<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, 2001
                                                    ----------------

[_] 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 January 20, 2002
was 16,442,662.


                                     Page 2

<PAGE>

PART I.  FINANCIAL INFORMATION


Item 1.  Financial Statements

                                VIDEO CITY, INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                 October 31,     January 31,
                                                                    2001             2001
                                                                ------------    ------------
                                                                (Unaudited)        (Audited)
          ASSETS
          Current assets:
            <S>                                                <C>               <C>
            Cash. ........................................       $   25,176      $ 1,046,164
            Customer receivables .........................          395,226          433,024
            Other Receivables ............................               --          946,655
            Merchandise inventory. .......................          570,685          965,025
            Other ........................................           52,416               --
                                                                -----------     ------------
             Total current assets ........................        1,043,503        3,390,868

          Rental library, net ............................        2,607,383        3,012,387
          Property and equipment, net ....................        1,290,350        1,525,409
          Goodwill .......................................        1,818,699        1,912,713
          Other assets ...................................          295,008          256,011
                                                                -----------     ------------
            Total assets .................................       $7,054,943      $10,097,388
                                                                ===========     ============
</TABLE>


           See accompanying notes to consolidated financial statements






                                          Page 3

<PAGE>


                                VIDEO CITY, INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                   October 31,         January 31,
                                                                                      2001               2001
                                                                                   ------------      -------------
                                                                                    (Unaudited)        (Audited)
          <S>                                                                       <C>               <C>
          LIABILITIES NOT SUBJECT TO COMPROMISE

          Current liabilities:
            Accounts payable....................................................   $  1,648,942      $     215,724
            Accrued Expenses ...................................................        811,797          1,041,134
            Current portion of tax liability ...................................        147,643                 --
            Shares issuable under plan of reorganization .......................      1,750,000                 --
                                                                                   ------------      -------------
              Total current liabilities ........................................      4,358,382          1,256,858

          Tax liability less current portion ...................................        456,400                 --

            Other liabilities ..................................................         28,694             45,526
                                                                                   ------------      -------------
          Total liabilities Not Subject to Compromise ..........................      4,843,476          1,302,384
                                                                                   ------------      -------------

          LIABILITIES SUBJECT TO COMPROMISE

          Accounts payable .....................................................      1,324,031         26,443,937
          Senior secured revolving credit facility .............................             --         10,451,429
          Notes payable ........................................................             --          6,790,454
          Accrued interest .....................................................             --          1,004,342
          Other liabilities ....................................................         11,230          1,628,690
                                                                                   ------------      -------------
               Total Liabilities Subject to Compromise                                1,335,261         46,318,852
                                                                                   ------------      -------------
          Total Liabilities                                                           6,178,737         47,621,236

          STOCKHOLDERS EQUITY (DEFICIT):

            Preferred stock ....................................................             --          6,292,135
            Common stock, $.01 par value per share, 30,000,000 shares
            authorized: 16,442,662  shares issued and outstanding at October 31,
            2001 and 16,442,662 shares issued and outstanding at
             January 31, 2001 ..................................................             --            164,427
            Additional paid-in capital .........................................     19,683,529         13,576,968
            Accumulated deficit ................................................    (18,807,323)       (57,557,378)
                                                                                   ------------      -------------
             Total stockholders' equity (deficit)...............................        876,206        (37,523,848)
                                                                                   ------------      -------------
          Total liabilities and stockholders' equity (deficit) .................   $  7,054,943      $  10,097,388
                                                                                   ============      =============
</TABLE>


                See accompanying notes to consolidated financial statements

                                     Page 4


<PAGE>

                                VIDEO CITY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                          Three Months Ended                Nine Months Ended
                                                                     October 31,      October 31,      October 31,      October 31,
                                                                        2001             2000             2001             2000
                                                                    ------------     ------------     ------------     ------------
<S>                                                                 <C>              <C>              <C>              <C>
REVENUES:

