<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

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

    For the quarterly period ended March 31, 2002

[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

    For the transition period from ______________to ___________

                         Commission File Number: 0-11532

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

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

         591 Camino De La Reina, Suite 418, San Diego, California 92108
                    (Address of principal executive offices)

                                 (858) 385-1000
                              ---------------------
                           (Issuer's telephone number)

                                 Not Applicable
                              ---------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

    State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: as of May 8, 2002, 7,206,598
shares of common stock, $.001 par value per share were outstanding.

    Transitional Small Business Disclosure Format (check one): Yes [_] No [X]

================================================================================

<PAGE>

                          VENTURE CATALYST INCORPORATED
                                   FORM 10-QSB

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                       Page
                                                                                      Number
                                                                                      ------
<S>                                                                                  <C>
PART I-FINANCIAL INFORMATION

Item 1.       Consolidated Financial Statements (Unaudited)

      Consolidated Balance Sheets -
      March 31, 2002 and June 30, 2001 .............................................    1

      Consolidated Statements of Operations -
      Three months ended March 31, 2002 and 2001 ...................................    2
      Nine months ended March 31, 2002 and 2001 ....................................    3

      Consolidated Statements of Cash Flows -
      Nine months ended March 31, 2002 and 2001 ....................................    4

      Notes to Interim Consolidated Financial Statements ...........................    5

Item 2.       Management's Discussion and Analysis
              or Plan of Operation .................................................   13

PART II-OTHER INFORMATION

Item 5.       Other Information ....................................................   22

Item 6.       Exhibits and Reports on Form 8-K .....................................   22

SIGNATURES .........................................................................   23
</TABLE>
                           FORWARD-LOOKING STATEMENTS

     This Quarterly Report on Form 10-QSB contains forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended, reflecting
management's current expectations. Examples of such forward-looking statements
include our expectations with respect to our strategy. Although we believe that
our expectations are based upon reasonable assumptions, there can be no
assurances that our financial goals will be realized. 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. 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. 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. The important
factors discussed under the caption "Factors That May Affect Future Results" in
Item 2 -- Management's Discussion and Analysis or Plan of Operation, herein,
among others, 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. We assume no
obligation to update the forward-looking information to reflect actual results
or changes in the factors affecting such forward-looking information.

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

                          VENTURE CATALYST INCORPORATED
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                       March 31,
                                                                         2002          June 30,
                                                                     (Unaudited)         2001
                                                                     -----------      -----------
<S>                                                                  <C>              <C>
                               ASSETS

Current assets:
   Cash and cash equivalents .....................................   $  7,033,337    $  4,099,927
   Income tax receivable .........................................      3,650,648       1,171,767
   Prepaid expenses and other assets .............................        181,406          46,630
   Receivables, net ..............................................         57,767          65,771
   Due from Barona Tribe - expansion project .....................            --        7,685,296
                                                                     ------------    ------------
      Total current assets .......................................     10,923,158      13,069,391

Non-current assets:
   Property, plant and equipment, net ............................        162,368         381,159
   Deposits and other assets .....................................        204,925         218,219
   Restricted cash ...............................................        133,000         133,000
   Capitalized software, net .....................................         95,687             --
   Non-current receivables (net of allowance of $208,613) ........         38,121          39,042
   Convertible notes, net ........................................            --           55,118
                                                                     ------------    ------------
      Total non-current assets ...................................        634,101         826,538
                                                                     ------------    ------------
      Total assets ...............................................   $ 11,557,259    $ 13,895,929
                                                                     ============    ============

                LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
   Advances of future consulting fees - Barona Tribe .............   $  3,693,756    $  3,682,240
   Accrued contract costs ........................................      3,091,368             --
   Accounts payable and accrued expenses .........................      1,027,048       1,359,130
                                                                     ------------    ------------
      Total current liabilities ..................................      7,812,172       5,041,370

Non-current liabilities:
   Long-term debt and accrued interest ...........................      9,662,708       8,993,055
   Accrued contract costs, non-current ...........................      3,225,469             --
                                                                     ------------    ------------
      Total liabilities ..........................................     20,700,349      14,034,425

Shareholders' deficit:
   Common stock, $.001 par value, 100,000,000 shares
     authorized and 7,414,156 shares issued ......................          7,415           7,415
   Additional paid-in-capital ....................................     12,280,179      12,283,568
   Deferred compensation .........................................         (1,663)        (28,304)
   Retained deficit ..............................................    (21,091,739)    (12,063,893)
   Common stock held in treasury, at cost (207,558 shares) .......       (337,282)       (337,282)
                                                                     ------------    ------------
      Total shareholders' deficit ................................     (9,143,090)       (138,496)
                                                                     ------------    ------------
      Total liabilities and shareholders' deficit ................   $ 11,557,259    $ 13,895,929
                                                                     ============    ============

</TABLE>

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

                                       1

<PAGE>

                          VENTURE CATALYST INCORPORATED
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                     For the Three Months Ended
                                                                             March 31,
                                                                        2002          2001
                                                                     ----------    -----------
<S>                                                                 <C>            <C>
Revenues:
   Client services ..............................................   $      --      $    77,477

Operating expenses:
   Cost of services .............................................       120,492      1,742,144
   General and administrative expenses ..........................       830,988      1,377,159
   Restructuring expenses and related asset impairment ..........       (64,182)          --
   Amortization of intangible assets and stock-based compensation         2,947        193,279
                                                                    -----------    -----------
   Operating expenses ...........................................       890,245      3,312,582
                                                                    -----------    -----------
   Operating loss ...............................................      (890,245)    (3,235,105)

Other income (expense):
   Interest income ..............................................        28,340        126,836
   Interest expense .............................................      (230,490)      (208,876)
   Other losses .................................................       (63,943)      (641,176)
                                                                    -----------    -----------
   Other expense, net ...........................................      (266,093)      (723,216)
                                                                    -----------    -----------
Income (loss) before income tax benefit .........................    (1,156,338)    (3,958,321)
Income tax benefit ..............................................     3,650,649      1,676,472
                                                                    -----------    -----------
Net income (loss) ...............................................   $ 2,494,311    $(2,281,849)
                                                                    ===========    ===========

Other comprehensive income (loss):
   Unrealized loss on securities, net of tax ....................          --          (54,797)
                                                                    -----------    -----------
Comprehensive income (loss) .....................................   $ 2,494,311    $(2,336,646)
                                                                    ===========    ===========

Basic and diluted income (loss) per share:
   Net income (loss) per share- basic and diluted ...............   $       .35    $      (.31)
                                                                    ===========    ===========
Weighted average common shares outstanding:
   Basic and diluted ............................................     7,206,598      7,296,540
                                                                    ===========    ===========
</TABLE>

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

                                        2

<PAGE>

                          VENTURE CATALYST INCORPORATED

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)
<TABLE>
<CAPTION>

                                                     For the Nine months Ended
                                                              March 31,
<S>                                                 <C>            <C>

                                                        2002           2001
                                                        ----           ----

Revenues:
   Client services .................................$         --   $  8,640,260

Operating expenses:
   Cost of services ................................   2,408,605      5,866,837
   Cost of services  - anticipated contract loss ...   6,955,578             --
   General and administrative expenses .............   2,503,609      5,888,557
   Restructuring expenses and related
     asset impairment ..............................      89,818      6,998,931
   Amortization of intangible assets and
     stock-based compensation ......................      23,251        935,893
                                                    ------------   ------------
   Operating expenses ..............................  11,980,861     19,690,218
                                                    ------------   ------------
   Operating loss .................................. (11,980,861)   (11,049,958)

Other income (expense):
   Interest income .................................     104,021        412,212
   Interest expense ................................    (671,415)      (595,974)
   Other losses ....................................    (181,992)    (2,943,182)
                                                    ------------   ------------
   Other expense, net ..............................    (749,386)    (3,126,944)
                                                    ------------   ------------
Loss before income tax benefit ..................... (12,730,247)   (14,176,902)
Income tax benefit .................................   3,702,400      1,317,634
                                                    ------------   ------------
Net loss ...........................................$ (9,027,847)  $(12,859,268)
                                                    ============   ============

