<PAGE>

================================================================================
                                  United States

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   ___________

                                    Form 10-Q

                                   ___________

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

                For the quarterly period ended October 31, 2000
                                               ----------------

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

              For the transition period from ________ to ________.

                           Commission File No. 0-14023


                                VIDEO CITY, INC.


             (Exact name of registrant as specified in its charter)

          Delaware                                      95-3897052
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 incorporation or organization)

           4800 Easton Drive, Suite 108, Bakersfield, California 93309
               (Address of principal executive offices) (Zip Code)

                                   ___________

       Registrant's telephone number, including area code: (661) 634-9171

________________________________________________________________________________

                                     Page 1

<PAGE>


     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 X No ---

     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes --- No ---

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

     The number of shares of Common Stock outstanding as of December 12, 2001
was 16,442,662.

________________________________________________________________________________

                                     Page 2

<PAGE>

PART I.  FINANCIAL INFORMATION


Item 1.  Financial Statements

                                VIDEO CITY, INC.
                              DEBTOR-IN-POSSESSION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                  October 31,     January 31,
                                                                                      2000           2000
                                                                                  -----------     -----------
                                                                                  (Unaudited)
     <S>                                                                          <C>             <C>
     ASSETS
     Current assets:
       Cash ....................................................................  $   626,945     $    24,316
       Customer receivables ....................................................      512,314       1,003,578
       Notes receivable ........................................................           --           9,078
       Merchandise inventory ...................................................    2,919,040       3,767,919
       Other ...................................................................      541,517          75,000
                                                                                  -----------     -----------
          Total current assets .................................................    4,599,816       4,879,891

     Rental library, net .......................................................    4,389,146       6,223,364
     Property and equipment, net ...............................................    2,564,286       4,266,665
     Goodwill ..................................................................    3,230,153       4,920,303
     Other assets ..............................................................      886,299       1,003,564
                                                                                  -----------     -----------
          Total assets .........................................................  $15,669,700     $21,293,787
                                                                                  ===========     ===========
</TABLE>

           See accompanying notes to consolidated financial statements


________________________________________________________________________________

                                     Page 3

<PAGE>

                                VIDEO CITY, INC.
                              DEBTOR-IN-POSSESSION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                              October 31,           January 31,
                                                                                                2000                   2000
                                                                                           --------------         -------------
                                                                                             Unaudited
     <S>                                                                                   <C>                   <C>
     LIABILITIES NOT SUBJECT TO COMPROMISE
     Current liabilities:
       Accounts payable ...............................................................       $    139,352        $ 23,033,955
       Accrued Expenses ...............................................................          1,022,366           3,069,765
       Senior secured revolving credit facility .......................................                 --           9,769,574
       Current portion of long-term debt ..............................................                 --           5,565,078
                                                                                              ------------        ------------
          Total current liabilities ...................................................          1,161,718          41,438,372
     Long-term debt, less current portion .............................................                 --           1,231,907
       Other liabilities ..............................................................             99,456              99,456
                                                                                              ------------        ------------
     Total liabilities Not Subject to Compromise ......................................          1,261,174          42,769,735
                                                                                              ------------        ------------

     LIABILITIES SUBJECT TO COMPROMISE

     Accounts payable .................................................................         26,937,085                  --
     Senior secured revolving credit facility .........................................         10,521,387                  --
     Notes payable ....................................................................          6,790,454                  --
     Accrued interest .................................................................          1,004,342                  --
     Other liabilities ................................................................          2,191,501                  --
                                                                                              ------------        ------------
          Total Liabilities Subject to Compromise .....................................         47,444,769                  --
                                                                                              ------------        ------------
     Total Liabilities ................................................................         48,705,943          42,769,735
     Stockholders' deficit:
       Preferred stock ................................................................          6,292,135           6,217,135
       Common stock, $.01 par value per share, 30,000,000 shares authorized;
        16,442,662 shares issued and outstanding at October 31, 2000 and
        15,767,959 shares issued and outstanding at January 31, 2000 ..................            164,427             157,679
       Additional paid-in capital .....................................................         13,576,968          13,268,548
       Accumulated deficit ............................................................        (53,069,773)        (41,119,310)
                                                                                              ------------        ------------
          Total stockholders' deficit .................................................        (33,036,243)        (21,475,948)
                                                                                              ------------        ------------
     Total liabilities and stockholders' deficit ......................................       $ 15,669,700        $ 21,293,787
                                                                                              ============        ============
</TABLE>

           See accompanying notes to consolidated financial statements
_______________________________________________________________________________
                                     Page 4

