations. Two of the independent wholesalers will sell ExxonMobil petroleum products. The other independent wholesaler will sell CITGO petroleum products.

Industry Overview

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

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

Business Strategy

The Company’s business strategy is to capture a greater market share of the interstate traveler market in Arizona and New Mexico by offering name brand recognized food service operations and gasoline, and unique Southwestern souvenirs and gifts, at a single location and at competitive prices delivered with a high standard of service.

The Company’s travel centers are strategically located along well-traveled interstate highways in Arizona and New Mexico where there are generally few gas stations, convenience stores or restaurants. The Company operates five full-service restaurants which are less than half of the Company’s twelve travel centers, under the Dairy Queen/Brazier or Dairy Queen trade names. All of the Company’s twelve travel centers sell convenience store food such as chips, nuts, cookies and prepackaged sandwiches along with a variety of bottled and canned drinks.

The Company’s travel centers offer brand name gasoline such as ExxonMobil and CITGO. The Company is an authorized distributor of ExxonMobil and CITGO petroleum products. Seven of the Company’s locations are ExxonMobil stations and four of its locations are CITGO stations. At this time, one of the Company’s locations does not offer gasoline.

The Company’s billboard advertising for its travel centers emphasizes the wide range of unique Southwestern souvenirs and gifts available at the travel centers, as well as the availability of gasoline and food. Merchandise at each of the Company’s stores is offered at prices intended to suit the budgets and tastes of a diverse traveling population. The merchandise ranges from inexpensive Southwestern gifts and souvenirs to unique handcrafted jewelry, rugs, pottery, and other gifts.

Growth Strategy

Travel Centers

The Company is committed to expanding its travel center operations through internal development.

The Company believes that the co-branding concept implemented at its travel centers has resulted in increased revenues, and intends to pursue opportunities to acquire rights to additional brand name products.

The Company intends to continue to offer high quality brand name food and products in a clean, safe environment designed to appeal to travelers on interstate highways.

The Company intends to continue to increase sales at existing locations through ongoing renovation and upgrading of facilities, including gasoline sales by focusing on the marketing of ExxonMobil and CITGO gasoline brands through its travel center outlets.

Gasoline Wholesaling

The Company has been wholesaling gasoline since 1997. Since 1997, revenues from wholesaling gasoline have accounted for an average of approximately 6.6% of gross revenues. Other than purchasing gas for retail sales through its travel centers, during the fiscal year ended January 31, 2006, the Company had only two wholesale customers. The Company anticipates expanding its current level of gasoline wholesaling and is marketing its wholesaling business. See “Business Operations - Gasoline Wholesaling.”

Business Operations

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

Each of the Company’s travel centers maintains a distinct, theme-oriented atmosphere. In addition to the Southwestern merchandise it purchases from Native American tribes, the Company also imports approximately 650 items from Mexico, including handmade blankets, earthen pottery and wood items. Additional goods, novelties and imprinted merchandise are imported from several Pacific Rim countries. The Company has long-standing relationships with many of its vendors and suppliers. While the Company has no formal agreements with any of its vendors and suppliers of Southwestern merchandise and items from Mexico, the Company believes that there are adequate resources outside of those that are regularly used so that the Company could continue to provide these items even if it were unable to use its regular sources.

The Company sells food at five of its twelve travel centers under the Dairy Queen and Dairy Queen/Brazier brand names. All of the Company’s twelve travel centers sell convenience store food such as chips, nuts, cookies and prepackaged sandwiches along with a variety of bottled and canned drinks.

The Company’s terms of its agreements with Dairy Queen obligate the Company to pay a franchise royalty and in some instances a promotion fee, each equal to a percentage of gross sales revenues from products sold, as well as comply with certain provisions governing the operation of the franchised stores. The Company is obligated to pay Dairy Queen 5.75% of its sales of their products in New Mexico and 4.0% for its sales of their products in Arizona.

The Company currently operates five Dairy Queens at its travel centers. It has individual franchise agreements for each Dairy Queen operated at the travel centers. None of these agreements are exclusive nor do they prevent the Company from entering into agreements with other food franchisors. Several of the agreements have different termination provisions and are effective for different terms. Under three of the Dairy Queen agreements, the term continues until the Company elects to terminate it with 60 days prior written notice, or if the Company or Dairy Queen elect to terminate the agreement because the other has breached the agreement and has not cured that breach within 14 days of notice of the breach. The other two Dairy Queen agreements are for specific terms. One of those Dairy Queen agreements, entered into February 1, 1984, is for a term of 25 years and the other, entered into on November 18, 1986, is for a term of 20 years. The Company may not terminate either of these agreements unless it gives notice to Dairy Queen that it is in breach of the agreement and Dairy Queen has not cured that breach within thirty days of our notice. Dairy Queen may terminate either of these agreements if it delivers notice to the Company that it is in breach of the agreement and it does not cure that breach within 14 days of that notice.

The Company continuously monitors and upgrades its travel center facilities to maintain a high level of comfort, quality and appearance. Periodic improvements typically include new awnings and facings, new signage and enhanced lighting, furnishings, buildings and parking lot improvements.

The Company is an authorized ExxonMobil and CITGO distributor. The Company sells ExxonMobil gasoline at seven travel centers, and CITGO gasoline at four travel centers. At this time one of the Company’s locations does not offer gasoline.

The fact that the Company is an authorized ExxonMobil and CITGO distributor has significance in the Company’s industry. As licensed distributors for ExxonMobil and CITGO, the Company purchases gasoline directly from ExxonMobil and CITGO as direct marketers at the lowest wholesale prices they offer. Prior to becoming a licensed distributor, the Company purchased gasoline through other distributors, paying a distributor’s markup price. This required the Company to negotiate and enter into agreements with other distributors to try to purchase gasoline at the lowest possible price. The ExxonMobil and CITGO distribution agreement allows the Company to streamline its gasoline supply arrangements and take advantage of volume-driven pricing by consolidating purchases from these suppliers.

The ExxonMobil distribution agreement has a five-year term beginning September 1, 2005 and expiring October 31, 2010. The CITGO distribution agreement has an initial three-year term beginning February 1, 2001 and expiring January 31, 2004, and automatically renews for a three-year term through 2007. ExxonMobil’s and CITGO’s ability to terminate or refuse to renew the agreement is subject to the occurrence of certain events set forth in the Petroleum Marketing Practices Act, which includes bankruptcy, or breach of the agreement, or termination by ExxonMobil or CITGO of its petroleum marketing activities in the Company’s distribution area. ExxonMobil and CITGO may terminate or refuse to renew these agreements only if it terminates or refuses to renew the agreement in compliance with the Petroleum Marketing Practices Act.

The Company’s agreements with ExxonMobil and CITGO do not prohibit it from entering into similar arrangements with other petroleum companies. The terms of the distribution agreements require the Company to purchase certain monthly minimum quantities of gasoline during the term of the agreement, which includes gasoline purchased for sale at its travel centers. The amount of required CITGO gasoline purchases ranges from a low of 126,000 gallons to a high of 280,500 gallons per month. The amount of required ExxonMobil gasoline purchases is a minimum of three million gallons per year. For ExxonMobil, the maximum monthly volume for the current month is the greater of actual volume in the prior month or the actual volume in the current month of the prior year. The Company determines the amount of gasoline it will purchase under the agreements based on what it believes its needs will be for gasoline, including seasonal demands. These determinations are based on historical sales and internal forecasts. During the term of the prior of the ExxonMobil distribution agreement, purchases of ExxonMobil products did not meet the minimum quantities for the first contract year ended March 31, 2003, but did meet the minimum quantities for contract years ended March 31, 2004 and March 31, 2005. The Company is on target to meet the required three million gallons for contract year ending October 31, 2006. Since the effective date of the CITGO agreement, purchases did not meet the minimum quantities for the first three years, met the minimum quantities for contract year ended January 31, 2005 but have not met the minimum quantities for the most recent contract year ended January 31, 2006. There are no penalties associated with not meeting the minimum quantities for ExxonMobil or CITGO. Additionally, the minimum quantities can be increased or decreased, as applicable, to accommodate additional travel centers, or losses of travel centers.

In addition to the requirement to purchase minimum amounts under the ExxonMobil and CITGO distribution agreements, the Company is also required to pay a processing fee of approximately 3% of the value of the sale for purchases of gasoline made by customers using a credit card.

Gasoline Wholesaling

During the fiscal year ended January 31, 2006, the Company had two wholesale customers. Over the past five years, wholesaling of gasoline has accounted for, on average, approximately 7.1% of overall revenues. The Company anticipates expanding its current level of gasoline wholesaling and is marketing its wholesaling business. Below is a table that shows the revenues generated from gasoline wholesaling, total revenues for the periods reflected, and the percentage total of overall revenues attributable to gasoline wholesaling.

Gasoline wholesaling revenues as a percentage of Gross Revenues (unaudited):

Fiscal Year Ended January 31,	Gross Revenues	Revenue from Gasoline Wholesaling	Percentage of Gross Revenues attributable to Gasoline Wholesaling
2002	$23,540,000	$2,126,000	9.03%
2003	$22,503,000	$1,789,000	7.95%
2004	$21,848,000	$1,749,000	8.00%
2005	$24,090,000	$1,754,000	7.28%
2006	$27,901,000	$1,636,000	5.86%

The Company does not derive a material amount of gross revenue from the wholesaling of gasoline. The cost of goods sold as a percentage of gross revenues for gasoline wholesaling is approximately 94%.

Competition

The Company faces competition at its travel centers from quick-service and full-service restaurants, convenience stores, gift shops and, to some extent, from truck stops located along interstate highways in Arizona and New Mexico. Large petroleum companies operate some of the travel centers that the Company competes with, while many others are small independently owned operations that do not offer brand name food service or gasoline. Giant Industries, Inc., a refiner and marketer of petroleum products, operates two travel centers, one in Arizona and one in New Mexico, which are high volume diesel fueling and large truck repair facilities that also include small shopping malls, full-service restaurants, convenience stores, fast food restaurants and gift shops. The Company’s principal competition from truck stops includes Love’s Country Stores, Inc., Petro Corporation and Flying J. Many convenience stores are operated by large, national chains that are substantially larger, better capitalized and have greater name recognition and access to greater financial and other resources than the Company. Although the Company faces substantial competition, the Company believes that few of its competitors offer the same breadth of products and services dedicated to the traveling public that the Company offers.

Employees

As of January 31, 2006, the Company had approximately 132 full-time and 33 part-time employees; 44 were located in Arizona, 121 were located in New Mexico. None of the Company’s employees are covered by a collective bargaining agreement and the Company believes that relations with its employees are good.

Regulation

The Company’s operations are subject to regulation for dispensing gasoline, maintaining mobile homes, dispensing food, sales of fireworks, sales of cactus, operating outdoor advertising signs, waste disposal and air quality control. The Company also must maintain registration of company vehicles, general business licenses and corporate licenses.

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

Travel center operations are also subject to extensive laws and regulations governing the sale of tobacco, and in New Mexico travel centers, the sale of fireworks. Such regulations include certain mandatory licensing procedures and ongoing compliance measures, as well as special sales tax measures. These regulations are subject to change and future modifications may result in decreased revenues or profit margins at the Company’s travel centers as a result of such changes.

Nearly all licenses and registrations are subject to renewal each year. The Company is not aware of any reason it would be unable to renew any of its licenses and registrations. The Company estimates that the total cost spent on an annual basis for all licenses and registrations is less than $15,000.

The Company anticipates that in the next twelve months the regulating agencies will develop regulations for above ground storage of fuel and anticipate that because of its expenditures and compliance, ongoing costs for compliance should not be material.

Trademarks

The Company operates its travel centers under a number of its own trademarks such as The Thing, Butterfield Station and Bowlin’s Running Indian, as well as certain trademarks owned by third parties and licensed to the Company, such as the Dairy Queen, Dairy Queen/Brazier, ExxonMobil and CITGO trademarks. The Company’s right to use the trademarks Dairy Queen, Dairy Queen/Brazier, ExxonMobil and CITGO are derived from the agreements entered into with these companies, and these rights expire when those agreements expire or are terminated. The Company has a Federal trademark for “BOWLIN” that is effective through 2008. All other rights to trade names that the Company uses in its operations are protected through common law or state rights granted through a registration process. The Company believes that its trademark rights will not materially limit competition with its travel centers. The Company also believes that, other than its Federal trademark for “BOWLIN”, none of the trademarks owned are material to overall business; however, the loss of one or more of our licensed trademarks could have an adverse effect.

Trademark / Trade Name	Where Registered	Expiration of Registration
BOWLIN	United States Patent and Trademark Office	October 27, 2008
Bowlin’s Running Indian	New Mexico	March 30, 2014
Bowlin Travel Centers	Arizona	April 26, 2006

In May 2005, the Company copyrighted various artworks with the US Copyright Office. The copyrights remain in effect for 95 years from the publication date or 120 years from the date of creation whichever is shorter. The copyrights have varying dates of creation and publication.

ITEM 1A.