Other comprehensive loss:
   Unrealized loss on securities, net of tax .......          --        (15,651)
                                                    ------------   ------------
Comprehensive loss .................................$ (9,027,847)  $(12,874,919)
                                                    ============   ============

Basic and diluted income (loss) per share:
   Net income (loss) per share- basic and diluted ..$      (1.25)  $      (1.75)
                                                    ============   ============
Weighted average common shares outstanding:
   Basic and diluted ...............................   7,206,598      7,366,057
                                                    ============   ============
</TABLE>

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

                                       3

<PAGE>

                          VENTURE CATALYST INCORPORATED
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                              For the Nine months Ended
                                                                                        March 31,
                                                                                    2002             2001
                                                                            ------------     ------------
<S>                                                                        <C>                <C>
Increase in cash:
Cash flows provided by operating activities:
   Net loss ............................................................    $ (9,027,847)    $(12,859,268)
     Adjustments to reconcile net loss to net cash
        Provided by operating activities:
   Depreciation and amortization .......................................         122,085        1,380,912
   Provision for bad debts .............................................           3,038          249,234
   Equity and convertible notes received for services ..................              --         (293,823)
   Write-off of assets classified as other assets ......................              --           10,101
   Loss on disposal of assets, net .....................................         123,320          517,596
   Loss on disposal of intangible assets ...............................              --        5,366,919
   Deferred taxes ......................................................       3,650,648         (169,060)
   Due from Barona Tribe - expansion project ...........................       7,685,296        2,000,000
   Amortization of stock-based compensation ............................          23,253         (103,374)
   Accrued contract costs ..............................................       6,316,837               --
   Loss on impairment of investments ...................................          56,795        3,585,910
   Changes in operating assets and liabilities .........................      (5,991,801)       1,226,670
                                                                            ------------     ------------
         Net cash provided by operating activities .....................       2,961,624          911,817
                                                                            ------------     ------------
Cash flows (used in) provided by investing activities:
   Investment in convertible notes, net of payments ....................          (1,600)        (137,024)
   Purchase of furniture and equipment .................................         (26,614)        (402,705)
   Receipt of restricted investment ....................................              --          395,812
   Release of restricted cash ..........................................              --        1,522,460
   Payment of loans, net of issuances ..................................              --           29,277
                                                                            ------------     ------------
         Net cash (used in) provided by investing activities ...........         (28,214)       1,407,820
                                                                            ------------     ------------
Cash flows (used in) financing activities:
   Repurchase of common stock ..........................................              --         (337,282)
   Payment of notes payable ............................................              --         (977,150)
                                                                            ------------     ------------
   Net cash (used in) financing activities .............................              --       (1,314,432)
                                                                            ------------     ------------
   Net increase in cash ................................................       2,933,410        1,005,205
Cash at beginning of period ............................................       4,099,927        4,766,743
                                                                            ------------     ------------
Cash at end of period ..................................................    $  7,033,337     $  5,771,948
                                                                            ============     ============
Supplemental disclosures of cash flow information:

   Interest expense paid ...............................................    $         --     $    373,220
                                                                            ============     ============
   Income taxes paid ...................................................    $         --     $         --
                                                                            ============     ============
</TABLE>

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

                                       4

<PAGE>


                          VENTURE CATALYST INCORPORATED
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2002

Note 1--The Company

      Venture Catalyst Incorporated ("VCAT") is a service provider of gaming
consulting, infrastructure and technology integration in the California Native
American gaming market. VCAT currently has one client, the Barona Group of
Capitan Grande Band of Mission Indians (the "Barona Tribe"). VCAT acts as a
critical resource partner and has as its central mission growing client top line
and bottom line revenues at an increasing rate. VCAT offers comprehensive gaming
and hospitality consulting services, public and governmental relations,
strategic planning, technology solutions, and professional and technical
expertise. VCAT's offices are located in San Diego, California.

      During fiscal 2001, VCAT initiated a research and development project
focused on creating client relationship management software ("CRM Software") for
the gaming and hospitality industry. VCAT recently completed a working model of
the CRM software that has been deployed at its client's facility, the Barona
Casino, to undergo a Beta test. The test is scheduled to be complete by June 30,
2002.

Note 2--Going Concern Matters

      The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate continuation of
VCAT as a going concern. VCAT has incurred net losses of $9,028,000 for the nine
months ended March 31, 2002 and $18,510,000 during the fiscal year ended June
30, 2001. At March 31, 2002, VCAT's total liabilities exceeded its total assets
by $9,143,000. Based on projections provided to VCAT by the Barona Casino in
August 2001, which were updated in March 2002, revenues from VCAT's consulting
agreement with the Barona Tribe are expected to be zero for the balance of the
term of the consulting agreement, however, in connection with the performance of
services under the agreement, VCAT expects to incur significant expense through
the end of the contract term in March 2004. (See Note 4). These factors, among
others, raise questions about VCAT's ability to continue as a going concern.

      During fiscal 2001, in response to the reductions in demand and revenue
for VCAT's technology and Internet services, it adopted a restructuring plan
designed to decrease its service offerings and reduce its costs. VCAT expanded
the cost reduction plan because of potential decreases in revenues from the
Barona Tribe, currently VCAT's only client. During fiscal 2002, VCAT continued
its cost reduction plan, however, the reductions have been less significant and
have been partially offset by an increase in professional service costs incurred
in connection with the Special Committee alternative study. The plan has
included significant personnel reductions, consolidation of positions throughout
VCAT at all levels and significant reductions in overhead and capital
expenditures, as well as the elimination of all non-gaming clients. As part of
the restructuring, VCAT consolidated its office locations into its San Diego
headquarters, which moved to a significantly smaller facility in June 2001.

      On May 29, 2001, VCAT's Board of Directors appointed a committee of
independent directors to explore strategic alternatives to maximize shareholder
value and to report its recommendations to the Board of Directors. On September
12, 2001, the committee reported its conclusions and recommendations to the
Board of Directors. Among the conclusions noted was that, none of the strategic
alternatives that it reviewed were likely to result in a meaningful increase in
shareholder value for the foreseeable future. Included among the recommendations
were that (a) VCAT attempt to collect from the Barona Tribe the $7,685,000 in
advances made by it; (b) VCAT consider further cost-cutting measures; and (c)
management present to the Board of Directors recommendations regarding (i)
renegotiation of the current consulting agreement with the Barona Tribe; (ii)
business plans for the client relationship management software ("CRM") under
development, the proposed joint venture with the Barona Tribe, and the pursuit
of additional gaming clients; and (iii) discussions with the Barona Tribe
regarding the forgiveness of the $3,682,000 in advances of future consulting
fees.

      In October 2001, management presented to the Board of Directors
information and recommendations in response to the recommendations of the
committee. As a result of this initial response, management requested that the
Barona Tribe repay to VCAT $7,685,000, representing the remaining amount of
advances that VCAT had made to the Barona Tribe prior to the Barona Tribe
obtaining all of its outside financing to fund its expansion project. In October
2001, the Barona Tribe repaid the $7,685,000 to VCAT.

                                       5

<PAGE>


                          VENTURE CATALYST INCORPORATED
         NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 March 31, 2002

      In addition, the Board delegated to the Audit Committee the task of
evaluating whether there should be further reductions in costs. After a review
of VCAT's cost structure in October 2001, the Audit Committee decided to approve
certain minor cost reductions recommended by management and noted that it will
continue to review such costs on a monthly basis. In taking this approach, the
Audit Committee was of the opinion that further significant reductions at such
time would require either one or all of the following actions: (a) a significant
reduction in the scope of services provided to the Barona Tribe; (b) suspending
the CRM software development project; or (c) a significant decrease in employee
compensation. The Audit Committee concluded that any one of these actions was
premature because they may interfere with the viability of pursuing one or more
of the strategic alternatives which still may be available. In November 2001,
the Audit Committee approved additional cost reductions including the
elimination of costs for two consultants, an employee termination, non-renewal
of our website hosting contracts and a reduction in client relations expenses.
In connection with these cost reductions, a new operating budget was adopted
which took effect in January 2002. In March 2002, further cost reductions were
made including reducing our staff by three persons.