<PAGE>
                                VIDEO CITY, INC.
                            DEBTOR - IN - POSSESSION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                          Three Months Ended               Nine Months Ended
                                                                      October 31,     October 31,      October 31,     October 31,
                                                                         2000            1999            2000             1999
                                                                     -------------   -------------   --------------   -------------
<S>                                                                  <C>             <C>             <C>              <C>
     REVENUES:

       Rental revenues and product sales ........................... $  5,808,282     $  8,723,038     $ 21,672,312    $ 36,241,069
       Management fee income .......................................      998,826               --        3,522,656              --
                                                                     ------------     ------------     ------------    ------------
     TOTAL REVENUES ................................................    6,807,108        8,723,038       25,194,968      36,241,069
                                                                     ------------     ------------     ------------    ------------

     OPERATING COSTS AND EXPENSES:

       Store operating expenses ....................................    3,855,825        5,849,472       13,012,773      22,905,007
       Amortization of rental library ..............................    1,872,009          928,953        6,903,956       4,434,986
       Cost of product sales .......................................      816,509        2,140,979        3,512,018       6,496,760
       Cost of leased product ......................................      343,540        1,562,097        1,192,068       3,713,689
       Restructuring ...............................................           --               --        1,564,000              --
       General and administrative expenses .........................    2,547,787        2,722,220        7,059,423       8,174,237
       Store Closure Expenses ......................................           --        1,345,400               --       1,345,400
                                                                     ------------     ------------     ------------    ------------
     TOTAL OPERATING COSTS AND EXPENSES ............................    9,435,670       14,549,121       33,244,238      47,070,079

     Loss from operations before reorganization items...............   (2,628,562)      (5,826,083)      (8,049,270)    (10,829,010)
     Other (Income) expense
       (Gain) Loss on sale of assets ...............................           --          383,384               --      (1,529,794)
       Interest expense, net (contractual interest $552,000
       and $1,758,000) .............................................      141,137          462,100        1,347,254       1,744,862
       Other .......................................................      (15,586)         (21,696)         (26,157)        (76,432)
                                                                     ------------     ------------     ------------    ------------
     Loss before reorganization items and income taxes .............   (2,754,113)      (6,649,871)      (9,370,367)    (10,967,646)
     Reorganization items
       Professional fees ...........................................      104,000               --          104,000              --
       (Gain) Loss on sale of assets ...............................    1,954,581               --        2,153,954              --
                                                                     ------------     ------------     ------------    ------------
     Loss Before Income Taxes ......................................   (4,812,694)      (6,649,871)     (11,628,321)    (10,967,646)
     Income tax benefit ............................................           --               --               --        (546,603)
                                                                     ------------     ------------     ------------    ------------
     Net Loss ......................................................   (4,812,694)      (6,649,871)     (11,628,321)    (10,421,043)
                                                                     ============     ============     ============    ============
     Dividends on preferred stock ..................................           --         (152,000)        (322,142)       (266,037)
                                                                     ------------     ------------     ------------    ------------
     Net loss applicable to common shareholders .................... $ (4,812,694)    $ (6,801,871)    $(11,950,463)   $(10,687,080)
                                                                     ============     ============     ============    ============
     Loss per common share data:
        Basic and Diluted Loss Per Share ........................... $      (0.29)    $      (0.46)    $      (0.73)   $      (0.76)
     Weighted average number of common shares outstanding
        Basic and Diluted ..........................................   16,442,662       14,823,823       16,268,843      14,152,717
</TABLE>


           See accompanying notes to consolidated financial statements

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

                                     Page 5

<PAGE>

                                VIDEO CITY, INC.

                            DEBTOR - IN - POSSESSION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                               Nine Months Ended
                                                                           October 31,    October 31,
                                                                             2000            1999
<S>                                                                      <C>             <C>
Increase (Decrease) in cash
Cash flows from operating activities:
Net Loss .............................................................   $(11,628,321)   $(10,421,043)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:

  Depreciation and amortization ......................................      8,508,961       5,974,897

  Increase in net deferred tax asset .................................             --        (546,603)

  Issuance of stock for services and inventory .......................        187,500       2,908,582

  (Gain) Loss on sale of asset .......................................      2,153,954      (1,529,802)

Changes in assets and liabilities, net of effects of acquisitions:

  Decrease (increase) in customer receivables ........................        491,264        (969,814)

  Decrease in notes receivable .......................................          9,078          (9,506)

  Decrease (increase) in merchandise inventories .....................        848,879      (2,480,269)

  Increase in other assets ...........................................       (426,417)     (1,060,015)

  Increase in accounts payable .......................................      3,923,008       8,629,521

  Increase (decrease) in accrued expenses ............................      1,148,444      (2,724,563)

  Decrease in other liabilities ......................................             --        (263,934)
                                                                         ------------    ------------
Net cash provided by (used in) operating activities ..................      5,216,350      (2,492,549)
                                                                         ------------    ------------
Cash flows from investing activities:

