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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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(Mark One)



|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------

For the quarterly period ended September 30, 2006



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|- | ---------------------------------------------------------------

For the transition period from  to

Commission File Number: 0-11532



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VENTURE CATALYST INCORPORATED

(Exact name of small business issuer as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Utah                                                           |  | 33-0618806                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

591 Camino De La Reina, Suite 418, San Diego, California 92108

(Address of principal executive offices)

(619) 330-4000

(Issuers telephone number)

Not Applicable

(Former name, former address and former fiscal year, if
changed since last report)



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

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

State the number of shares outstanding of each of the issuers classes of common equity, as of the
latest practicable date: as of October 31, 2006, 7,221,598 shares of common stock, $.001 par value per share, were outstanding.

Transitional Small Business Disclosure Format (check one):    Yes ̈No   x



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##### Table of Contents

VENTURE CATALYST INCORPORATED

FORM 10-QSB

FOR THE PERIOD ENDED SEPTEMBER 30, 2006

TABLE OF CONTENTS



|                                                                                                    |  |           
|--------------------------------------------------------------------------------------------------- |  | ----------
|                                                                                                    |  | PageNumber
|PART I - FINANCIAL INFORMATION                                                                      |  |           
|                                                                                                    | 
|Item 1. Financial Statements                                                                        |  |           
|Balance Sheets - September 30, 2006 (unaudited) and June 30, 2006                                   |  | 1         
|Statements of Operations (unaudited) - Three months ended September 30, 2006 and September 30, 2005 |  | 2         
|Statements of Cash Flows (unaudited) - Three months ended September 30, 2006 and September 30, 2005 |  | 3         
|Notes to Financial Statements                                                                       |  | 4         
|Item 2.
Managements Discussion and Analysis or Plan of Operation                                   |  | 16        
|Item 3.
Controls and Procedures                                                                     |  | 27        
|                                                                                                    | 
|PART II - OTHER INFORMATION                                                                         |  |           
|                                                                                                    | 
|Item 6.
Exhibits                                                                                    |  | 28        
|Signatures                                                                                          |  | 30        

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-QSB contains forward-looking statements reflecting our current expectations. Examples of such forward-looking statements
include our expectations with respect to our strategy, financial goals and our expectations with respect to the completion of our merger with IGT and the divestiture of the gaming consulting services division. Although we believe that our
expectations are based upon reasonable assumptions, there can be no assurances that we will be able to implement our strategy, that our financial goals will be realized or that the merger and the divestiture of the gaming consulting services
division will be consummated. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any
future results, performance or achievements expressed or implied by such forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words, believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. Numerous factors may affect our actual results and
may cause results to differ materially from those expressed in forward-looking statements made by or on behalf of us. The failure to obtain required regulatory or shareholder approval for the merger, the merger not closing for any other reason,
including the occurrence of a material adverse event, and the other factors discussed under the caption Factors That May Affect Future Results in Part I, Item 2 - Managements Discussion and Analysis or Plan of Operation,
herein, among others, are the many factors that would cause actual results to differ materially from those indicated by forward-looking statements made herein and represent managements current expectations and are inherently uncertain.
Investors are warned that actual results may differ from managements expectations. Forward-looking statements in this Form 10-QSB express expectations only as of the date they are made. We assume no obligation to update the forward-looking
information to reflect actual results or changes in the factors affecting such forward-looking information.



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##### Table of Contents

PART I - FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

VENTURE CATALYST INCORPORATED

BALANCE SHEETS



|                                                                                                                                 |  |                                |             |   |               |   |             |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ----------- | - | ------------- | - | ----------- | -
|                                                                                                                                 |  | September 30, 2006 (Unaudited) |             |   | June 30, 2006 |  
|ASSETS                                                                                                                           |  |                                |             |   |               |   |             |  
|Current Assets:                                                                                                                  |  |                                |             |   |               |   |             |  
|Cash and cash equivalents                                                                                                        |  | $                              | 4,613,814   |   |               | $ | 4,352,145   |  
|Accounts receivable, net                                                                                                         |  |                                | 1,182,597   |   |               |   | 1,035,926   |  
|Accounts receivable-Barona Tribe                                                                                                 |  |                                | 624,310     |   |               |   | 624,310     |  
|Prepaid expenses and other current assets                                                                                        |  |                                | 292,694     |   |               |   | 164,281     |  
|Deferred tax asset, current                                                                                                      |  |                                | 171,000     |   |               |   | 37,000      |  
|                                                                                                                                 |  |                                |             |   |               |   |             |  
|Total current assets                                                                                                             |  |                                | 6,884,415   |   |               |   | 6,213,662   |  
|                                                                                                                                 |  |                                |             |   |               |   |             |  
|Non-Current Assets:                                                                                                              |  |                                |             |   |               |   |             |  
|Deferred tax asset, non-current                                                                                                  |  |                                | 463,000     |   |               |   | 455,000     |  
|Property, plant and equipment, net                                                                                               |  |                                | 405,583     |   |               |   | 339,303     |  
|Deposits and other assets                                                                                                        |  |                                | 12,238      |   |               |   | 12,576      |  
|                                                                                                                                 |  |                                |             |   |               |   |             |  
|Total non-current assets                                                                                                         |  |                                | 880,821     |   |               |   | 806,879     |  
|                                                                                                                                 |  |                                |             |   |               |   |             |  
|Total assets                                                                                                                     |  | $                              | 7,765,236   |   |               | $ | 7,020,541   |  
|                                                                                                                                 |  |                                |             |   |               |   |             |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                             |  |                                |             |   |               |   |             |  
|Current Liabilities:                                                                                                             |  |                                |             |   |               |   |             |  
|Billings in excess of costs, uncompleted software contracts                                                                      |  | $                              | 2,518,409   |   |               | $ | 1,538,034   |  
|Accounts payable and accrued expenses                                                                                            |  |                                | 590,671     |   |               |   | 506,128     |  
|Accrued wages                                                                                                                    |  |                                | 410,404     |   |               |   | 641,952     |  
|Deferred revenue, net                                                                                                            |  |                                | 336,403     |   |               |   | 349,899     |  
|Sales taxes payable                                                                                                              |  |                                | 32,531      |   |               |   | 21,775      |  
|Income taxes payable, net                                                                                                        |  |                                | 16,314      |   |               |   | 16,314      |  
|                                                                                                                                 |  |                                |             |   |               |   |             |  
|Total current liabilities                                                                                                        |  |                                | 3,904,732   |   |               |   | 3,074,102   |  
|                                                                                                                                 |  |                                |             |   |               |   |             |  
|Commitments and Contingencies                                                                                                    |  |                                |            |   |               |   |            |  
|Shareholders Equity:                                                                                                            |  |                                |             |   |               |   |             |  
|Common stock, $.001 par value, 100,000,000 shares authorized and 7,221,598 shares issued at September 30, 2006 and June 30,
2006 |  |                                | 7,222       |   |               |   | 7,222       |  
|Additional paid-in-capital                                                                                                       |  |                                | 19,626,668  |   |               |   | 19,622,384  |  
|Accumulated deficit                                                                                                              |  |                                | (15,773,386 | ) |               |   | (15,683,167 | )
|                                                                                                                                 |  |                                |             |   |               |   |             |  
|Total shareholders equity                                                                                                       |  |                                | 3,860,504   |   |               |   | 3,946,439   |  
|                                                                                                                                 |  |                                |             |   |               |   |             |  
|Total liabilities and shareholders equity                                                                                       |  | $                              | 7,765,236   |   |               | $ | 7,020,541   |  
|                                                                                                                                 |  |                                |             |   |               |   |             |  

The accompanying notes are an integral part of these statements.



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##### Table of Contents

VENTURE CATALYST INCORPORATED

STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                            |  |                                          |           |   |      |   |           |  
|------------------------------------------- |  | ---------------------------------------- | --------- | - | ---- | - | --------- | -
|                                            |  | For the three months ended September 30, |          
|                                            |  | 2006                                     |           |   | 2005 |  
|Revenues:                                   |  |                                          |           |   |      |   |           |  
|Consulting services                         |  | $                                        | 1,922,930 |   |      | $ | 1,946,461 |  
|Software products and related services      |  |                                          | 150,169   |   |      |   | 124,570   |  
|                                            |  |                                          |           |   |      |   |           |  
|Total revenues                              |  |                                          | 2,073,099 |   |      |   | 2,071,031 |  
|Cost of revenues:                           |  |                                          |           |   |      |   |           |  
|Consulting services                         |  |                                          | 709,302   |   |      |   | 714,540   |  
|Software products and related services      |  |                                          | 299,405   |   |      |   | 278,305   |  
|                                            |  |                                          |           |   |      |   |           |  
|Total cost of revenues                      |  |                                          | 1,008,707 |   |      |   | 992,845   |  
|                                            |  |                                          |           |   |      |   |           |  
|Gross profit                                |  |                                          | 1,064,392 |   |      |   | 1,078,186 |  
|                                            |  |                                          |           |   |      |   |           |  
|Operating expenses:                         |  |                                          |           |   |      |   |           |  
|General and administrative                  |  |                                          | 1,062,819 |   |      |   | 1,019,315 |  
|Sales and marketing                         |  |                                          | 217,772   |   |      |   | 274,832   |  
|Research and development                    |  |                                          | 66,447    |   |      |   | 62,436    |  
|                                            |  |                                          |           |   |      |   |           |  
|Total operating expenses                    |  |                                          | 1,347,038 |   |      |   | 1,356,583 |  
|                                            |  |                                          |           |   |      |   |           |  
|Operating loss                              |  |                                          | (282,646  | ) |      |   | (278,397  | )
|                                            |  |                                          |           |   |      |   |           |  
|Other income:                               |  |                                          |           |   |      |   |           |  
|Interest income                             |  |                                          | 50,999    |   |      |   | 32,052    |  
|Litigation settlement                       |  |                                          |          |   |      |   | 47,000    |  
|Other losses                                |  |                                          | (572      | ) |      |   |          |  
|                                            |  |                                          |           |   |      |   |           |  
|Other income, net                           |  |                                          | 50,427    |   |      |   | 79,052    |  
|                                            |  |                                          |           |   |      |   |           |  
|Net loss before income tax benefit          |  |                                          | (232,219  | ) |      |   | (199,345  | )
|Income tax benefit                          |  |                                          | 142,000   |   |      |   | 114,000   |  
|                                            |  |                                          |           |   |      |   |           |  
|Net loss                                    |  | $                                        | (90,219   | ) |      | $ | (85,345   | )
|                                            |  |                                          |           |   |      |   |           |  
|Basic and diluted loss per share:           |  |                                          |           |   |      |   |           |  
|Net loss per share - basic                  |  | $                                        | (.01      | ) |      | $ | (.01      | )
|                                            |  |                                          |           |   |      |   |           |  
|Net loss per share - diluted                |  | $                                        | (.01      | ) |      | $ | (.01      | )
|                                            |  |                                          |           |   |      |   |           |  
|Weighted average common shares outstanding: |  |                                          |           |   |      |   |           |  
|Basic                                       |  |                                          | 7,221,598 |   |      |   | 7,206,598 |  
|                                            |  |                                          |           |   |      |   |           |  
|Diluted                                     |  |                                          | 7,221,598 |   |      |   | 7,206,598 |  
|                                            |  |                                          |           |   |      |   |           |  

The accompanying notes are an integral part of these statements.



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##### Table of Contents

VENTURE CATALYST INCORPORATED

STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                                                |  |                                          |           |   |      |   |           |  
|------------------------------------------------------------------------------- |  | ---------------------------------------- | --------- | - | ---- | - | --------- | -
|                                                                                |  | For the Three months Ended September 30, |          
|                                                                                |  | 2006                                     |           |   | 2005 |  
|Increase in cash:                                                               |  |                                          |           |   |      |   |           |  
|Cash flows provided by operating activities:                                    |  |                                          |           |   |      |   |           |  
|Net loss for the period                                                         |  | $                                        | (90,219   | ) |      | $ | (85,345   | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                                          |           |   |      |   |           |  
|Depreciation and amortization                                                   |  |                                          | 39,153    |   |      |   | 30,262    |  
|Amortization of stock based compensation                                        |  |                                          | 4,284     |   |      |   |          |  
|Increase in deferred tax assets                                                 |  |                                          | (142,000  | ) |      |   | (114,000  | )
|Loss on disposal of asset                                                       |  |                                          | 572       |   |      |   |          |  
|Changes in operating assets and liabilities                                     |  |                                          | 555,885   |   |      |   | 701,363   |  
|                                                                                |  |                                          |           |   |      |   |           |  
|Net cash provided by operating activities                                       |  |                                          | 367,675   |   |      |   | 532,280   |  
|                                                                                |  |                                          |           |   |      |   |           |  
|Cash flows used in investing activities:                                        |  |                                          |           |   |      |   |           |  
|Purchase of furniture and equipment                                             |  |                                          | (106,006  | ) |      |   | (54,505   | )
|                                                                                |  |                                          |           |   |      |   |           |  
|Net cash used in investing activities                                           |  |                                          | (106,006  | ) |      |   | (54,505   | )
|                                                                                |  |                                          |           |   |      |   |           |  
|Cash flows provided by (used in) financing activities:                          |  |                                          |           |   |      |   |           |  
|Net cash provided by (used in) financing activities                             |  |                                          |          |   |      |   |          |  
|                                                                                |  |                                          |           |   |      |   |           |  
|Net increase in cash                                                            |  |                                          | 261,669   |   |      |   | 477,775   |  
|Cash at beginning of period                                                     |  |                                          | 4,352,145 |   |      |   | 3,839,310 |  
|                                                                                |  |                                          |           |   |      |   |           |  
|Cash at end of period                                                           |  | $                                        | 4,613,814 |   |      | $ | 4,317,085 |  
|                                                                                |  |                                          |           |   |      |   |           |  
|Supplemental disclosures of cash flow information:                              |  |                                          |           |   |      |   |           |  
|Interest paid                                                                   |  | $                                        |          |   |      | $ |          |  
|                                                                                |  |                                          |           |   |      |   |           |  
|Income taxes paid                                                               |  | $                                        | 14,800    |   |      | $ | 12,000    |  
|                                                                                |  |                                          |           |   |      |   |           |  

The accompanying notes are an integral part of these statements.