  Rental revenues and product sales ............................    $  3,862,364     $  5,808,282     $ 12,980,825     $ 21,672,312
  Management fee income ........................................              --          998,826            7,143        3,522,656
                                                                    ------------     ------------     ------------     ------------
TOTAL REVENUES .................................................       3,862,364        6,807,108       12,987,968       25,194,968
                                                                    ------------     ------------     ------------     ------------

OPERATING COSTS AND EXPENSES:
  Store operating expenses .....................................       2,491,990        3,855,825        7,773,295       13,012,773
  Amortization of rental library ...............................       1,347,583        1,872,009        4,141,317        6,903,956
  Cost of product sales ........................................         399,308          816,509        1,408,011        3,512,018
  Cost of leased product .......................................              --          343,540           41,442        1,192,068
  Restructuring ................................................              --               --               --        1,564,000
  General and administrative expenses ..........................         815,174        2,547,787        2,325,401        7,059,423
                                                                    ------------     ------------     ------------     ------------
TOTAL OPERATING COSTS AND EXPENSES .............................       5,054,055        9,435,670       15,689,466       33,244,238

Loss from operations before reorganization items ...............      (1,191,691)      (2,628,562)      (2,701,498)      (8,049,270)
Other (Income) expense
  Interest expense, net (contractual interest $552,000
and $1,758,000) ................................................              --          141,137           12,500        1,347,254
  Other ........................................................         (74,107)         (15,586)        (184,003)         (26,157)
                                                                    ------------     ------------     ------------     ------------
Loss before reorganization items ...............................      (1,117,584)      (2,754,113)      (2,529,995)      (9,370,367)
Reorganization items ...........................................
  Professional fees ............................................              --          104,000          417,577          104,000
  (Gain) Loss on sale of assets ................................              --        1,954,581          (34,600)       2,153,954
  Relocation of Corporate Office ...............................              --               --           57,925               --
                                                                    ------------     ------------     ------------     ------------
Net Loss before extraordinary items ............................      (1,117,584)      (4,812,694)      (2,970,897)     (11,628,321)

Extraordinary items:
  Troubled debt restructuring gain, net of tax of $0
(Note 6) .......................................................              --               --        8,951,429               --
  Discharge of liabilities subject to compromise (Note 3) ......      32,769,523               --       32,769,523               --
                                                                    ------------     ------------     ------------     ------------
Total extraordinary items ......................................      32,769,523               --       41,720,952               --
                                                                    ------------     ------------     ------------     ------------
Net income (loss) before dividends .............................      31,651,939       (4,812,694)      38,750,055      (11,628,321)

Dividends on preferred stock ...................................              --               --               --         (322,142)
                                                                    ------------     ------------     ------------     ------------
Net Income (loss) attributable to common shareholders ..........    $ 31,651,939     $ (4,812,694)    $ 38,750,055     $(11,950,463)
                                                                    ============     ============     ============     ============

Basic and diluted loss per common share before
extraordinary items ............................................    $      (0.07)    $      (0.29)    $      (0.18)    $      (0.73)
Basic and diluted income per common share from
extraordinary items ............................................    $       1.99     $         --     $       2.53     $         --
Basic and diluted net income (loss) per common share ...........    $       1.92     $      (0.29)    $       2.36     $      (0.73)
Weighted average number of common shares outstanding
basic and diluted ..............................................      16,442,662       16,442,662       16,442,662       16,268,843
</TABLE>

           See accompanying notes to consolidated financial statements

                                     Page 5

<PAGE>

                                VIDEO CITY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                     Nine Months Ended
                                                                                                October 31,     October 31,
                                                                                                  2001             2000
     <S>                                                                                     <C>               <C>
     Increase (Decrease) in cash
     Cash flows from operating activities:
     Net income (loss) before dividends .............................................        $ 38,750,055      $(11,628,321)
     Adjustments to reconcile net loss to net cash provided by (used
     in) operating activities:

       Depreciation and amortization ................................................           4,770,735         8,508,961
       Extraordinary item - troubled debt restructuring .............................          (8,951,429)               --
       Extraordinary item - discharge of liabilities subject to compromise ..........         (32,769,523)               --
       Issuance of stock for services and inventory .................................                  --           187,500
       (Gain) Loss on sale of asset .................................................             (34,600)        2,153,954
     Changes in assets and liabilities, net of effects of acquisitions:
       Decrease (increase) in customer receivables ..................................              37,798           491,264
       Decrease in other receivables ................................................             946,655                --
       Decrease in notes receivable .................................................                  --             9,078
       Decrease in merchandise inventories ..........................................             394,340           848,879
       Increase in other assets .....................................................            (101,913)         (426,417)
       Increase in accounts payable and liabilities subject to compromise ...........           1,334,377         3,923,008
       Increase in accrued expenses .................................................             225,647         1,148,444
       Decrease in other liabilities and liabilities subject to compromise ..........             (27,202)               --
                                                                                             ------------      ------------
     Net cash provided by operating activities ......................................           4,574,940         5,216,350
                                                                                             ------------      ------------
     Cash flows from investing activities:
       Purchases of videocassette rental library, ...................................          (3,937,478)       (5,705,372)
       Purchases of fixed assets ....................................................            (292,820)         (162,391)
       Proceeds from sale of assets .................................................             134,370                --
       Proceeds from sale of assets after Chapter 11 filing .........................                  --           508,760
                                                                                             ------------      ------------
     Net cash (used) in investing activities ........................................          (4,095,928)       (5,359,003)
                                                                                             ------------      ------------
       Cash flows from financing activities:
       Proceeds from (repayment) of long term debt ..................................                  --            (6,531)
       Proceeds from borrowings (repayments) under credit facility ..................          (1,500,000)          751,813
                                                                                             ------------      ------------
     Net cash provided by (used in) financing activities ............................          (1,500,000)          745,282
                                                                                             ------------      ------------
     Net increase (decrease) in cash ................................................          (1,020,988)          602,629
     Cash at beginning of  period ...................................................           1,046,164            24,316
                                                                                             ------------      ------------
     Cash at end of period ..........................................................        $     25,176      $    626,945
                                                                                             ============      ============
</TABLE>

           See accompanying notes to consolidated financial statements

                                     Page 6

<PAGE>

                                VIDEO CITY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                Nine Months Ended
                                                                                        October 31,        October 31,
                                                                                           2001               2000
                                                                                        -----------        -----------
          <S>                                                                           <C>                <C>
          Supplementary disclosures of cash flow information
          Cash Paid For:
            Interest ............................................................       $    12,500        $   651,225
            Reorganization items ................................................           228,061            104,000

          Non-cash investing and financing activities:
            Troubled debt restructuring .........................................         8,951,429                 --
            Discharge of liabilities subject to compromise ......................        34,169,523                 --
            Cancellation of preferred stock .....................................         6,292,135                 --
            Cancellation of common stock ........................................        13,741,395                 --
            Liability for shares issuable under plan of reorganization ..........         1,750,000
            Common Stock issued for professional services .......................                --            112,500
            Preferred stock issued in satisfaction of liabilities ...............                --             75,000
            Preferred stock dividends ...........................................                --            322,142
</TABLE>

          See accompanying notes to consolidated financial statements.

                                     Page 7

<PAGE>

                                VIDEO CITY, INC.
                   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, 2001, the consolidated
statement of operations for the three and nine months ended October 31, 2001 and
2000, and the consolidated statement of cash flows for the nine months ended
October 31, 2001 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, 2001, the results of operations for the
three and nine months ended October 31, 2001 and 2000, and cash flows for the
nine months ended October 31, 2001 and 2000. 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, 2001.

                                     Page 8

<PAGE>

The accompanying consolidated balance sheets as of January 31, 2001 and October
31, 2001 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.

The reorganization value of the assets immediately before the date of
confirmation was more than the total of all postpetition liabilities and allowed
claims. Consequently, fresh-start reporting does not apply and the emergence
from Chapter 11 has been accounted for as a quasi-reorganization.

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 of
approximately $950,000, lease liability for the former executive offices in
Torrance, California of approximately $100,000, moving expenses of the corporate
office of approximately $80,000 and non-cash write down of the related leasehold
improvements of approximately $430,000. 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.
The merger agreement was subsequently terminated and the merger did not occur.