  Purchases of videocassette rental library ..........................     (5,705,372)     (6,217,385)

  Purchases of fixed assets ..........................................       (162,391)     (2,413,732)

  Repayment on note receivable .......................................             --       1,228,000

  Store acquisitions .................................................             --        (167,036)

  Proceeds from sale of assets .......................................             --      13,863,000

  Proceeds from sale of assets after Chapter 11 filing ...............        508,760              --
                                                                         ------------    ------------
Net cash provided by (used) in investing activities ..................     (5,359,003)      6,292,847
                                                                         ------------    ------------
  Cash flows from financing activities:

  Repayment of long-term debt ........................................         (6,531)       (356,599)

  Proceeds from issuance of long-term debt ...........................             --       2,015,979

  Proceeds from issuance of preferred stock ..........................             --         625,000

  Proceeds from borrowings (repayments) under credit facility ........        751,813      (6,085,390)

  Cash payments made in conversion of preferred stock ................             --        (188,325)

  Proceeds from exercising options and warrants ......................             --          45,712
                                                                         ------------    ------------
Net cash provided by (used in) financing activities ..................        745,282      (3,943,623)
                                                                         ------------    ------------
Net increase (decrease) in cash ......................................        602,629        (143,325)

Cash at beginning of  period .........................................         24,316         172,043
                                                                         ------------    ------------
Cash at end of period ................................................   $    626,945    $     28,718
                                                                         ============    ============
</TABLE>

           See accompanying notes to consolidated financial statements


________________________________________________________________________________
                                     Page 6

<PAGE>
                                VIDEO CITY, INC.
                            DEBTOR - IN - POSSESSION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                              Nine Months Ended
                                                                                         October 31,      October 31,
                                                                                            2000             1999
                                                                                          ---------       -----------
          Supplementary disclosures of cash flow information
          Cash Paid For:
          <S>                                                                            <C>              <C>
            Interest ..................................................................   $ 651,225       $ 1,174,777
            Income taxes ..............................................................          --            17,924
            Reorganization items ......................................................     104,000                --

          Non-cash investing and financing activities:
            Common Stock issued for professional services .............................     112,500         2,908,582
            Preferred stock issued in satisfaction of liabilities .....................      75,000         1,187,334
            Note receivable from sale of assets .......................................          --           830,000
            Preferred stock dividends .................................................     322,142           266,037

          For acquisitions consummated during the Nine months ended October 31,
          1999, the Company paid $167,036, net of cash acquired. In conjunction
          with the 1999 acquisitions, liabilities were assumed as follows:

          Fair value of assets acquired ...............................................                   $ 1,614,929
          Cash paid ...................................................................                      (167,036)
          Common stock issued .........................................................                      (641,394)
          Preferred stock issued ......................................................                    (1,251,174)
          Goodwill ....................................................................                     4,172,469

                                                                                                          -----------
            Liabilities assumed .......................................................                   $ 3,727,794
                                                                                                          ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

________________________________________________________________________________
                                      Page 7

<PAGE>

                                VIDEO CITY, INC.
                            DEBTOR - IN - POSSESSION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  Financial Statement Presentation

The accompanying consolidated financial statements include the accounts of Video
City, Inc. ("the Company") and all of its wholly owned subsidiaries. These
subsidiaries include Old Republic Entertainment, Inc., Sulpizio One, Inc., Video
Tyme, Inc., Videoland, Inc., and Video Galaxy, Inc. All material intercompany
transactions have been eliminated. The financial statements include the
operations of companies acquired from the dates of acquisition.

The consolidated balance sheet as of October 31, 2000, the consolidated
statement of operations for the three and nine months ended October 31, 2000 and
1999, and the consolidated statement of cash flows for the nine months ended
October 31, 2000 are unaudited and have been prepared in accordance with the
American Institute of Certified Public Accountants Statement of Position 90-7,
Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. The
financial statements have been prepared using accounting principles applicable
to a going concern, which assumes realization of assets and settlement of
liabilities in the normal course of business. The appropriateness of using the
going concern basis is dependent upon, among other things, the ability to comply
with debtor-in-possession financing agreements, confirmation of a plan of
reorganization, the ability to achieve profitable operations, and the ability to
generate sufficient cash flow from operations to meet its obligations.

The accompanying interim consolidated financial statements reflect all
adjustments that are, in the opinion of management, necessary to present fairly
the financial position as of October 31, 2000, the results of operations for the
three and nine months ended October 31, 2000 and 1999, and cash flows for the
nine months ended October 31, 2000 and 1999. All such adjustments are of a
normal and recurring nature. The results of operations for the interim periods
presented are not necessarily indicative of the results to be expected for the
full year. Certain reclassifications have been made to the prior year financial
statements to conform with the current year presentation. It is recommended that
these financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K for the fiscal year ended January 31, 1999.