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##### Table of Contents

VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS

September 30, 2006 (Unaudited)

Note 1. Basis
of Presentation and Description of Business

Basis of Presentation

The accompanying unaudited financial statements for Venture Catalyst Incorporated have been prepared by us in conformity with generally accepted accounting principles for interim financial information and with the
rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such regulations. As used in this Report, the terms we, us, our and VCAT refer to Venture Catalyst Incorporated.

In the opinion of management, these financial statements reflect all normal, recurring adjustments and disclosures which are necessary for a fair
presentation. The interim unaudited financial statements should be read in conjunction with our Annual Report on Form 10-KSB for the fiscal year ended June 30, 2006, referred to as fiscal 2006. Amounts related to disclosure of
June 30, 2006 balances within these interim statements were derived from the aforementioned Form 10-KSB. Certain items in the financial statements for fiscal 2006 have been reclassified to conform to the current years presentation.
Current and future financial statements may not be directly comparable to our historical financial statements. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year.

Description of Business

We are a
provider of consulting services and technology in the gaming and hospitality industry. We operate two business divisions: consulting services and software. Our consulting services division offers comprehensive gaming and hospitality consulting
services to clients in the gaming and hospitality industry. As of September 30, 2006, we had one client in our consulting services division, the Barona Group of Capitan Grande Band of Mission Indians (the Barona Tribe) a federally
recognized, sovereign Native American tribe. We have provided services to the Barona Tribe since 1991. We currently provide services to the Barona Tribe in connection with their operation of the Barona Valley Ranch Resort & Casino (the
Barona Valley Ranch). The Barona Valley Ranch is located in Lakeside, California, near San Diego. To date, our consulting fees resulting from our consulting services to the Barona Tribe have been our principal source of revenue and
liquidity.

From February 2005 until July 31, 2006, we provided business advisory services to the Buena Vista Rancheria of Me-Wuk
Indians (the Buena Vista Tribe), in connection with the establishment of a gaming operation on the Buena Vista Tribes reservation located near Ione, in Northern California. Effective July 31, 2006, we no longer provide
services to the Buena Vista Tribe. See Note 4.

Our software division is dedicated to the ongoing operations, sales and product development
of Mariposa, a fully-integrated customer relationship management (CRM), marketing and business intelligence software system for license to businesses in the gaming and hospitality industry. Mariposa consists of a suite of applications
designed to operate in conjunction with existing player tracking and other data systems. The various Mariposa applications provide data warehousing, data mining and modeling, analytical processing, campaign management, customer contact management
and data visualization. The applications can be licensed individually or as a fully-integrated system. We have expanded our service offerings to Mariposa clients and other potential clients to include value-added data analysis and marketing related
services, marketed as and referred to as business intelligence services.

Agreement to Acquire VCAT by International Game
Technology

On August 28, 2006, VCAT announced that it had entered into a definitive Agreement and Plan of Merger (the Merger
Agreement) with IGT, a wholly-owned subsidiary of International Game Technology, and Mariposa Acquisition Corp, a wholly-owned subsidiary of IGT (Merger Sub). The Merger Agreement provides that, upon the terms and subject to the
conditions set forth in the Merger Agreement, Merger Sub will merge with and into VCAT (the Merger), with VCAT continuing as the surviving corporation and a wholly-owned subsidiary of IGT. At the effective time and as a result of the
Merger, each share of VCAT common stock issued and outstanding immediately prior to the effective time of the Merger (other than dissenting shares) will be cancelled and extinguished and shall be converted into the right to receive $2.58 in cash,
without interest (the Merger Consideration). IGT is not assuming any of VCATs stock options or agreements and,



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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS

September 30, 2006 (Unaudited)



as a result and pursuant to the terms of VCATs applicable stock option plans or agreements, all unvested options to purchase VCAT common stock will
vest in full effective immediately prior to the closing of the Merger. All outstanding options to purchase VCAT common stock that are vested as of the effective time of the Merger, including those options that vest as a result of the Merger, will be
terminated in consideration for a cash payment equal to the product of (a) the excess, if any, of the Merger Consideration over the exercise price per share of such stock option and (b) the number of shares of VCAT common stock issuable
upon the exercise of such option.

VCAT has made representations, warranties and covenants in the Merger Agreement, including, among
others, covenants (a) to carry on its business in the usual, regular and ordinary course in the same manner as previously conducted during the interim period between the execution of the Merger Agreement and the consummation of the Merger;
(b) not to engage in certain kinds of transactions during such period; (c) to cause a shareholder meeting to be held to consider approval of the Merger; (d) subject to certain exceptions, for the Board of Directors of VCAT to
recommend adoption by its shareholders of the Merger Agreement; (e) not to solicit, initiate or encourage proposals relating to alternative takeover proposals; and (f) subject to certain exceptions, not to participate in negotiations or
discussions concerning, or provide nonpublic information in connection with, alternative takeover proposals.

Consummation of the Merger is
subject to the satisfaction or waiver (if applicable) of a number of conditions, including (a) approval by the required vote of VCATs shareholders; (b) subject to certain exceptions, the absence of a material adverse change with
respect to VCAT during the interim period between the execution of the Merger Agreement and consummation of the Merger; (c) receipt of certain third party consents, including the consent of the Barona Tribe, which has been obtained, and
regulatory approvals; (d) absence of any law or order prohibiting the consummation of the Merger; and (e) each of the Asset Purchase Agreement and Consulting Services Agreement (each as described below) remaining in full force and effect
and the conditions to closing under these agreements satisfied. In addition, each partys obligation to consummate the Merger is subject to the accuracy of the representations and warranties of the other party, subject to a material adverse
effect condition and material compliance of the other party with its covenants.

If the Merger is not completed, under specified
circumstances, we may be required to pay IGT a termination fee of $750,000 pursuant to the Merger Agreement, in connection with its termination.

Concurrently with entering into the Merger Agreement, IGT entered into voting agreements with L. Donald Speer, II, our Chairman of the Board, Greg Shay, our Chief Executive Officer, President and Chief Operating Officer, and Kevin McIntosh,
our Senior Vice President, Chief Financial Officer and Secretary. These voting agreements provide that the officers will vote their shares, which represented approximately fifteen percent (15%) of VCATs outstanding shares of common stock
as of August 25, 2006, in favor of the Merger and against any inconsistent proposals or transactions. The voting agreements terminate on the earlier of (a) February 21, 2007, or such later date, if any, to which VCAT and IGT extend
the outside date specified in the Merger Agreement and (b) the termination of the Merger Agreement by VCAT under certain circumstances.

Also, simultaneously with the execution of the Merger Agreement, Messrs. Speer, Shay and McIntosh entered into non-competition agreements with VCAT and IGT that provide that they will not compete with the server-based gaming business of
VCAT or IGT for 18 months from the effective time of the Merger.

As a condition precedent to the closing of the Merger, VCAT must divest
itself of the consulting services division. This divestiture required the negotiation of a modification to the Consulting Agreement with the Barona Tribe and consent to the divestiture from the Barona Tribe. IGT, as the prospective owner of VCAT,
including all of its assets, negotiated the divestiture of the consulting services division. On August 25, 2006, VCAT entered into an asset purchase agreement (the Asset Purchase Agreement) with a new entity (the LLC),
controlled by Mr. Speer. The Asset Purchase Agreement provides that, upon terms and subject to conditions set forth in the Asset Purchase Agreement, VCAT will sell to the LLC certain assets used by VCAT in its gaming consulting services
division (exclusive of its Mariposa software division but including the Consulting Agreement with the Barona Tribe and $500,000 in cash) for approximately $4.5 million in secured promissory notes (as described below) and the assumption by the LLC of
certain liabilities (the Asset Purchase). The LLC is to execute three promissory notes in favor of VCAT upon consummation of the Asset Purchase, including (a) a $500,000 promissory note, with interest at the annual rate of 6%,
payable on the second anniversary of the closing of the Asset Purchase; (b) a $2 million promissory note, with interest at the annual rate of 6%, payable in four annual installments on the



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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS

September 30, 2006 (Unaudited)



first through fourth anniversaries of the closing of the Asset Purchase; and (c) a $2 million promissory note, with interest at the annual rate of 6%,
payable in three installments, one on the closing date of the Asset Purchase and the remaining two on the first day of the two calendar years subsequent to the closing date of the Asset Purchase.

In connection with the Asset Purchase Agreement, VCAT and the LLC entered into a Consulting Services Agreement, which the parties amended on
October 5, 2006. The Consulting Services Agreement provides that the LLC will provide consulting services to VCAT for an initial term of three years commencing on the closing date of the Asset Purchase. The LLC is to receive consulting fees of
$2 million, in three pre-paid installments, for all consulting services and deliverables to be provided during the three year term.

On
August 25, 2006, the Compensation Committee of our Board of Directors approved the payment of cash bonuses to three executive officers of VCAT in connection with the Merger. The Compensation Committee provided for bonuses of $225,000, $100,000
and $100,000 to be paid to Greg Shay, President, Chief Executive Officer and Chief Operating Officer, Kevin McIntosh, Senior Vice President, Chief Financial Officer, Treasurer and Secretary, and Javier Saenz, Senior Vice President, Information
Systems, respectively. Payment of such bonuses will be made by VCAT and is contingent upon (a) consummation of the Merger and (b) in the case of Mr. Saenz, remaining employed by IGT, VCAT and/or any affiliate of either VCAT or IGT
until August 25, 2007, and, in the case of Messrs. Shay and McIntosh, remaining employed by VCAT, LLC, VCAT, IGT, and/or affiliates of VCAT or IGT until August 25, 2007.

On October 11, 2006, VCAT filed a preliminary proxy with the Securities and Exchange Commission in connection with the solicitation by our board of
directors of proxies to be used at the special meeting of shareholders of VCAT to approve and adopt the Merger Agreement and the Asset Purchase Agreement.

On October 31, 2006, VCAT and IGT entered into a Consulting Services Agreement pursuant to which VCAT will provide consulting services to IGT prior to the closing of the merger. VCAT will be paid an hourly fee
for actual time worked and will be reimbursed for certain expenses. The consulting services will be performed by Mr. Saenz, Senior Vice President, Information Services.

Note 2. Summary of Significant Accounting Policies

Revenue Recognition

Consulting Services. In accordance with SEC Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial
Statements and SEC SAB No. 104. Revenue Recognition, revenue for consulting services is recognized when the services are rendered, provided all of the following criteria are met:



| |  |  | persuasive evidence of an arrangement exists;
| | - |  | ---------------------------------------------



| |  |  | services have been rendered;
| | - |  | ----------------------------



| |  |  | the fee is fixed or determinable; and
| | - |  | -------------------------------------



| |  |  | collectibility is reasonably assured.
| | - |  | -------------------------------------

Consulting service
revenues from the Barona Tribe are recorded monthly, as earned, pursuant to the above referenced guidelines. Additionally, as an incentive to the Barona Tribe to enter into the 2004 Consulting Agreement, we granted the Barona Tribe certain Mariposa
profit sharing rights, which are incorporated in the 2004 Consulting Agreement. These profit sharing rights may periodically generate cash obligations from VCAT to the Barona Tribe, and in accordance with Emerging Issues Task Force
(EITF) 01-09 Accounting for Consideration Given by a Vendor to a Customer, such obligations will be recorded as a reduction of the revenues earned from the Barona Tribe. For a detailed discussion relating to the terms of the
1996 Consulting Agreement and 2004 Consulting Agreement with the Barona Tribe, see Note 4.

Advisory service revenues from the Buena Vista
Tribe were recorded monthly as earned, pursuant to the above referenced guidelines. For a detailed discussion relating to the terms of the Advisory Agreement with the Buena Vista Tribe, see Note 4.



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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS

September 30, 2006 (Unaudited)



Software Products and Related Services. We derive a portion of our revenues from
licensing Mariposa and the sale of related services, including integration, installation and training (collectively, professional services) and maintenance and support services (support services). We recognize revenue from
software licensing and related professional services in accordance with Statement of Position (SOP) 97-2, Software Revenue Recognition, as amended by SOP 98-9. If the arrangement between us and the purchaser does not require significant
production, modification or customization of software, we will generally recognize revenue when all of the following criteria are met, as set forth in paragraph 8 of SOP 97-2:



| |  |  | persuasive evidence of an arrangement exists;
| | - |  | ---------------------------------------------



| |  |  | delivery has occurred;
| | - |  | ----------------------



| |  |  | the fee is fixed or determinable; and
| | - |  | -------------------------------------



| |  |  | collectibility is probable.
| | - |  | ---------------------------

Our standard
software contracts are multiple element arrangements that include both software products and professional services. The professional services are essential to the functionality of the software products, which require significant modification to meet
the customers purpose; therefore, in accordance with paragraph 69 of SOP 97-2, ARB No. 45 and SOP 81-1, contract accounting is applied to both the software and service elements of the arrangement. The final determination for revenue
recognition and related accounting issues is made based on the specific details for each software contract, which could result in the application of alternative revenue recognition policies for individual contracts.