      At March 31, 2002, VCAT had unrestricted cash and cash equivalents of
$7,033,000 and working capital of $3,111,000, which is calculated by taking the
current assets less current liabilities.

Note 3--Basis of Presentation of Interim Consolidated Financial Information

      The accompanying interim unaudited consolidated financial statements have
been prepared by VCAT and its subsidiaries 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. The interim unaudited consolidated
financial statements reflect all normal, recurring adjustments and disclosures
which are, in the opinion of management, necessary for a fair presentation. The
interim unaudited consolidated financial statements should be read in
conjunction with VCAT's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 2001. Certain items in the prior year's financial statements have been
reclassified to conform to the current year's presentation. Current and future
financial statements may not be directly comparable to VCAT's 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.

Note 4--Barona Consulting Agreement

      VCAT has provided services to the Barona Tribe since 1991. Consulting
services are currently provided to the Barona Tribe pursuant to an Amended and
Restated Consulting Agreement dated April 29, 1996, as modified on February 17,
1998. The consulting agreement expires March 31, 2004, unless renewed or
extended.

      In March 1996, the Barona Tribe submitted the initial consulting agreement
(a predecessor agreement to the Amended and Restated Consulting Agreement) to
the National Indian Gaming Commission (the "NIGC"). In April 1996, VCAT amended
that consulting agreement to correct errors in the fee calculations. Because
VCAT concluded that the amended consulting agreement did not contain any
material changes to the initial consulting agreement, VCAT did not submit the
amendment to the NIGC at that time. In May 1996, the NIGC determined that the
initial consulting agreement was not a management agreement and, therefore, not
subject to NIGC approval, and forwarded such agreement to the Bureau of Indian
Affairs (the "BIA"). In July 1997, the BIA reviewed the initial consulting
agreement and determined that no further action was required by it with respect
to such agreement.

     In January 1997, VCAT entered into a settlement agreement with the NIGC
regarding its historical relationship with the Barona Tribe. In the same month
and after the settlement with the NIGC was reached, VCAT submitted to the NIGC
the amended consulting agreement. In April 1997, VCAT received a letter from the
NIGC which questioned whether such agreement was a management contract and
stated that an additional review would be necessary. In February 1998, VCAT
entered into a modification of the amended consulting agreement that, among
other things, extended the term from March 1999 to March 2004 and clarified
certain accounting practices relating to the calculation of the consulting fee.
In March 1999, the NIGC commenced a

                                        6

<PAGE>
                          VENTURE CATALYST INCORPORATED
          NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 March 31, 2002

preliminary review of VCAT's relationship with the Barona Tribe, including the
amended and restated consulting agreement. In September 1999, VCAT submitted the
modification of such consulting agreement to the NIGC. The review remains
pending.

     VCAT believes that the consulting agreement, as amended and modified, is
not a management agreement, based on (a) the May 1996 and July 1997
determinations of the NIGC and BIA, respectively, with respect to the initial
consulting agreement, (b) the NIGC's findings in the January 1997 settlement
agreement and (c) the nature of the relationship between the Barona Tribe and
VCAT. However, there is no assurance that the NIGC will determine that the
consulting agreement is not a management agreement, and failure to do so could
have a material adverse effect on VCAT's business and financial condition. If
the NIGC concludes that the consulting agreement is not a management agreement,
the NIGC will forward the consulting agreement to 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 consulting agreement, and failure to approve such agreement
may have a material adverse effect on VCAT's business and financial condition.

     Based on projections provided to VCAT by the Barona Casino, revenues from
the consulting agreement with the Barona Tribe are expected to be zero for the
balance of the term of the consulting agreement, however, under the terms of the
consulting agreement, VCAT is obligated to provide services to the Barona Tribe.
In connection with the performance of these services, VCAT incurs significant
expense, and will continue to incur these expenses for the life of the
consulting agreement. In the second quarter of fiscal 2002, VCAT recorded a loss
for the estimated amount of the foreseeable expenses, which totaled $6,956,000.
The loss was recorded as "cost of services - contract loss". VCAT established
corresponding liabilities for the current and non-current amounts, which were
classified as "accrued contract costs". During the three month period ended
March 31, 2002, VCAT incurred costs of $639,000 related to the consulting
agreement. The remaining accrued contract costs at March 31, 2002 were
$6,317,000. VCAT will review the estimated loss and liabilities related to the
consulting agreement on an ongoing basis and, if necessary, will adjust the loss
and liabilities accordingly.

Note 5--Deferred Contract Costs

     Pursuant to oral agreements with the Barona Tribe, VCAT agreed to fund, or
to arrange acceptable financing for, the construction of facility improvements,
furniture and equipment, the establishment of initial working capital, and the
losses, if any, of the Barona Casino's operations. Because the Barona Tribe did
not allow its land to be encumbered and did not assume liability for any of
these obligations, VCAT capitalized those costs incurred as "deferred contract
costs" since VCAT had the ultimate responsibility for such costs incurred in
connection with developing the Barona Casino and VCAT's management believed that
these costs were fully recoverable over the life of the consulting agreement
through receipt of fee income from the Barona Tribe. Amortization of the
deferred costs is calculated using the straight-line method over the remaining
term of the consulting agreement. Under the terms of the consulting agreement,
title to the Barona Casino facilities, furniture and equipment rests solely with
the Barona Tribe, unless the Barona Tribe agrees otherwise. At this time, VCAT
has no plans to contribute additional funds to the Barona Casino or the Barona
Tribe in the form of deferred contract costs.

     On an ongoing basis, VCAT reviewed the valuation and recoverability of
these unamortized deferred contract costs. At the end of fiscal 2001, VCAT fully
reduced the carrying value of the deferred contract costs, which were
$1,900,000, based on the nominal fee income received during the last two
quarters of fiscal 2001, and the reduced fee expectations from the Barona Tribe
for the balance of the term of the consulting agreement. This amount was
recorded as "Impairment of Deferred Contract Costs".

Note 6--Due from Barona Casino--Expansion Project

     The Barona Tribe is in the development stage of an approximately
$260,000,000 expansion project. VCAT assisted the Barona Tribe in obtaining
outside financing for the project. Prior to obtaining such outside financing,
VCAT shared in funding the expansion costs incurred with the Barona Tribe. VCAT
advanced an aggregate of $9,685,000, substantially all of its commitment of up
to $10,000,000, as an unsecured, non-interest-bearing advance to the Barona
Tribe. These advances were accounted for as a receivable from the Barona Tribe
to VCAT.

     In fiscal 2001, the Barona Tribe used a portion of a bridge loan to repay
$2,000,000 of the outstanding advances made by VCAT to the Barona Tribe prior to
the Barona Tribe obtaining all of its outside financing to fund its expansion
project. In July 2001, the Barona Tribe obtained permanent financing of
$200,000,000. The bridge loan was repaid out of the permanent financing. In
October 2001, management requested that the Barona Tribe repay to VCAT
$7,685,000, representing the remaining amount of

                                       7

<PAGE>
                         VENTURE CATALYST INCORPORATED
         NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 March 31, 2002

advances that VCAT had made to the Barona Tribe. In October 2001, the Barona
Tribe repaid the $7,685,000 to VCAT.

Note 7--Income Tax Receivable

      During fiscal year 2001, VCAT established a receivable of $1,136,000 for
income tax refunds in connection with fiscal 2001 net operating losses. The
refunds were paid to VCAT during the second quarter of fiscal 2002.

      In March 2002, Congress passed the Job Creation and Workers Assistance Act
of 2002 (the "Act"). The Act contains temporary changes in certain tax laws,
including an increase in the net operating loss carry-back period from two to
five years. In March 2002, as a result of the change in the carry-back period,
VCAT established a receivable of $3,651,000 for additional income tax refunds
due to it. VCAT expects to receive the refunds in varying amounts during May and
June 2002.