RISK FACTORS

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

This Form 10-K contains forward-looking statements that involve risks and uncertainties. You should not rely on these forward-looking statements. The Company uses words such as “anticipate,” “believe,” “plan,” “expect,” “future,” “intend” and similar expressions to identify such forward-looking statements. This Form 10-K also contains forward-looking statements attributed to certain third parties relating to their estimates regarding the travel center industry, among other things. You should not place undue reliance on those forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks faced described below and elsewhere in this Form 10-K.

The Company’s shares of common stock are traded on the OTC Bulletin Board and will likely be subject to significant price volatility and an illiquid market.

The Company’s shares trade on the OTC Bulletin Board. In order to purchase and sell shares of the Company’s common stock on the OTC Bulletin Board, you must use one of the market makers then making a market in the stock. Because of the wide variance in the BID and ASK spreads, there is significant risk that an investor that sold shares on the OTC Bulletin Board would sell them for a price that was significantly lower than the price at which the shares could be purchased, and vice versa. The number of shares traded to date indicates that the market for the Company’s shares of common stock is illiquid which could make it difficult to purchase or sell shares.

The Company might be subject to financial and other restrictive covenants upon operations if unable to secure additional financing.

There can be no assurance that any additional financing will be available in the future on terms acceptable to the Company. The Company anticipates that any financing secured could impose certain financial and other restrictive covenants upon operations.

There is no assurance that the Company will be able to successfully expand business.

The Company intends to continue to explore the possibilities of acquiring or building additional travel centers. Although existing operations are based primarily in the Southwest, current expansion plans include consideration of acquisition opportunities in both the Southwest and other geographic regions of the United States. However, there can be no assurance that suitable acquisitions can be identified, and the Company will likely face competition from other companies for available acquisition opportunities. Any such acquisition would be subject to negotiation of definitive agreements, appropriate financing arrangements and performance of due diligence. There can be no assurance that the Company will be able to complete such acquisitions, obtain acceptable financing, or any required consent of our bank lenders, or that such acquisitions, if completed, can be integrated successfully into existing operations. The success of an expansion program will depend on a number of factors, including the availability of sufficient capital, the identification of appropriate expansion opportunities, the Company’s ability to attract and retain qualified employees and management, and the continuing profitability of existing operations. There can be no assurance that the Company will achieve its planned expansion or that any expansion will be profitable.

The Company’s use of petroleum products subjects it to various laws and regulations, and exposes it to substantial risks.

The Company is subject to federal, state and local laws and regulations governing the use, storage, handling, and disposal of petroleum products. The risk of accidental contamination to the environment or injury cannot be eliminated. In the event of such an accident, the Company could be held liable for any damages that result and any such liability could exceed available resources. The Company could be required to incur significant costs to comply with environmental laws and regulations that may be enacted in the future.

Because all of the Company’s travel centers are located in Arizona and New Mexico, a downturn in the economic conditions in the Southwestern United States could adversely affect business operations and financial conditions.

The Company’s travel centers are located only in Arizona and New Mexico. The Company relies on the business generated from travelers and patrons within these two states, and those traveling through these states. Risks from economic downturns are not diversified or spread out across several regions. Because of the geographic concentration of the Company’s travel centers, business may be adversely affected in the event of a downturn in general economic conditions in the Southwestern United States generally, or in Arizona or New Mexico.

The Company’s distribution and franchise agreements may prevent the Company from pursuing alternate business opportunities, which could limit the Company’s sales and growth potential.

The Company is dependent on a number of third party relationships under which it offers brand name and other products at its travel centers. These brand name relationships include distributorship relationships with ExxonMobil and CITGO and existing franchise agreements with Dairy Queen/Brazier. The Company’s existing operations and plans for future growth anticipate the continued existence of such relationships.

The ExxonMobil distribution agreement has a five-year term beginning September 1, 2005 and expiring October 31, 2010. The CITGO distribution agreement has an initial three-year term beginning February 2, 2001 and expiring January 31, 2004, and automatically renews for a three-year term through 2007. ExxonMobil’s and CITGO’s ability to terminate or refuse to renew the agreement with the Company is subject to the occurrence of certain events set forth in the Petroleum Marketing Practices Act, which includes bankruptcy, or breach of the agreement by the Company, or termination by ExxonMobil or CITGO of its petroleum marketing activities in the Company’s distribution area. ExxonMobil and CITGO may terminate or refuse to renew these agreements only if it terminates or refuses to renew the agreement in compliance with the Petroleum Marketing Practices Act.

Under three of the Company’s Dairy Queen agreements, the term continues until the Company elects to terminate it with 60 days prior written notice, or if the Company or Dairy Queen elect to terminate the agreement because the other has breached the agreement and has not cured that breach within 14 days of notice of the breach. The other two Dairy Queen agreements are for specific terms. One of those Dairy Queen agreements, entered into February 1, 1984, is for a term of 25 years and the other, entered into on November 18, 1986, is for a term of 20 years. The Company may not terminate either of these agreements unless it gives notice to Dairy Queen that they are in breach of the agreement and Dairy Queen has not cured that breach within thirty days of notice. Dairy Queen may terminate either of these agreements if they deliver notice to the Company that it is in breach of the agreement and does not cure that breach within 14 days of that notice.

There can be no assurance that the agreements that govern these relationships will not be terminated (for greater detail regarding the terms of these agreements, see “Item I. Business Operations”). Several of these agreements contain provisions that prohibit the Company from offering additional products or services that are competitive to those of its suppliers. There can be no assurance that adherence to existing agreements will not prevent the Company from pursuing opportunities that management would otherwise deem advisable. These agreements may limit the Company’s ability to seek additional sales or growth opportunities. In addition, there are no material early termination provisions under any of the franchise or petroleum distribution agreements.

The Company also relies upon several at-will relationships with various third parties for much of its souvenir and gift merchandise. There can be no assurance that the Company will be able to maintain relationships with suppliers of suitable merchandise at appropriate prices and in sufficient quantities.

If the Company is not able to successfully compete in its industry it could have an adverse impact on business operations or financial condition.

The Company’s travel centers face competition from

major and independent oil companies;

independent service station operators;

national and independent operators of restaurants, diners and other eating establishments; and

national and independent operators of convenience stores and other retail outlets.

Some of the Company’s competitors, including major oil companies and convenience store operators, are substantially larger, better capitalized, and have greater name recognition and access to greater resources than the Company does. There can be no assurance that the Company’s travel centers will be able to compete successfully in their respective markets in the future.

The Company’s operating results may fluctuate, which makes our results difficult to predict and could have an adverse effect on the Company’s results from period to period.

The Company’s travel center operations are subject to seasonal fluctuations, and revenues may be affected by many factors, including weather, holidays and the price of alternative travel modes.

The Company’s travel center operations are subject to seasonal fluctuations. The first quarter of the Company’s fiscal year is typically the weakest. The second quarter is normally the Company’s strongest due to the summer being the Company’s peak season. The third quarter is not as strong due to the end of summer. The fourth quarter is generally weak but is partially offset by Holiday sales. Therefore, through out the Company’s fiscal year, revenues and earnings may experience substantial fluctuations from quarter to quarter. These fluctuations could result in periods of decreased cash flow that might cause the Company to use its lending sources, or to secure additional financing, in order to cover expenses during those periods. This could increase the interest expense of the Company’s operations and decrease net income and have a material adverse effect on business and results of operations.

The Company is subject to numerous governmental regulations, including those related to food handling, fireworks sales, tobacco sales, and underground storage tanks.

Each of the Company’s food service operations is subject to licensing and regulation by a number of governmental authorities, including regulations relating to health, safety, cleanliness and food handling, as well as federal and state laws governing such matters as working conditions, overtime, tip credits and minimum wages. The Company’s travel center operations are also subject to extensive laws and regulations governing the sale of tobacco and fireworks in New Mexico travel centers. In addition, the Company has incurred ongoing costs to comply with federal, state and local environmental laws and regulations, primarily relating to underground storage tanks. These costs include assessment, compliance, and remediation costs, as well as certain ongoing capital expenditures relating to gasoline dispensing operations.

Such regulations include certain mandatory licensing procedures and the ongoing compliance measures, as well as special sales tax measures. Any failure to comply with applicable regulations, or the adoption of additional regulations or changes in existing regulations could impose additional compliance costs, require a cessation of certain activities or otherwise have a material adverse effect on business and results of operations.

Nevada law, the Company’s charter documents and the Company’s current capitalization may impede or discourage a takeover, which could affect the price of our stock.

In the Company’s Articles of Incorporation, pursuant to Nevada Revised Statues Section 78.378, the Company elected not to be governed by the provisions of Nevada Revised Statutes Section 78.378 to 78.3793, inclusive. Pursuant to Nevada Revised Statutes Section 78.434, the Company also elected not to be governed by the provisions of Nevada Revised Statutes Sections 78.411 to 78.444, inclusive. These statutes are sometimes referred to as “interested stockholder” statutes and their purpose is to limit the way in which a stockholder may effect a business combination with the corporation without board or stockholder approval. Because the Company has elected not to be governed by these statutes, a person or entity could attempt a takeover, or attempt to acquire a controlling interest of, and effect a business combination with, Bowlin Travel Centers without the restrictions of these Nevada Revised Statutes provisions.

However, the Company’s Board of Directors has the authority to issue up to ten million (10,000,000) shares of common stock, $.001 par value, and up to one million (1,000,000) shares of preferred stock, $.001 par value, in one or more series, and to determine the price, rights, preferences and privileges of the shares of each such series without any further vote or action by the stockholders. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any shares of preferred stock that may be issued in the future. The issuance of preferred stock could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of the Company, thereby delaying, deferring or preventing a change of control of the Company.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2.

PROPERTIES

As of January 31, 2006, the Company operated twelve travel centers, nine of which are in New Mexico and three of which are in Arizona. The Company owns the real estate and improvements where seven of its travel centers are located, all of which are subject to mortgages. Five of the Company’s existing travel centers are located on real estate that the Company leases from various third parties. These leases have terms ranging from five to thirty-five years, assuming exercise by the Company of all renewal options available under certain leases.

The Company’s principal executive offices occupy approximately 20,000 square feet of space owned by the Company in Albuquerque, New Mexico. The Company owns its principal office space. The Company owns a central warehouse and distribution facility occupying approximately 44,000 square feet in Las Cruces, New Mexico. The Company believes that its headquarters and warehouse facilities are adequate for its operations for the foreseeable future.

The following table lists the locations of the Company’s facilities as of the date of this report, the size of such facilities and whether they are leased or owned.

Retail Location	Size of Property	Own/ Lease

Akela Flats Trading Post	6,100 sq. ft.	Own
20 miles east of Deming NM on I-10

Alamogordo Running Indian Trading Post	3,800 sq. ft.	Own
4 miles north of Alamogordo NM on US70

Bluewater DQ Travel Center	6,500 sq. ft.	Own
10 miles west of Grants NM on I-40

Butterfield Station DQ Travel Center	10,400 sq. ft.	Own
20 miles west of Deming NM on I-10

Continental Divide Trading Post	8,000 sq. ft.	Lease
20 miles east of Lordsburg NM on I-10

Retail Location	Size of Property	Own/ Lease

Flying C Ranch DQ Travel Center	10,400 sq. ft.	Own
40 miles west of Santa Rosa NM on I-10

Old West Trading Post	8,200 sq. ft.	Lease
15 miles west of Las Cruces NM on I-10

Picacho Peak DQ Travel Center	6,300 sq. ft.	Lease
45 miles west of Tucson AZ on I-10

Picacho Peak Plaza	10,800 sq. ft.	Lease
45 miles west of Tucson AZ on I-10

Rio Puerco Outpost	5,000 sq. ft.	Own
17 miles west of Albuquerque NM on I-40

Edgewood Travel Center	2,800 sq. ft.	Own
I-40 at Edgewood NM Interchange

The Thing DQ Travel Center	9,400 sq. ft.	Lease
17 miles east of Benson AZ on I-10

ITEM 3.

LEGAL PROCEEDINGS

The Company from time to time may be involved in litigation in the ordinary course of business, including disputes involving employment claims and construction matters. The Company is not currently a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on the Company’s business operations or financial condition.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company did not submit any matters to a vote of security holders in the fourth quarter of fiscal 2006.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

As of April 28, 2006, there were 4,583,348 shares of common stock of Bowlin Travel Centers, Inc. outstanding. There are no outstanding options or warrants to purchase, or securities convertible into shares of common stock of Bowlin Travel Centers, Inc. Shares of the common stock of the Company are traded on the OTC Bulletin Board under the symbol “BWTL.” On April 12, 2006, there were approximately 27 holders of record of the Company’s common stock. The following table sets forth the high and low sales prices for the Company’s common stock for each quarter during the past two fiscal years. These over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. The Company made no purchases of its equity securities in the fourth quarter of fiscal 2006.