3.  Bankruptcy

                                     Page 9

<PAGE>

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 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.

                                    Page 10

<PAGE>

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.

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 in cancellation of all shares of common stock outstanding
prior to such distribution, for pro rata distribution; 700,000 shares of common
stock are to be issued in cancellation of all shares of preferred stock
outstanding prior to such distribution to preferred shareholders; and 5,600,000
shares of common stock are to be issued to Video City's creditors. The Company
anticipates that all liabilities subject to compromise will receive shares of
common stock of Video City in full satisfaction of their claims based on the
Plan of Reorganization. As part of the plan certain class 4A creditors 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 tax obligations of approximately $1.3 million that are to be
paid in cash over five years from the date of assessment, of which approximately
$600,000 have been reclassified out of liabilities subject to compromise. The
remaining balance is still in dispute.

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 its
independent certified public accountants.

On August 29, 2001, the effective date of the Plan, liabilities subject to
compromise totaling $34,169,523 were discharged. All of the preferred and common
stock of the Company was deemed canceled. The Company recorded an extraordinary
gain of $32,769,523, net of $1,400,00 fair value of 5,600,000 share of common
stock to be issued

                                    Page 11

<PAGE>

to creditors, to discharge liabilities subject to compromise. At October 31,
2001 the balance sheet reflects a liability in the amount of $1,750,000 for
7,000,000 shares of common stock issuable under the Plan of Reorganization. The
estimated fair value of the common stock was $0.25 determined by the board of
directors based on pre-petition trading prices converted at the ratio of common
stock issued to the existing common shareholders in the plan of reorganization.

4.  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 they have been cancelled as a
result of the bankruptcy filing on August 24, 2000 and the subsequent Plan of
Reorganization.

5.  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.

6.  Significant Developments

In July 2000, the Company sold 2 stores and recorded a loss of approximately
$199,000. On September 27, 2000, the Company obtained approval from the United
States Bankruptcy Court to reject the leases on 17 under-

                                    Page 12

<PAGE>

performing store locations and liquidate the assets. The assets were sold to
Video One Liquidators at the aggregate net liquidation price of $508,760. As a
result, the Company recognized a loss on sale of approximately $2.2 million
during the third quarter ended October 31, 2000. During the fourth quarter of
fiscal 2001, the Company sold an additional 11 stores and recorded a loss of
approximately $1.3 million, which included approximately $1.25 million of
unamortized goodwill.

Effective February 13, 2001 West Coast Entertainment directors informed the
Company that they were terminating the "Management Agreement" effective
immediately, due to the sale of substantially all of 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, 93309.

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 and the second payment of $500,000 was made on June 29,
2001 resulting in the full satisfaction of the Allowed Fleet Claim. As a result,
the Company has recorded an extraordinary gain from troubled debt restructuring
during the nine months ended October 31, 2001. 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.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

Special Note Regarding Forward Looking Statements

                                    Page 13

<PAGE>

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, 2001.

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, 2001 compared to the three months
and nine months ended October 31, 2000:

Revenues

Rental revenue and product sales for the three months and nine months ended
October 31, 2001 totaled $3.9 million and $13.0 million compared to $5.8 million
and $21.7 million for the three and nine months ended October 31, 2000. Revenue
decreased by $1.9 million or 33% and $8.7 million or 40% for the three months
and nine months ended October 31, 2001 as compared to the corresponding periods
of the previous year. The decreased revenues were primarily attributable to the
reduced number of stores operating during the three and nine month periods
ending October 31, 2001 as compared to the prior year periods. The Company
divested 17 stores during the period August 1, 2000 to September 30, 2000 as
part of the Company's bankruptcy reorganization plan. The Company had no
management fee income for the three months and $7,143 for the nine months ended
October 31, 2001 compared to $1.0 million and $3.5 million of income in the
corresponding periods of the previous year. The Company entered

                                    Page 14

<PAGE>

into a "Management Agreement" with West Coast Entertainment Corporation on March
3, 2000 and West Coast Entertainment terminated the agreement on February 13,
2001.