Note 8--Acquisitions

      In August 1998, VCAT acquired all of the outstanding capital stock of
Cyberworks, Inc. ("Cyberworks") in exchange for shares of its common stock and
$500,000 in cash. In January 2000, VCAT acquired all outstanding shares of
capital stock of webinc., Inc. ("webinc") in exchange for 6,884 shares of its
common stock and $20,000 in cash. In March 2000, VCAT acquired all of the
outstanding shares of capital stock of CT Interactive Incorporated ("CTI") in
exchange for 230,474 shares of its common stock and $300,000 in cash. In August
2000, VCAT sold the Cyberworks Internet domain names for $1,000,000 and agreed
to cease using the business name. In September 2000, the operations of
Cyberworks, webinc and CTI were merged into VCAT.

      In July 2000, VCAT acquired all of the outstanding shares of capital stock
of DayPlan.com, Inc. ("DayPlan"), in exchange for 175,000 shares of its common
stock. In April 2001, VCAT decided to stop offering the services provided by
DayPlan and in February 2002, DayPlan was merged into VCAT. DayPlan did not
generate any revenues. VCAT has no remaining subsidiaries.

      During fiscal 2001, VCAT realigned its operations to focus all business
activities solely on the gaming industry. This decision resulted in the
elimination of approximately three-quarters of its employees, most of whom were
in the Internet and technology divisions, and a transition of all non-gaming
clients to other service providers. In connection with the restructuring, during
the second quarter of fiscal 2001, VCAT fully reduced the carrying value of the
remaining goodwill associated with the above acquisitions, totaling $5,367,000.

Note 9--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 instruments with
original maturities of three months or less. VCAT maintains its cash in bank
deposit and checking accounts that, at times, may exceed Federally insured
limits. To date, VCAT has not experienced any losses in such accounts. VCAT's
cash equivalents consist primarily of commercial paper, certificates of
deposits, banker's acceptances and U.S. treasury securities with maturities
ranging from one to three months.

Note 10--Business Concentration

      Historically, a significant portion of VCAT's revenue has been earned from
its only current client, the Barona Tribe. VCAT received no consulting fees from
the Barona Tribe during the three and nine months ended March 31, 2002 and based
on projections provided to VCAT by the Barona Casino, VCAT expects fees from the
consulting agreement to be zero for the balance of the consulting agreement,
which extends through March 2004. During the three months ended March 31, 2001,
revenues from the Barona Tribe were $0 and during the nine months ended March
31, 2001, revenues from the Barona Tribe were $6,869,000, or 80% of total
revenues.

Note 11--Restricted Cash

      VCAT issued an irrevocable letter of credit for $133,000 to satisfy terms
of the lease agreement for VCAT's prior corporate office. This space has been
subleased; however, as part of the sublease agreement, the letter of credit
remained in place. The letter of credit expires on October 31, 2002, unless
canceled by the lessor.

                                       8

<PAGE>
                         VENTURE CATALYST INCORPORATED
         NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 March 31, 2002

Note 12--Available-for-Sale Securities

     VCAT classifies its investments in equity securities as available-for-sale
securities. These securities are carried at fair value, less deemed impairment.
On an ongoing basis, VCAT reviews the valuation and recoverability of the
investments and records a realized loss for any portion of the securities
determined necessary for fair statement. Available-for-sale securities at March
31, 2002 consisted of investments in:

          .  Senscom, Inc.

          .  Idealabs, Inc.

          .  companyfinance.com, Inc.

          .  Watchnet, Inc.

          .  eFresh Incorporated

          .  SeatAdvisor, Inc.

          .  Brand Equity, Inc. (formerly KINeSYS Pharmaceutical, Inc.)

          .  MobilePro Corporation (formerly "CraftClick.com, Inc.")

          .  clickNsettle.com, Inc.

          .  Ultrexx Corporation

          .  Asset Equity Group (formerly "WorldNet Resource Group, Inc.")

          .  TheBigHub.com, Inc.

     Collectively, these investments had no carrying value at March 31, 2002.

     During fiscal 2001, VCAT realized losses for impairment charges related to
its available-for-sale securities. To fully reduce the carrying value of the
investments, VCAT recorded the following losses: (a) $1,400,000 for the
investment in Predict It, Inc.; (b) $1,119,000 for the investment in
CraftClick.com, Inc. (now MobilePro Corporation); (c) $250,000 for the
investment in Watchnet, Inc.; (d) $200,000 for the investment in eFresh
Incorporated; (e) $130,000 for the investment in Ultrexx Corporation; (f)
$100,050 for the investment in SeatAdvisor, Inc.; (g) $100,000 for the
investment in Senscom, Inc.; (h) $100,000 for the investment in
companyfinance.com, Inc.; (i) $100,000 for the investment in Idealabs, Inc.; (j)
$76,000 for the investment in Invigo, Inc.; (k) $64,000 for the investment in
TheBigHub.com, Inc.; (l) $40,000 for the investment in Bullet Point News, Inc.;
(m) $32,000 for the investment in clickNsettle.com, Inc.; and (n) $17,500 for
the investment in WorldNet Resource Group, Inc. (now Asset Equity Group).
PredictIt, Inc., Invigo, Inc. and Bullet Point News, Inc. have been dissolved
and cease to exist.

     During fiscal 2000, the carrying value of VCAT's investment in KINeSYS
Pharmaceutical, Inc. ("KINeSYS") was fully reduced. In January 2001, VCAT agreed
to exchange shares of KINeSYS and to convert an outstanding KINeSYS receivable,
which was previously reserved for, for shares of Brand Equity, Inc., a company
formed by the two principals of KINeSYS. Brand Equity has acquired the assets
and most of the liabilities of KINeSYS and is operating essentially the same
business.

     Additionally, VCAT holds securities, in the form of options, in
companyfinance.com, Inc. The options expire in March 2005. These securities were
given to VCAT as an inducement to serve on an advisory board. Such securities
have no established cost basis and were determined to have minimal value, due to
the significant price premium over market price at the time of grant, and the
limited operating history for the company.

     VCAT will continue to monitor the operations of the above-referenced
companies and the valuation of these securities and will establish a fair value
and record an unrealized gain or loss, if deemed appropriate.

Note 13--Convertible Notes Receivable

     VCAT held convertible notes with an aggregate face value of $829,000 in
Watchnet, Inc. ("Watchnet"), FastestLink, Inc., Asquare Communications, Inc.,
Rapidcare.com, Inc., simplegov.com, Inc., SeatAdvisor, Inc., and CraftClick,
Inc. ("CTCK"). The notes were received for cash investments VCAT made in the
companies or as payment for services. The notes were convertible into equity at
any time or payable at maturity (as may be accelerated), pursuant to the terms
and conditions of the notes. The notes accrued interest at rates ranging from 8%
to 10%, and had maturity dates ranging from October 2000 to June 2002.
Collectively,

                                       9

<PAGE>

                         VENTURE CATALYST INCORPORATED
         NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 March 31, 2002

these investments had no carrying value at March 31, 2002.

      During fiscal 2001, VCAT realized aggregate losses of $779,000 related to
the convertible notes as the companies were unable to secure necessary
additional funding to repay the notes. Additionally, of the losses recorded,
$80,000 was recovered in fiscal 2001, as CTCK secured sufficient additional
funding to repay its note that matured during the period. During fiscal 2002,
VCAT realized a loss of $50,000 related to the convertible note in Watchnet.
Watchnet is in the process of negotiating a possible merger and upon completion
the convertible note would be converted into common shares of the new company, a
privately held company that operates a similar business as Watchnet. If the
merger is not completed, Watchnet does not have sufficient funds to meet its
obligations, including VCAT's note. The investment is deemed to have no value at
this time.

      VCAT will continue to monitor the operations of the above-referenced
companies and the valuation of these securities, and will establish a fair value
and record a realized gain or loss, if deemed appropriate.

Note 14--Capitalized Software

      During fiscal 2001, VCAT initiated a research and development project
focused on creating client relationship management software ("CRM Software") for
the gaming and hospitality industry. In January 2002, technological feasibility
was attained and VCAT completed a working model of the CRM software that has
been deployed at its client's facility, the Barona Casino, to undergo a Beta
test. The test is scheduled to be complete by June 30, 2002. All costs incurred
subsequent to the completion of the working model are being capitalized until
the product is ready for general release which is expected to occur shortly
after completion of the Beta test. The balance of the capitalized software as of
March 31, 2002 was $96,000.