	High	Low
Fiscal Year Ended January 31, 2005
Fiscal Quarter Ended 4/30	$2.00	$1.65
Fiscal Quarter Ended 7/31	$1.80	$1.50
Fiscal Quarter Ended 10/31	$1.90	$1.52
Fiscal Quarter Ended 1/31	$2.00	$1.73

	High	Low
Fiscal Year Ended January 31, 2006
Fiscal Quarter Ended 4/30	$1.93	$1.85
Fiscal Quarter Ended 7/31	$2.00	$1.90
Fiscal Quarter Ended 10/31	$2.00	$1.50
Fiscal Quarter Ended 1/31	$1.95	$1.50

The Company is authorized to issue up to 10,000,000 shares of common stock, par value $.001 per share, and up to 1,000,000 shares of preferred stock, par value $.001. Holders of shares of common stock are entitled to one vote per share on all matters to be voted on by stockholders and do not have cumulative voting rights. Subject to the rights of holders of outstanding shares of preferred stock, if any, the holders of common stock are entitled to receive such dividends, if any, as may be declared from time to time by the Board of Directors in its discretion from funds legally available therefore, and upon liquidation, dissolution, or winding up are entitled to receive all assets available for distribution to the stockholders. The common stock has no preemptive or other subscription rights, and there are no conversion rights or redemption or sinking fund provisions with respect to such shares. All of the outstanding shares of common stock are fully paid and nonassessable. Since becoming a publicly traded company, Bowlin Travel Centers has not paid dividends. Any declaration or payment of dividends by the Company would be subject to the discretion of the Board of Directors.

ITEM 6.

SELECTED FINANCIAL DATA

The selected financial data presented below are derived from the audited financial statements of the Company for the five years ended January 31, 2006. The data presented below should be read in conjunction with the audited financial statements, related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included herein.

SELECTED FINANACIAL DATA

	YEARS ENDED JANUARY 31,
	2006		2005		2004		2003		2002
STATEMENT OF INCOME DATA:
Net sales	$	27,668,364	$	23,890,999	$	21,595,359	$	22,300,116	$	23,327,309

Net income	$	650,353	$	438,927	$	493,894	$	507,258	$	173,234

Earnings per share	$	0.14	$	0.10	$	0.11	$	0.11	$	0.04

BALANCE SHEET DATA (at end of period):
Total assets	$	19,807,942	$	20,085,144	$	17,456,106	$	16,383,388	$	16,532,141

Long-term debt, including current maturities	$	5,314,209	$	5,844,366	$	4,144,619	$	4,046,640	$	4,684,334

On January 18, 2005, the Company opened a new state-of-the-art travel center in Picacho, Arizona. Strategically located on I-10 between metropolitan Phoenix and Tucson, the new facility has 10,000 square feet of retail space, a convenience department for gourmet coffee and snacks with a large screen plasma TV with satellite news plus a state-of-the-art super-pumper gasoline facility offering CITGO brand gasoline.

The following tables presents additional financial information of income and expense items derived from the Statements of Operations for twelve months ended January 31, 2006 and 2005 for comparison of all stores, same stores and Picahco stores:

	Twelve Months Ended January 31, 2006
	All Stores			Same Store*			Picacho Stores
Selected Statement of Operations Data:
(in thousands, except per share data)
Gross sales	$	27,904		$	23,195		$	4,709
Discounts on sales		235			216			19
Net sales		27,669			22,979			4,690
Cost of goods sold		17,980			14,584			3,396
Gross profit		9,689			8,395			1,294
General and administrative expenses		(7,833	)		(6,653	)		(1,180	)
Depreciation and amortization		(885	)		(668	)		(217	)
Operating income (loss)		971			1,074			(103	)
Non-operating income (expense):
Interest income		69			69			—
Gain on sale of property and equipment		197			197			—
Rental income		184			173			11
Interest expense		(406	)		(238	)		(168	)
Total non-operating income (expense)		44			201			(157	)
Income (loss) before income taxes	$	1,015		$	1,275		$	(260	)
_______________
* Excludes both Picacho Peak stores for fiscal year 2006.

	Twelve Months Ended January 31, 2005
	All Stores			Same Store*			Picacho Store
Selected Statement of Operations Data:
(in thousands, except per share data)
Gross sales	$	24,090		$	21,097		$	2,993
Discounts on sales		199			185			14
Net sales		23,891			20,912			2,979
Cost of goods sold		15,113			12,944			2,169
Gross profit		8,778			7,968			810
General and administrative expenses		(7,365	)		(6,686	)		(679	)
Depreciation and amortization		(703	)		(652	)		(51	)
Operating income (loss)		710			630			80
Non-operating income (expense):
Interest income		45			45			—
Gain on sale of property and equipment		3			3			—
Rental income		189			184			5
Interest expense		(203	)		(192	)		(11	)
Total non-operating income (expense)		34			40			(6	)
Income (loss) before income taxes	$	744		$	670		$	74
_______________
* Excludes the Picacho Peak store for fiscal year 2005.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of the financial condition and results of operations of the Company as of and for the three fiscal years ended January 31, 2006, 2005 and 2004. This discussion should be read in conjunction with the Financial Statements of the Company and the related notes included elsewhere in this Form 10-K. References to specific years refer to the Company’s fiscal year ending January 31 of such year.

The forward-looking statements included in Management’s Discussion and Analysis of Financial Condition and Results of Operations reflect management’s best judgement based on factors currently known and involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including but not limited to, those discussed.

The Company’s gross retail sales include merchandise, retail gasoline sales, restaurant sales and wholesale gasoline sales. Each of the Company’s travel center locations retail a variety of unique Southwestern souvenirs and gifts. Eleven of the twelve retail operations retail gasoline. Five of the Company’s twelve locations have full-service restaurants that operate under the Dairy Queen/Brazier or Dairy Queen brand names. The merchandise, gasoline and restaurant retail sales are all a part of the Company’s ongoing retail business and have been aggregated.

The Company wholesales gasoline to four independent third party locations. The wholesale gasoline does not meet the operating segment definition criteria of paragraph 10(b) of FAS 131 as the Company does not review wholesale gasoline operating results for decision making about resource allocation. Therefore, wholesale gasoline sales have been aggregated with the Company’s business activities.

Fiscal Year Ended January 31, 2006 (Fiscal 2006) Compared to Fiscal Year Ended January 31, 2005 (Fiscal 2005)

Same Store

Same store financial data excludes the Company’s newly opened location, Picacho Peak Plaza as well as the existing Picacho Peak but does not include restaurant sales, as the new facility does not have a restaurant operation. For the twelve months ended January 31, 2006, the sales of the new facility impacted the existing facility, with a negative impact on overall operating income. A discussion of the new and existing Picacho Peak facilities follow the same store discussion.

Gross sales at the Company’s travel centers increased by 9.9% to $23.195 million for the twelve months ended January 31, 2006, from $21.097 million for the twelve months ended January 31, 2005. Merchandise sales increased 5.6% to $9.085 million for the twelve months ended January 31, 2006, from $8.604 million for the twelve months ended January 31, 2005. The increase is primarily due to volume purchasing as well as maintaining mark ups. Gasoline sales increased 21.2% to $10.079 million for the twelve months ended January 31, 2006, from $8.315 million for the same period in 2005. The increase is due to market price increases. Restaurant sales decreased 1.2% to $2.395 million for the twelve months ended January 31, 2006, from $2.424 million for the twelve months ended January 31, 2005. The decrease is due to personnel issues at one of the restaurant locations, cost increases not reflected in retail prices and increases in convenience store food sales at the new Picacho Peak Plaza facility. Wholesale gasoline sales to independent retailers decreased 6.7% to $1.636 million for the twelve months ended January 31, 2006, from $1.754 million for the twelve months ended January 31, 2005. The decrease is primarily due to the termination of one of the Company’s independent wholesale locations in the third quarter of fiscal year 2006.

Total cost of goods sold increased 12.7% to $14.584 million for the twelve months ended January 31, 2006, from $12.944 million for the twelve months ended January 31, 2005. Merchandise cost of goods increased 2.8% to $3.184 million for the twelve months ended January 31, 2006, from $3.096 million for the twelve months ended January 31, 2005. The increase is directly related to improved volume purchase pricing as well as maintaining mark-ups. Gasoline cost of goods increased 22.2% to $9.063 million for the twelve months ended January 31, 2006, from $7.415 million for the twelve months ended January 31, 2005. The increase corresponds to market price increases. Restaurant cost of goods increased 1.0% to $736,000 for the twelve months ended January 31, 2006, from $729,000 for the twelve months ended January 31, 2005. The increase is primarily due to cost increases not reflected in retail prices. Wholesale gasoline cost of goods decreased 6.0% to $1.601 million for the twelve months ended January 31, 2006, from $1.704 million for the twelve months ended January 31, 2005. The increase is due to market price increases partially offset by decreases in volume. Cost of goods sold as a percentage of gross revenues increased to 62.9% for the twelve months ended January 31, 2006, as compared to 61.4% for the twelve months ended January 31, 2005.

Gross profit increased 5.4% to $8.395 million for the twelve months ended January 31, 2006, from $7.968 million for the twelve months ended January 31, 2005. The increase is primarily attributable to increased sales and volume purchasing.

General and administrative expenses consist of salaries, bonuses and commissions for travel center personnel, property costs and repairs and maintenance. General and administrative expenses decreased 0.5% to $6.653 million for the twelve months ended January 31, 2006, from $6.686 million for the twelve months ended January 31, 2005. The decrease is primarily due to decreases in general insurance, sign repairs and maintenance as well as legal fees.

Depreciation and amortization expense increased 2.5% to $668,000 for the twelve months ended January 31, 2006, from $652,000 for the twelve months ended January 31, 2005.

The above factors contributed to an increase in operating income of 70.5% to $1.074 million for the twelve months ended January 31, 2006, compared to an operating income of $630,000 for the twelve months ended January 31, 2005.

New and existing Picacho Peak facilities

On January 18, 2005, the Company opened a new state-of-the-art travel center near the existing travel center in Picacho, Arizona. For the twelve months ended January 31, 2006, the sales of the new facility impacted the existing facility, with a negative impact on overall operating income. The following discussion does not include restaurant sales, as the new travel center does not have a restaurant operation.

Gross sales at the new travel center were $2.943 million for the twelve months ended January 31, 2006. Merchandise sales were $1.087 million and gasoline sales were $1.856 million.

Gross sales at the existing travel center decreased by 41.0% to $1.766 million for the twelve months ended January 31, 2006, from $2.993 million for the twelve months ended January 31, 2005. Merchandise sales decreased 34.8% to $670,000 for the twelve months ended January 31, 2006, from $1.028 million for the twelve months ended January 31, 2005. The decrease is due to the impact of the new facility. Gasoline sales decreased 44.2% to $1.096 million for the twelve months ended January 31, 2006, from $1.965 million for the same period in 2005. The decrease is due to the impact of the new facility.

Cost of goods sold for the new travel center were $2.137 million for the twelve months ended January 31, 2006. Merchandise cost of goods were $494,000 and gasoline cost of goods were $1.643 million. Cost of goods as a percentage of gross revenues was 72.6% for the twelve months ended January 31, 2006.

Cost of goods for the existing travel center decreased 42.0% to $1.259 million for the twelve months ended January 31, 2006, from $2.169 million for the twelve months ended January 31, 2005. Merchandise cost of goods decreased 34.5% to $284,000 for the twelve months ended January 31, 2006, from $434,000 for the twelve months ended January 31, 2005. The decrease directly corresponds to the decrease in sales, which is due to the impact of the new facility. Gasoline cost of goods decreased 43.8% to $975,000 for the twelve months ended January 31, 2006, from $1.735 million for the same period in 2005. The decrease directly corresponds to the decrease in sales, which is due to the impact of the new facility. In the aggregate, cost of goods sold as a percentage of gross revenues decreased for the twelve months ended January 31, 2006 to 71.3% compared to 72.5% for the twelve months ended January 31, 2005.

Gross profit at the new travel center was $798,000 for the twelve months ended January 31, 2006.

Gross profit for the existing travel center decreased 38.8% to $496,000 for the twelve months ended January 31, 2006, from $810,000 for the twelve months ended January 31, 2005. The decrease is attributable to the impact of the new facility.

General and administrative expenses consist of salaries, bonuses and commissions for travel center personnel, property costs and repairs and maintenance. General and administrative expenses at the new store were $675,000. General and administrative expenses at the existing store decreased 25.6% to $505,000 for the twelve months ended January 31, 2006, from $679,000 for the twelve months ended January 31, 2005 primarily as a result of a decrease in payroll related expenses. In the aggregate, general and administrative expenses increased 73.8% to $1.180 million for the twelve months ended January 31, 2006, from $679,000 for the twelve months ended January 31, 2005. The increase is primarily due to the total cost of operating the new facility.

Depreciation and amortization expense at both the new and existing travel centers increased 325.5% to $217,000 for the twelve months ended January 31, 2006, from $51,000 for the twelve months ended January 31, 2005. The increase is primarily associated with the new travel centers’ assets.

The above factors for both the new and existing travel centers contributed to an overall decrease in operating income of 228.8% to a loss of $103,000 for the twelve months ended January 31, 2006, compared to operating income of $80,000 for the twelve months ended January 31, 2005.