Store Operating Expenses

Store operating expenses for the three months and nine months ended October 31,
2001 totaled $2.5 million and $7.8 million, as compared to $3.9 million and
$13.0 million for the three months and nine months ended October 31, 2000. Store
operating expenses decreased by $1.4 million or 36% and $5.2 million or 40% for
the three months and nine months ended October 31, 2001 as compared to the
corresponding periods of the previous year. The decrease in store expenses was
primarily attributable to the reduced number of stores operating during the
three and nine month periods ending October 31, 2001 as compared to the prior
year periods. The Company divested 17 stores during the period August 1, 2000 to
September 30, 2000 as part of the Company's bankruptcy reorganization plan.
Store operating expenses as a percentage of rental revenues and product sales
were 65% and 60% for the three months and nine months ended October 31, 2001
compared to 67% and 60% for the corresponding periods of 2000.

Amortization of Videocassette Rental Inventory

Amortization of videocassette rental inventory for the three months and nine
months ended October 31, 2001 totaled $1.4 million and $4.1 million, compared to
$1.9 million and $6.9 million for the three months and nine months ended October
31, 2000. Amortization decreased by $0.5 million or 26% and $2.7 million or 39%
for the three months and nine months ended October 31, 2001 as compared to the
corresponding periods of the previous year. The decrease in amortization expense
was primarily attributable to the reduced number of stores operating during the
three and nine month periods ending October 31, 2001 which resulted in lower
levels of rental inventory as compared to the prior year periods. The Company
divested 17 stores during the period August 1, 2000 to September 30, 2000 as
part of the Company's bankruptcy reorganization plan. Amortization of
videocassette rental inventory as a percentage of rental revenues and product
sales were 35% and 32% for the three months and nine months ended October 31,
2001 compared to 33% and 32% for the corresponding period of 2000.

                                    Page 15

<PAGE>

Cost of Product Sales

Cost of product sales for the three months and nine months ended October 31,
2001 totaled $0.4 million and $1.4 million, compared to $0.8 million and $3.5
million for the three months and nine months ended October 31, 2000. Cost of
product sales decreased by $0.4 million or 50% and $2.1 million or 60% for the
three months and nine months ended October 31, 2001 as compared to the
corresponding periods of the previous year. The decrease in cost of product
sales was primarily attributable to the reduced number of stores operating
during the three and nine month periods ending October 31, 2001 as compared to
the prior year periods. The Company divested 17 stores during the period August
1, 2000 to September 30, 2000 as part of the Company's bankruptcy reorganization
plan. In addition, the Company lacked sufficient 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 10% and 11% for the three
months and nine months ended October 31, 2001, compared to 14% and 16% for the
corresponding period of the previous year.

Cost of Leased Product

Cost of leased product for the three months and nine months ended October 31,
2001 totaled $0 and $41,442, compared to $0.3 million and $1.2 million for the
three months and nine months ended October 31, 2000. Cost of leased product
decreased by $0.3 million and $1.2 million for the three months and nine months
ended October 31, 2001 as compared to the corresponding periods of the previous
year. Cost of leased product as a percentage of rental revenues and product
sales, was 0% and 0% for the three months and nine months ended October 31,
2001, compared to 6% and 6% for the same period of 2000. 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.

Restructuring Costs

The Company incurred $1.6 million in restructuring costs during the fiscal year
ending 2001, consisting of severance obligations to employees of approximately
$950,000, lease liability for the former executive offices in Torrance,
California of approximately $100,000, moving expenses of the corporate office of
approximately $80,000

                                    Page 16

<PAGE>

and non-cash write down of the related leasehold improvements of approximately
$430,000. These costs were 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. During
fiscal 2001 the Company paid $703,472 in cash for restructuring expenses.