Mariposa is a complex fully-integrated software system that, in order to meet the customers functionality, must work in conjunction with the
customers player tracking system and a number of other customer data systems. As a result of the difficulty in making dependable estimates and customer acceptance rights, we are using the completed contract method of accounting and will
recognize revenue and cost of revenues for each software contract at the time of completion of all elements of our software contracts. Provisions for contract adjustments and losses are recorded in the period such items are identified.

Support services are provided pursuant to a separate contractual arrangement, or for one software client, pursuant to an annual term license
agreement. Fees for support services are recognized ratably over the term of the support period. Deferred revenues are recorded when billings for support services exceed revenues recognized to date.

Business Intelligence Services. During fiscal 2006, we expanded our service offerings to Mariposa clients and other potential clients to include
value-added data analysis and marketing related services (marketed as, and referred to as, business intelligence services). Business intelligence services revenues are recognized as earned as services are provided. Deferred revenues are
recorded when billings for business intelligence services exceed revenues recognized to date.

Out-of-Pocket Expenses. We
recognize revenues related to certain out-of-pocket expenses in accordance with EITF No. 01-14 Income Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred (EITF 01-14).
EITF 01-14 requires that certain out-of-pocket expenses re-billed to customers be recorded as revenue versus an offset to the related expense. The out-of-pocket expenses re-billed to customers are included in revenues in the respective division.

Cost of Revenues  Software Products and Related Services

The cost of revenues in our software division consist primarily of compensation and other personnel-related expenses, and other direct costs related to our software products and related services. We are incurring
costs to perform (a) minor updates and upgrades to the existing Mariposa applications and (b) support and training services on an ongoing basis. Updates, upgrades, support and training services are provided to customers pursuant to
maintenance and support contracts. These costs are expensed as incurred and are included in the cost of revenues for software products and related services.



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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS

September 30, 2006 (Unaudited)



Research and DevelopmentSoftware Products

Costs incurred in the research and development of new software products, including major product enhancements, are expensed as incurred until
technological feasibility is established. Software development costs are capitalized in accordance with the provisions of SFAS 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.Software
development costs begin to be capitalized at the time a products technological feasibility is established and end when the product reaches the working model stage. During the three months ended September 30, 2006 and 2005, products and
major enhancements are expected to reach, or have generally reached, technological feasibility and commercial viability at substantially the same time. Accordingly we did not, and do not expect to, capitalize any software developments costs related
to current software development projects.

Deferred Income Taxes

Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. The effect of a change in tax rates is recognized in earnings in the period that includes the enactment date. A valuation allowance is provided when management estimates it is
more likely that a portion of deferred tax assets will not be realized.

New Accounting Pronouncements

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections  A Replacement of APB Opinion No. 20 and
FASB Statement No. 3(SFAS 154). SFAS 154 changes the requirements for the accounting and reporting of a change in accounting principle. Under previous guidance, changes in accounting principle were recognized as a
cumulative affect in the net income of the period of the change. The new statement requires retrospective application of changes in accounting principle, limited to the direct effects of the change, to prior periods financial statements,
unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Additionally, this Statement requires that a change in depreciation, amortization or depletion method for long-lived, non-financial
assets be accounted for as a change in accounting estimate affected by a change in accounting principle and that correction of errors in previously issued financial statements should be termed a restatement. SFAS 154 is effective
for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. We do not believe the adoption of SFAS 154 will have a material impact on our financial statements.

In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements (SAB 108). SAB 108 was issued to provide consistency between how registrants quantify financial statement misstatements.

Historically, there have been two widely-used methods for quantifying the effects of financial statement misstatements. These methods are referred to as
the roll-over and iron curtain method. The roll-over method quantifies the amount by which the current year income statement is misstated. Exclusive reliance on an income statement approach can result in the accumulation of
errors on the balance sheet that may not have been material to any individual income statement, but which may misstate one or more balance sheet accounts. The iron curtain method quantifies the error as the cumulative amount by which the current
year balance sheet is misstated. Exclusive reliance on a balance sheet approach can result in disregarding the effects of errors in the current year income statement that results from the correction of an error existing in previously issued
financial statements. We currently use the roll-over method for quantifying identified financial statement misstatements.

SAB 108
established an approach that requires quantification of financial statement misstatements based on the effects of the misstatement on each of the companys financial statements and the related financial statement disclosures. This approach is
commonly referred to as the dual approach because it requires quantification of errors under both the roll-over and iron curtain methods.

SAB 108 allows registrants to initially apply the dual approach either by (1) retroactively adjusting prior financial statements as if the dual approach had always been used or by (2) recording the
cumulative effect of initially applying the dual approach as adjustments to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting



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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS

September 30, 2006 (Unaudited)



adjustment recorded to the opening balance of retained earnings. Use of this cumulative effect transition method requires detailed disclosure of
the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose. We will initially apply SAB 108 using the cumulative effect transition method in connection with the preparation of our
annual financial statements for the year ending June 30, 2007.

Note. 3 Stock Options

Stock Based Compensation

Effective July 1, 2006,
we adopted the provisions of Statement of Financial Accounting Standards No. 123R (SFAS 123R), Share-Based Payments, which requires the measurement and recognition of compensation expense for all share-based payment
awards to employees and non-employee based on estimated fair values. SFAS 123R supersedes our previous accounting methodology using the intrinsic value method under Accounting Principles Board Opinion APB No. 25, Accounting for Stock
Issued to Employees. Under the intrinsic value method, no share-based compensation expense related to stock option awards granted to employees had been recognized in our statements of operations, as all stock option awards granted under
the plans had an exercise price equal to the market value of the common stock on the date of grant. We have no awards with market or performance conditions.

We adopted SFAS 123R using the modified prospective transition method. Under this transition method, compensation expense recognized during the three months ended September 30, 2006
included: (a) compensation expense for all share-based awards granted prior to, but not yet vested, as of June 30, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and
(b) no share-based awards were granted subsequent to June 30, 2006 of which compensation expense needs to be computed based on the fair value estimated in accordance with the provisions of SFAS 123R. In accordance with the modified
prospective transition method, our financial statements for prior periods have not been restated to reflect the impact of SFAS 123R. We adopted SFAS 123R as of July 1, 2006 and had $4,300 related to non-vested equity awards that was expensed
during the three months ended September 30, 2006.

The following table shows the amounts recognized in the financial statements for
the three months ended September 30, 2006 for share-based compensation related to employees. In addition, for the three months ended September 30, 2006, there was no incremental tax benefit from stock options exercised in the period.



|                                                                                                      |  |                                      |          
|----------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ---------
|                                                                                                      |  | Three months endedSeptember 30, 2006
|Cost of revenues                                                                                      |  | $                                    | 1,008,707
|General and administrative, selling and marketing, and research and development                       |  | $                                    | 1,347,038
|Total cost of employee share-based compensation included in operating loss, before income tax benefit |  | $                                    | 4,284    
|Amount of income tax recognized in earnings                                                           |  |                                      |         
|                                                                                                      |  |                                      |          
|Amount charged against income                                                                         |  | $                                    | 4,284    
|                                                                                                      |  |                                      |          
|Impact on net income (loss) per common share:                                                         |  |                                      |          
|Basic                                                                                                 |  |                                      |         
|                                                                                                      |  |                                      |          
|Diluted                                                                                               |  |                                      |         
|                                                                                                      |  |                                      |          

As of September 30, 2006, there was $11,000 of unamortized compensation cost related to
non-vested stock option awards, which is expected to be recognized over a remaining weighted-average vesting period of one year.

For
purposes of pro forma disclosures under SFAS 123 for the three months ended September 30, 2005, the estimated fair value of share-based awards was assumed to be amortized to expense over the vesting period of the award. There is no pro forma
presentation for the three months ended September 30, 2006 as we adopted SFAS 123R as of July 1, 2006, as discussed above. The pro forma effects of recognizing estimated compensation expense under the fair value method on net loss and loss
per common share were as follows:



|                                                                                                                                                   |  |                                       |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | -
|                                                                                                                                                   |  | Three Months ended September 30, 2005 |        
|Net loss:                                                                                                                                          |  |                                       |         |  
|As reported                                                                                                                                        |  | $                                     | (85,345 | )
|Add:                                                                                                                                               |  |                                       |        |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all option grants, net of related tax
effects |  |                                       | (13,208 | )
|                                                                                                                                                   |  |                                       |         |  
|Pro forma                                                                                                                                          |  | $                                     | (98,553 | )
|                                                                                                                                                   |  |                                       |         |  
|Net loss per share:                                                                                                                                |  |                                       |         |  
|As reported                                                                                                                                        |  | $                                     | (.01    | )
|Pro forma                                                                                                                                          |  | $                                     | (.01    | )



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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS

September 30, 2006 (Unaudited)



The fair value of each option granted was calculated on the date of grant using the Black-Scholes
option pricing model with no expected dividends. The weighted average assumptions used for the stock options granted were risk free interest rates of 3.66%, expected life of 10 years, and volatility of 1.94. No stock options were granted during the
three months ended September 30, 2006 and 2005.

We have the following stock option plans under which shares were available for grant
at September 30, 2006:

In 1995, we adopted the 1995 Stock Option Plan (the 1995 Plan), currently under which options to
purchase up to 12,000,000 shares of our common stock could be granted. Options to purchase common stock that terminate without exercise are available for re-issuance. Options may be issued to our employees, consultants and directors either as
(a) incentive stock options or (b) non-statutory stock options.

Stock options are granted by the Compensation Committee of our
Board of Directors or, in the absence of the Compensation Committee, by the full Board of Directors. Under the 1995 Plan, options granted to any single individual cannot exceed 1,500,000 shares over any period of three consecutive fiscal years.
Options granted under the 1995 Plan can have a maximum term of up to ten years and generally vest ratably over a four year period following the date of grant. Incentive stock options must have an exercise price of not less than fair market value on
the date of grant. Incentive stock options may be granted to any officer or key employee who owns more than 10% of our common stock only if the exercise price is at least 110% of the fair market value on the date of grant, and such options must have
a maximum term of five years from date of grant. Non-statutory stock options must have an exercise price of not less than 85% of the fair market value on the date of grant. As of September 30, 2006, there were 5,946,069 shares of common stock
that may be issued pursuant to options available for future grant pursuant to the 1995 Plan.

In 1996, we adopted the 1996 Non-employee
Directors Stock Option Plan (the 1996 Plan), currently under which options to purchase up to 300,000 shares of our common stock could be granted. The 1996 Plan provides that each non-employee director will automatically be granted an
option to purchase 10,000 shares on the date such non-employee director is first elected to the Board of Directors. In addition, the 1996 Plan provides that each non-employee director will be granted an option to purchase 5,000 shares on each of our
Annual Meetings of Shareholders at which such non-employee director is elected to the Board of Directors. These option grants are non-statutory stock options, and the option price is equal to the closing price of our common stock on the date of
grant. These option grants vest fully six months from the date of grant. As of September 30, 2006, there were 210,000 shares of common stock that may be issued pursuant to options available for future grant pursuant to the 1996 Plan.



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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS

September 30, 2006 (Unaudited)



The following table summarizes stock option activity under our 1995 Stock Option Plan and 1996
Non-employee Directors Stock Option Plan (collectively the Plans) for the three months ended September 30, 2006:



|                                                     |  |                    |   |  |                                         |      |                                                      |     
|---------------------------------------------------- |  | ------------------ | - |  | --------------------------------------- | ---- | ---------------------------------------------------- | ----
|                                                     |  | OptionsOutstanding |   |  | WeightedAverage ExercisePrice Per Share |      | WeightedAverage RemainingContractual Term (in years)
|Outstanding, July 1, 2006                            |  | 4,910,750          |   |  | $                                       | 2.62 |                                                      | 3.62
|Granted                                              |  |                   |   |  |                                         |     |                                                      |    
|Exercised                                            |  |                   |   |  |                                         |     |                                                      |    
|Cancelled                                            |  | (130,000           | ) |  | $                                       | 3.75 |                                                      |    
|                                                     |  |                    |   |  |                                         |      |                                                      |     
|Outstanding, September 30, 2006                      |  | 4,780,750          |   |  | $                                       | 2.59 |                                                      | 3.69
|                                                     |  |                    |   |  |                                         |      |                                                      |     
|Options vested and exercisable at September 30, 2006 |  | 4,369,500          |   |  | $                                       | 2.68 |                                                      | 3.59
|                                                     |  |                    |   |  |                                         |      |                                                      |     

Note 4. Agreements with the Barona Tribe and Buena Vista Tribe

Agreements with the Barona Tribe

We have provided
services to the Barona Tribe since 1991. From April 1996 to March 2004, consulting services were provided to the Barona Tribe pursuant to an Amended and Restated Consulting Agreement dated April 29, 1996, as amended by Modification No. 1
(Modification No. 1) on February 17, 1998 (as amended, the 1996 Consulting Agreement). The 1996 Consulting Agreement expired on March 31, 2004. On May 25, 2004 we entered into an amendment and
extension (Modification No. 2) to the 1996 Consulting Agreement which was effective April 1, 2004. The 1996 Consulting Agreement, as amended by Modification No. 2, shall hereinafter be referred to as the 2004
Consulting Agreement. The 2004 Consulting Agreement expires March 31, 2009 unless renewed or extended.

Under the 2004
Consulting Agreement, we agreed to a fixed monthly fee of $575,000 for consulting services rendered to the Barona Tribe, with an annual cost of living adjustment not to exceed 5%. In April 2005, our monthly fee increased to $597,000, and in April
2006 our monthly fee increased to $624,000, as a result of the annual cost of living adjustment. Fees under the 2004 Consulting Agreement will continue to be subordinated under the terms of the subordination agreement, discussed below. The term of
the 2004 Consulting Agreement is five years, with the Barona Tribe having the right to negotiate an additional five year extension and a right to terminate after giving nine months notice. The 2004 Consulting Agreement also reaffirmed certain
license and profit-sharing rights to our Mariposa software that we had previously granted to the Barona Tribe, which are described in more detail below.