________________________________________________________________________________
                                      Page 8

<PAGE>

The accompanying unaudited consolidated balance sheet as of October 31, 2000
segregates liabilities subject to compromise, such as unsecured claims, from
liabilities not subject to compromise, such as fully secured liabilities and
liabilities arising subsequent to filing bankruptcy. A plan of reorganization
could materially change the amounts currently recorded in the consolidated
financial statements. The consolidated statements that might result from the
outcome of this uncertainty may be materially different that those presented
herein.

Reorganization items represent expenses incurred by the Company as a result of
the bankruptcy filing and proceedings, which are required to be expensed as
incurred.

2.  Restructuring Costs

The Company incurred $1.6 million in restructuring costs during the period
ending October 31, 2000, consisting of severance obligations to employees, lease
liability for the former executive offices in Torrance, California, and non-cash
write down of the related leasehold improvements. These costs are related to the
Company's effort to improve the performance of its operations and streamline its
corporate expenses after entering into the Management Agreement and in
anticipation of the proposed merger between the Company and West Coast
Entertainment Corporation.

3.  Bankruptcy

On August 17, 2000, Fleet Retail Finance purported to accelerate the outstanding
indebtedness under the Company's secured credit facility with Fleet Retail
Finance. Fleet Retail Finance also initiated an action in the Massachusetts
State Court to recover the sums allegedly due under the credit facility and
obtained a temporary order requiring that the Company deposit its cash receipts
into designated Fleet Retail Finance accounts. Additionally, the Company filed a
complaint against Fleet Retail Finance and certain other defendants seeking
damages in excess of $25.0 million. The Complaint alleges fraud, breach of
contract, breach of the covenant of good faith and fair dealing, intentional
interference with contractual relations, intentional interference with
advantageous relations, violation of

________________________________________________________________________________
                                      Page 9

<PAGE>
 .

the Racketeer Influenced and Corrupt Organizations Act and violation of
applicable provisions of Massachusetts state law.

The Company also filed a motion to vacate the temporary order obtained by Fleet
Retail Finance and to restrain Fleet Retail Finance from sweeping the cash from
the Company's depository accounts, which are used to fund operations and
payroll. On August 22, 2000 the Massachusetts court directed Fleet Retail
Finance to release enough funds to cover payroll.

On August 24, 2000, as a result of Fleet Retail Finance action to accelerate
payment of the outstanding indebtedness under the Company's secured credit
facility, the Company and its subsidiaries filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code. The
company retained possession of its properties and assets and continued to
operate with its existing directors and officers as a Debtor-in-Possession
("DIP"). As Debtors-in-Possession, the Company is authorized to operate its
business, but may not engage in transactions outside of the normal course of
business without approval, after notice and hearing, of the Bankruptcy Court.

Pursuant to the provisions of the Bankruptcy Code, as of the petition date
actions to collect pre-petition indebtedness owed by the Company are stayed and
other pre-petition contractual obligations may not be enforced against the
Company. In addition, as debtors-in-possession, the Company has the right,
subject to the Bankruptcy Court's approval and certain other conditions, to
assume or reject any pre-petition executory contracts and unexpired leases.
Parties affected by these rejections may file claims with the Bankruptcy Court
in accordance with the reorganization process. Accordingly, these obligations
have been included as liabilities subject to compromise.

The Bankruptcy Court approved payment of certain pre-petition liabilities such
as employee expenses and benefits. The Bankruptcy Court also allowed for the
retention of legal and financial professionals. The items are recorded as
accounts payable and accrued expenses not subject to compromise.

4.  Divestiture of Stores

________________________________________________________________________________
                                     Page 10

<PAGE>

On September 27, 2000 the Company obtained approval from the United States
Bankruptcy Court to reject the leases on 17 under performing store locations and
liquidate the assets. The assets were sold to Video One Liquidators at the
aggregate net liquidation price of $508,760. The company recognized loss on sale
of approximately $2.2 million during the third quarter ended October 31, 2000,
which is included in the reorganization items.

5.  Earnings Per Share

Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted from issuance of common stock that then share in
earnings.

Common stock options, warrants, and preferred stock were not included in the
computations of diluted earnings per share because the effect of exercise and/or
conversion would have an antidilutive effect on earnings per share.

6.  Use of Estimates

In addition to the uncertainties related to the Chapter 11 proceedings, the
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

7.  Subsequent Events

________________________________________________________________________________
                                     Page 11

<PAGE>

Effective February 13, 2001, West Coast Entertainment director's informed the
Company that they were terminating the "Management Agreement" effective
immediately, due to the sale of substantially all West Coast Entertainment's
remaining 56 Stores and various other assets to Video One Liquidators.