General and Administrative Expenses

General and administrative expenses for the three months and nine months ended
October 31, 2001 totaled $0.8 million and $2.3 million, compared to $2.5 million
and $7.1 million for the three months and nine months ended October 31, 2000.
General and administrative expenses decreased by $1.7 million or 68% and $4.8
million or 68% for the three months and nine months ended October 31, 2001 as
compared to the corresponding periods of the previous year. The decrease in
general and administrative expenses was primarily attributable to the reduction
in executive and staff employee salaries, professional fees, travel and
entertainment, utilities and related cost savings that resulted from the moving
of the Company's corporate headquarters from Philadelphia, Pennsylvania to
Bakersfield, California in February 2001 and the monitoring of costs during the
bankruptcy period. In addition, the Company incurred additional costs for
professional services and travel expenses in connection with the "Management
Agreement" during the three and nine months ended October 31, 2000, that were
not incurred in the current periods. General and administrative expenses as a
percentage of total revenues were 21% and 18% for the three months and nine
months ended October 31, 2001, compared to 43% and 33% for the same period in
2000.

Interest Expense

Interest Expense for the three months and nine months ended October 31, 2001
totaled $0 and $12,500, compared to $141,137 and $1.3 million for the three and
nine months ended October 31, 2000. The decrease in interest expense is
reflective of the discontinuance of recording interest expense on unsecured and
partially secured prepetition debt subject to compromise. The $12,500 interest
expense during the three and nine months ended

                                    Page 17

<PAGE>

October 31, 2001 was interest charged on the balance of the $500,000 payable to
Fleet Retail Finance on June 29, 2001, per the agreement ("the Fleet
Compromise"), which was approved by the Bankruptcy Court on March 28, 2001.

Other (Income) Expense

The Company had other income of $74,107 and $184,003 for the period ending
October 31, 2001 compared to $15,586 and $26,157 in other income in the prior
period ending October 31, 2000.

Reorganization Items

Reorganization items expense was $0 and $382,977 for the three months and nine
months ended October 31, 2001. It consisted of professional fees, corporate
relocation expenses and a gain on the sale of assets directly related the
Company's Chapter 11 reorganization plan. The Company had $2,058,581
reorganization items expense in the prior year consisting of professional fees
and loss on sale of assets.

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, 2001.

Extraordinary Items

During the three months ended October 31, 2001 the Company reported an
extraordinary gain from the discharge of $32,769,523 of allowed claims that will
be issued common stock pursuant to the Company's approved Plan of
Reorganization. During the nine months ended October 31, 2001 the Company
reported an extraordinary gain on troubled debt restructuring of $8,951,429,
which represents a settlement of the loan agreement with Fleet Retail Finance as
part of the Fleet Compromise.

                                    Page 18

<PAGE>

Liquidity and Capital Resource

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.

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, 2002.

On December 29, 1998, the Company entered into a Senior Secured Revolving Credit
Facility agreement (the "Credit Facility") with BankBoston/Fleet Retail Finance
to be used for working capital purposes and capital expenditures. The Credit
Facility was scheduled to mature on December 29, 2001. On September 23, 1999,
the Company entered into a forbearance agreement with BankBoston/Fleet Retail
Finance that amended the terms of the Loan Agreement, revised the financial
performance covenants of the Loan Agreement and contained weekly covenant
requirements. In November 1999, the Company did not meet the financial
performance covenants as set forth in the forbearance agreement. During the
fiscal year ended January 31, 2000, the Company did not meet certain of the
financial covenants as required by the credit facility. On March 9, 2000, the
Company entered into a second forbearance agreement that limited the Credit
Facility to $10,750,000 and revised the financial covenant requirements.

                                    Page 19

<PAGE>

On August 24, 2000, as a result of the Fleet Retail Finance action to accelerate
payment of the outstanding indebtedness under the Company's secured credit
facility, the Company filed a voluntary petition in the United States Bankruptcy
Court seeking to reorganize under Chapter 11 of the U.S. Bankruptcy Code.

The Company and Fleet Retail Finance entered into a compromise agreement which
was approved by the Bankruptcy Court on March 28, 2001 under which the
outstanding debt to Fleet Retail Finance was settled in full satisfaction by the
payment of $1,500,000.

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. 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 2002; however, no assurance can be given with
respect to the Company's liquidity.

During the Debtor-in-Possession period the Company's supply vendors required 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, DVD and inventory purchases.