All Stores

Gross sales at the Company’s travel centers increased by 15.8% to $27.904 million for the twelve months ended January 31, 2006, from $24.090 million for the twelve months ended January 31, 2005. Merchandise sales increased 12.6% to $10.842 million for the twelve months ended January 31, 2006, from $9.632 million for the twelve months ended January 31, 2005. The increase is due to volume purchasing, maintaining mark ups and the new Picacho Peak store. Gasoline sales increased 26.8% to $13.031 million for the twelve months ended January 31, 2006, from $10.279 million for the same period in 2005. The increase is due to market price increases and the new Picacho Peak store. Restaurant sales decreased 1.2% to $2.395 million for the twelve months ended January 31, 2006, from $2.424 million for the twelve months ended January 31, 2005. The decrease is due to personnel issues at one of the restaurant locations, cost increases not reflected in retail prices and increases in convenience store food sales at the new Picacho Peak Plaza facility. Wholesale gasoline sales to independent retailers decreased 6.8% to $1.636 million for the twelve months ended January 31, 2006, from $1.755 million for the twelve months ended January 31, 2005. The decrease is primarily due to the termination of one of the Company’s independent wholesale locations in the third quarter of fiscal year 2006.

Cost of goods sold increased 19.0% to $17.980 million for the twelve months ended January 31, 2006, from $15.113 million for the twelve months ended January 31, 2005. Merchandise cost of goods increased 12.2% to $3.962 million for the twelve months ended January 31, 2006, from $3.530 million for the twelve months ended January 31, 2005. This increase directly relates to the increase in sales partially offset by volume purchasing as well as maintaining mark-ups. Gasoline cost of goods increased 27.7% to $11.681 million for the twelve months ended January 31, 2006, from $9.150 million for the twelve months ended January 31, 2005. The increase corresponds to market price increases. Restaurant cost of goods increased 1.0% to $736,000 for the twelve months ended January 31, 2006, from $729,000 for the twelve months ended January 31, 2005. The increase is primarily due to cost increases not reflected in retail prices. Wholesale gasoline cost of goods decreased 6.0% to $1.601 million for the twelve months ended January 31, 2006, from $1.704 million for the twelve months ended January 31, 2005. The decrease is primarily due to the termination of one of the Company’s independent wholesale locations in the third quarter of fiscal year 2006. Cost of goods sold as a percentage of gross revenues increased to 64.4% for the twelve months ended January 31, 2006, as compared to 62.7% for the twelve months ended January 31, 2005.

Gross profit increased 10.4% to $9.689 million for the twelve months ended January 31, 2006, from $8.778 million for the twelve months ended January 31, 2005. The increase is primarily attributable to continued improvement of management of costs of goods due to increases in volume purchasing as well as the new facility.

General and administrative expenses consist of salaries, bonuses and commissions for travel center personnel, property costs and repairs and maintenance. General and administrative expenses also include executive and administrative compensation and benefits, accounting, legal and investor relations fees. General and administrative expenses increased 6.4% to $7.833 million for the twelve months ended January 31, 2006, from $7.365 million for the twelve months ended January 31, 2005. The increase is primarily due to the total cost of operating the new facility as well as bankcard fees, utilities, and bonuses related to the sales incentive programs and executive management.

Depreciation and amortization expense increased 25.9% to $885,000 for the twelve months ended January 31, 2006, from $703,000 for the twelve months ended January 31, 2005. The increase is primarily associated with the new travel centers’ property and equipment.

The above factors contributed to an overall increase in operating income of 36.8% to $971,000 for the twelve months ended January 31, 2006, compared to operating income of $710,000 for the twelve months ended January 31, 2005.

Non-operating income (expense) includes interest income, rental income and interest expense. Interest income increased 53.3% to $69,000 for the twelve months ended January 31, 2006, from $45,000 for the twelve months ended January 31, 2005. The increase is primarily due higher interest rates. Gains from the sale of property and equipment increased to $197,000 for the twelve months ended January 31, 2006 from $3,000 for the twelve months ended January 31, 2005. The gain of $197,000 for the twelve months ended January 31, 2006 is primarily due to a balloon payment received related to a note receivable that included a deferred gain, the sale of land and the early termination of one independent wholesale contract resulting in a penalty payment. The gain of $3,000 for the twelve months ended January 31, 2005 is primarily due to an installment payment received related to a note receivable that included a deferred gain. There was no miscellaneous income for fiscal year 2006 compared to miscellaneous income of $400 in fiscal year 2005. Rental income was $184,000 for the twelve months ended January 31, 2006 compared to $189,000 for the twelve months ended January 31, 2005. Interest expense increased 100.0% to $406,000 for the twelve months ended January 31, 2006, from $203,000 for the twelve months ended January 31, 2005. The increase is primarily due to increases in long-term debt balances primarily related to the new travel center as well as higher interest rates.

Income before income taxes increased 36.4% to $1.015 million for the twelve months ended January 31, 2006, compared to income before income taxes of $744,000 for the twelve months ended January 31, 2005. As a percentage of gross revenues, income before income taxes was 3.6% for the twelve months ended January 31, 2006, compared to 3.1% for the twelve months ended January 31, 2005.

Income tax expense increased 19.7% to $365,000 for the twelve months ended January 31, 2006, compared to an income tax expense of $305,000 for the twelve months ended January 31, 2005. The increase is primarily due an increase in operating income and a non-operating gain from the sale of property and equipment partially off set by increases in interest expense. The effective tax rate for fiscal 2006 was 36.0%, compared to 41.0% for fiscal 2005.

The foregoing factors contributed to net income for the twelve months ended January 31, 2006 of $650,000 compared to a net income of $439,000 for the twelve months ended January 31, 2005.

Fiscal Year Ended January 31, 2005 (Fiscal 2005) Compared to Fiscal Year Ended January 31, 2004 (Fiscal 2004)

Gross sales at the Company’s travel centers increased 10.3% to $24.090 million for fiscal 2005, from $21.848 million for fiscal 2004. Merchandise sales increased 3.8% to $9.632 million for fiscal 2005, from $9.283 million for fiscal 2004. The increase is primarily due to sales incentives, additional supervisory support dedicated to the stores as well as an increase of $150,000 at one location due to additions of billboards advertising that location. Gasoline sales increased 19.5% to $10.279 million for fiscal 2005, from $8.605 million for fiscal 2004. The increase is due to market price increases. Restaurant sales increased 9.6% to $2.424 million for fiscal 2005, from $2.211 million for fiscal 2004. The increase is primarily due to sales incentive programs, supervisory support dedicated to the restaurants as well as an increase of $61,000 at one location due to additions of billboards advertising that location. Wholesale gasoline sales to independent retailers increased 0.3% to $1.755 million for fiscal 2005, from $1.749 million for fiscal 2004. The increase is due to market price increases offset by decreases in volume.

Cost of goods sold for the travel centers increased 12.4% to $15.113 million for fiscal 2005, from $13.450 million for fiscal 2004. Merchandise cost of goods decreased 0.6% to $3.530 million for fiscal 2005, from $3.551 million for fiscal 2004. The decrease corresponds to continued volume purchasing as well as maintaining mark-ups. Gasoline cost of goods increased 21.2% to $9.150 million for fiscal 2005, from $7.547 million for fiscal 2004. The increase is due to market prices increases. Restaurant cost of goods increased 11.8% to $729,000 for fiscal 2005, from $652,000 for fiscal 2004. The increase directly corresponds to the increase in restaurant sales as well as an increase in prices. Wholesale gasoline cost of goods increased 0.2% to $1.704 million in fiscal 2005, from $1.700 million for fiscal 2004. The increase is primarily due market price increases offset by decreases in volume. Cost of goods sold as a percentage of gross revenues increased for fiscal 2005 to 62.7%, compared to 61.6% for fiscal 2004.

Gross profit for the travel centers increased 7.8% to $8.778 million for fiscal 2005 from $8.146 million for fiscal 2004. The increase is primarily due attributable to improved management of cost of goods due to increases in volume purchasing.

General and administrative expenses for travel centers consist of salaries, bonuses and commissions for travel center personnel, property costs and repairs and maintenance. General and administrative expenses also include executive and administrative compensation and benefits, investor relations and accounting and legal fees. General and administrative expenses for the travel centers increased 8.2% to $7.365 million for fiscal 2005, from $6.805 million for fiscal 2004. The increase is due to bonuses related to the sales incentive programs, additional personnel, sign rent related to the additions of billboards advertising one location, utilities related to trash removal, normal repair and maintenance to billboards and credit card fees related to processing credit cards through the Company’s gasoline distributorships.

Depreciation and amortization expenses increased by 2.6% to $703,000 for fiscal 2005, from $685,000 for fiscal 2004. The increase is primarily associated with certain assets related to capital expenditures.

The above factors contributed to an increase in travel centers operating income of 8.4% to $710,000 for fiscal 2005, from $655,000 for fiscal 2004.

Other income (expense) includes interest income, gains and losses from the sale of assets, rental income and interest expense. Interest income decreased 50.0% to $45,000 in fiscal 2005, from $90,000 in fiscal 2004. The decrease is primarily due to bond interest and mortgages receivable interest earned in the prior period not present in the current period. Gains from the sale of property and equipment decreased to $3,000 in fiscal 2005 from $54,000 in fiscal 2004. The gain of $3,000 for the twelve months ended January 31, 2005 is primarily due to an installment payment received related to a note receivable that included a deferred gain. Miscellaneous income decreased 69.2% to $400 in fiscal 2005, from $1,300 in fiscal 2004. Rental income was $189,000 in fiscal 2005, compared to $193,000 in fiscal 2004. The Company leases available office space at the Company’s corporate headquarters as well as housing to management at the store sites. Interest expense increased 9.7% to $203,000 for fiscal 2005, from $185,000 for fiscal 2004. The increase is primarily attributable to higher interest rates.

Income before income taxes decreased 8.0% to $744,000 for fiscal 2005, from $809,000 for fiscal 2004. The decrease is primarily due the decrease in miscellaneous income partially offset by the increase in interest expense. As a percentage of gross revenues, income before income taxes decreased to 3.1% for fiscal 2005, from 3.7% for fiscal 2004.

Income taxes decreased to $305,000 for fiscal 2005, compared to $315,000 for fiscal 2004, as a result of lower pre-tax income partially offset by non-deductible expenses added back to income for tax calculations. The effective tax rate for fiscal 2005 was 41.0%, compared to 38.9% for fiscal 2004.

The foregoing factors contributed to the Company’s decrease in net income for fiscal 2005 to $439,000, compared to $494,000 for fiscal 2004.

Liquidity and Capital Resources

At January 31, 2006, the Company had working capital of $4.394 million compared to working capital of $3.582 million at January 31, 2005 (“working capital” is the excess of total current assets over total current liabilities). At January 31, 2006, the Company had a current ratio of 3.0:1 compared to a current ratio of 2.5:1 at January 31, 2005 (“current ratio” is the ratio of current assets to current liabilities). The increase in working capital is due to an increase in cash of $572,000, an increase in inventory of $99,000, a decrease in accounts payable of $222,000, a decrease in short-term borrowing of $210,000, a decrease in the current portion of long-term debt of $67,000 partially offset by a decrease in prepaid expenses of $88,000, an increase in accrued liabilities of $68,000, an increase in accrued salaries and benefits of $133,000 and an increase in the current portion of deferred revenue of $65,000. The increase in cash is attributable to the increase in net income, which includes proceeds from the sale of assets of $384,000. The increase in inventory is primarily due to gasoline market price increases. The decrease in accounts payable is due to payments made at the time of delivery rather than usual terms for merchandise in exchange for deeper discounts as well as higher payable balances in the prior period as the Company opened the new Picacho Peak travel center. Short-term borrowing was paid off at January 31, 2006. The decrease in the current portion of long-term borrowing is normal scheduled payments. The decrease in prepaid expenses is primarily due to decreases in federal and state income taxes as a result of deferred tax assets and liabilities recognized for future tax consequences attributable to differences between financial statement carrying amounts of existing current assets and liabilities and their respective tax bases as well as decreases in insurance, rent and sign permits. The increase in accrued liabilities is due to increases in FICA and federal withholding as well as sales tax related to stronger sales, property taxes associated with the new travel center and higher assessments and vacation payable related to high employee retention. The increase in accrued salaries and benefits is due to discretionary bonuses that were accrued through January 2006 to be paid the following fiscal year. The increase in the current portion of deferred revenue is the result of a two-year brand incentive program for four locations branded ExxonMobil in fiscal year 2004 that ends in April of 2006.

The Company’s travel center operations are subject to seasonal fluctuations. The first quarter of the Company’s fiscal year is typically the weakest. The second quarter is normally the Company’s strongest due to the summer being the Company’s peak season. The third quarter is not as strong due to the end of summer. The fourth quarter is generally weak but is partially offset by Holiday sales. Therefore, through out the Company’s fiscal year, revenues and earnings may experience substantial fluctuations from quarter to quarter. These fluctuations could result in periods of increased or decreased cash flow as well as increased or decreased net income.