Note 15--Common Stock Transactions

      In February 2001, VCAT acquired 207,558 shares of its common stock from a
former employee in exchange for $337,000 in cash. The repurchase was negotiated
in connection with the employee's separation agreement and termination of his
employment contract. The shares have been recorded as treasury stock within the
shareholders' deficit section of the consolidated balance sheet.

Note 16--Net Income (Loss) Per Share

      Below is the reconciliation of the components of the calculation of basic
and diluted net income (loss) per share for the time periods indicated:

<TABLE>
<CAPTION>
                                                            For the Three Months            For the Nine Months
                                                               ended March 31,                ended March 31,
                                                               ---------------                ---------------
                                                            2002           2001             2002            2001
                                                            ----           ----             ----            ----
<S>                                                     <C>             <C>             <C>             <C>

Net income (loss) available to common shareholders      $ 2,494,311     ($2,281,849)    ($9,027,847)    ($12,859,268)
                                                        ===========     ===========     ===========     ============
Weighted average shares outstanding--basic                7,206,598       7,296,540       7,206,598        7,366,057
Effect of stock options                                           -               -               -                -
                                                        -----------     -----------     -----------     ------------
Weighted average shares outstanding--diluted              7,206,598       7,296,540       7,206,598        4,995,549
                                                        ===========     ===========     ===========     ============
</TABLE>

      At March 31, 2002, options to purchase 5,887,312 shares of VCAT's common
stock, at prices ranging from $.13 to $12.50 per share, were not included in the
computation of diluted EPS because they were anti-dilutive for that purpose. The
options expire on various future dates through November 2011. At March 31, 2001,
options to purchase 7,620,471 shares of VCAT's common stock, at prices ranging
from $1.00 to $12.50 per share, were not included in the computation of diluted
EPS because they were anti-dilutive for that purpose.

Note 17--Stock Options

      The following table summarizes stock option activity under VCAT's 1994
Stock Option Plan, 1995 Stock Option Plan and 1996 Non-employee Directors Stock
Option Plan (collectively the "Plans") for the nine months ended March 31, 2002:

                                       10

<PAGE>

                         VENTURE CATALYST INCORPORATED
         NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 March 31, 2002
<TABLE>
<CAPTION>
                                                             Options                Price
                                                           Outstanding            Per Share
                                                          -------------------------------------
<S>                                                       <C>                 <C>
            Outstanding, July 1, 2001                          7,147,721      $ .59 - $12.50
            Granted                                               20,000      $ .13 -  $ .13
            Exercised                                                 --          -       --
            Cancelled                                         (1,280,409)     $1.00 - $12.50
                                                             -----------
            Outstanding, March 31, 2002                        5,887,312      $ .13 - $12.50
                                                             ===========
</TABLE>


Note 18--Restructuring Expenses and Related Asset Impairment

      During fiscal 2001, in response to the reductions in demand and revenue
for its technology and Internet services, VCAT adopted a restructuring plan
designed to decrease its service offerings and reduce its costs. VCAT expanded
the cost reduction plan because of decreases in revenues from the Barona Tribe,
and VCAT is continuing with this plan currently. The plan has included
significant personnel reductions, consolidation of positions throughout VCAT at
all levels and significant reductions in overhead and capital expenditures, as
well as the cessation of services to all non-gaming clients. VCAT will continue
to monitor and restructure its operations in light of the rapidly changing
market conditions and its revenue expectations from the Barona Tribe.

      VCAT recorded expenses of $154,000 during the three months ended September
30, 2001, in connection with its ongoing restructuring plan. These charges
consisted of remaining future rent obligations for a closed office in excess of
the obligation recorded in fiscal 2001. VCAT reversed $64,000 of expenses
related to remaining future rent obligations for the closed office during the
three months ended March 31, 2002, in connection with the sublease of the office
space to a third party.

      VCAT recorded expenses and related asset impairment charges of $6,999,000
during the nine months ended March 31, 2001, consisting of (a) severance
obligations; (b) rent, sublease, leasehold improvement obligations and related
facility expenses for offices that were closed due to the reduction in
workforce; (c) impairment of goodwill and intangible assets relating to acquired
businesses that focused on non-gaming clients and industries; and (d) asset
disposals.

Note 19--Stock Repurchase/ Long-Term Debt

      In September 1996, VCAT entered into a Stock Purchase and Settlement and
Release Agreement with two shareholders, including a former director (the "Stock
Purchase Agreement"). The terms of the Stock Purchase Agreement included (a) an
aggregate cash payment of $200,000 to such shareholders upon closing, (b) the
issuance of two unsecured promissory notes in the aggregate principal amount of
$3,500,000, with interest at the rate of 10% per annum, payments of interest
only for the first three years commencing September 30, 1997, followed by three
equal annual installments of principal repayment, with interest on the remaining
balance, commencing September 30, 2000, (c) a contingent obligation (the
"Initial Contingent Obligations") to issue an aggregate principal amount of
$9,856,000 in unsecured promissory notes to such shareholders including
$2,000,000 in principal amount of notes each year for four years and $1,856,000
in principal amount of notes to be issued in a fifth year, each note with
interest at 10%, payment of interest only for three years, followed by three
equal annual installments of principal plus interest on the remaining principal
balance, and (d) another contingent obligation (the "Second Contingent
Obligation") to issue an additional aggregate principal amount of $3,000,000 in
unsecured promissory notes (or cash, if VCAT has closed a firm commitment
underwritten public offering of securities of not less than $35 million prior to
the contingencies being met).

      The Initial Contingent Obligations are contingent upon VCAT's retained
earnings balance, with certain adjustments, being at least $4,000,000 for the
fiscal year ending immediately prior to the date the notes are to be issued. The
test is to be made each year for eight successive years that commenced with the
fiscal year ended June 30, 1997. The Initial Contingent Obligation has been met
for the first four test periods; accordingly, $2,000,000 in obligations were
recorded at each of June 30, 1997, 1998, 1999 and 2000, and have been treated as
additional consideration for the common stock repurchased under the Stock
Purchase Agreement. The retained earnings balance test was not met on June 30,
2001, accordingly, VCAT did not record the issuance of any additional notes
during fiscal 2001. The Second Contingent Obligation is subject to the following
conditions: (a) the Barona Tribe enters into a Class III Gaming Compact with the
State of California which permits the operation of video gaming machines at the
Barona Casino in San Diego County; (b) at the time that the Barona Tribe enters
into a compact, VCAT has a consulting agreement or similar contractual
arrangement with the Barona Tribe; and (c) consulting fees paid to VCAT by the
Barona Tribe relating to the

                                       11

<PAGE>
                         VENTURE CATALYST INCORPORATED
         NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 March 31, 2002

Barona Casino for any consecutive 12-month period within five years after the
Barona Tribe has entered into the Compact, equal or exceed one and one-half
times the consulting fees for the fiscal year ended June 30, 1996. Two of the
foregoing criteria were satisfied during fiscal 2000. The contingent obligations
will be recorded as the additional cost of the repurchase of VCAT's common
stock, as each contingency or condition is met.

      In April 2000, VCAT and the two note holders announced that $3,069,000 of
current and future corporate indebtedness would be exchanged for equity prior to
its maturity. Pursuant to the terms of the exchange, a total of 579,000 shares
of VCAT's restricted stock and warrants to acquire an additional 145,000 shares
of VCAT's common stock at $5.89 per share were issued to retire the debt. The
transaction resulted in a non-cash extraordinary loss of $324,000, attributable
to the deemed value of the warrants.

      All payments pursuant to the Stock Purchase Agreement and the notes are
subject to VCAT's ability to meet certain financial tests and compliance with
certain state law provisions and VCAT's Articles of Incorporation concerning
repurchase transactions. Because of VCAT's current financial position, VCAT was
not required to make payments under the notes in September 2001. This does not
constitute a default under the notes. Pursuant to the terms of the stock
purchase agreement and the applicable notes, accrued interest of $843,000 was
added to the principal amount of debt which will continue to accrue interest
pending certain other events, including the permissibility of VCAT to make
payments in the future.