In February 2001, the Company relocated its corporate offices from 9998 Global
Road, 2nd Floor, Philadelphia, Pennsylvania, 19115 to 4800 Easton Drive, Suite
108, Bakersfield, California.

The Company and Fleet Retail Finance entered into an agreement ("the Fleet
Compromise"), which was approved by the Court on March 28, 2001. The salient
terms of the agreement granted Fleet Retail Finance an allowed claim in the
amount of $10,000,000. In full satisfaction of the claim, the Company agreed to
make two payments consisting of $1,500,000. The first payment of $1,000,000 was
paid on March 28, 2001, which resulted in partial satisfaction of the Allowed
Fleet Claim and the second payment of $500,000 on June 29, 2001 resulted in the
full satisfaction of the Allowed Fleet Claim. In addition, both parties jointly
dismissed the State Court Action with prejudice and Fleet Retail Finance and the
Company simultaneously executed a mutual release of any and all claims against
the directors, officers, employees and other representatives of each company.

On July 30, 2001, the Bankruptcy Court entered an Order confirming Video City's
First Amended Chapter 11 Plan of Reorganization (the "Plan"). The Plan became
effective on August 29, 2001. Pursuant to the Plan, the existing common
shareholders of Video City are to receive 700,000 shares of common stock of
Reorganized Video City (10% of the outstanding shares) for pro rata
distribution; 700,000 shares are to be issued to preferred shareholders; and
5,600,000 shares are to be issued to Video City's creditors. The Company
anticipates that approximately all liabilities subject to compromise will
receive in full satisfaction of their claims through shares of common stock of
Video City based on the Plan of Reorganization. As part of the plan certain
class 4A creditor's had the option to receive 20% of their claim in cash if
their claim was under $1,000 or if they choose to reduce their claim to that
amount. The total amount for all class 4A creditors who opted for the cash
payout was less than $22,000. In addition, certain liabilities subject to
compromise consist of tax obligations that are to be paid in cash over five
years from date of assessment

________________________________________________________________________________
                                     Page 12

<PAGE>

The Company will issue 7,000,000 shares of new common stock of reorganized Video
City upon completion of the Company's past SEC filings on forms 10Q and 10K and
completion of the audit and reviews of the Company's financial statements by
it's independent certified public accountants.


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


Special Note Regarding Forward Looking Statements


Certain statements in this Quarterly Report on Form 10-Q, may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking
statements involve known and unknown risks, uncertainties, and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements,
expressed or implied by such forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed herein and in the Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 2000.


As described in Note 1 to the unaudited consolidated financial statements, the
Company filed voluntary petitions for reorganization under Chapter 11 of the
United States Bankruptcy Code on August 24, 2000.


Results of Operations


Three months and nine months ended October 31, 2000 compared to the three months
and nine months ended October 31, 1999.


Revenues


Rental revenue and product sales for the three months and nine months ended
October 31, 2000 totaled $5.8 million and $21.7 million compared to $8.7 million
and $36.2 million for the three and nine months ended October 31,

________________________________________________________________________________
                                     Page 13

<PAGE>

1999. Revenue decreased by $2.9 million or 33% and $14.5 million or 40% for the
three months and nine months ended October 31, 2000 as compared to the
corresponding periods of the previous year. The decreased revenues were
primarily attributable to the liquidation and closing of 22 stores during this
quarter and the previous quarter. As of October 31, 2000, the Company was
operating 55 stores in 10 states compared to 77 stores in 10 states at October
31, 1999. In addition, the Company was operating in Chapter 11 Bankruptcy for
nearly the entire quarter, which reduced the working capital available for
product purchases. The Company had management fee income of $1.0 million and
$3.5 million for the three and nine months ended October 31, 2000, related to
the "Management Agreement" entered into with West Coast Entertainment
Corporation on March 3, 2000 and terminated on February 13, 2001. The Company
had no management fee income for the three and nine months ended October 31,
1999.


Store Operating Expenses


Store operating expenses for the three months and nine months ended October 31,
2000 totaled $3.9 million and $13.0 million, as compared to $5.8 million and
$22.9 million for the three months and nine months ended October 31, 1999. Store
operating expenses decreased by $1.9 million or 33% and $9.9 million or 43% for
the three months and nine months ended October 31, 2000 as compared to the
corresponding periods of the previous year. The decrease in store operating
expenses was primarily due to the liquidation and closing of 22 stores this
quarter and the previous quarter. In addition, due to operating in Chapter 11
Bankruptcy the store expenses were reduced to minimum levels to preserve cash.
Store operating expenses as a percentage of rental revenues and product sales
were 67% and 60% for the three months and nine months ended October 31, 2000
compared to 67% and 63% for the corresponding periods of 1999.