In connection with a $200,000,000 loan obtained by the Barona Tribe, we entered into a Reaffirmation, Consent and Amendment of Intercreditor and Subordination Agreement (Subordination Agreement) in July
2001. In October 2004, we reaffirmed the Subordination Agreement in connection with an amendment and restatement to the financing loan agreement (the Loan Agreement). The Subordination Agreement limits the Barona Tribes ability to
make payments to us if the debt coverage ratios set forth in the Loan Agreement are not met. No payments may be made if there is a default under the terms of the Loan Agreement that has not been cured or waived. As of September 30, 2006, we are
not aware of a default by the Barona Tribe of any of the terms of the Loan Agreement or a failure on the part of the Barona Tribe to meet the debt coverage ratios set forth in the Loan Agreement.

As part of our business relationship with the Barona Tribe and in return for use of the Barona Tribes gaming operations as a testing and marketing
platform for Mariposa, we:



| |  |  | granted to the Barona Tribe a perpetual, royalty-free, non-exclusive and non-transferable license to use Mariposa at the Barona Valley Ranch including all upgrades, maintenance and
support;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | entered into a profit sharing arrangement with the Barona Tribe, whereby, so long as we have a consulting agreement in place with the Barona Tribe, we will share a percentage of any
net profits generated by Mariposa on a quarterly basis, starting January 1, 2003, based on the following sliding scale:
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 25% percent of the first $250,000 of the net profits per quarter;
| | - |  | -----------------------------------------------------------------



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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS

September 30, 2006 (Unaudited)



| |  |  | 30% percent of the second $250,000 of the net profits per quarter;
| | - |  | ------------------------------------------------------------------



| |  |  | 35% percent of the net profits in excess of $500,000 per quarter; and
| | - |  | ---------------------------------------------------------------------



| |  |  | agreed never to provide Mariposa or future related software products developed by us to any Native American tribe in San Diego County or within sixty-five miles of the Barona Valley
Ranch.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There were no profit-sharing payment obligations generated from the above-referenced profit sharing arrangement
during the three months ended September 30, 2006 and 2005. Profit sharing payment obligations to the Barona Tribe, if generated, are recorded as a reduction in revenues earned from the Barona Tribe pursuant to applicable accounting guidelines.

On August 10, 2006, we entered into Modification No. 3 (Modification No. 3) to the 2004 Consulting Agreement
which (a) deletes in its entirety Section 5 of the 2004 Consulting Agreement, which incorporated into the 2004 Consulting Agreement the license and profit sharing rights with respect to Mariposa that were granted to the Barona Tribe as
noted above, and (b) will cause Modification No. 3 to be subordinated to any other obligations of the Barona Tribe under any agreements through which the Barona Tribe has borrowed funds for the construction of the Barona Valley Ranch.

On August 10, 2006, we also entered into the Barona Consent Agreement with the Barona Tribe and IGT (the Barona Consent
Agreement), pursuant to which (a) we will make a payment of $1,000,000 in cash to the Barona Tribe, (b) the Barona Tribe will assign to us any and all rights it may have in and to Mariposa, (c) any existing licenses of Mariposa
to the Barona Tribe will terminate, (d) we will grant to the Barona Tribe a royalty-free, non-exclusive (with certain exceptions discussed below), non-transferable (without right to sublicense), perpetual license to use Mariposa at the Barona
Valley Ranch as Mariposa exists in the Barona Tribes possession on the effective date of the Merger, (e) we and IGT will provide support, maintenance, updates, upgrades, repair and other services with respect to Mariposa for so long as we
or IGT provide such services to any customer and (f) the Barona Tribe will continue to make available its gaming operation to us and IGT as a testing and marketing platform for Mariposa and other IGT system products. The license to use Mariposa
granted to the Barona Tribe under the Barona Consent Agreement will be non-exclusive, except that it will be exclusive to the Barona Tribe in all of San Diego County, California and the area within 65 miles of the Barona Valley Ranch.
Notwithstanding this exclusivity, neither we nor IGT will be prohibited from incorporating or integrating Mariposa, or any of its components, into or with other VCAT or IGT products or distributing or licensing such products in any geographic area.
Under the Barona Consent Agreement, the Barona Tribe has also consented to the assignment of the 2004 Consulting Agreement, together with Modification No. 3, by us to any of IGT, its affiliates or an entity owned and controlled by L. Donald
Speer, II.

All of the rights and obligations of the parties to each of Modification No. 3 and the Barona Consent Agreement are
contingent upon, and will be effective simultaneously with, (a) the consummation of the Merger; (b) the effectiveness of VCATs assignment of the 2004 Consulting Agreement together with Modification No. 3 to the LLC; and
(c) the consent of the Barona Tribes lenders to Modification No. 3 and the Barona Consent Agreement. The consent of the Barona Tribes lenders has been obtained.

Agreement with the Buena Vista Tribe

On January 31, 2005, we entered into a Business Advisory
Agreement (the Advisory Agreement) with the Buena Vista Tribe. Under the terms of the Advisory Agreement, we provided business advisory services to the Buena Vista Tribe in connection with the establishment and operation of a gaming
operation on the Buena Vista Tribes reservation located near Ione, in Northern California.

On August 7, 2006, VCAT and the
Buena Vista Tribe entered into a Modification Agreement (the Modification Agreement) which modified the termination date of the Advisory Agreement, allowing for mutual termination of the Advisory Agreement, effective August 7, 2006.
Pursuant to the Modification Agreement: (a) the Buena Vista Tribes obligation to pay consulting fees as specified under the Advisory Agreement to us for services rendered ceased on July 31, 2006; (b) the Buena Vista Tribe will
remain obligated to compensate us for services rendered to it under the Advisory



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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS

September 30, 2006 (Unaudited)



Agreement on and prior to July 31, 2006; and (c) on and after August 7, 2006, we will have no continuing obligations to offer to the Buena
Vista Tribe a perpetual license to use Mariposa software. Under the Advisory Agreement, the Buena Vista Tribe paid us a monthly flat fee of $50,000 per month from February 2005 until July 31, 2006.

Gaming Authority Regulations

The operation of any
type of gaming casino on Native American land is subject to extensive Federal, state and tribal regulation. The regulatory environment regarding Native American gaming is evolving rapidly. Changes in Federal, state, or tribal law or regulations may
limit or otherwise affect Native American gaming and could therefore have a material adverse effect on our operations.

In March 1999, the
National Indian Gaming Commission (the NIGC) commenced a preliminary review of our relationship with the Barona Tribe, including a review of the 1996 Consulting Agreement. We submitted Modification No. 1 and Modification No. 2
to the NIGC in September 1999 and June 2004, respectively. The review is currently pending. We believe that the 2004 Consulting Agreement is not a management agreement, however, there is no assurance that the NIGC will determine that the 2004
Consulting Agreement is not a management agreement, and failure to do so could have a material adverse effect on our business and financial condition. If the NIGC concludes that the 2004 Consulting Agreement is not a management agreement, the NIGC
will forward the 2004 Consulting Agreement to the Bureau of Indian Affairs (the BIA) for its review. If the BIA determines that its approval is required, there can be no assurance that the BIA will approve the 2004 Consulting Agreement
and failure to approve such agreement may have a material adverse effect on our business and financial condition.

As part of the tribal
licensing process, applicants, like VCAT, are required to obtain a determination of suitability from the California Gambling Control Commission (CGCC). While an applicant can receive a tribal license and conduct gaming related business
prior to the state rendering a determination, if the state determines that the applicant would not qualify for a gambling license under state law, the tribal gaming agency must immediately revoke the tribal gaming license and terminate the
applicants contract with the tribal gaming operation. The denial of a state determination of suitability is subject to review in state court and, if reversed by the state court, the tribal gaming agency may re-issue a license to the applicant.
In January 2005, the CGCC issued a finding of suitability for VCAT which was re-issued in January 2006.

Note 5. Business Concentration

Historically, a significant portion of our revenue has been earned from the Barona Tribe. Although we expect to generate revenues from software
products and related services, we expect the majority of our revenues to be generated from the Barona Tribe until the proposed merger with IGT is closed or, if the proposed merger transaction is terminated, for the foreseeable future. During the
three months ended September 30, 2006 and 2005, revenues from the Barona Tribe were $1,873,000 and $1,792,000, respectively, representing 90% and 87% of our total revenues, respectively.

Note 6. Cash and Cash Equivalents

For purposes of
the balance sheet and the statement of cash flows, cash equivalents include time deposits and all highly liquid debt and equity instruments with original maturities of three months or less. We maintain our cash in bank deposit and checking accounts
that, at times, may exceed federally insured limits. To date, we have not experienced any losses in such accounts.

Cash equivalents during
the three months ended September 30, 2006 consisted of commercial paper with maturities ranging from 30-days to 60-days. The interest rates earned on such investments was 5.0%. Cash equivalents during the three months ended September 30,
2005, consisted of commercial paper and certificate of deposit (CD) instruments. The commercial paper and CD instruments had maturities ranging from 30-days to 90-days. Interest rates earned during the three months ended
September 30, 2005, ranged from 2.8% to 3.2%.



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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS

September 30, 2006 (Unaudited)



Note 7. Uncompleted Software Contracts

Billings and costs related to our uncompleted software contracts are accumulated on the balance sheets. When accumulated costs exceed related billings to
date, they are recorded as an asset called costs in excess of billings, uncompleted software contracts. When billings to date exceed related costs incurred, a liability is recorded called billings in excess of costs, uncompleted
software contracts. Contracts are segregated for purposes of recording related assets and liabilities.

The following table is a
summary of billings and costs for our uncompleted software contracts as of:



|                                                                 |  |                   |           |              |   |          
|---------------------------------------------------------------- |  | ----------------- | --------- | ------------ | - | ---------
|                                                                 |  | September 30,2006 |           | June 30,2006
|Number of uncompleted software contracts                         |  |                   | 6         |              |   | 6        
|Gross contracts amount                                           |  | $                 | 5,153,500 |              | $ | 4,760,000
|Uncompleted software contracts with billings in excess of costs: |  |                   |           |              |   |          
|Billings                                                         |  |                   | 3,084,500 |              |   | 1,948,000
|Costs incurred                                                   |  |                   | 566,091   |              |   | 409,966  
|                                                                 |  |                   |           |              |   |          
|Billings in excess of costs, uncompleted software contracts      |  | $                 | 2,518,409 |              | $ | 1,538,034
|                                                                 |  |                   |           |              |   |          

Note 8. Litigation Settlement Income

We filed a lawsuit in January 2005 against multiple parties (the Defendants) for breach of contract, trade secret misappropriation, unfair
business practices, copyright infringement and other related claims, each relating to Mariposa. The Defendants were hired by us to provide software development, support, installation and integration services for VCAT pursuant to development and
services agreements. During the course of the lawsuit counterclaims were filed against VCAT and three of its officers. In July 2005, we reached a comprehensive settlement of our suit against certain Defendants and related third parties, whereas the
Defendants paid us $47,000. In December 2005, we reached a comprehensive settlement of our suit against the remaining Defendants. Pursuant to the settlement, the Defendants and related third parties (a) paid $300,000 in monetary damages to us;
(b) consented to a stipulated injunction and dismissal with prejudice under which they are enjoined from participating in certain prohibited activities related to our business and products until September 1, 2007; and (c) stipulated
to the dismissal of all of their claims, counterclaims and cross claims in the action that they had against VCAT and its officers. In addition, under the terms of the settlement in December 2005, the parties agreed to a mutual release of actual or
potential claims related to the action, and agreed upon a procedure to be in place until September 1, 2007 addressing future claims by us against the defendants and certain related parties for patent infringement on any currently pending VCAT
patent application.

Note 9. Net Loss Per Share

Basic net loss per share is based on the weighted effect of all common shares issued and outstanding and is calculated by dividing net loss available to common shareholders by the weighted average shares outstanding during the period.
Diluted loss per share reflects the potential dilution from common stock options.

Below is the calculation of basic and diluted loss per
share for the three months ended:



|                                              |  |               |           |   |      |   |           |  
|--------------------------------------------- |  | ------------- | --------- | - | ---- | - | --------- | -
|                                              |  | September 30, |          
|                                              |  | 2006          |           |   | 2005 |  
|Net loss available to common shareholders     |  | $             | (90,219   | ) |      | $ | (85,345   | )
|                                              |  |               |           |   |      |   |           |  
|Weighted average shares outstanding  basic   |  |               | 7,221,598 |   |      |   | 7,206,598 |  
|Effect of dilutive options                    |  |               |          |   |      |   |          |  
|                                              |  |               |           |   |      |   |           |  
|Weighted average shares outstanding  diluted |  |               | 7,221,598 |   |      |   | 7,206,598 |  
|Net loss per common share  basic             |  | $             | (.01      | ) |      | $ | (.01      | )
|                                              |  |               |           |   |      |   |           |  
|Net loss per common share  diluted           |  | $             | (.01      | ) |      | $ | (.01      | )
|                                              |  |               |           |   |      |   |           |  



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##### Table of Contents

VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS

September 30, 2006 (Unaudited)



Options to purchase 4,780,750 shares of our common stock with exercise prices ranging from $0.13 to
$12.50 per share were outstanding at September 30, 2006, which expire on various future dates through 2014. During the three months ended September 30, 2006, options to purchase 4,780,750 shares of common stock, representing all
outstanding options, were not included in the calculation of EPS because the effect would have been anti-dilutive. During the three months ended September 30, 2005, options to purchase 5,668,250 shares of common stock, representing all
outstanding options, were not included in the calculation of EPS because they were anti-dilutive.