      The remaining principal amount of debt (including the accrued interest
that was added to principal as a result of VCAT not making the scheduled
payments in September 2001) and the accrued interest on the adjusted principal
related to this stock repurchase was $9,663,000 as of March 31, 2002. Based upon
projections provided to us by the Barona Casino and VCAT's current sources of
revenues, VCAT does not expect that such payments will be required for the
foreseeable future, therefore all amounts have been classified as "non-current
liabilities". In addition, amounts previously reported as current liabilities
under the Stock Purchase Agreement have been reclassified as non-current
liabilities to conform to the March 31, 2002 presentation.

      If VCAT's financial condition improves to the extent that VCAT meets the
financial tests set forth in the Stock Purchase Agreement and the notes and, at
the time a scheduled payment becomes due, VCAT does not have sufficient cash on
hand to pay the scheduled payments and sustain its ongoing operations, VCAT will
need to seek additional capital to repay some or all of this debt. There can be
no assurance that this alternative would be available at the time or on terms
acceptable to VCAT, or, if available it could have a material adverse affect on
VCAT's financial condition, or may result in dilution to VCAT's shareholders.

Note 20 -- Subsequent Events

     On May 13, 2002, VCAT (a) signed a definitive merger agreement with L.
Donald Speer, II, VCAT's Chief Executive Officer, Chief Operating Officer and
Chairman of the Board, and Speer Casino Marketing, Inc., a Delaware corporation
wholly owned by Mr. Speer, and (b) entered into agreements with the two note
holders of VCAT's outstanding obligations relating the Stock Purchase Agreement
to $8,333,000 and to exchange the previously issued notes for new notes
representing the reduced debt amount. The restructuring of VCAT's indebtedness
to the note holders is contingent upon the approval of the proposed merger and
certain other conditions. See "Item 5. Other Information" for more information.

                                       12

<PAGE>

Item 2.   Management's Discussion and Analysis or Plan of Operation
Overview

      Venture Catalyst Incorporated, or VCAT, is a provider of gaming
consulting, infrastructure and technology integration services in the California
Native American gaming market. We currently have one client, the Barona Group of
Capitan Grande Band of Mission Indians (the "Barona Tribe"), a federally
recognized, sovereign Native American tribe. We act as a critical resource
partner and have as our central mission growing client top line and bottom line
revenues at an increasing rate. We offer comprehensive gaming and hospitality
consulting services, public and governmental relations, strategic planning,
technology solutions, and professional and technical expertise. Our objective is
to make our clients money by working with them during every stage of their
development and financial growth. In connection with the implementation of our
strategy, we have, in the past, made investments, or taken all or a portion of
our fees, in securities of our clients. However, we do not expect this to be a
part of our strategy going forward.

      During fiscal 2001, VCAT initiated a research and development project
focused on creating client relationship management software ("CRM Software") for
the gaming and hospitality industry. VCAT recently completed a working model of
the CRM software that has been deployed at our client's facility, the Barona
Casino, to undergo a Beta test. The test is scheduled to be complete by June 30,
2002. There can be no assurance that the CRM Software will be completed or, if
completed, will result in additional clients or revenues.

      This discussion and analysis 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, 2001.

Critical Accounting Policies

         VCAT's discussion and analysis of our financial condition and results
of operations are based upon our consolidated 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. In
fiscal 2002, we identified our treatment of "accrued contract costs" as our
critical accounting policy. The following represents a summary of our critical
accounting policy.

Accrued Contract Costs

         Based on projections provided to us by the Barona Casino, revenues from
the consulting agreement with the Barona Tribe are expected to be zero for the
balance of the term of the consulting agreement, however, under the terms of the
consulting agreement, we are obligated to provide services to the Barona Tribe.
In connection with the performance of these services, we incur significant
expense, and will continue to incur these expenses for the life of the
consulting agreement. In the second quarter of fiscal 2002, we recorded a loss
for the estimated amount of the foreseeable expenses, which totaled $6,956,000.
The amount was based on the assumption that (a) we will continue to incur
expenses at a level consistent to the current level of expenses being incurred
and (b) we will continue to provide services through the end of the current term
of the agreement in March 2004. The loss was recorded as "cost of services -
anticipated contract loss". We established corresponding liabilities for the
current and non-current amounts, which were classified as "accrued contract
costs". The remaining accrued contract costs at March 31, 2002 were $6,317,000.
We will review the estimated loss and liabilities related to the consulting
agreement on an ongoing basis and, if necessary, will adjust the loss and
liabilities accordingly. If we are successful in our efforts to renegotiate a
new business relationship with the Barona Tribe, then the remaining accrued
contract costs and estimated loss could be reduced, possibly to zero.

Results of Operations

Three Months Ended March 31, 2002 Compared with the Three Months Ended March 31,
2001.

Revenues

Consolidated revenues for the three months ended March 31, 2002 were zero as
compared to $77,000 during the same period last year.

                                       13

<PAGE>

      Revenues for services provided to the Barona Tribe were zero for the three
months ended March 31, 2002 and 2001. Although revenues at the Barona Casino
exceeded expenses for the three month period ended March 31, 2002, the level of
revenues were not sufficient under the formula used to calculate our consulting
fee to offset the effect of the significant capital, construction, interest and
operating expenses incurred at the Barona Casino. These expenses primarily
relate to the completion of Barona Casino's interim expansion, the expenses
associated with the ongoing development of the Barona Valley Ranch and the
increase of debt by the Barona Tribe for use in the expansion project. Based
upon financial projections provided to us by the Barona Casino in August 2001,
which were updated in March 2002, and the current formula for calculating our
fee under the consulting agreement, we believe that no consulting fees will be
paid to us through March 2004, the end of the term of the consulting agreement.

      Revenues for services provided to clients other than the Barona Tribe for
the three months ended March 31, 2002 were zero as compared to $77,000 earned
during the same period last year. This decrease is the result of our decision to
restructure our business and realign our operations to focus solely on the
Native American gaming industry. Our decision, made in the second quarter of the
fiscal year ended June 30, 2001, was in response to the reduction in demand for
our technology and Internet services.

Cost of Services

      Cost of services decreased 93% to $120,000 for the three months ended
March 31, 2002, from $1,742,000 during the same period last year. The decrease
is primarily attributable to the reversal of accrued contract costs of $639,000
for the costs of services incurred during the period in connection with
providing services to the Barona Tribe. The remaining decrease of $983,000 was
primarily attributable to decreases in (a) compensation and benefits, resulting
from a decrease in the average number of employees during the period as a result
of the restructuring plan implemented during fiscal 2001; (b) fees to outside
consultants incurred in connection with our performance of services to the
Barona Tribe; (c) expenses related to our gaming business development efforts;
and (d) client relation expenses. These decreases were partially offset by an
increase in costs for professional services incurred in connection with our
ongoing CRM software development project.

General Operating and Administrative Expenses

      General operating and administrative expenses decreased 40% to $831,000
for the three months ended March 31, 2002, from $1,377,000 during the same
period last year. The decrease was primarily attributable to decreases in (a)
compensation and benefits, resulting from the decrease in the average number of
administrative employees, as a result of the restructuring plan implemented
during fiscal 2001 and (b) facility expenses, attributable to the closing of
offices in Los Angeles and Orange County, California and the relocation to a
smaller facility in San Diego, California. These decreases were partially offset
by an increase in outside legal fees, primarily as a result of the strategic
alternative study being conducted by the special committee.

Restructuring Expenses and Related Asset Impairment

      During the three months ended March 31, 2002, we reversed $64,000 of
previously recorded restructuring expenses related to remaining future rent
obligations for a closed office in connection with the sublease of the office to
a third party during the period. We did not record any restructuring expenses
during the same period last year.

Amortization of Intangible Assets and Stock-Based Compensation

      Amortization of intangible assets and stock-based compensation for
continuing operations decreased 98% to $3,000 for the three months ended March
31, 2002, from $193,000 during the same period last year, as a result of a
decrease in goodwill amortization and deferred contract cost amortization. We
did not incur any amortization expense for our intangible assets for the three
months ended March 31, 2002. Furthermore, we do not expect to incur such
expenses in the foreseeable future, as a result of the full reduction of our
intangible assets in fiscal 2001 due to our restructuring plan and the reduced
fee expectations from the Barona Tribe for the balance of the consulting
agreement.