Amortization of Videocassette Rental Inventory


Amortization of videocassette rental inventory for the three months and nine
months ended October 31, 2000 totaled $1.9 million and $6.9 million, compared to
$0.9 million and $4.4 million for the three months and nine months ended October
31, 1999. Amortization increased by $1.0 million or 111% and $2.5 million or 57%
for the three months and nine months ended October 31, 2000 as compared to the
corresponding periods of the previous year. On

________________________________________________________________________________
                                     Page 14

<PAGE>

January 2000 the Company adopted an accelerated method of amortizing its rental
inventory. Based on the new amortization method, the Company amortizes base
stock (copies 1-3) on an accelerated basis over three months to $8, with the
remaining base stock cost amortized on a straight line basis over 33 months to a
salvage value of $3. The cost of non base stock (generally greater than 3 copies
per title per store) are amortized on an accelerated basis over three months to
an estimated $3 salvage value. Amortization of videocassette rental inventory as
a percentage of rental revenues and product sales were 33% and 32% for the three
months and nine months ended October 31, 2000 compared to 10% and 12% for the
corresponding period of 1999. In addition, the increase was partially due to the
Company not leasing product under studio revenue sharing agreements due to the
Chapter 11 filing. This was partially offset by the liquidation and closing of
22 stores.


Cost of Product Sales


Cost of product sales for the three months and nine months ended October 31,
2000 totaled $0.8 million and $3.5 million, compared to $2.1 million and $6.5
million for the three months and nine months ended October 31, 1999. Cost of
product sales decreased by $1.3 million or 62% and $3.0 million or 46% for the
three months and nine months ended October 31, 2000 as compared to the
corresponding periods of the previous year. The decrease in the cost of product
sales for the three months and nine months ended October 31, 2000 was primarily
due to the liquidation and closing of 22 stores this quarter and the previous
quarter. In addition, the Company lacked proper working capital during the
fiscal year to purchase adequate sell thru products. Cost of product sales as a
percentage of rental revenues and product sales, was 14% and 16% for the three
months and nine months ended October 31, 2000, compared to 24% and 18% for the
same period of 1999.


Cost of Leased Product


Cost of leased product for the three months and nine months ended October 31,
2000 totaled $0.3 million and $1.2 million, compared to $1.6 million and $3.7
million for the three months and nine months ended October 31, 1999. Cost of
leased products decreased by $1.3 million or 81% and $2.5 million or 68% for the
three months and nine months ended October 31, 2000 as compared to the
corresponding periods of the previous year. Cost of leased

________________________________________________________________________________
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product as a percentage of rental revenues and product sales, was 5% and 6% for
the three months and nine months ended October 31, 2000, compared to 18% and 10%
for the same period of 1999. The decrease was primarily due to the Company not
leasing product under studio revenue sharing agreements beginning August 24,
2000 due the Chapter 11 Bankruptcy filing. The decrease was also attributable to
a reduction in the number of stores this period as opposed to last year.


Restructuring Costs


The Company incurred $1.6 million in restructuring costs during the nine months
ending October 31, 2000, consisting of severance obligations to employees, lease
liability for the former executive offices in Torrance, California, and a
non-cash write down of the related leasehold improvements. These costs are
related to the Company's effort to improve the performance of its operations and
streamline its corporate expenses after entering into the Management Agreement
and in anticipation of the proposed merger between the Company and West Coast
Entertainment Corporation.


General and Administrative Expenses


General and administrative expenses for the three months and nine months ended
October 31, 2000 totaled $2.5 million and $7.1 million, compared to $2.7 million
and $8.2 million for the three months and nine months ended October 31, 1999.
General and administrative expenses decreased by $0.2 million or 7% and $1.1
million or 13% for the three months and nine months ended October 31, 2000 as
compared to the corresponding periods of the previous year. The decrease in
general and administrative expenses was primarily attributable to the company
reduction in employee salaries and related cost savings that resulted from the
moving of the Company's corporate headquarters from Torrance, California to
Philadelphia, Pennsylvania in March 2000. General and administrative expenses as
a percentage of total revenues were 43% and 33% for the three months and nine
months ended October 31, 2000, compared to 31% and 23% for the same period in
1999.


Store Closure Expenses

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During September and October of 1999, the Company closed 13 under-performing
stores and incurred $1.3 million of store closure expenses. The majority of
expenses associated with the closure of these stores included rent, utilities,
field management, inventory transfer and payroll expenses.


Interest Expense


Interest Expense for the three months and nine months ended October 31, 2000
totaled $0.1 million and $1.3 million, compared to $0.5 million and $1.7 million
for the three and nine months ended October 31, 1999. The decrease in interest
expense is reflective of a decreased average balance of borrowings as well as
the discontinuance of recording interest expense on unsecured and partially
secured prepetition debt subject to compromise.