Note 10. Segment Reporting

We operate with two business divisions, consulting services and software, which comprise our segments. We have prepared operating segment information in
accordance with SFAS No. 131 Disclosures About Segments of an Enterprise and Related Information to report components that are evaluated regularly by our decision making group in deciding how to allocate assets and resources and in
assessing performance.

The segment results reflect an allocation of operating expenses consistent with the basis and manner in which we
internally disaggregate financial information for the purpose of assisting in making internal operating decisions. We do not evaluate performance based on return on assets at the segment level and do not identify or allocate our assets by operating
segments. As such, segment asset information is not disclosed. Information on segments and a reconciliation to the operating profit (loss) before other income for the three months ended September 30, 2006 and 2005 is as follows:



|                                       |  |                     |           |                                      |   |          |       |  |   |           |  
|-------------------------------------- |  | ------------------- | --------- | ------------------------------------ | - | -------- | ----- |  | - | --------- | -
|                                       |  | Consulting Services |           | Software Productsand RelatedServices |   |          | Total | 
|Three months ended September 30, 2006: |  |                     |           |                                      |   |          |       |  |   |           |  
|Revenues                               |  | $                   | 1,922,930 |                                      | $ | 150,169  |       |  | $ | 2,073,099 |  
|Cost of revenues                       |  |                     | 709,302   |                                      |   | 299,405  |       |  |   | 1,008,707 |  
|Allocated operating expenses           |  |                     | 617,217   |                                      |   | 729,821  |       |  |   | 1,347,038 |  
|                                       |  |                     |           |                                      |   |          |       |  |   |           |  
|Operating profit (loss)                |  | $                   | 596,411   |                                      | $ | (879,057 | )     |  | $ | (282,646  | )
|                                       |  |                     |           |                                      |   |          |       |  |   |           |  
|Three months ended September 30, 2005: |  |                     |           |                                      |   |          |       |  |   |           |  
|Revenues                               |  | $                   | 1,946,461 |                                      | $ | 124,570  |       |  | $ | 2,071,031 |  
|Cost of revenues                       |  |                     | 714,540   |                                      |   | 278,305  |       |  |   | 992,845   |  
|Allocated operating expenses           |  |                     | 601,847   |                                      |   | 754,736  |       |  |   | 1,356,583 |  
|                                       |  |                     |           |                                      |   |          |       |  |   |           |  
|Operating profit (loss)                |  | $                   | 630,074   |                                      | $ | (908,471 | )     |  | $ | (278,397  | )
|                                       |  |                     |           |                                      |   |          |       |  |   |           |  

Note 11. Income Taxes

We recorded an income tax benefit during the three months ended September 30, 2006 of $142,000 as a result of applying the estimated annual effective tax rate of 61% to the net loss for the period. The estimated
annual effective tax rate of 61% is higher than the statutory tax rate due primarily to permanent non-deductible differences. We recorded an income tax benefit of $114,000 during the three months ended September 30, 2005, as a result of
applying our estimated annual effective tax rate in the prior year period to the loss recorded in the prior year period.



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis or Plan of Operation
|------- | ---------------------------------------------------------

Overview

We are a provider of consulting services and technology in the gaming and hospitality industry. We operate two
business divisions: consulting services and software. Our consulting services division offers comprehensive gaming and hospitality consulting services and our software division is dedicated to the ongoing operations, sales and product development of
Mariposa, a fully-integrated CRM, marketing and business intelligence software system for the gaming and hospitality industry. As used in this Report, the terms we, us, our and VCAT refer to Venture
Catalyst Incorporated. This Report should be read in conjunction with Managements Discussion and Analysis or Plan of Operation set forth in our Annual Report on Form 10-KSB for the year ended June 30, 2006 (fiscal 2006).

Our Consulting Services Division

As of September 30, 2006, our consulting services division had one client, the Barona Tribe, a federally recognized, sovereign Native American tribe. We currently provide services to the Barona Tribe pursuant to
a consulting agreement in connection with the Barona Tribes operation of the Barona Valley Ranch located in Lakeside, California, near San Diego. Our consulting fees resulting from our consulting services to the Barona Tribe are VCATs
principal source of revenues and liquidity.

We have provided services to the Barona Tribe since 1991. From April 1996 to March 2004,
consulting services were provided to the Barona Tribe pursuant to an Amended and Restated Consulting Agreement dated April 29, 1996, as amended by Modification No. 1 on February 17, 1998 (as amended, the 1996 Consulting
Agreement). The 1996 Consulting Agreement expired on September 30, 2004. On May 25, 2004, we entered into an amendment and extension (Modification No. 2) to the 1996 Consulting Agreement which was effective
April 1, 2004. The 1996 Consulting Agreement, as amended by Modification No. 2, shall hereinafter be referred to as the 2004 Consulting Agreement. The 2004 Consulting Agreement expires September 30, 2009 unless renewed or
extended. The Barona Tribe has the right under the 2004 Consulting Agreement to negotiate an additional five year extension and a right to terminate after giving nine months notice.

Under the 2004 Consulting Agreement, we agreed to a fixed monthly fee of $575,000 for consulting services rendered to the Barona Tribe, with an annual
cost of living adjustment not to exceed 5%. In April 2005 our monthly fee increased to $597,000, and in April 2006 our monthly fee increased to $624,000, as a result of the annual cost of living adjustment. Fees under the 2004 Consulting Agreement
will continue to be subordinated under the terms of the subordination agreement, as discussed below. The initial term of the 2004 Consulting Agreement is five years. The 2004 Consulting Agreement also reaffirmed certain license and profit-sharing
rights to our Mariposa software that we had previously granted to the Barona Tribe, which are described in more detail below.

In
connection with a $200,000,000 loan obtained by the Barona Tribe relating to the Development of the Barona Valley Ranch (the Development Loan), we entered into a Reaffirmation, Consent and Amendment of Subordination Agreement in July
2001 (the Subordination Agreement). In October 2004, we reaffirmed the Subordination Agreement in connection with an amendment and restatement to the Development Loan (the Loan Agreement). The Subordination Agreement limits
the Barona Tribes ability to make payments to us if the debt coverage ratios set forth in the Loan Agreement are not met. No payments may be made if there is a default under the terms of the Loan Agreement that has not been cured or waived. As
of September 30, 2006, we are not aware of a default by the Barona Tribe of any of the terms of the Loan Agreement or a failure on the part of the Barona Tribe to meet the debt coverage ratios set forth in the Loan Agreement. Our consulting
fees under the 2004 Consulting Agreement continue to be subject to the Subordination Agreement.

From February 2005 until July 31,
2006, we provided business advisory services to Buena Vista Rancheria of Me-Wuk Indians (the Buena Vista Tribe), in connection with the establishment of a gaming operation on the Buena Vista Tribes reservation located near Ione, in
Northern California. Effective July 31, 2006, we no longer provide services to the Buena Vista Tribe.

Our Software Division

Our software division is dedicated to the ongoing operation, sales and product development of Mariposa, a fully-integrated CRM,
marketing and business intelligence software system for the gaming and hospitality industry. Mariposa consists of a suite of functionally distinct applications, each designed to address a specific set of requirements within the gaming and
hospitality industry. The applications may be licensed and deployed as an integrated solution or individually, depending upon the customers needs and financial resources. We have made, and may continue to make, material



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organizational changes, including adding staff, to cultivate qualified sales leads and to install, support and continue development of Mariposa and/or
related software products. If we remain a stand-alone company, this may involve material increases to our expenses and additional capital. At this time, we are uncertain whether we will be able to generate enough revenue to absorb the additional
expenses.

As of September 30, 2006, we had six uncompleted software contracts that, if completed, will result in additional aggregate
revenues of $5,154,000, exclusive of any potential support fees, at the time of their completion. There can be no assurance that we will complete all of the software contracts or that, if all of the software contracts are completed, they will be
completed pursuant to existing terms. We expect to incur additional costs to complete each of the software contracts. However, we believe that the costs will be less than the revenues to be recognized under each of the software contracts.

As part of our business relationship with the Barona Tribe and in return for use of the Barona Tribes gaming operations as a testing
and marketing platform for Mariposa, we have:



| |  |  | granted to the Barona Tribe a perpetual, royalty-free, non-exclusive and non-transferable license to use Mariposa at the Barona Valley Ranch including all upgrades, maintenance and
support;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | entered into a profit sharing arrangement with the Barona Tribe, whereby, so long as we have a consulting agreement in place with the Barona Tribe, we will pay them a percentage of
any net profits generated by Mariposa on a quarterly basis, based on the following sliding scale:
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 25% percent of the first $250,000 of the net profits per quarter;
| | - |  | -----------------------------------------------------------------



| |  |  | 30% percent of the second $250,000 of the net profits per quarter;
| | - |  | ------------------------------------------------------------------



| |  |  | 35% percent of the net profits in excess of $500,000 per quarter; and
| | - |  | ---------------------------------------------------------------------



| |  |  | agreed never to provide Mariposa or future related software products developed by us to any Native American tribe in San Diego County or within sixty-five miles of the Barona Valley
Ranch.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There were no profit-sharing payment obligations generated from the above-referenced profit sharing arrangement
during the three months ended September 30, 2006 and 2005.

On August 10, 2006, we entered into Modification No. 3
(Modification No. 3) to the 2004 Consulting Agreement which (a) deletes in its entirety Section 5 of the 2004 Consulting Agreement, which incorporated into the 2004 Consulting Agreement the license and profit sharing
rights with respect to Mariposa that were granted to the Barona Tribe as noted above, and (b) will cause Modification No. 3 to be subordinated to any other obligations of the Barona Tribe under any agreements through which the Barona Tribe
has borrowed funds for the construction of the Barona Valley Ranch.

On August 10, 2006, we also entered into the Barona Consent
Agreement with the Barona Tribe and IGT (the Barona Consent Agreement), pursuant to which (a) we will make a payment of $1,000,000 in cash to the Barona Tribe, (b) the Barona Tribe will assign to us any and all rights it may
have in and to Mariposa, (c) any existing licenses of Mariposa to the Barona Tribe will terminate, (d) we will grant to the Barona Tribe a royalty-free, non-exclusive (with certain exceptions discussed below), non-transferable (without
right to sublicense), perpetual license to use Mariposa at the Barona Valley Ranch as Mariposa exists in the Barona Tribes possession on the effective date of the Merger, (e) we and IGT will provide support, maintenance, updates,
upgrades, repair and other services with respect to Mariposa for so long as we or IGT provide such services to any customer and (f) the Barona Tribe will continue to make available its gaming operation to us and IGT as a testing and marketing
platform for Mariposa and other IGT system products. The license to use Mariposa granted to the Barona Tribe under the Barona Consent Agreement will be non-exclusive, except that it will be exclusive to the Barona Tribe in all of San Diego County,
California and the area within 65 miles of the Barona Valley Ranch. Notwithstanding this exclusivity, neither we nor IGT will be prohibited from incorporating or integrating Mariposa, or any of its components, into or with other VCAT or IGT products
or distributing or licensing such products in any geographic area. Under the Barona Consent Agreement, the Barona Tribe has also consented to the assignment of the 2004 Consulting Agreement, together with Modification No. 3, by us to any of
IGT, its affiliates or an entity owned and controlled by L. Donald Speer, II.

All of the rights and obligations of the parties to each of
Modification No. 3 and the Barona Consent Agreement are contingent upon, and will be effective simultaneously with, (a) the consummation of the Merger; (b) the effectiveness of VCATs assignment of the 2004 Consulting Agreement
together with Modification No. 3 to the LLC; and (c) the consent of the Barona Tribes lenders to Modification No. 3 and the Barona Consent Agreement, which consent has been obtained. See below for a more detailed discussion on
the Merger between IGT and VCAT.



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Agreement to Acquire VCAT by International Game Technology

On August 28, 2006, VCAT announced that it had entered into a definitive Agreement and Plan of Merger (the Merger Agreement) with IGT, a
wholly-owned subsidiary of International Game Technology, and Mariposa Acquisition Corp, a wholly-owned subsidiary of IGT (Merger Sub). The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the
Merger Agreement, Merger Sub will merge with and into VCAT (the Merger), with VCAT continuing as the surviving corporation and a wholly-owned subsidiary of IGT. At the effective time and as a result of the Merger, each share of VCAT
common stock issued and outstanding immediately prior to the effective time of the Merger (other than dissenting shares) will be cancelled and extinguished and shall be converted into the right to receive $2.58 in cash, without interest (the
Merger Consideration). IGT is not assuming any of VCATs stock options or agreements and, as a result and pursuant to the terms of VCATs applicable stock option plans or agreements, all unvested options to purchase VCAT common
stock will vest in full effective immediately prior to the closing of the Merger. All outstanding options to purchase VCAT common stock that are vested as of the effective time of the Merger, including those options that vest as a result of the
Merger, will be terminated in consideration for a cash payment equal to the product of (a) the excess, if any, of the Merger Consideration over the exercise price per share of such stock option and (b) the number of shares of VCAT common
stock issuable upon the exercise of such option.