The net cash provided by operating activities was $1.188 million at January 31, 2006, compared to $1.409 million at January 31, 2005. During fiscal 2006, there were decreases in net operating assets and liabilities of $279,000, a decrease in the provision for deferred income taxes of $149,000, an increase in depreciation and amortization of $182,000 and an increase in the gain on sales of property and equipment of $194,000.

Net cash provided by investing activities was $131,000 at January 31, 2006, compared to net cash used by investing activities of $3.450 million at January 31, 2005. The increase was primarily due to a decrease in purchases of property and equipment of $3.080 million of which $2.480 million was for the new travel center in Picacho, Arizona, offset by an increase in proceeds from the sale of assets of $374,000 and payments received from notes receivable of $132,000.

Net cash used in financing activities was $747,000 at January 31, 2006, compared to net cash provided by financing activities of $1.845 million at January 31, 2005. Payments on long-term debt were $740,000 at January 31, 2006 compared to payments on long-term debt of $975,000 at January 31, 2005. There were no proceeds from long-term borrowing at January 31, 2006 compared to proceeds from long-term borrowing of $2.675 million at January 31, 2005. There were no proceeds from short-term borrowing at January 31, 2006 compared to proceeds from short-term borrowing of $200,000 at January 31, 2005. Payments for debt issuance costs were $6,000 at January 31, 2006 compared to debt issuance costs of $55,000 at January 31, 2005.

As of January 31, 2006, the Company was indebted to various banks and individuals in an aggregate principal amount of approximately $5.314 million under various loans and promissory notes, compared to $5.844 million as of January 31, 2005. Land, buildings, equipment and inventories of the Company secure many of the loans and promissory notes. The loans and promissory notes mature at dates from September 2008 to February 2015 and accrue interest at rates ranging from 7.16% to 7.50% per annum. The Company’s total monthly payments on outstanding long-term debt obligations are approximately $74,000.

Approximately $5.249 million of the $5.314 million outstanding as of January 31, 2006 was borrowed under the Master Loan Agreement with Bank of the West. Under this master loan agreement, the Company grants a security interest in substantially all of its assets and property as security interests against its obligations under the agreement.

In July 2006, the Company renewed a $1,250,000 open line of credit with one of its existing lenders. The line of credit is secured by buildings and equipment. The Company did not borrow any funds from this open line of credit during fiscal year 2006. As of January 31, 2006, $1,250,000 remains on the open line of credit which will mature July 2007 and requires variable interest at the bank’s prime rate. The rate was 7.50% at January 31, 2006.

Under the Master Loan Agreement, the Company must maintain minimum financial ratios, calculated quarterly from fiscal quarter reviewed statements with income and expense items annualized. For fiscal year ending January 31, 2006, the Company was in compliance with the minimum financial ratios.

The Company has forecasted approximately $750,000 for capital commitments for fiscal year 2006 consisting of renovation and upgrading of facilities. The Company expects to use current working capital and cash flows from operations to fund these commitments as well as debt sources for these commitments.

The Company’s business and cash flow from operations rely on revenues generated from the sale of gasoline. During the fiscal year ended January 31, 2006, retail gasoline sales accounted for approximately 46.7% of the Company’s gross sales. To the extent that the availability of gasoline was restricted for any reasons, including due to storms, political issues, pipeline disruption, war, act or threats of terrorism in the United States or abroad, the Company’s gross sales would be affected, thereby reducing the amount of net cash that would be provided by operating activities. It is impossible to foresee or predict the exact economic effect on cash flows that any such restriction would have.

The Company is unaware of any trends or demands, commitments or uncertainties that will result or are reasonably likely to result in liquidity increasing or decreasing in any material way over the next twelve months. The Company believes that its working capital and the cash flow generated from current operations will be sufficient to fund operations over the next twelve months without borrowing any additional funds under the credit facility. The Company is not currently a party to any agreements to acquire any additional travel centers. But if the Company were to additional travel centers it would likely have to obtain additional financing to do so, either under the current credit facility or through other means. The Company cannot predict with any certainty what the terms of such financing might be.

The following table represents our future commitments under contractual obligations as of January 31, 2006:

	Total		Current maturities		2-3 years		4-5 years		More than 5 years

Long-Term Debt Obligations	$	5,314,209	$	515,423	$	1,033,346	$	609,172	$	3,156,268
Operating Lease Obligations		1,968,999		171,176		288,149		256,888		1,252,786
Total	$	7,283,208	$	686,599	$	1,321,495	$	866,060	$	4,409,054

The Company leases land at several of its retail operating locations. The leasing agreements for the various locations include 5 to 30 year leases with remaining lives on those leases ranging from approximately 1 to 27 years at January 31, 2006. Contingent rentals are generally based on percentages of specified gross receipts. Several leases include terms for computation of rent expense as the greater of a percent of gross receipts or a percent of land value as defined by the lease. In most cases, the Company is responsible for certain repairs and maintenance, insurance, property taxes or property tax increases, and utilities.

Critical Accounting Policies and Estimates

The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Critical accounting policies are those that the Company believes are both most important to the portrayal of the Company’s financial condition and operating results and require managements’ most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. The Company considers the following policies to be most critical in understanding the judgments that are involved in preparing its financial statements.

Revenue and Cost Recognition. Revenues from the Company’s two primary product categories, gasoline and merchandise, are recognized at the point of sale. The associated costs of the merchandise are included in the cost of sales and are based on estimates throughout the year based on standard markups within defined categories.

Inventory. Inventories, which consist primarily of gasoline and merchandise for resale, are state at the lower of cost or market value, with cost begin determined using the first-in, first-out (FIFO) method. The Company receives vendor discounts on the basis of volume purchasing that vary by product and are recognized as reductions of cost of sales.

Long-lived Assets. The Company reviews its long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount of fair value less costs to sell. Judgments and estimates made by the Company related to the expected useful lives of long-lived assets are affected by such changes in economic conditions and changes in operating performance. The accuracy of such provisions can vary materially from original estimates and the Company regularly monitors the adequacy of the provision until final disposition occurs.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of January 31, 2006, approximately $5.249 million of the Company’s total indebtedness is accruing interest at variable rates tied to LIBOR or the respective bank’s prime lending rate. As such, the Company is subject to fluctuations in interest rates that could have a negative impact on the net income of the Company. In addition, it is likely that future indebtedness incurred by the Company will be at variable rates that could impact the Company’s ability to finance internal development and growth of the business. Based upon the Company’s variable rate debt at January 31, 2006, a hypothetical 1% increase in interest rates would result in an annual increase in interest expense of approximately $52,000. The Company does not, however, believe that any risk inherent in the variable rate nature of its debt is likely to have a material effect on its financial position, results of operations or liquidity.

The Company has not entered into any market risk sensitive instruments for trading purposes. Further, the Company does not currently have any derivative instruments outstanding and has no plans to use any form of derivative instruments to manage its business in the foreseeable future.

Profit margins on gasoline sales can be adversely affected by factors beyond the control of the Company, including supply and demand in the retail gasoline market, price volatility and price competition from other gasoline marketers. The availability and price of gas could have an adverse impact on general highway traffic. The Company has not entered into any long-term fixed-price supply agreements for gasoline. Any substantial decrease in profit margins on gasoline sales or number of gallons sold could have a material adverse effect on the Company’s gross margins and operating income.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Following on next page.

BOWLIN TRAVEL CENTERS, INC.

Financial Statements

January 31, 2006 and 2005

Report of Independent Registered

Public Accounting Firm

The Board of Directors

Bowlin Travel Centers, Inc.

Albuquerque, New Mexico

We have audited the accompanying balance sheet of Bowlin Travel Centers, Inc. as of January 31, 2006, and the related statements of income, stockholders’ equity and cash flows for the year ended January 31, 2006. 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 audit. The 2005 statements of Bowlin Travel Centers, Inc. were audited by Neff + Ricci LLP who combined with Moss Adams LLP as of January 1, 2006, and whose report dated April 6, 2005, expressed an unqualified opinion on those statements. The 2004 statements of income, changes in stockholders’ equity and cash flows were also audited by Neff + Ricci LLP, and whose report dated March 26, 2004, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. 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 our audit provide 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 Bowlin Travel Centers, Inc. at January 31, 2006, and the results of its operations and its cash flows for the year ended January 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

/s/ Moss Adams LLP

Albuquerque, New Mexico

April 28, 2006

Report of Independent Registered

Public Accounting Firm

The Board of Directors

Bowlin Travel Centers, Inc.

Albuquerque, New Mexico

We have audited the accompanying balance sheet of Bowlin Travel Centers, Inc. as of January 31, 2005, and the related statements of income, stockholders’ equity and cash flows for each of the two years in the period ended January 31, 2005. 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.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. 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 our audits provide 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 Bowlin Travel Centers, Inc. at January 31, 2005, and the results of its operations and its cash flows for each of the two years in the period ended January 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

/s/ Neff + Ricci LLP

Albuquerque, New Mexico

April 6, 2005

BOWLIN TRAVEL CENTERS, INC.
Balance Sheets
January 31, 2006 and 2005

Assets	2006		2005
Current assets:
Cash and cash equivalents	$	2,615,414		2,043,203
Accounts receivable		41,464		8,755
Accounts receivable - related parties		—		43,251
Inventories		3,606,037		3,506,831
Prepaid expenses		275,638		363,749
Notes receivable, current maturities		8,928		3,368
Total current assets		6,547,481		5,969,157
Property and equipment, net		12,541,029		13,265,165
Intangible assets, net		190,022		225,052
Interest receivable		12,988		21,218
Investment in real estate		414,753		439,036
Notes receivable, less current portion		101,669		165,516
Total assets	$	19,807,942		20,085,144

Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowing	$	—		210,250
Current maturities of long-term debt		515,423		581,944
Accounts payable		860,686		1,083,087
Accrued salaries and benefits		389,549		256,565
Accrued liabilities		292,303		224,203
Deferred revenue, current		95,554		30,835
Total current liabilities		2,153,515		2,386,884

Deferred income taxes		812,200		877,200
Deferred revenue, long-term		—		165,550
Long-term debt, less current maturities		4,798,786		5,262,422
Total liabilities		7,764,501		8,692,056

Commitments		—		—

Stockholders’ equity:
Preferred stock, $.001 par value; 1,000,000 shares authorized,
none issued or outstanding at January 31, 2006 and 2005		—		—
Common stock, $.001 par value; 10,000,000 shares authorized,
4,583,348 issued and outstanding at January 31, 2006 and 2005		4,583		4,583
Additional paid-in capital		9,775,192		9,775,192
Retained earnings		2,263,666		1,613,313
Total stockholders’ equity		12,043,441		11,393,088
Total liabilities and stockholders’ equity	$	19,807,942		20,085,144

See accompanying notes to financial statements.

BOWLIN TRAVEL CENTERS, INC.

Statements of Income

	Years ended January 31,
	2006			2005			2004

Gross sales	$	27,903,599			24,089,536			21,848,055
Less discounts on sales		(235,235	)		(198,537	)		(252,696	)

Net sales		27,668,364			23,890,999			21,595,359
Cost of goods sold		17,979,627			15,113,327			13,449,655

Gross profit		9,688,737			8,777,672			8,145,704

General and administrative expense		(7,832,828	)		(7,364,784	)		(6,805,245	)
Depreciation and amortization		(884,561	)		(703,050	)		(685,051	)

Operating income		971,348			709,838			655,408

Other income (expense):
Interest income		69,385			45,075			89,973
Gain on sale of property and equipment		196,593			2,997			53,615
Rental income		184,330			189,413			192,864
Miscellaneous		—			370			1,347
Interest expense		(406,403	)		(203,366	)		(184,513	)

Total other income (expense)		43,905			34,489			153,286

Income before income taxes		1,015,253			744,327			808,694

Income taxes		364,900			305,400			314,800

Net income	$	650,353			438,927			493,894

Earnings per share:
Weighted average common shares outstanding		4,583,348			4,583,348			4,583,348

Basic and diluted	$	0.14			0.10			0.11

See accompanying notes to financial statements.

BOWLIN TRAVEL CENTERS, INC.

Statements of Stockholders’ Equity
For the Years Ended January 31, 2006, 2005 and 2004

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


Balance at January 31, 2003		4,583,348	$	4,583		9,775,192		680,492		10,460,267
Net income		—		—		—		493,894		493,894

Balance at January 31, 2004		4,583,348		4,583		9,775,192		1,174,386		10,954,161
Net income		—		—		—		438,927		438,927

Balance at January 31, 2005		4,583,348		4,583		9,775,192		1,613,313		11,393,088
Net income		—		—		—		650,353		650,353

Balance at January 31, 2006		4,583,348	$	4,583		9,775,192		2,263,666		12,043,441


See accompanying notes to financial statements.

BOWLIN TRAVEL CENTERS, INC.