Other Income and Expense

      During the three months ended March 31, 2002, interest income was $28,000
compared to $127,000 for the same period last year, as a result of the
significantly lower interest rates on our investments. Interest expense
increased to $230,000 during the three months ended March 31, 2002, from
$209,000 for the same period last year, as a result of a higher long-term debt
balance during the period.

      Other gains and losses during the three months ended March 31, 2002
resulted in a net loss of $64,000, as a result of asset

                                       14

<PAGE>

disposals. Other gains and losses during the same period last year resulted in a
net loss of $641,000, primarily attributable to: (a) a $294,000 loss recorded to
fully reduce the carrying value of our tenant improvements at our corporate
headquarters, in connection with our relocating to a smaller facility; (b) a
$130,000 loss recorded to fully reduce the carrying value of our investment in
Ultrexx, Inc.; (c) a $104,000 loss recorded to fully reduce the carrying value
of our investment in Asquare Communications, Inc.; and (d) a $77,000 loss from
fixed asset disposals in connection with our restructuring and facility
relocation.

Income Tax Benefit

      During the three months ended March 31, 2002, we recorded a "one-time"
income tax benefit of $3,651,000 in connection with the temporary change in
certain tax laws, including an increase in the net operating loss carry-back
period from two to five years. As a result of the change in the carry-back
period, we are now entitled to refunds for the income taxes paid in during
previous years. We recorded an income tax benefit of $1,676,000 during the same
period last year in connection with tax losses incurred during the period.

Nine months Ended March 31, 2002 Compared with the Nine months Ended March 31,
2001.

Revenues

      Consolidated revenues for the nine months ended March 31, 2002 were zero
as compared to $8,640,000 during the same period last year.

      Revenues for services provided to the Barona Tribe for the nine months
ended March 31, 2002 were zero as compared with $6,869,000 earned during the
same period last year. Although revenues at the Barona Casino exceeded expenses
for the nine months ended March 31, 2002, the level of revenues were not
sufficient under the formula used to calculate our consulting fee to offset the
effect of the significant capital, construction, interest and operating expenses
incurred at the Barona Casino. These expenses primarily relate to the completion
of Barona Casino's interim expansion, the expenses associated with the ongoing
development of the Barona Valley Ranch and the increase of debt by the Barona
Tribe for use in the expansion project. Based upon financial projections
provided to us by the Barona Casino in August 2001, which were updated in March
2002, and the current formula for calculating our fees under the consulting
agreement, we believe that no consulting fees will be paid to us through March
2004, the end of the term of the consulting agreement.

      Revenues for services provided to clients other than the Barona Tribe for
the nine months ended March 31, 2002 were zero as compared to $1,771,000 earned
during the same period last year. This decrease is the result of our decision to
restructure our business and realign our operations to focus solely on the
Native American gaming industry. Our decision, made in the second quarter of the
fiscal year ended June 30, 2001, was in response to the reduction in demand for
our technology and Internet services.

Cost of Services

      Cost of services decreased 59% to $2,409,000 for the nine months ended
March 31, 2002, from $5,867,000 during the same period last year. The decrease
is attributable to the reversal of accrued contract costs of $639,000 for the
costs incurred during the period in connection with providing services to the
Barona Tribe. The remaining decrease of $2,819,000 was primarily attributable to
decreases in (a) compensation and benefits, resulting from a decrease in the
average number of employees during the period as a result of the restructuring
plan implemented during fiscal 2001; (b) fees to outside consultants incurred in
connection with our performance of services to the Barona Tribe; (c) client
relation expenses; (d) political contributions; (e) expenses related to our
gaming business development efforts; and (f) cost of sales, including equipment
sold and expenses billed to clients. These decreases were partially offset by an
increase in costs for professional services incurred in connection with our
ongoing CRM software development project.

Cost of Services - Anticipated Contract Loss

      We recorded an anticipated loss of $6,956,000 for the nine months ended
March 31, 2002. No comparable loss was recorded in the same period last year.
The loss represents the estimated costs to be incurred in connection with the
performance of services under the Barona consulting agreement through the end of
its current term in March 2004. The loss was recorded as a result of the
expectation of zero revenues from the consulting agreement and the increased
uncertainty regarding the possibility of renegotiating or restructuring of the
consulting agreement with the Barona Tribe.

General Operating and Administrative Expenses

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<PAGE>

      General operating and administrative expenses decreased 57% to $2,504,000
for the nine months ended March 31, 2002, from $5,889,000 during the same period
last year. The decrease was primarily attributable to decreases in (a)
compensation and benefits, resulting from the decrease in the average number of
administrative employees, as a result of the restructuring plan implemented
during fiscal 2001; (b) facility expenses, attributable to the closing of
offices in Los Angeles and Orange County, California and the relocation to a
smaller facility in San Diego, California; (c) bad debt expense; (d) public
relations and marketing expenses; (e) telecommunications; and (f) employee
relations expenses. These decreases were partially offset by an increase in
outside legal fees, primarily as a result of the strategic alternative study
being conducted by the special committee.

Restructuring Expenses and Related Asset Impairment

      We incurred $90,000 in restructuring expenses during the nine months ended
March 31, 2002, in connection with the ongoing restructuring and cost reduction
plan. These charges consist of remaining future rent obligations for a closed
office in excess of the obligation recorded in fiscal 2001. During the same
period last year, we incurred $6,999,000 in restructuring expenses, consisting
primarily of (a) the impairment of goodwill and intangible assets relating to
acquired businesses that focused on non-gaming clients and industries; (b) rent,
sub-lease, leasehold improvement obligations and related facility expenses for
offices that were closed due to the reduction in workforce; (c) severance
obligations; and (d) asset disposals.

Amortization of Intangible Assets and Stock-Based Compensation

      Amortization of intangible assets and stock-based compensation for
continuing operations decreased 98% to $23,000 for the nine months ended March
31, 2002, from $936,000 during the same period last year, as a result of a
decrease in goodwill amortization and deferred contract cost amortization. We
did not incur any amortization expense for our intangible assets for the nine
months ended March 31, 2002. We do not expect to incur such expenses in the
foreseeable future, as a result of the full reduction of our intangible assets
in fiscal 2001 due to our restructuring plan and the reduced fee expectations
from the Barona Tribe for the balance of the consulting agreement.

Other Income and Expense

      During the nine months ended March 31, 2002, interest income was $104,000
compared to $412,000 for the same period last year, as a result of the
significantly lower interest rates on our investments. Interest expense
increased to $671,000 during the nine months ended March 31, 2002, from $596,000
for the same period last year, as a result of a higher long-term debt balance
during the period.

      Other gains and losses during the nine months ended March 31, 2002
resulted in a net loss of $182,000, primarily as a result of fixed asset
disposals and the loss recorded to fully reduce the carrying value of our
investment in Watchnet, Inc. Other gains and losses during the same period last
year resulted in a net loss of $2,943,000, which included (a) a $3,585,000 net
loss recorded to fully reduce the carrying value of our investments in the
securities of numerous Internet and technology companies, most of which were
start-up companies; (b) a gain of $1,000,000 for the sale of the certain
intellectual properties, which included the Cyberworks domain names; and (c) a
net loss on fixed asset disposals of $370,000.

Income Tax Benefit

      During the nine months ended March 31, 2002, we recorded an income tax
benefit of $3,702,000 primarily as a result of a "one-time" income tax benefit
of $3,651,000 in connection with the temporary change in certain tax laws,
including an increase in the net operating loss carry-back period from two to
five years. In connection with the change, we are now entitled to refunds for
income taxes paid in previous years. We recorded a $1,318,000 income tax benefit
during the same period last year as a result of the tax losses during the
period.

Liquidity and Capital Resources

      Our principal source of liquidity at March 31, 2002 consisted of
unrestricted cash and cash equivalents of $7,033,000.