As a condition precedent to the closing of the Merger, VCAT must divest itself of the
consulting services division. This divestiture required the negotiation of a modification to the Consulting Agreement with the Barona Tribe and consent to the divestiture from the Barona Tribe. IGT, as the prospective owner of VCAT, including all of
its assets, negotiated the divestiture of the consulting services division. On August 25, 2006, VCAT entered into an asset purchase agreement (the Asset Purchase Agreement) with a new entity (the LLC), controlled by
Mr. Speer. The Asset Purchase Agreement provides that, upon terms and subject to conditions set forth in the Asset Purchase Agreement, VCAT will sell to the LLC certain assets used by VCAT in its gaming consulting services division (exclusive
of its Mariposa software division but including the Consulting Agreement with the Barona Tribe and $500,000 in cash) for approximately $4.5 million in secured promissory notes (as described below) and the assumption by the LLC of certain liabilities
(the Asset Purchase). The LLC is to execute three promissory notes in favor of VCAT upon consummation of the Asset Purchase, including (a) a $500,000 promissory note, with interest at the annual rate of 6%, payable on the second
anniversary of the closing of the Asset Purchase; (b) a $2 million promissory note, with interest at the annual rate of 6%, payable in four annual installments on the first through fourth anniversaries of the closing of the Asset Purchase; and
(c) a $2 million promissory note, with interest an the annual rate of 6%, payable in three installments, one on the closing date of the Asset Purchase and the remaining two on the first day of the two calendar years subsequent to the closing
date of the Asset Purchase.

In connection with the Asset Purchase Agreement, VCAT and the LLC entered into a Consulting Services
Agreement. The Consulting Services Agreement provides that the LLC will provide consulting services to VCAT for an initial term of three years commencing on the closing date of the Asset Purchase. The LLC is to receive consulting fees of $2 million,
in three pre-paid installments, for all consulting services and deliverables to be provided during the three year term.

On August 25,
2006, the Compensation Committee of our Board of Directors approved the payment of cash bonuses to three executive officers of VCAT in connection with the Merger. The Compensation Committee provided for bonuses of $225,000, $100,000 and $100,000 to
be paid to Greg Shay, President, Chief Executive Officer and Chief Operating Officer, Kevin McIntosh, Senior Vice President, Chief Financial Officer, Treasurer and Secretary, and Javier Saenz, Senior Vice President, Information Systems,
respectively. Payment of such bonuses will be made by VCAT and is contingent upon (a) consummation of the Merger and (b) in the case of Mr. Saenz, remaining employed by IGT, VCAT and/or any affiliate of either VCAT or IGT until
August 25, 2007, and, in the case of Messrs. Shay and McIntosh, remaining employed by VCAT, LLC, VCAT, IGT, and/or affiliates of VCAT or IGT until August 25, 2007.

On October 11, 2006, VCAT filed a preliminary proxy with the Securities and Exchange Commission in connection with the solicitation by our board of
directors of proxies to be used at the special meeting of shareholders of VCAT to approve and adopt the Merger Agreement and the Asset Purchase Agreement.

On October 31, 2006, VCAT and IGT entered into a Consulting Services Agreement pursuant to which VCAT will provide consulting services to IGT prior to the closing of the merger. VCAT will be paid an hourly fee
for actual time worked and will be reimbursed for certain expenses. The consulting services will be performed by Mr. Saenz, Senior Vice President, Information Services.



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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses for each period. Critical accounting policies are defined as policies that management believes are (a) the most important
to the portrayal of our financial condition and results of operations; and (b) that require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently
uncertain.

We believe that revenue recognition and accounting for deferred income taxes are the most critical accounting policies that
impact our financial statements.

Revenue Recognition-Consulting Division

Consulting Services. In accordance with the applicable revenue recognition guidelines, revenue for consulting and advisory services is recognized
when the services are rendered, provided all of the following criteria are met:



| |  |  | persuasive evidence of an arrangement exists;
| | - |  | ---------------------------------------------



| |  |  | services have been rendered;
| | - |  | ----------------------------



| |  |  | the fee is fixed or determinable; and
| | - |  | -------------------------------------



| |  |  | collectibility is reasonably assured.
| | - |  | -------------------------------------

Consulting service
revenues from the Barona Tribe are recorded monthly, as earned, pursuant to the above referenced guidelines. Additionally, as an incentive to the Barona Tribe to enter into the 2004 Consulting Agreement, we granted the Barona Tribe certain Mariposa
profit sharing rights, which are incorporated in the 2004 Consulting Agreement. These profit sharing rights may periodically generate cash obligations from VCAT to the Barona Tribe, and in accordance with applicable accounting guidelines such
obligations will be recorded as a reduction of the revenues earned from the Barona Tribe.

Advisory service revenues from the Buena Vista
Tribe were recorded monthly as earned, pursuant to the above referenced guidelines.

Revenue Recognition-Software Division

Software Products and Related Services.We expect to derive a portion of our revenues from licensing Mariposa and the sale of related professional
services, including integration, installation and training (collectively, professional services) and maintenance and support services (support services). Inherent in the software revenue recognition process are significant
estimates and judgments which influence the timing and amount of revenues recognized.

In accordance with the applicable revenue
recognition guidelines, if the arrangement between vendor and purchaser does not require significant production, modification or customization of software, revenue should be recognized when all of the following criteria are met:



| |  |  | persuasive evidence of an arrangement exists;
| | - |  | ---------------------------------------------



| |  |  | delivery has occurred;
| | - |  | ----------------------



| |  |  | the vendors fee is fixed or determinable; and
| | - |  | ----------------------------------------------



| |  |  | collectibility is probable.
| | - |  | ---------------------------



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Our standard software contracts are multiple element arrangements that include both software products and
professional services. The professional services are essential to the functionality of the software products, which require significant modification to meet the customers purpose; therefore contract accounting is applied to both the software
and professional service elements of the arrangement. The final determination for revenue recognition policies and related accounting issues will be made based on the specific details of each software contract, which could result in the application
of alternative revenue recognition policies in the future.

Mariposa is a complex software system that, in order to meet the
customers functionality, must work in conjunction with the customers player tracking system and a number of other customer data systems. As a result of the difficulty in making dependable estimates and customer acceptance rights, we are
using the completed contract method and will recognize revenue and cost of revenues for each software contract at the time of completion of all elements of a multiple element arrangement. Provisions for contract adjustments and losses are recorded
in the period such items are identified.

Billings and costs related to our uncompleted software contracts are accumulated on the balance
sheet. When accumulated costs exceed related billings to date, they are recorded as an asset called costs in excess of billings, uncompleted software contracts. If billings to date exceed related costs incurred, a liability is recorded
called billings in excess of costs, uncompleted software contracts. Contracts are segregated for purposes of recording related assets and liabilities.

Support services are provided pursuant to a separate contractual arrangement, or for one software client, pursuant to an annual term license agreement. Fees for support services are recognized ratably over the term of
the support period. Deferred revenues are recorded when billings for support services exceed revenues recognized to date.

Business
Intelligence Services. We recently expanded our service offerings to Mariposa clients and other potential clients to include value-added data analysis and marketing related services (marketed as and referred to as business intelligence
services). Business intelligence services revenues are earned and recognized as services are provided. Deferred revenues are recorded when billings for business intelligence services exceed revenues recognized to date.

Deferred Income Taxes

We record a
valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized pursuant to SFAS No. 109, Accounting for Income Taxes. In evaluating our ability to recover our
deferred tax assets, we consider all available positive and negative evidence which is, in part, based upon our estimate of current and future taxable income. In estimating future taxable income, we use assumptions that require significant judgment.

Results of Operations

Three Months Ended
September 30, 2006 Compared with the Three Months Ended September 30, 2005.

Revenues

Revenues for the three months ended September 30, 2006 were $2,073,000 compared to $2,071,000 for the three months ended September 30, 2005.

Revenues in our consulting services division for the three months ended September 30, 2006 decreased to $1,923,000 from $1,946,000
earned during the three months ended September 30, 2005. During the current period, we earned (a) $1,873,000 in fees for consulting services provided to the Barona Tribe and (b) $50,000 in revenues from advisory services provided to
the Buena Vista Tribe. During the prior year period, we earned (a) $1,792,000 in fees for consulting services provided to the Barona Tribe; (b) $150,000 in revenues from advisory services provided to the Buena Vista Tribe; and
(c) $4,000 in other revenues. Revenues earned from the Barona Tribe increased during the current year period as compared to the same period in the prior year as a result of cost of living adjustment applied to the fees in April of each year.
Revenues earned from the Buena Vista Tribe decreased in the current year period as compared to the prior year period as a result of the termination of the Advisory Agreement between VCAT and the Buena Vista Tribe effective July 31, 2006.

Revenues from our software products and related services during the three months ended September 30, 2006 increased 21% to $150,000
from $125,000 earned during the three months ended September 30, 2005. The revenues in the current year period resulted from (a) fees for support services of $131,000; (b) $12,000 from business intelligence services; (c) $7,000
in revenues from the completion of a software contract change order; and (d) $1,000 from out-of-pocket expenses re-billed to customers. The revenues in the prior year period resulted from (a) $120,000 of fees for support services and
(b) $5,000 from



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software contract change orders and out-of-pocket expenses re-billed to customers. Revenues from our software products and related services increased in the
current year period as compared to the prior year period as a result of an increase in the number of support contracts in effect during the current year.

Cost of Revenues

The cost of revenues during the three months ended September 30, 2006
increased 2% to $1,009,000, compared to $993,000 during the same period last year.

Cost of revenues in our consulting services division
consist primarily of compensation and other personnel-related expenses, costs of services provided by third-party consultants and service providers, client relations expenses, allocated overhead expenses and other direct costs related to providing
consulting services to the Barona Tribe and, through July 31, 2006, advisory services to the Buena Vista Tribe. The cost of revenues in the current year period in our consulting services division was $709,000 compared to $715,000 incurred
during the same period last year. The decrease in the cost of revenues was the result of a decrease in (a) client relations expenses of $33,000; (b) other direct costs for providing services to the Barona Tribe and Buena Vista Tribe of
$24,000, including business gifts, charitable contributions, and sponsorships; (c) third-party professional services of $23,000; (d) travel and lodging expenses of $14,000; and (e) costs incurred in connection with providing software
support services to the Barona Tribe of $11,000. The decrease was partially offset by an increase in compensation and related costs of $59,000 and allocated overhead expenses of $41,000.

The cost of revenues in our software division consisted primarily of compensation and other personnel-related expenses, allocated overhead expenses, and
other direct costs related to our software products and related services. Cost of revenues are incurred in connection with integration, installation and training services for completed software contracts and contract change orders, maintenance and
support for our software products, and our business intelligence services. The cost of revenues in our software division during the current year period increased 8% to $299,000 from $278,000 incurred during the same period last year. Expenses during
the current year period increased primarily as a result of an increase in compensation and other personnel-related expenses of $122,000, resulting from an increase in the number of software division employees during the current year period. The
increase was partially offset by a decrease in costs incurred in connection with providing maintenance and support services of $101,000.

General Operating and Administrative Expenses

General and administrative expenses include costs associated with our
finance, human resources, legal and other operating and administrative functions. These costs consist primarily of compensation and other personnel-related expenses, professional services fees, facilities, depreciation, insurance costs, allocated
overhead expenses and other administrative costs. General operating and administrative expenses during the three months ended September 30, 2006 increased 4% to $1,063,000 from $1,019,000 incurred during the three months ended
September 30, 2005. The increase was primarily attributable to an increase in (a) professional services of $146,000, primarily comprised of professional services fees in connection with the strategic transaction with IGT in the current
year period and legal fees incurred in connection with the Mariposa related litigation in the prior year period; (b) compensation and other personnel-related expenses of $53,000 resulting primarily from additional employees performing general
and administrative functions; (c) other general and administrative expenses of $36,000; and (d) charitable contributions of $13,000. The increase was partially offset by a decrease in (a) allocated overhead expenses of $150,000,
resulting from an increase in allocated overhead expenses to other divisions and cost centers; (b) facility and related expenses of $26,000; (c) third-party consultant costs of $19,000, and (d) membership dues and subscriptions of
$9,000.

Sales and Marketing

Sales and marketing expenses consist primarily of compensation and other personnel-related expenses, costs of marketing programs, including trade shows and advertising, and travel and lodging expenses in connection with sales efforts. Sales
and marketing expenses during the three months ended September 30, 2006 decreased 21% to $218,000 from $275,000 incurred during the three months ended September 30, 2005. The decrease was primarily a result of a decrease in marketing
costs, including tradeshows and advertising, of $109,000. The decrease was the result of the Global Gaming Exposition (G2E), a large industry trade show, being held in November 2006, whereas in the prior year G2E was held in September
2005. We incur significant expenses in connection with G2E. The decrease was partially offset by an increase in (a) compensation and other personnel-related expenses of $34,000, primarily as a result of sales commission earned during the
current year period; (b) allocated overhead expenses of $12,000; and (c) other direct costs incurred in connection with business development efforts of $6,000.



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Research and Development

Research and development expenses consist primarily of compensation and other personnel-related expenses for internal engineering personnel, allocated
overhead expenses, professional services and equipment and software used in the development of our software products and related services.

During the three months ended September 30, 2006, research and development expenses increased 6% to $66,000, from $62,000 during the three months ended September 30, 2005. The increase was the result of an increase in professional
services costs of $17,000 and allocated overhead expenses of $10,000, partially offset by a decrease in compensation and other personnel-related expenses for internal engineering personnel of $21,000.

Other Income and Expense

During the
three months ended September 30, 2006, interest income increased to $51,000 from $32,000 earned during the three months ended September 30, 2005, primarily as a result of higher interest rates for our investments and an increase in our
average cash balance.

During the three months ended September 30, 2006 other income included $1,000 in other losses resulting from
the disposition of fixed assets. During the three months ended September 30, 2005, other income included $47,000 resulting from litigation settlement.

Income Tax Benefit

We recorded an income tax benefit during the three months ended
September 30, 2006 of $142,000 as a result of applying the estimated annual effective tax rate of 61% to the net loss for the period. The estimated annual effective tax rate of 61% is higher than the statutory tax rate due primarily to
permanent non-deductible differences. We recorded an income tax benefit of $114,000 during the three months ended September 30, 2005, as a result of applying our estimated annual effective tax rate in the prior year period to the loss recorded
in the prior year period.