Income Taxes


Statement of Financial Accounting Standards No. 109 requires a valuation
allowance to be recorded when it is more likely than not that some or all of the
deferred tax assets of a Company will not be realized. Accordingly, a full
valuation allowance has been established against the deferred tax asset at
October 31, 2000.


Liquidity and Capital Resource


Under Chapter 11, actions to enforce certain claims against the Company are
stayed if the claims arose, or are based on, events that occurred on or before
the petition date of August 24, 2000. The ultimate terms of settlement of these
claims will be determined in accordance with a plan of reorganization, which
requires the approval of the impaired prepetition creditors and shareholders and
confirmation by the Bankruptcy Court. Additional claims may arise subsequent to
the filing of the Chapter 11 petitions resulting from further rejection of
certain executory contracts and unexpired leases and from the determination by
the Court (or agreed to by the parties in interest) of allowed claims for
contingencies and other disputed amounts. The ultimate resolution of such
liabilities, all of which are subject to compromise, will be part of a plan of
reorganization.

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                                     Page 17

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Until the Bankruptcy Court confirms a plan of reorganization, only such payments
on prepetition obligations that are approved or required by the Bankruptcy Court
will be made. Except for payments for property and equipment under lease,
principal and interest payments on prepetition debt have not been made since the
filing date and will not be made without the Bankruptcy Court's approval or
until a plan or reorganization, defining the repayment terms, has been confirmed
by the Bankruptcy Court. There is no assurance at this time that a plan of
reorganization will be proposed by the Company or if a proposed plan will be
approved or confirmed by the Bankruptcy Court.

The Company funds its short-term working capital needs, including the purchase
of videocassettes and other inventory, primarily through cash from operations.
The Company expects that cash from operations will be sufficient to fund future
videocassette and other inventory purchases and other working capital needs for
its existing stores.

Inherent in a successful plan of reorganization is a capital structure which
permits the Company to generate sufficient cash flow after reorganization to
meet its restructured obligations and fund the current obligations of the
reorganized Company. Under the Bankruptcy Code, the rights of and ultimate
payment to prepetition creditors may be substantially altered and, as to some
classes, eliminated. At this time, it is not possible to predict the outcome of
the Chapter 11 filing, in general, or its effects on the business of the Company
or on the interests of creditors or shareholders.

The Company believes that the sources of capital described above and internally
generated funds will be adequate to meet the Company's anticipated needs through
fiscal 2001; however as a result of the Company's Chapter 11 proceedings and its
other events described above, no assurance can be given with respect to the
Company's liquidity.

During the Debtor-in-Possession period the Company's supply vendors require all
purchases of inventory be made only by cash in advance. There can be no
assurance, however, that future cash from operations will be sufficient to fund
future videocassette and inventory purchases.

                                     Page 18

<PAGE>

Videocassette rental inventories are accounted for as noncurrent assets under
generally accepted accounting principles because they are not assets which are
reasonably expected to be completely realized in cash or sold in the normal
business cycle. Although the rental of this inventory generates a substantial
portion of the Company's revenue, the classification of these assets as
noncurrent excludes them from the computation of working capital. The
acquisition cost of videocassette rental inventories, however, is reported as a
current liability until paid and, accordingly, included in the computation of
working capital. Consequently, the Company believes working capital is not as
significant a measure of financial condition for companies in the video retail
industry as it is for companies in other industries. Because of the accounting
treatment of videocassette rental inventory as a noncurrent asset, the Company
anticipates that it will operate with a working capital deficit during the
fiscal year ended January 31, 2001.

On July 30, 2001, the Bankruptcy Court entered an Order confirming Video City's
First Amended Chapter 11 Plan of Reorganization (the "Plan"). The Plan became
effective on August 29, 2001. Pursuant to the Plan, the existing common
shareholders of Video City are to receive 700,000 shares of common stock of
Reorganized Video City (10% of the outstanding shares) for pro rata
distribution; 700,000 shares are to be issued to preferred shareholders; and
5,600,000 shares are to be issued to Video City's creditors. The Company
anticipates that approximately all liabilities subject to compromise will
receive in full satisfaction of their claims through shares of common stock of
Video City based on the Plan of Reorganization. As part of the plan certain
class 4A creditor's had the option to receive 20% of their claim in cash if
their claim was under $1,000 or if they choose to reduce their claim to that
amount. The total amount for all class 4A creditors who opted for the cash
payout was less than $22,000. In addition, certain liabilities subject to
compromise consist of tax obligations that are to be paid in cash over five
years from date of assessment.