Statement of Cash Flows

	Years ended January 31,
	2006			2005			2004
Cash flows from operating activities:
Net income	$	650,353			438,927			493,894
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		884,561			703,050			685,051
Amortization of loan fee		36,963			29,453			23,922
Gain on sale of property and equipment		(196,593	)		(2,997	)		(53,615	)
Provision for deferred income taxes		(65,000	)		83,900			203,700
Changes in operating assets and liabilities
Accounts receivable		10,542			55,307			3,212
Inventories		(99,206	)		(254,110	)		(158,785	)
Prepaid expenses and other		88,111			148,788			(203,931	)
Accounts payable and accrued liabilities		(21,317	)		44,136			268,601
Deferred income		(100,831	)		162,328			—
Income taxes		—			—			(1,706	)
Net cash provided by operating activities		1,187,583			1,408,782			1,260,343

Cash flows from investing activities:
Proceeds from sale of assets		384,309			10,635			300,461
Purchases of property and equipment		(460,336	)		(3,540,832	)		(2,171,328	)
Accrued interest receivable		8,230			924			4,794
Investment in real estate		24,283			36,091			(76	)
Payments received from mortgages receivable		—			—			310,129
Increase in notes receivable		—			—			(10,000	)
Payment received from notes receivable		174,899			42,908			33,424
Net cash provided by (used in) investing activities		131,385			(3,450,274	)		(1,532,596	)

Cash flows from financing activities:
Payments on long-term debt		(740,407	)		(975,253	)		(652,021	)
Payments for debt issuance costs		(6,350	)		(54,775	)		(12,518	)
Proceeds from short-term borrowings		—			200,000			10,250
Proceeds from borrowings		—			2,675,000			750,000
Net cash used in (provided by) financing activities		(746,757	)		1,844,972			95,711

Net increase (decrease) in cash and cash equivalents		572,211			(196,520	)		(176,542	)
Cash and cash equivalents at beginning of year		2,043,203			2,239,723			2,416,265

Cash and cash equivalents at end of year	$	2,615,414			2,043,203			2,239,723

(Continued)

BOWLIN TRAVEL CENTERS, INC.

Statement of Cash Flows

	Years ended January 31,
	2006		2005		2004

Supplemental disclosure of cash flow information:
Cash paid for interest	$	406,403		203,366		184,513
Cash paid for income taxes	$	370,000		217,000		112,806

Noncash investing and financing activities:
Like-kind exchange of property	$	—		308,500		—
Real estate sold in exchange for
notes receivable	$	116,612		—		—

See accompanying notes to financial statements.

BOWLIN TRAVEL CENTERS, INC.

Notes to Financial Statements

January 31, 2006

(1)

Summary of Significant Accounting Policies

(a)

Description of Business

Bowlin Travel Centers, Inc. (BTC or the Company) is located in Albuquerque, New Mexico. The Company’s principal business activities include the operation of full-service travel centers and restaurants which offer brand-name food and gasoline, and a unique variety of Southwestern merchandise to the traveling public in the Southwestern United States, primarily New Mexico.

BTC’s articles of incorporation authorize 10,000,000 shares of common stock ($.001 par value) and 1,000,000 shares of preferred stock ($.001 par value) which can be issued at the discretion of the Board of Directors.

(b)

Cash and Cash Equivalents

The Company considers all liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company places its temporary cash investments with a local financial institution. Excess collected funds are invested in securities repurchase agreements and are collateralized by securities with fair market values of 102 percent. The remaining funds at year-end were covered by Federal Deposit Insurance Corporation insurance.

(c)

Inventories

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

(d)

Property and Equipment

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

(e)

Intangible Assets

Debt issuance costs are deferred and amortized over the terms of the respective borrowings on a straight-line basis for the revolving portion and the interest method for the term note portion. Franchise fees are amortized on a straight-line basis over the shorter of the life of the related franchise agreements or the periods estimated to be benefited, ranging from fifteen to twenty-five years.

(f)

Sales and Cost Recognition

Sales of merchandise are recognized at the time of sale and the associated costs of the merchandise are included in cost of sales.

BOWLIN TRAVEL CENTERS, INC.

Notes to Financial Statements

January 31, 2006

(g)

Income Taxes

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

(h)

Impairment of Long-lived Assets and Long-lived Assets to Be Disposed Of

The Company reviews its long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount of fair value less costs to sell.

(i)

Financial Instruments

The Company’s financial instruments are cash and cash equivalents, accounts receivable, notes receivable, accounts payable, accrued liabilities and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable, notes receivable, accounts payable, accrued liabilities and long-term debt approximate fair value.

(j)

Use of Estimates

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

(k)

Earnings Per Share

Earnings per share of common stock, both basic and diluted, are computed by dividing net income by the weighted average common shares outstanding, assuming the shares distributed on January 30, 2001 were outstanding for all periods presented. Diluted earnings per share is calculated in the same manner as basic earnings per share as there were no potential dilutive securities outstanding for all periods presented.

BOWLIN TRAVEL CENTERS, INC.

Notes to Financial Statements

January 31, 2006

(l)

Reclassifications

Certain 2005 and 2004 amounts have been reclassified to conform to 2006 presentation. Such reclassifications had no effect on net income.

(m)

Accounts Receivable

Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received.

Management believes that all accounts receivable are fully collectable. Therefore, no allowance for doubtful accounts is deemed to be required.

(n)

Deferred Revenue

The current portion of deferred revenue consists of advertising revenue received in advance for billboards that the Company rents. This revenue is recognized in income as services are provided over the term of the contract. The long-term portion of deferred revenue consists of revenue received in advance for a Brand Incentive Program for projected ExxonMobil gallons purchased beginning April 1, 2004 and ending March 31, 2006.

(2)

Notes Receivable

Notes receivable as of January 31, 2006 and 2005 consist of the following:

	2006			2005
$400,000 8% note of which $234,074 is deferred, due $37,500 annually through 2005 (including interest) with the balance due in 2006 (a)	$	—			168,884
$100,000 8% note of which $85,124 is deferred, due $667 interest only monthly, $4,000 principal due the first year and $24,000 annually for the remaining four years (b)		14,876			—
$80,000 8% note of which $21,886 is deferred, due $1,622 monthly (including interest) through 2010 (b)		55,725			—
$75,000 8% note of which $31,378 is deferred, due $4,587 quarterly (including interest) through 2010 (b)		39,996			—
		110,597			168,884
Less current portion		(8,928	)		(3,368	)
	$	101,669			165,516
_______________ (a) Collateralized by land and improvements and equipment sold. In the event of default, the property and equipment reverts back to the Company.
(b) Collateralized by the property sold. In the event of default, the property reverts back to the Company.

BOWLIN TRAVEL CENTERS, INC.

Notes to Financial Statements

January 31, 2006

In May of 2005, the Company received a balloon payment of $375,217. The payment was in full of a $168,884 not receivable with the remaining balance of $206,333 considered a gain on the sale of property. The gain was received and recognized as non-operating income.

In August 2005, the Company sold property to a third party for $20,000 cash and a note receivable of $100,000. The note receivable has a stated rate of interest of 8%. Interest is payable monthly with principal payable in annual installments of $4,000 for the first year and $24,000 for the following four years. The property sold had a carrying value of $9,002 and the costs incurred to sell the land were $8,831. The gain on the sale of the land was $102,149 of which $17,025 was recognized initially and $85,124 was deferred and will be recognized into income using the installment method as payments are received. The deferred gain is reflected as a reduction to the note receivable in the accompanying balance sheet.

In August 2005, the Company sold property to a third party for $10,000 cash and a note receivable of $80,000. The note receivable has a stated rate of interest of 8% and is payable in monthly installments of $1,622 for five years. The property sold had a carrying value of $64,167 and the costs incurred to sell the land were $1,211. The gain on the sale of the land was $24,622 of which $2,735 was recognized initially and $21,886 was deferred and will be recognized into income using the installment method as payments are received. The deferred gain is reflected as a reduction to the note receivable in the accompanying balance sheet.

In September 2005, the Company sold property to a third party for $10,000 cash and a note receivable of $75,000. The note receivable has a stated rate of interest of 8% and is payable in quarterly installments of $4,587 for five years. The property sold had a carrying value of $47,675 and the costs incurred to sell the land were $1,764. The gain on the sale of the land was $35,561 of which $4,184 was recognized initially and $31,378 was deferred and will be recognized into income using the installment method as payments are received. The deferred gain is reflected as a reduction to the note receivable in the accompanying balance sheet.

Management believes that all notes receivable are fully collectable. Therefore, no allowance is deemed to be required.

BOWLIN TRAVEL CENTERS, INC.

Notes to Financial Statements

January 31, 2006

(3)

Property and Equipment

Property and equipment consist of the following at January 31:

	Estimated life (years)		2006			2005

Land			$	2,352,865			2,472,104
Buildings and improvements		10 - 40		10,310,803			10,254,455
Machinery and equipment		3 - 10		7,798,745			7,756,969
Autos, trucks and mobile homes		3 - 10		1,784,827			1,759,685
Billboards		15 - 20		1,582,282			1,529,529
Construction in progress				25,710			27,164
Less accumulated depreciation				(11,314,203	)		(10,534,741	)
			$	12,541,029			13,265,165

Gains and losses on sale of property, equipment, early termination of wholesale gasoline location and investment in real estate at January 31:

	2006			2005

Land	$	233,785			3,810
Buildings and improvements		(78,146	)		—
Machinery and equipment		(22,083	)		70
Autos, trucks and mobile homes		—			(883	)
Wholesale gasoline termination		52,806			—
Investment in real estate		10,231			—
	$	196,593			2,997

In August 2005, the Company sold property to a third party for $20,000 cash and a note receivable of $100,000. The property sold had a carrying value of $9,002 and the costs incurred to sell the land were $8,831. The gain on the sale of the land was $102,149 of which $17,025 was recognized initially and $85,124 was deferred and will be recognized into income using the installment method as payments are received. The deferred gain is reflected as a reduction to the note receivable in the accompanying balance sheet.

In August 2005, the Company sold property to a third party for $10,000 cash and a note receivable of $80,000. The property sold had a carrying value of $64,167 and the costs incurred to sell the land were $1,211. The gain on the sale of the land was $24,622 of which $2,735 was recognized initially and $21,886 was deferred and will be recognized into income using the installment method as payments are received. The deferred gain is reflected as a reduction to the note receivable in the accompanying balance sheet.

BOWLIN TRAVEL CENTERS, INC.

Notes to Financial Statements

January 31, 2006

In September 2005, the Company sold property to a third party for $10,000 cash and a note receivable of $75,000. The property sold had a carrying value of $47,675 and the costs incurred to sell the land were $1,764. The gain on the sale of the land was $35,561 of which $4,184 was recognized initially and $31,378 was deferred and will be recognized into income using the installment method as payments are received. The deferred gain is reflected as a reduction to the note receivable in the accompanying balance sheet.

In October 2005, one wholesale gasoline location elected early termination of their wholesale agreement. The agreement was terminated within the original ten year term which resulted in a termination penalty of $100,000 as well as the gross margin the Company would have received from gasoline sales had the agreement continued for the remainder of the term. The $100,000 was offset by the disposal of equipment of approximately $47,194 resulting in an overall non-operating gain of approximately $52,806.

On January 18, 2005, the Company opened a new state-of-the-art travel center in Picacho, Arizona. Strategically located on I-10 between metropolitan Phoenix and Tucson, The new facility has 10,000 square feet of retail space, a convenience department for gourmet coffee and snacks with a large screen plasma TV with satellite news plus a state-of-the-art super-pumper gasoline facility offering CITGO brand gasoline. The total cost of the project was approximately $2,480.000.

(4)

Intangible Assets

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

	2006			2005

Franchise fees	$	132,442			132,442
Debt issuance costs		384,915			378,565
		517,357			511,007
Less accumulated amortization		(327,335	)		(285,955	)
	$	190,022			225,052

The following schedule discloses the estimated amortization expense at January 31:

2007	$	30,080
2008		27,357
2009		23,563
2010		22,740
2011		22,490
Thereafter		63,792
Total	$	190,022

BOWLIN TRAVEL CENTERS, INC.

Notes to Financial Statements

January 31, 2006

(5)

Investment in Real Estate

Approximately twelve acres of previously undeveloped land in Alamogordo, New Mexico was sub-divided into thirty-five approximately quarter-acre residential lots. The subdivision includes paved roads, fencing, water, sewer and electricity. Two manufactured homes were purchased and installed. One lot and manufactured home was sold in December 2003. In December 2005, two lots were sold. The other manufactured home was moved for the Company’s use at the new facility in Picacho, Arizona. The thirty-two lots that remain are for sale.

(6)

Short-term Borrowing

In July 2005, the Company renewed a $1,250,000 open line of credit with one of its existing lenders. The line-of-credit is secured by building and equipment. The Company did not borrow any funds during fiscal year 2006. As of January 31, 2006, $1,250,000 remains on the open line of credit that will mature July 2007 and requires variable interest (7.50% at January 31, 2006).