Liquidity and Capital Resources

Our principal source of liquidity at September 30, 2006, consisted of unrestricted cash and cash equivalents of $4,614,000 and our cash flows from operations.

During the three months ended September 30, 2006, our cash position increased by $262,000 from the June 30, 2006 balance of $4,352,000. This
increase was a result of cash provided by operating activities of $368,000 partially offset by cash used in investing activities of $106,000.

During the three months ended September 30, 2006, cash provided by operating activities of $368,000 resulted primarily from consulting fee payments from the Barona Tribe of $1,873,000, advisory fee payments from the Buena Vista Tribe
of $100,000, and payments received pursuant to our software contracts of $1,165,000, less our operating cash expenditures and payments during the year. Cash used in investing activities of $106,000 resulted from the purchase of fixed assets.

If we remain a stand-alone company, subject to the terms of the Subordination Agreement, we expect to continue to receive monthly
consulting fee payments from the Barona Tribe through the end of the term of the 2004 Consulting Agreement in March 2009. If the proposed Merger with IGT is completed, we expect to sell the consulting business to the LLC and no longer receive these
fees.

Over the next twelve months, we expect to receive up to $3,039,000 in additional payments from clients in our software division
pursuant to uncompleted software contracts which we have entered into as of September 30, 2006. There can be no assurance that all of the uncompleted contracts will be completed and that all remaining payments will be made to us or, that if all
contracts are completed, that they will be completed pursuant to existing terms. Although we expect to incur costs to complete the software contracts the amount of costs cannot be estimated at this time. However, we expect the aggregate costs to be
incurred to be less than revenues to be earned.



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As noted above, on August 28, 2006, we announced that we had entered into a definitive Agreement and
Plan of Merger with IGT whereby IGT will acquire all of the outstanding shares of VCAT for $2.58 per share in cash. Under the terms of the agreement, VCAT will merge with and into a wholly-owned subsidiary of IGT, with VCAT surviving the merger as a
wholly-owned subsidiary of IGT. The transaction, which has been approved by the board of directors of each company, is subject to approval by our shareholders, applicable regulatory approvals and other customary closing conditions. Cash requirements
pursuant to the acquisition will be funded from our current cash balances. Expenses related to the merger, which were approximately $901,000 as of September 30, 2006, have been significant. We expect to continue to incur significant expenses in
connection with the transaction.

As of September 30, 2006, we have no significant capital commitments.

Our principal sources of liquidity to fund operations have been existing cash and cash equivalents on hand and cash generated by operations. If we remain
a stand-alone company, we believe these sources will be sufficient to fund expected capital expenditures, and to meet our working capital requirements and other cash needs during the next twelve months.

Off-Balance Sheet Arrangements

We do not use special
purpose entities or other off-balance sheet financing techniques.

Risk Factors

Risks Related to our Proposed Acquisition by International Game Technology

There is no assurance that the proposed merger transaction with IGT will be completed. If the Merger is not completed, our business may be adversely
affected.

Completion of the Merger is subject to several closing conditions, including obtaining requisite shareholder approval,
obtaining third party consents and regulatory approvals and the absence of any material adverse event. There can be no assurance that these conditions will be met and the Merger will be completed.

If the Merger is not completed, the trading prices of the Common Stock may decline to the extent that the current market price of our shares reflects a
market assumption that the proposed Merger will be completed. We also have paid and will be required to pay significant costs incurred in connection with the Merger, including legal, accounting and a portion of financial advisory fees, whether or
not the Merger is completed. Moreover, under specified circumstances, we may be required to pay IGT a termination fee of $750,000 pursuant to the Merger Agreement, in connection with its termination.

Failure to complete the merger could negatively affect VCATs stock prices and future business and operations.

If the merger is not completed for any reason, the price of VCATs common stock may decline to the extent that the current market price of
VCATs common stock reflects a positive market assumption that the transaction will be completed. In addition, if the merger agreement is terminated, VCAT may be unable to find a third party willing to engage in a similar transaction on terms
as favorable as those set forth in the merger agreement, or at all. This could limit VCATs ability to pursue its strategic goals in an atmosphere of increased uncertainty.

General uncertainty related to the merger could harm VCAT.

Although VCAT is not aware that any of its customers have, as of the date hereof, delayed, deferred or cancelled any purchasing decisions with respect to existing agreements, there is a risk they may delay, defer or
cancel such purchasing decisions in response to the announcement of the proposed transaction or delay of its completion. If VCATs customers delay, defer or cancel such decisions, the revenues of VCAT, could be reduced.

Speculation regarding the likelihood of the closing of the transaction could increase the volatility of VCATs share prices.



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Some of VCATs officers and directors have interests in the merger and divestiture of the gaming
consulting services division that may influence them to support or approve the transaction.

Some of the directors of VCAT who recommend
that you vote in favor of the transaction, the members of the special committee who have made recommendations to the board of directors, and the officers of VCAT who provided information to the VCAT board of directors relating to the transaction,
have employment, indemnification, stock option and bonus arrangements that provide them with interests in the transaction that may differ from yours. The receipt of compensation or other benefits in the transaction may have influenced VCATs
directors in making their recommendation that you vote in favor of the transactions called for by the merger agreement, the special committee in making their recommendation that the board of directors vote in favor of the transactions called for by
the merger agreement, and the officers in making recommendations to the special committee and the board of directors relating to the transaction.

VCAT will incur substantial costs whether or not the merger is completed.

VCAT will incur substantial costs related to the
merger whether or not the transaction is completed. These costs include fees for financial advisors, attorneys and accountants, filing fees and financial printing costs. In addition, if VCAT terminates the merger agreement, it may be obligated to
pay a termination fee to IGT under certain circumstances.

Risks Related to our Financial Condition

We have limited resources to grow our business.

As of September 30, 2006, our cash and cash equivalents were $4,614,000. Our limited cash and cash equivalent reserves may limit our ability to pursue other business opportunities unless we obtain additional
funds from operations or from other sources. If we are unable to pursue or exploit future business opportunities, it could have an adverse effect on the growth of our business.

Risks Related to our Consulting Agreement and Business Concentration with the Barona Tribe

Our revenues are currently substantially dependent upon one client, the Barona Tribe.

We have historically derived the majority of our revenue from providing consulting services to the Barona Tribe. The loss of the Barona Tribe as a client,
or a material reduction in the fees that we earn from the Barona Tribe, would have a material adverse effect on our business and may result in our inability to continue to operate the business or invest in the growth of our software division.

We have entered into subordination agreements that, under certain circumstances, may preclude the Barona Tribe from making payments to
us for consulting services.

Our right to receive fees from the Barona Tribe is subordinated to certain senior debt of the Barona Tribe.
In connection with two of the Barona Tribes financings, we entered into agreements pursuant to which the Barona Tribe may not pay us any fees if there is a default under the applicable financing documents. In addition, one of those financing
agreements also limits the Barona Tribes ability to make payments to us if its debt coverage ratios, which are set forth in the loan agreement, are not met. Moderate or severe economic downturns or adverse conditions, nationally and especially
in Southern California, may negatively affect the Barona Valley Ranchs operations which may result in the Barona Tribe being precluded from making payments to us. If, as a result of negative economic or other adverse conditions, the Barona
Tribe is precluded from making payments to us, we will still be obligated to provide services to the Barona Tribe under the 2004 Consulting Agreement and, in connection with providing such services, it is possible that we will deplete our cash and
cash equivalents. If that should occur, and we are not able to generate alternative sources of revenues to finance our operations, we may not be able to continue to operate our business.

Approval of the Consulting Agreement by appropriate regulatory authorities is still pending.

In March 1999, the National Indian Gaming Commission (the NIGC) commenced a preliminary review of our relationship with the Barona Tribe,
including a review of the 1996 Consulting Agreement. Such review is still pending. In addition, the NIGC, and the Bureau of Indian Affairs (the BIA), if the BIA believes such review to be necessary, have not yet approved the 2004
Consulting Agreement. If the 2004 Consulting Agreement is not approved or is significantly modified



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by regulatory authorities to our detriment, or if the review by the NIGC of our relationship with the Barona Tribe is adverse to us, such action(s) could
have a material adverse effect on our business and financial condition. In addition, the regulatory review could result in our being required to pay fines or incur additional expenses, all of which could have a material adverse effect on our
business and financial condition.

There has been an increase in competition in the Southern California market.

The expansion of gaming activities in California has resulted in experienced gaming companies negotiating or entering into contracts with Native American
tribes in California. There has been an increase in the number of Native American casinos open and operating in the Southern California marketplace and there are additional casinos that will be opening, or that are attempting to open, in this area,
all of which may be competing for the same customers. This increased competition could reduce the profit levels achieved at the Barona Valley Ranch. In addition, changes in California law (including by ballot initiatives) that would have the effect
of expanding gaming operations by persons other than Native American tribes could result in even more competition. Under the terms of the 2004 Consulting Agreement, if unforeseen circumstances or factors beyond the control of the Barona Tribe or us
result in a significant reduction in the financial viability or profitability of the Barona Valley Ranch, we may be required to renegotiate our arrangement with the Barona Tribe or, if such adverse circumstances persist over time, the Barona Tribe
would have the right to terminate our engagement with nine months notice or on terms to be mutually agreed upon in good faith by us and the Barona Tribe.

Risks Related to Mariposa and our Software Business

We may not be able to compete in the
CRM software market.

We compete in the highly competitive CRM software market. A principal source of competition is our potential
customers internal information technology departments, which may develop systems that provide for some or all of the functionality of our applications. Our products also compete with products or solutions offered by numerous competitors.
Compared to us, many of these competitors have a longer operating history, greater name recognition, larger customer bases and significantly greater financial resources. This may place us at a disadvantage in responding to our competitors
pricing strategies, technological advances, advertising campaigns, strategic partnerships and other initiatives. Competitive pressures and our perceived viability in this market may make it difficult for us to acquire and retain customers.

If we fail to keep pace with technological innovation, improve our existing products, or develop new products, Mariposa could become
obsolete.

The market for CRM software products is marked by rapid technological change, frequent new product introductions, uncertain
product life cycles, changes in client demands and evolving industry standards. If we are unable to market Mariposa on a timely and cost-effective basis, we may not generate significant revenues from the sale or license of our software products and
services. In marketing Mariposa, we may:



| |  |  | fail to respond to technological changes in a timely or cost-effective manner;
| | - |  | ------------------------------------------------------------------------------



| |  |  | encounter software products, capabilities or technologies developed by others that render Mariposa obsolete or noncompetitive or that shorten the life cycle of Mariposa;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | experience difficulties that could delay or prevent the successful development, marketing and deployment of Mariposa; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | fail to achieve broad market acceptance of Mariposa.
| | - |  | ----------------------------------------------------

If our product does not operate with the wide variety of hardware, software and operating systems used by our current and potential customers, our revenues would be harmed.

We currently market Mariposa to a customer base that uses a wide variety of constantly changing hardware, software applications, operating and other
systems. Mariposa will gain broad market acceptance only if it can support a wide variety of hardware, software applications, systems and standards, including those developed in the future.



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Mariposa could contain undetected errors or failures.

Mariposa may contain undetected errors or failures. This may result in the loss of, or delay in, the market acceptance of Mariposa and could cause us to
incur significant costs to correct errors or failures or to pay damages suffered by customers as a result of such errors or failures.

Errors in Mariposa also may be caused by defects in third-party software incorporated into our software. If so, we may not be able to fix the defects without the cooperation of the software providers. Since these defects may not be as
significant to the software provider as they are to us, we may not receive the rapid cooperation that it requires. We may not have the contractual right to access the source code of third-party software and, even if we have the right to access the
source code, we may not be able to fix the defect. Our customers could seek significant compensation from us for their losses resulting from defects in our products. Even if unsuccessful, a product liability claim brought against us could be time
consuming and costly.

If we are unable to protect our intellectual property or become subject to intellectual property infringement
claims, we may lose a valuable asset or incur costly and time-consuming litigation.

Our success depends in part on the development and
protection of the proprietary aspects of our technology as well as our ability to operate without infringing the proprietary rights of others. To protect our proprietary technology, we rely primarily upon the protections afforded under the trade
secret, copyright, trademark, and patent laws, as well as upon confidentiality procedures and contractual restrictions. Despite our efforts to protect our proprietary rights and technology, unauthorized parties may attempt to copy aspects of our
products, obtain the source code to our software, or use other information that we regard as proprietary. Such parties may also attempt to develop software competitive to ours. Our means of protecting our proprietary rights may not be adequate, and
our competitors may independently develop similar technology or duplicate our products or software. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and
scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. Any such litigation could result in substantial costs and diversion of resources that could have a material adverse effect on our business,
operating results and financial condition.

We have filed six U.S. patent applications, all of which remain pending in the Patent Office.
We have also filed two corresponding international patent applications. In addition, we may file additional patent applications in the future. It is possible that these patent applications will not issue as patents and that, even if issued, the
validity or enforceability of such patents may be successfully challenged. It is also possible that we may not develop additional proprietary products or technologies that are patentable; that any patents issued to us may fail to provide us with
competitive advantage and that the patents of others may materially harm our ability to do business. In the future, a third party may bring suit claiming that our products or software infringe its patents, trade secrets or copyrights. Any claims,
with or without merit, could be costly and time-consuming to defend, divert our managements attention, or cause product delays. If our products or software were found to infringe a third partys proprietary rights, we could be required to
enter into royalty or licensing agreements to be able to license or sell our products or software. Royalty and licensing agreements, if required, may not be available on terms that are acceptable to us (or at all), which could materially harm our
business.

Other Risks

Our business is subject to strict regulation by gaming authorities.