In June 2001, the Company entered into a purchase money security agreement
directly with Warner Brothers Home Video. The agreement provides the company
with a line of trade credit and 60 day terms for repayment. The company
purchases all Warner Brothers product directly from Warner Brothers Home Video,
which is then distributed to all Video City's home entertainment retail chain
through a third party distributor.

In July 2001 the Company entered into an agreement with Video Products
Distributors ("VPD") under which VPD agreed to become the exclusive video
distributor for all of Video City's home entertainment retail chain. VPD will
provide all videocassettes, DVDs and accessories for rental and sale with the
exception of Warner Brothers Home Video product in all locations. As part of
this agreement, Video City is receiving a line of trade credit and 90 day terms
for repayment to VPD.

                                    Page 20

<PAGE>

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 in cancellation of all shares of common stock outstanding
prior to such distribution, for pro rata distribution; 700,000 shares of common
stock are to be issued in cancellation of all shares of preferred stock
outstanding prior to such distribution to preferred shareholders; and 5,600,000
shares of common stock are to be issued to Video City's creditors. The Company
anticipates that all liabilities subject to compromise will receive shares of
common stock of Video City in full satisfaction of their claims based on the
Plan of Reorganization. As part of the plan certain class 4A creditors 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 tax obligations of approximately 1.3 million are to be paid in
cash over five years from date of assessment, of which approximately $600,000
have been reclassified out of liability subject to compromise. The remaining
balance is still in dispute.

Cash Flows

Nine months Ended October 31, 2001 Compared to the Nine months Ended October 31,
2000

Cash Provided by Operating Activities

Net cash provided by operating activities for the nine months ended October 31,
2001, decreased by approximately $641,000, or 12%, compared to the nine months
ended October 31, 2000. This change was caused by an increase in net income of
approximately $50 million over the comparable prior year period, offset by the
non-cash gain of approximately $41.7 million recorded upon completion of the
troubled debt restructuring and discharge of liabilities as a result of the
confirmation of the Plan of Reorganization. The change was also attributable to
a decrease in depreciation and amortization as a result of the divestiture of
stores during the bankruptcy period. All of these stores were closed for the
nine months ended October 31, 2001 and this has also caused a decrease in
merchandise

                                    Page 21

<PAGE>

inventories. The change was also due to a smaller increase in accounts payable
and accrued expenses as a result of the bankruptcy filing.

Cash Used in Investing Activities

Net cash used in investing activities during the nine months ended October 31,
2001 decreased by approximately $1.3 million or 24%, compared to the nine months
ended October 31, 2000. The change was mainly attributable to the decrease in
the purchase of videocassettes for the rental library as a result of the
bankruptcy and the conserving of cash during this period, offset by the proceeds
received from the sale of assets.

Cash Provided by (Used in) Financing Activities

Net cash used in financing activities during the nine months ended October 31,
2001, increased by approximately $2.2 million or 301%, compared to the nine
months ended October 31, 2000. The change was mainly attributable to the
repayment of $1.5 million, approved by the Bankruptcy Court, for the revolving
credit facility with Fleet (formerly BankBoston). As a result of these payments,
the debt to Fleet was forgiven and the Company recorded a non-cash item of
$8,951,429.

Item 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

                                    Page 22

<PAGE>

On July 30, 2001, the Bankruptcy Court entered an Order confirming Video City's
First Amended Chapter 11 Plan of Reorganization (the "Plan"). On August 29,
2001, the Reorganization Plan became effective and the Company emerged from
bankruptcy reorganization proceedings.

Item 2. Changes in Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities.

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

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

(a)      Exhibits

         None

(b)      Reports on Form 8-K

         None


                                   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)

                                    Page 23

<PAGE>


       February 15, 2002                              /S/ Timothy L. Ford
                                                      -------------------

                                                        Timothy L. Ford

                                                    Chief Executive Officer

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


       February 15, 2002
                                                      /S/ Rudolph R. Patino
                                                      ---------------------

                                                        Rudolph R. Patino

                                                      Chief Financial Officer

                                                   (Principal Financial Officer)

                                     page 24