(7)

Long-term Debt

Long-term debt consists of the following at January 31:

	2006			2005
Due bank, maturity September 2008, variable interest (7.16% at January 31, 2006), monthly installments of $27,345, secured by buildings and equipment	$	789,030			1,060,089
Due bank, maturity October 2013, variable interest (7.50% at January 31, 2006), monthly installments of $6,830, secured by land and buildings		525,019			571,779
Due bank, maturity October 2013, variable interest (7.50% at January 31, 2006), monthly installments of $4,072, secured by land and buildings		315,433			343,165
Due bank, maturity September 2014, variable interest (7.50% at January 31, 2006), monthly installments of $5,132, secured by buildings and equipment		436,210			468,740
Due bank, maturity January 2013, interest at 6%, monthly installments of $944, secured by land		64,719			71,881
Due bank, maturity January 2011, variable interest (7.50% at January 31, 2006), monthly installments of $10,580, secured by buildings and equipment		569,518			656,991
Due bank, maturity February 2015, variable interest (7.50% at January 31, 2006), monthly installments of $16,225, secured by buildings and equipment		2,125,679			2,175,000
Due bank, maturity November 2014, variable interest (7.50% at January 31, 2006), monthly installments of $3,317, secured by buildings and equipment		488,601			496,721
		5,314,209			5,844,366
Less current maturities		(515,423	)		(581,944	)
	$	4,798,786			5,262,422

BOWLIN TRAVEL CENTERS, INC.

Notes to Financial Statements

January 31, 2006

Future maturities of long-term debt for the years ending January 31 are as follows:

2007	$	515,423
2008		554,294
2009		479,052
2010		293,275
2011		315,897
Thereafter		3,156,268
Total	$	5,314,209

(8)

Income Taxes

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

	Current		Deferred			Total
2006:
U.S. Federal	$	358,200		(54,200	)		304,000
State		71,700		(10,800	)		60,900
	$	429,900		(65,000	)		364,900

2005:
U.S. Federal	$	184,500		69,900			254,400
State		37,000		14,000			51,000
	$	221,500		83,900			305,400

2004:
U.S. Federal	$	92,600		169,700			262,300
State		18,500		34,000			52,500
	$	111,100		203,700			314,800

BOWLIN TRAVEL CENTERS, INC.

Notes to Financial Statements

January 31, 2006

Income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 34 percent to pre-tax income as a result of the following for the years ended January 31:

	2006			2005		2004

Computed “expected” tax	$	345,186			253,071		274,956
State income taxes, net of federal tax benefit		44,000			33,629		34,673
Other		(24,286	)		18,700		5,171
Total	$	364,900			305,400		314,800

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

	2006		2005

Deferred tax assets:
At January 31, 2006 deferred revenue principally due to accrual for financial reporting purposes	$	37,266		76,590
At January 31, 2006, compensated absences, principally due to accrual for financial reporting purposes		34,722		(27,715	)
Total gross deferred tax assets		71,988		48,875
Deferred tax liabilities:
Property and equipment, principally due to differences in depreciation		884,185		938,262
Other		3		(12,187	)
Total gross deferred liabilities		884,188		926,075
Net deferred tax liability	$	812,200		877,200

There was no valuation allowance for deferred tax assets as of January 31, 2006, 2005 or 2004. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.

(9)

Profit-Sharing Plan

The Company maintains a qualified defined contribution profit-sharing plan that covers substantially all employees. The plan year end is December 31. The elected salary reduction is subject to limits as defined by the Internal Revenue Code. The Company provides a matching contribution and additional discretionary contributions as determined by resolution of the board of directors. Legal and accounting expenses related to the plan are absorbed by the Company. The Company’s contributions to the profit-sharing plan were $60,020, $64,361 and $48,806 in fiscal 2006, 2005 and 2004, respectively.

BOWLIN TRAVEL CENTERS, INC.

Notes to Financial Statements

January 31, 2006

(10)

Commitments

The Company leases land at several of its retail operating locations. Included in general and administrative expenses in the accompanying statements of income is rental expense for these land leases of $255,426, $237,970 and $246,528 for the years ended January 31, 2006, 2005 and 2004, respectively. The Company also leases land where several of its retail billboards are located and rent expense for these leases was $191,088, $152,158 and $117,148 for the years ended January 31, 2006, 2005 and 2004, respectively.

The leasing agreements for the various locations include 5 to 30 year leases with remaining lives on those leases ranging from approximately 1 to 27 years at January 31, 2006. Contingent rentals are generally based on percentages of specified gross receipts. Several leases include terms for computation of rent expense as the greater of a percent of gross receipts or a percent of land value as defined by the lease. In most cases, the Company is responsible for certain repairs and maintenance, insurance, property taxes or property tax increases, and utilities.

Future minimum rental payments under these leases are as follows:

Year ending January 31:
2007	$	171,176
2008		151,048
2009		137,101
2010		129,699
2011		127,189
Thereafter		1,252,786
Total	$	1,968,999

(11)

Related Party Transactions

Wholesale gasoline distribution sales were sold to a Stuckey’s franchise travel center not owned by the Company. The travel center is owned by the niece of Michael L. Bowlin.

In October 2005, this wholesale gasoline location elected early termination of their wholesale agreement. The agreement was terminated within the original ten year term which resulted in a termination penalty of $100,000 that was offset by the disposal of equipment of approximately $47,194 resulting in gain of approximately $52,806 as well as gross margin of $12,098 the Company would have received from gasoline sales had the agreement continued for the remainder of the term. The $52,806 gain is reflected in the gain on sale of property and equipment in the Company’s statements of income.

BOWLIN TRAVEL CENTERS, INC.

Notes to Financial Statements

January 31, 2006

The sales with the associated cost of goods and gross profit consist of the following at January:

	2006		2005		2004

Gross sales	$	1,137,523		1,333,324		1,399,527
Cost of goods sold		1,109,490		1,288,990		1,355,553
Gross profit	$	28,033		44,334		43,974

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On January 4, 2006, Neff+Ricci LLP (“Neff+Ricci”) notified the “Company” that it combined its practice with Moss Adams LLP (“Moss Adams”) and therefore resigned as the Company’s registered independent public accounting firm. According to the information provided to the Company by Neff+Ricci, all of the partners of Neff+Ricci have become partners of Moss Adams. Neff+Ricci’s audit reports on the Company’s financial statements for the past two years did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

During the Company’s two most recent fiscal years and the subsequent interim period preceding the replacement of Neff+Ricci, there were no disagreements with Neff+Ricci on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Neff+Ricci, would have caused them to make reference to the subject matter of the disagreements in connection with their reports; and there were no reportable events as described in Item 304(a)(1)(v) of Regulation S-K (“Regulation S-K”) promulgated by the Securities and Exchange Commission (the “SEC”) pursuant to the Securities Exchange Act of 1934, as amended.

The Company requested that Neff+Ricci furnish it with a letter addressed to the Commission stating whether or not Neff+Ricci agrees with the statement set forth above. A copy of that letter, dated January 9, 2006, is filed as Exhibit 16.1 to the Form 8-K filed January 9, 2006.

On January 5, 2006, the Company engaged Moss Adams LLP (“Moss Adams”) as its registered independent public accounting firm. The Company’s Board of Directors recommended and approved the engagement of Moss Adams.

During the Registrant’s two most recent fiscal years and through the date of the report on the Form 8-K filed January 9, 2006, the Company did not consult Moss Adams with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Registrant’s financial statements, or any other matters or reportable events listed in Item 304(a)(2)(i) or (ii) of Regulation S-K.

ITEM 9A.

CONTROLS AND PROCEDURES

The Company’s management evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that there was a material weakness in the control environment related to general merchandise inventory at the Company’s twelve retail locations and the related disclosure controls and procedures are ineffective. The Company used estimates throughout the year based on standard markups within defined categories to record cost of goods sold. The Company historically counts physical inventory at each location at the end of each fiscal year. Therefore, variances between the estimates used and physical counts are accounted for at the end of the fiscal year rather than periodically.

The general merchandise inventory at the Company’s twelve retail locations was approximately $1.627 million or 45.1% of the Company’s total inventory. Inventory at the Company’s warehouse was maintained on a perpetual inventory system where purchases and issues are recorded directly into the inventory account as they occur. Therefore, the balance in the warehouse inventory account represents the ending inventory amount and there is no weakness related to the warehouse inventory. The warehouse inventory at the end of the Company’s fiscal year was approximately $1.047 million or 29.0% of the Company’s total inventory. Other key inventories including gasoline, Dairy Queen food and jewelry were taken monthly and the physical was reconciled to the book; therefore there are no weaknesses related to these inventories. Gasoline, Dairy Queen food, and jewelry inventories were approximately $823,000 or 22.8% of the Company’s total inventory.

The Company is dedicating resources to correct this issue and is in the process of implementing a plan to use an electronic point of sale merchandise tracking system that will provide the Company with the ability to conduct more periodic physical inventories as well as more accurately monitor cost of goods sold. Other than the above issue, there were no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of fiscal 2006 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The first phase of the plan, which is in process, is to have all items in the Company’s central warehouse bar-coded.

ITEM 9B.

OTHER INFORMATION

Not applicable.

PART III

ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information regarding the officers and directors of Bowlin Travel Centers. A summary of the background and experience of each of these individuals is set forth after the table.

Name	Age	Position

Michael L. Bowlin	62	Chairman of the Board, President and Chief Executive Officer
William J. McCabe	56	Senior Vice President -Management Information Systems, Secretary, Treasurer and Director
David B. Raybould	53	Director
Nina J. Pratz	54	Chief Financial Officer, Senior Vice President and Director
Kim D. Stäke	50	Chief Administrative Officer, Vice President and Director

Michael L. Bowlin. Mr. Bowlin has served as Chairman of the Board and Chief Executive Officer, President and as a Director of the Company since August of 2000. Mr. Bowlin served as Chairman of the Board and Chief Executive Officer of Bowlin Outdoor from 1991 through January of 2001, and as President from 1983 through 1991. Mr. Bowlin had been employed by Bowlin Outdoor since 1968. Mr. Bowlin holds a Bachelor’s degree in Business Administration from Arizona State University.

William J. McCabe. Mr. McCabe has served as Senior Vice President, Management Information Systems, Secretary, Treasurer and as a Director of the Company since August of 2000. Mr. McCabe served as a member of the Board of Directors of Bowlin Outdoor from 1983 until August 1996. Prior to 1997, Mr. McCabe served as Senior Vice President - Advertising Services from 1993 to 1996, Vice President of Outdoor Operations from 1988 to 1992 and as Vice President of Accounting from 1984 to 1987. Mr. McCabe has been employed by the Company since 1976 in such additional capacities as a Staff Accountant and Controller. Mr. McCabe holds a Bachelor’s degree in Business Administration from New Mexico State University.

David B. Raybould. Mr. Raybould has been employed as a sales professional by Xpedx, a division of International Paper Company from 1995 until June 2002. During his employment with Xpedx, Mr. Raybould was a consultant to small, independent business firms as well as many Fortune 500 companies. Mr. Raybould holds a Bachelor’s degree in Business Administration from the University of New Mexico.

Nina J. Pratz. Ms. Pratz has served as the Company’s Senior Vice President and Chief Financial Officer since April of 2001. Ms. Pratz has served as a member of the Bowlin Outdoor’s Board of Directors from 1976 until January 2001. Prior to 1997, Ms. Pratz served as Chief Administrative Officer of Bowlin Outdoor since 1988. Ms. Pratz holds a Bachelor’s degree in Business Administration from New Mexico State University.

Kim D. Stäke. Ms. Stäke has served as Vice President and Chief Administrative Officer since April of 2002. Ms. Stäke has been employed with the Company since December 1997. Ms. Stäke also serves in such capacities as Controller and SEC compliance. Prior to December 1997, Ms. Stäke was employed in public accounting. Ms. Stäke holds a Bachelor’s degree in Business Administration from the University of New Mexico.

In lieu of an Audit Committee, the Company’s Board of Directors is responsible for reviewing and making recommendations concerning the selection of outside auditors, reviewing the scope, results and effectiveness of the annual audit of the Company's financial statements and other services provided by the Company’s independent public accountants. The Board of Directors also reviews the Company's internal accounting controls, practices and policies. The Board of Directors has determined that Kim D. Stäke qualifies as an audit committee financial expert as defined in Item 401(h)(2)-(3) of Regulation S-K.

The Company promotes accountability for adherence to honest and ethical conduct; endeavors to provide full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with the Commission and in other public communications made by the Company; strive to be compliant with applicable governmental laws, rules and regulations; and promotes prompt internal reporting of violations of the code of ethics to an appropriate person or persons. The Company has not formally adopted a written code of business conduct and ethics that governs to the Company’s employees, officers and directors as the Company is not required to do so.

ITEM 11.

EXECUTIVE COMPENSATION

No employee or officer of Bowlin Travel Centers has entered into an employment agreement with Bowlin Travel Centers, nor do we anticipate entering into any employment agreements in the future.

The following table summarizes all compensation paid by Bowlin Travel Centers, Inc. to its Chief Executive Officer for services rendered to Bowlin Travel Centers, Inc. during the fiscal years ended January 31, 2006, 2005 and 2004. The Company has no other executive officer whose total annual salary and bonus paid to them by Bowlin Travel Centers, Inc. exceeded $100,000 for the most recent fiscal year. All information set forth in this table reflects compensation earned by these individuals for services with Bowlin Travel Centers.