Cash Flows

Nine months Ended October 31, 2000 Compared to the Nine months Ended October 31,
1999

The increase in net cash provided by operating activities of $7.7 million for
the nine months ended October 31, 2000 compared to the nine months ended October
31, 1999 was primarily due to an increase in accrued expenses and accounts
payable and a decrease in merchandise inventories, partially offset by an
increase in other assets. Net cash

                                     Page 19

<PAGE>

used in investing activities increased by $11.7 million for the nine months
ended October 31, 2000 compared to the nine months ended October 31, 1999
primarily due to a decrease in the proceeds from sale of assets and a decrease
in purchases of videocassette rental inventory and fixed assets resulting from
the reduction in the number of stores. Net cash provided by financing activities
decreased $4.7 million for the nine months ended October 31, 2000 compared to
the nine months ended October 31, 1999 primarily due to increased borrowings
under the credit facility.

3. Quantitative and Qualitative Disclosure About Market Risk

The Company's market risk sensitive instruments do not subject it to material
market risk exposures, except for such risks related to interest rate
fluctuations. The Company discontinued recording interest expense on unsecured
and partially secured prepetition debt subject to compromise.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On August 17, 2000, Fleet Retail Finance purported to accelerate the outstanding
indebtedness under the Company's secured credit facility with Fleet Retail
Finance. Fleet Retail Finance also initiated an action in the Massachusetts
State Court to recover the sums allegedly due under the credit facility and
obtained a temporary order requiring that the Company deposit its cash receipts
into designated Fleet Retail Finance accounts. Additionally, the Company filed a
complaint against Fleet Retail Finance and certain other defendants seeking
damages in excess of $25,000,000. The Complaint alleges fraud, breach of
contract, breach of the covenant of good faith and fair dealing, intentional
interference with contractual relations, intentional interference with
advantageous relations, violation of the Racketeer Influenced and Corrupt
Organizations Act and violation of applicable provisions of Massachusetts state
law.

The Company also filed a motion in the Massachusetts State Court to vacate the
temporary order obtained by Fleet Retail Finance and to restrain Fleet Retail
Finance from sweeping the cash from the Company's depository accounts,

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which are used to fund operations and payroll. On August 22, 2000 the
Massachusetts court directed Fleet Retail Finance to release enough funds to
cover payroll.

On August 24, 2000, as a result of Fleet Retail Finance Retail action to
accelerate payment of the outstanding indebtedness under the Company's secured
credit facility, the Company and its subsidiaries filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code. The
company is in possession of its properties and assets and continues to operate
with its existing directors and officers as a Debtor-in-Possession. As
debtors-in-possession, the Company is authorized to operate its business, but
may not engage in transactions outside of the normal course of business without
approval, after notice and hearing, of the Bankruptcy Court.

The Company and Fleet Retail Finance entered into an agreement ("the Fleet
Compromise"), which was approved by the Court on March 28, 2001. The salient
terms of the agreement granted Fleet Retail Finance an allowed claim in the
amount of $10.0 million. In full satisfaction of the claim, the Company agreed
to make two payments consisting of $1.5 million. The first payment of $1.0
million was paid on March 28, 2001, which resulted in partial satisfaction of
the Allowed Fleet Claim and the second payment of $0.5 million on June 29, 2001
resulted in the full satisfaction of the Allowed Fleet Claim. In addition, both
parties jointly dismissed the State Court Action with prejudice and Fleet Retail
Finance and the Company simultaneously executed a mutual release of any and all
claims against the directors, officers, employees and other representatives of
each company.

Item 2. Changes in Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

The Company operated under certain forbearance agreements with their Senior
Lender, Fleet Retail Finance (formerly Bank Boston), during the quarter ended
October 31, 2000 and were not in compliance with the financial performance
covenants as set forth in the forbearance agreements.

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Pursuant to the provisions of the Bankruptcy Code, as of the petition date
actions to collect pre-petition indebtedness owed by the Company are stayed and
other pre-petition contractual obligations may not be enforced against the
Company.

Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits

     None

(b)  Reports on Form 8-K

On August 24, 2000, the Company filed a current report on form 8-K, dated August
24, 2000, to report under Item 3 that the Company filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code.

                                     Page 22

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                                   SIGNATURES

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

                                                            Video City, Inc
                                                            ---------------
                                                             (Registrant)


           December 19, 2001
                                                          /s/ Timothy L. Ford
                                                          -------------------

                                                            Timothy L. Ford

                                                        Chief Executive Officer

                                                  (Principal Executive Officer)
                                                   ---------------------------


           December 19, 2001

                                                          /s/ Rudolph R. Patino
                                                          ---------------------

                                                            Rudolph R. Patino

                                                       Chief Financial Officer

                                                  (Principal Financial Officer)
                                                   ---------------------------

                                     Page 23