We operate in a highly regulated industry and our
ability to operate in certain jurisdictions could be subject to extensive federal, state, local and foreign regulation by various gaming authorities. Although the laws and regulations of the various jurisdictions in which we may operate vary in
their technical requirements, and are subject to amendment from time to time, virtually all these jurisdictions could require licenses, permits, documentation of our qualifications, including evidence of integrity and financial stability, and other
forms of approval for us, as well as for our officers, directors, major shareholders and key personnel. We will attempt to obtain all licenses, permits, registrations, findings of suitability and approvals necessary; however, there can be no
assurance those licenses, permits, registrations, findings of suitability or approvals will be granted. Additionally, there can be no assurance that any regulatory agency will not enact new rules or change regulations that would negatively impact
our ability to operate within such jurisdictions.

We are dependent upon our Chairman of the Board and other key personnel.

Our success largely depends upon the continued contributions of L. Donald Speer, II, VCATs Chairman of the Board. The loss of
Mr. Speers services, for any reason, would have a material adverse effect on our success and prospects. We have



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not entered into an employment agreement with Mr. Speer. If Mr. Speer was to leave VCAT or his services to us became unavailable, there can be no
assurance that we will be able to find a suitable replacement, particularly in connection with our ability to perform consulting services to the Barona Tribe.

Our future performance in our software division also depends in significant part upon the continued service of our key technical and senior management personnel. We have a small number of employees and our dependence
on maintaining our relationships with key employees is particularly significant.



|Item 3. | Controls and Procedures
|------- | -----------------------

Evaluation of
Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures (as defined in
Rules 13(a)-15(e) under the Securities Act of 1934, as amended) are effective to ensure that all information required to be disclosed by us in the reports filed or submitted by us under the Securities and Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to
our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate and allow timely decisions regarding required disclosure.

Changes in Internal Controls.In connection with the above-referenced evaluation, no change in our internal control over financial reporting occurred during the period covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART IIOTHER INFORMATION



|Item 6. | Exhibits
|------- | --------

(a) Exhibits.

The Exhibits listed below are hereby filed with the U.S. Securities and Exchange Commission (the Commission) as part of this Quarterly Report
on Form 10-QSB.



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|            | 
|2.1 *       |  | Agreement and Plan of Merger, dated as of August 25, 2006, by and among IGT, Mariposa Acquisition Corp. and Venture Catalyst Incorporated, previously filed as Exhibit 2.1 to VCATs
Current Report on Form 8-K dated August 25, 2006 filed with the Commission on August 28, 2006 (File No. 0-11532), which is incorporated herein by reference.                                                                                                                                    
|            | 
|2.2 *       |  | Asset Purchase Agreement dated August 25, 2006 by and between VCAT, LLC and Venture Catalyst Incorporated, previously filed as Exhibit 2.2 to VCATs Annual Report on Form 10-KSB for
the Fiscal Year Ended June 30, 2006, filed with the Commission on September 27, 2006 (File No. 0-11532), which is incorporated herein by reference.                                                                                                                                            
|            | 
|3.1 *       |  | Articles of Amendment of Articles of Incorporation of VCAT, filed with the Secretary of State of Utah on December 10, 1999, previously filed as Exhibit 3.1 to VCATs Quarterly
Report on Form 10-QSB for the Quarterly Period Ended December 31, 1999, filed with the Commission on February 14, 2000 (File No. 0-11532), which is incorporated herein by reference.                                                                                                                
|            | 
|3.2 *       |  | Amended and Restated Articles of Incorporation of VCAT (formerly known as Twin Creek Exploration Co., Inc.), previously filed as Exhibit 3.1 to VCATs Annual Report on form 10-KSB for
the Fiscal Year Ended June 30, 1995, filed with the Commission on October 12, 1995 (File No. 0-11532), which is incorporated herein by reference.                                                                                                                                            
|            | 
|3.3 *       |  | Amended and Restated Bylaws of VCAT, as amended, previously filed as Exhibit 3.1 to VCATs Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2003, filed with
the Commission on May 13, 2003 (File No. 0-11532), which is incorporated herein by reference.                                                                                                                                                                                               
|            | 
|10.1        |  | Letter agreement between Greg Shay and VCAT, dated November 7, 2006, regarding retention bonus payments in connection with the merger between VCAT and IGT.                                                                                                                                                                                                                                                                                                                          
|            | 
|10.2        |  | Letter agreement between Kevin McIntosh and VCAT, dated November 7, 2006, regarding retention bonus payments in connection with the merger between VCAT and IGT.                                                                                                                                                                                                                                                                                                                     
|            | 
|10.3        |  | Letter agreement between Javier Saenz and VCAT, dated November 7, 2006, regarding retention bonus payments in connection with the merger between VCAT and IGT.                                                                                                                                                                                                                                                                                                                       
|            | 
|10.4        |  | Letter agreement between Jana McKeag and VCAT, effective September 11, 2006, regarding base compensation and bonus.                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|10.5 *      |  | This Business Advisory Agreement Modification agreement entered into on August 7, 2006, to modify the termination date of the Business Advisory Agreement (Agreement) dated January 31, 2005,
by and between the Buena Vista Rancheria of Me-Wuk Indians (the Tribe) and VCAT, previously filed as Exhibit 99.1 to VCATs Current Report on Form 8-K dated August 7, 2006 filed with the Commission on August 11, 2006 (File No. 0-11532), which
is incorporated herein by reference.
|            | 
|10.6 *      |  | Modification No. 3 to Amended and Restated Consulting Agreement dated August 10, 2006 between the Barona Band of Mission Indians and Venture Catalyst Incorporated, previously filed as Exhibit
10.29 to VCATs Annual Report on form 10-KSB for the Fiscal Year Ended June 30, 2006, filed with the Commission on September 27, 2006 (File No. 0-11532), which is incorporated herein by reference.                                                                                 



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|            |  |                                                                                                                                                                                                                                                                                                                                                                                                  
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                      
|            | 
|10.7 *      |  | Barona Consent Agreement dated August 10, 2006 by and among the Barona Band of Mission Indians, Venture Catalyst Incorporated and International Game Technology, previously filed as Exhibit
10.30 to VCATs Annual Report on form 10-KSB for the Fiscal Year Ended June 30, 2006, filed with the Commission on September 27, 2006 (File No. 0-11532), which is incorporated herein by reference.
|            | 
|10.31 *     |  | Consulting Services Agreement dated August 25, 2006 by and between Venture Catalyst Incorporated and VCAT, LLC, previously filed as Exhibit 10.31 to VCATs Annual Report on form 10-KSB
for the Fiscal Year Ended June 30, 2006, filed with the Commission on September 27, 2006 (File No. 0-11532), which is incorporated herein by reference.                                                 
|            | 
|10.32       |  | First Amendment to Consulting Services Agreement, dated October 5, 2006, by and among Venture Catalyst Incorporated and VCAT, LLC.                                                                                                                                                                                                                                                               
|            | 
|31.1        |  | Certification of Chief Executive Officer of Venture Catalyst Incorporated, pursuant to Rule 13a-14 of the Securities Exchange Act.                                                                                                                                                                                                                                                               
|            | 
|31.2        |  | Certification of Chief Financial Officer of Venture Catalyst Incorporated, pursuant to Rule 13a-14 of the Securities Exchange Act.                                                                                                                                                                                                                                                               
|            | 
|32.1        |  | Certification of Chief Executive Officer of Venture Catalyst Incorporated, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                             
|            | 
|32.2        |  | Certification of Chief Financial Officer of Venture Catalyst Incorporated, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                             

---

|* | Exhibits incorporated by reference.
|- | -----------------------------------



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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.



|                       |  |  |  |                                                   |  |                    |  |                                                                                                                                                          
|---------------------- |  |  |  | ------------------------------------------------- |  | ------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|                       |  |  |  | VENTURE CATALYST INCORPORATED, a
Utah Corporation
|                       |  |  | 
|Date: November 8, 2006 |  |  |  | By:                                               |  | /s/ GREG SHAY     
|                       |  |  |  |                                                   |  |                    |  | Greg Shay Chief Executive Officer, President and Chief Operating Officer (Authorized Signatory,
Principal Executive Officer)                             
|                       |  |  | 
|Date: November 8, 2006 |  |  |  | By:                                               |  | /s/ KEVIN MCINTOSH
|                       |  |  |  |                                                   |  |                    |  | Kevin McIntosh Senior Vice President, Chief Financial Officer, Secretary and Treasurer (Authorized Signatory, Principal Financial and Accounting Officer)



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Exhibit Index



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|            | 
|2.1 *       |  | Agreement and Plan of Merger, dated as of August 25, 2006, by and among IGT, Mariposa Acquisition Corp. and Venture Catalyst Incorporated, previously filed as Exhibit 2.1 to VCATs
Current Report on Form 8-K dated August 25, 2006 filed with the Commission on August 28, 2006 (File No. 0-11532), which is incorporated herein by reference.                                                                                                                                    
|            | 
|2.2 *       |  | Asset Purchase Agreement dated August 25, 2006 by and between VCAT, LLC and Venture Catalyst Incorporated, previously filed as Exhibit 2.2 to VCATs Annual Report on Form 10-KSB for
the Fiscal Year Ended June 30, 2006, filed with the Commission on September 27, 2006 (File No. 0-11532), which is incorporated herein by reference.                                                                                                                                            
|            | 
|3.1 *       |  | Articles of Amendment of Articles of Incorporation of VCAT, filed with the Secretary of State of Utah on December 10, 1999, previously filed as Exhibit 3.1 to VCATs Quarterly
Report on Form 10-QSB for the Quarterly Period Ended December 31, 1999, filed with the Commission on February 14, 2000 (File No. 0-11532), which is incorporated herein by reference.                                                                                                                
|            | 
|3.2 *       |  | Amended and Restated Articles of Incorporation of VCAT (formerly known as Twin Creek Exploration Co., Inc.), previously filed as Exhibit 3.1 to VCATs Annual Report on form 10-KSB for
the Fiscal Year Ended June 30, 1995, filed with the Commission on October 12, 1995 (File No. 0-11532), which is incorporated herein by reference.                                                                                                                                            
|            | 
|3.3 *       |  | Amended and Restated Bylaws of VCAT, as amended, previously filed as Exhibit 3.1 to VCATs Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2003, filed with
the Commission on May 13, 2003 (File No. 0-11532), which is incorporated herein by reference.                                                                                                                                                                                               
|            | 
|10.1        |  | Letter agreement between Greg Shay and VCAT, dated November 7, 2006, regarding retention bonus payments in connection with the merger between VCAT and IGT.                                                                                                                                                                                                                                                                                                                          
|            | 
|10.2        |  | Letter agreement between Kevin McIntosh and VCAT, dated November 7, 2006, regarding retention bonus payments in connection with the merger between VCAT and IGT.                                                                                                                                                                                                                                                                                                                     
|            | 
|10.3        |  | Letter agreement between Javier Saenz and VCAT, dated November 7, 2006, regarding retention bonus payments in connection with the merger between VCAT and IGT.                                                                                                                                                                                                                                                                                                                       
|            | 
|10.4        |  | Letter agreement between Jana McKeag and VCAT, effective September 11, 2006, regarding base compensation and bonus.                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|10.5 *      |  | This Business Advisory Agreement Modification agreement entered into on August 7, 2006, to modify the termination date of the Business Advisory Agreement (Agreement) dated January 31, 2005,
by and between the Buena Vista Rancheria of Me-Wuk Indians (the Tribe) and VCAT, previously filed as Exhibit 99.1 to VCATs Current Report on Form 8-K dated August 7, 2006 filed with the Commission on August 11, 2006 (File No. 0-11532), which
is incorporated herein by reference.
|            | 
|10.6 *      |  | Modification No. 3 to Amended and Restated Consulting Agreement dated August 10, 2006 between the Barona Band of Mission Indians and Venture Catalyst Incorporated, previously filed as Exhibit
10.29 to VCATs Annual Report on form 10-KSB for the Fiscal Year Ended June 30, 2006, filed with the Commission on September 27, 2006 (File No. 0-11532), which is incorporated herein by reference.                                                                                 
|            | 
|10.7 *      |  | Barona Consent Agreement dated August 10, 2006 by and among the Barona Band of Mission Indians, Venture Catalyst Incorporated and International Game Technology, previously filed as Exhibit
10.30 to VCATs Annual Report on form 10-KSB for the Fiscal Year Ended June 30, 2006, filed with the Commission on September 27, 2006 (File No. 0-11532), which is incorporated herein by reference.                                                                                    
|            | 
|10.31 *     |  | Consulting Services Agreement dated August 25, 2006 by and between Venture Catalyst Incorporated and VCAT, LLC, previously filed as Exhibit 10.31 to VCATs Annual Report on form 10-KSB
for the Fiscal Year Ended June 30, 2006, filed with the Commission on September 27, 2006 (File No. 0-11532), which is incorporated herein by reference.                                                                                                                                     



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##### Table of Contents

|            |  |                                                                                                                                                                                     
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                         
|            | 
|10.32       |  | First Amendment to Consulting Services Agreement, dated October 5, 2006, by and among Venture Catalyst Incorporated and VCAT, LLC.                                                  
|            | 
|31.1        |  | Certification of Chief Executive Officer of Venture Catalyst Incorporated, pursuant to Rule 13a-14 of the Securities Exchange Act.                                                  
|            | 
|31.2        |  | Certification of Chief Financial Officer of Venture Catalyst Incorporated, pursuant to Rule 13a-14 of the Securities Exchange Act.                                                  
|            | 
|32.1        |  | Certification of Chief Executive Officer of Venture Catalyst Incorporated, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|            | 
|32.2        |  | Certification of Chief Financial Officer of Venture Catalyst Incorporated, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

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|* | Exhibits incorporated by reference.
|- | -----------------------------------



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