Long Term

Compensation

Annual Compensation

Awards

Name and Principal Position

Fiscal

Year

Salary ($)

(1)

Bonus

($)

Other Annual Compensa-

tion ($)

Securities

Underlying

Options/

SARs (#)

All Other Compensa-

tion ($)

Michael L. Bowlin

Chairman of the Board,

President, CEO &

Director

2006

2005

2004

97,000

97,500

35,050

17,526 (2)

17,438 (2)

16,664 (2)

—

_______________

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

(2)

Amount for 2006 includes (i) $1,620 discretionary matching contributions allocated to Mr. Bowlin’s 401(k) Profit Sharing Plan account; (ii) $9,406 for premiums on term life, auto and disability insurance policies of which Mr. Bowlin or his wife is the owner, and (iii) $6,500 for Mr. Bowlin’s car allowance. Amount for 2005 includes (i) $1,620 of Bowlin Travel Centers discretionary matching contributions allocated to Mr. Bowlin’s 401(k) Profit Sharing Plan account; (ii) $9,318 for premiums on term life, auto and disability insurance policies of which Mr. Bowlin or his wife is the owner; and (iii) $6,500 for Mr. Bowlin’s car allowance. Amount for 2004 includes (i) $1,620 of Bowlin Travel Centers discretionary matching contributions allocated to Mr. Bowlin’s 401(k) Profit Sharing Plan account; (ii) $8,544 for premiums on term life, auto and disability insurance policies of which Mr. Bowlin or his wife is the owner; and (iii) $6,500 for Mr. Bowlin’s car allowance.

COMPENSATION OF DIRECTORS

Directors who are not employees of the Company are entitled to receive $500 per each meeting of the Board of Directors, or any committee thereof, attended. Directors do not receive any other compensation for services as directors of the Company.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of January 31, 2006, there were 4,583,348 shares of Bowlin Travel Centers common stock outstanding. The following table sets forth the number of shares of common stock beneficially owned by (i) all persons known by the Company to be the beneficial owners of more than five percent of the outstanding shares of common stock; (ii) each Director of the Company; (iii) the executive officers of the Company; and (iv) all Directors and executive officers of the Company as a group. This security ownership disclosure includes shares that may be received in 60 days as required by Exchange Act Rule 13d-3.

NAME OF BENEFICIAL OWNER	AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (3)	PERCENT OF CLASS (4)

Michael L. Bowlin (5)(1)	2,818,536	61.5%
William J. McCabe (1)	64,548	1.4%
Nina J. Pratz (1)	116,802	2.5%
Kim D. Stäke (1)	*	*
David B. Raybould (1)	—	—
Monica A. Bowlin (6)(1)	2,818,536	61.5%
Jonathan Brooks (2)	585,550	12.8%
All directors and executive officers as a group (5 persons)	2,999,886	65.4%

_______________

*	Less than 1.0%

(1)	Address is c/o Bowlin Travel Centers, Inc., 150 Louisiana NE, Albuquerque, NM, 87108.

(2)	Address is 1999 Avenue of the Stars, Suite 2040, Los Angeles, CA, 90067.

(3)	Unless otherwise noted and subject to community property laws, where applicable, the persons named in the table above have sole voting and investment power with respect to all shares of Common Stock as shown beneficially owned by them.

(4)	The shares and percentages shown include the shares of common stock actually owned as of April 28, 2006.

(5)	Includes 425,687 shares held by Mr. Bowlin’s wife and 171,332 shares held by each of three daughters. Mr. Bowlin disclaims beneficial ownership of an aggregate of 513,996 of such shares, which are held by three of his daughters.

(6)	Includes 1,878,853 shares held by Mrs. Bowlin’s husband and 171,332 shares held by each of her three daughters. Mrs. Bowlin disclaims beneficial ownership of an aggregate of 513,996 of such shares, which are held by three of her daughters.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Wholesaling to Relative of Officer and Director and Stockholder of Bowlin Travel Centers

Wholesale gasoline distribution sales were sold to a Stuckey’s franchise travel center not owned by the Company. The travel center is owned by the niece of Michael L. Bowlin.

In October 2005, this wholesale gasoline location elected early termination of their wholesale agreement. The agreement was terminated within the original ten year term which resulted in a termination penalty of $100,000 that was offset by the disposal of equipment of approximately $47,194 resulting in an overall non-operating gain of approximately $52,806 as well as gross margin of $12,098 the Company would have received from gasoline sales had the agreement continued for the remainder of the term.

The sales with the associated cost of goods and gross profit consist of the following the year ended January 31:

	2006		2005		2004

Gross sales	$	1,137,523		1,333,324		1,399,527
Cost of goods sold		1,109,490		1,288,990		1,355,553

Gross profit	$	28,033		44,334		43,974

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The Board of Directors approves the fees and other significant compensation to be paid to the independent auditors for the purpose of preparing or issuing an audit report or related work. The Company provides appropriate funding, as determined by the Board of Directors, for payment of fees and other significant compensation to the independent auditor. The Board of Directors also preapproves all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent auditors, subject to the de minimis exceptions for non-audit services described in the Securities Exchange Act of 1934.

Audit Fees

The aggregate fees billed by Neff+Ricci LLP for professional services rendered for the audit of the Company’s annual financial statements for the fiscal years ended January 31, 2006 and January 31, 2005, and for the review of the financial statements included in the Company’s Quarterly Reports on Form 10-Q for the fiscal years ended January 31, 2006 and January 31, 2005, were approximately $37,000.

On January 4, 2006, Neff+Ricci LLP combined its practice with Moss Adams and therefore resigned as the Company’s registered independent public accounting firm. Neff+Ricci’s audit reports on the Company’s financial statements for the past two years did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. See, also, “Item 9: Changes in and disagreements with accountants on accounting and financial disclosure.”

Audit-Related Fees

None.

Tax Fee

The fees billed by Greg DuBrock, CPA for professional services rendered for the preparation of the Company’s tax return for the fiscal year ended January 31, 2005 were approximately $1,000.

All Other Fees

The fees billed by Greg DuBrock, CPA for professional services rendered for the preparation of the Company’s annual return/report of employee benefit plan for the fiscal year ended January 31, 2005 were approximately $2,100.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	See Item 8

(b)

Exhibits

The exhibits as indexed below are included as part of this Form 10-K.

INDEX TO EXHIBITS

3.1(1)		Form of Certificate of Incorporation of Bowlin Travel Centers, Inc.
3.2(1)		Bylaws of Bowlin Travel Centers, Inc.
10.1(1)		Management Services Agreement, between Bowlin Outdoor Advertising and Travel Centers Incorporated and Bowlin Travel Centers, dated August 1, 2000.
10.2(1)		Distributor Franchise Agreement, dated as of July 19, 1995, between the Registrant and CITGO Petroleum Corporation.
10.3(1)		Distributor Sales Agreement, dated as of April 1, 1999, between the Registrant and ExxonMobil Company, U.S.A. (a division of ExxonMobil Corporation).
10.8(1)		Lease, dated as of January 12, 1987, between Janet Prince and the Registrant.
10.9(1)		Commercial Lease, dated as of September 21, 1996, between the State of Arizona and the Registrant, as amended.
10.10(1)		Commercial Lease, dated as of March 16, 2000, between the New Mexico Commissioner of Public Lands and the Registrant, as amended.
10.12(1)		Lease Agreement, dated as of June 23, 1989, between the Registrant and Rex Kipp, Jr., as amended.
10.13(1)		Lease, dated as of September 29, 1983, between J.T. and Ida M. Turner and the Registrant.
10.14(1)		Business Lease, dated as of October 1, 1996, between the Registrant and the New Mexico Commission of Public Lands.

INDEX TO EXHIBITS

(Continued)

10.15(1)		Commercial Lease, dated as of September 21, 1996, between the Registrant and the State of Arizona, as amended.
10.19(1)		“Dairy Queen” Operating Agreement, dated as of March 10, 1983, between Interstate Dairy Queen Corporation and the Registrant d/b/a DQ/B of Edgewood, NM, together with amendments and ancillary agreements related thereto.
10.20(1)		“Dairy Queen” Operating Agreement, dated as of May 1, 1982, between Interstate Dairy Queen Corporation and the Registrant d/b/a DQ/B of Flying C, New Mexico, together with amendments and ancillary agreements related thereto.
10.21(1)		“Dairy Queen” Store Operating Agreement, dated as of November 18, 1986, between Dairy Queen of Southern Arizona, Inc. and the Registrant, together with amendments and ancillary agreements related thereto.

10.22(1)		“Dairy Queen” Operating Agreement, dated as of September 1, 1982, between Interstate Dairy Queen Corporation and the Registrant d/b/a DQ of Bluewater, New Mexico, together with amendments and ancillary agreements related thereto.
10.23(1)		“Dairy Queen” Store Operating Agreement, dated as of February 1, 1984, between Dairy Queen of Arizona, Inc. and the Registrant, together with amendments and ancillary agreements related thereto.
10.25(1)		“Dairy Queen” Operating Agreement, dated as of June 7, 1989, between Interstate Dairy Queen Corporation and the Registrant d/b/a “DQ” at Butterfield Station, together with amendments and ancillary agreements related thereto.

10.26(1)		Letter of Agreement, dated as of March 1, 1987, between Stuckey’s Corporation and the Registrant confirming franchise of Benson, AZ Stuckey’s Pecan Shoppe.
10.27(2)		Franchise Agreement, dated as of July 7, 1982, between Stuckey’s, Inc. and the Registrant, together with a related Personal Guaranty and Indemnity.
10.28(2)		Amended and Restated Master Loan Agreement with First Security Bank, dated as of November 10, 2000, by and among the Registrant, Bowlin Outdoor Advertising and Travel Centers Incorporated, and First Security Bank.
10.29(1)		Lease Agreement between Bowlin Outdoor Advertising and Travel Centers Incorporated and the Registrant, dated August 1, 2000.

10.30(2)		Contribution Agreement, dated as of November 1, 2000, by and between the Registrant and Bowlin Outdoor Advertising and Travel Centers Incorporated.
10.31(2)		Tax Sharing and Disaffiliation Agreement, dated as of November 1, 2000, by and between the Registrant and Bowlin Outdoor Advertising and Travel Centers Incorporated.
10.32(3)		Loan Agreement with Bank of the West, dated July 10, 2003, by and amoung the Registrant, Bowlin Travel Centers, Inc., and Bank of the West.
10.35(6)		Purchase and Sale agreement, dated September 1, 2005 by and between Bowlin Travel Centers, Inc. and Lost River Estates, LLC for a tract of land known as La Luz Gate Road/Highway 54/70 in Alamogordo, New Mexico.
10.36(6)		Purchase and Sale agreement dated September 1, 2005 by and between Bowlin Travel Centers, Inc. and Lazy L, LLC for three tracts of land known as Sec.32, T.23S, R.9W., N.M.P.M., in Luna County, New Mexico.
10.37(6)		Purchase and Sale agreement, dated October 12, 2005 by and between Bowlin Travel Centers, Inc. and Devin Fenn dba D. Fenn Enterprises, Inc. for vacant land known as lots 15 through 26, inclusive, and lot 29, P.I.C. Benson Acres, according to tiled Map No. 615., records of Cochise County in Benson, Arizona.

INDEX TO EXHIBITS

(Continued)

16.1(7)		Letter dated January 9, 2006, announcing changes in the Registrant’s certifying accountant.
31.1		Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2		Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

_____________

(1)	Incorporated by reference to the correspondingly numbered Exhibits in the Registrant’s Form 10, filed November 10, 2000.

(2)	Incorporated by reference to the correspondingly numbered Exhibits in the Registrant’s Amendment No. 1 to the Form 10, filed December 8, 2000.

(3)	Incorporated by reference to the correspondingly numbered Exhibits in the Registrants Form 10-Q, filed September 10, 2004.

(4)	Incorporated by reference to the correspondingly numbered Exhibits in the Registrants Form 10-Q, filed December 10, 2004.

(5)	Incorporated by reference to the correspondingly numbered Exhibits in the Registrants Form 10-K filed April 15, 2004.

(6)	Incorporated by reference to the correspondingly numbered Exhibits in the Registrants Form 10-Q filed December 12, 2005.

(7)	Incorporated by reference to the Registrants Form 8-K filed January 9, 2006.

SIGNATURES

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


	Bowlin Travel Centers, Inc.

Date: October 31, 2006	By:	/s/ MICHAEL L. BOWLIN

		Michael L. Bowlin, Chairman of the Board, President and Chief Executive Officer

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

Signature			Date


/s/ MICHAEL L. BOWLIN			October 31, 2006

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

/s/ NINA J. PRATZ			October 31, 2006

Nina J. Pratz Chief Financial Officer, Senior Vice President, and Director (Principal Accounting Officer)

/s/ WILLIAM J. McCABE			October 31, 2006

William M. McCabe Senior Vice President, Management Information Systems, Secretary, Treasurer and Director

/s/ KIM D. STÄKE			October 31, 2006

Kim D. Stäke Chief Administrative Officer, Vice President and Director

/s/ DAVID B. RAYBOULD			October 31, 2006

David B. Raybould, Director

Bowlin Travel Centers (BWTL) Inactive 10-K/A2006 FY Annual report (amended)