      During the nine months ended March 31, 2002, our cash position increased
by $2,933,000 to $7,033,000 from the June 30, 2001 balance of $4,100,000. This
increase was a result of net cash provided by operating activities of $2,962,000
partially offset by cash used in investing activities of $28,000.

      The cash provided by operating activities of $2,962,000 resulted primarily
from the collection of $7,685,000 in advances

                                       16

<PAGE>

made to the Barona Tribe in connection with the expansion project, offset by a
net change in operating assets and liabilities of $5,992,000 and a net loss of
$9,028,000 which included non-cash expenses and adjustments of $10,296,000. The
non-cash expenses and adjustments consisted of (a) a $6,317,000 loss recorded in
connection with the Barona consulting agreement; (b) deferred taxes of
$3,651,000; (c) a $123,000 loss on asset disposals; (d) depreciation on property
and equipment of $122,000; (e) loss on investments in convertible notes of
$57,000; (f) amortization of stock-based compensation of $23,000 and (g) bad
debt reserve of $3,000.

      Cash used in investing activities of $28,000 resulted primarily from the
purchase of fixed assets in connection with our CRM software development
project, net of fixed asset sales.

      In March 2002, Congress passed the Job Creation and Workers Assistance Act
of 2002 (the "Act"). The Act contains temporary changes in certain tax laws,
including an increase in a net operating loss carry-back period from two to five
years. In March 2002, as a result of the change in the carry-back period, we
established a receivable of $3,651,000 for income tax refunds due to us. We
expect to receive the refunds in varying amounts during May and June 2002.

      With respect to the current project to expand the Barona Casino, VCAT, the
Barona Tribe and the Barona Casino agreed to share in funding the expansion
costs incurred prior to obtaining all outside financing. We advanced an
aggregate of $9,685,000, substantially all of our commitment of up to
$10,000,000, as an unsecured, non-interest bearing advance to the Barona Tribe,
of which $7,685,000 remained outstanding as of June 30, 2001. These advances
were accounted for as a receivable from the Barona Tribe to us. In October 2001,
we requested that the Barona Tribe repay us the $7,685,000, representing the
remaining amount of advances that we had made to the Barona Tribe prior to the
Barona Tribe obtaining all of its outside financing to fund its expansion
project. In response to our request, the Barona Tribe repaid $7,685,000 to us in
October 2001.

      In connection with a $200,000,000 loan obtained by the Barona Tribe in
July 2001, we entered into a Reaffirmation, Consent and Amendment of
Intercreditor and Subordination Agreement. The agreement permits consulting fees
or other amounts owed to us to be paid up to the amounts permitted under the
debt coverage ratios set forth in the permanent financing loan agreement. No
payments may be made if there is a default under the terms of the permanent
financing loan agreement that has not been cured or waived.

      We currently have an obligation called "advances of future consulting
fees" due to the Barona Tribe of $3,700,000. These advances are unsecured and
non-interest bearing. At the beginning of the management relationship in 1992
with the Barona Tribe, the Barona Tribe was not in a financial position to make
required investments in the Barona Casino. We invested approximately $2,500,000
into the Barona Casino for additional working capital needs that was accounted
for as revenue to the Barona Casino and expensed by us due to the uncertainty of
recovery. The amount was not accounted for as a deferred contract cost (similar
to those investments discussed in Note 5). As the Barona Casino became
profitable between 1992 and 1994, $2,500,000 of the initial profits of the
Barona Casino were distributed to us after all draws, distributions and payments
were made to the Barona Tribe and were recorded on our books as an obligation
called "advances of future consulting fees." The Barona Casino established a
corresponding receivable. The remaining balance in advances of future consulting
fees at March 31, 2002 of $1,200,000, is due primarily to timing differences
between payments to us and consulting revenues earned and recognized since that
time. Sometime prior to when the consulting relationship ends in 2004, VCAT and
the Barona Tribe will discuss how to handle this balance, which may not have to
be repaid. Depending on the outcome, if the obligation is forgiven by the Barona
Tribe, we may have an additional source of liquidity in the sense that the debt
may not have to be repaid; however, if the obligation is not forgiven, we may
have to repay the debt. We are not certain on how this issue will ultimately be
resolved. All other transactions between the two parties are being treated
independently.

      In September 1996, we entered into a Stock Purchase and Settlement and
Release Agreement with two shareholders, including a former director (the "Stock
Purchase Agreement"). The terms of the Stock Purchase Agreement included (a) an
aggregate cash payment of $200,000 to such shareholders upon closing, (b) the
issuance of two unsecured promissory notes in the aggregate principal amount of
$3,500,000, with interest at the rate of 10% per annum, payments of interest
only for the first three years commencing September 30, 1997, followed by three
equal annual installments of principal repayment, with interest on the remaining
balance commencing September 30, 2000, (c) a contingent obligation (the "Initial
Contingent Obligations") to issue an aggregate principal amount of $9,856,000 in
unsecured promissory notes to such shareholders including $2,000,000 in
principal amount of notes each year for four years and $1,856,000 in principal
amount of notes to be issued in a fifth year, each note with interest at 10%,
payment of interest only for three years, followed by three equal annual
installments of principal plus interest on the remaining principal balance, and
(d) another contingent obligation (the "Second Contingent Obligation") to issue
an additional aggregate principal amount of $3,000,000 in unsecured promissory
notes (or cash, if we have closed a firm commitment underwritten public offering
of securities of not less than $35 million prior to the contingencies being
met).

      The Initial Contingent Obligations are contingent upon our retained
earnings balance, with certain adjustments, being at least $4,000,000 for the
fiscal year ending immediately prior to the date the notes are to be issued. The
test is to be made each year

                                       17

<PAGE>

for eight successive years that commenced with the fiscal year ended June 30,
1997. The Initial Contingent Obligation has been met for the first four test
periods, accordingly, $2,000,000 in obligations were recorded at each of June
30, 1997, 1998, 1999 and 2000, and have been treated as additional consideration
for the common stock repurchased under the Stock Purchase Agreement. The
retained earnings balance test was not met on June 30, 2001, therefore we did
not record the issuance of any additional notes during fiscal 2001. The Second
Contingent Obligation is subject to the following conditions: (a) the Barona
Tribe enters into a Class III Gaming Compact with the State of California which
permits the operation of video gaming machines at the Barona Casino in San Diego
County; (b) at the time that the Barona Tribe enters into a compact, we have a
consulting agreement or similar contractual arrangement with the Barona Tribe;
and (c) consulting fees paid to us by the Barona Tribe relating to the Barona
Casino for any consecutive 12-month period within five years after the Barona
Tribe has entered into the Compact, equal or exceed one and one-half times the
consulting fees for the fiscal year ended June 30, 1996. Two of the foregoing
criteria were satisfied during fiscal 2000. The contingent obligations will be
recorded as the additional cost of the repurchase of our common stock, as each
contingency or condition is met.

      In April 2000, VCAT and the two note holders announced that $3,069,000 of
current and future corporate indebtedness would be exchanged for equity prior to
its maturity. Pursuant to the terms of the exchange, a total of 579,000 shares
of our restricted stock and warrants to acquire an additional 145,000 shares of
our common stock at $5.89 per share were issued to retire the debt. The
transaction resulted in a non-cash extraordinary loss of $324,000, attributable
to the deemed value of the warrants.

      All payments pursuant to the Stock Purchase Agreement and the notes are
subject to our ability to meet certain financial tests and compliance with
certain state law provisions and our Articles of Incorporation concerning
repurchase transactions. Because of our current financial position, we were not
required to make payments under the notes in September 2001. This does not
constitute a default under the notes. Pursuant to the terms of the stock
purchase agreement and the applicable notes, accrued interest of $843,000 was
added to the principal amount of debt which will continue to accrue interest
pending certain other events, including the permissibility of VCAT to make
payments in the future.

      The remaining principal amount of debt (including the accrued interest
that was added to principal as a result of VCAT not making the scheduled
payments in September 2001) and accrued interest on the adjusted principal
related to this stock repurchase was $9,663,000 as of March 31, 2002. Based upon
projections provided to us by the Barona Casino in August 2001, which were
updated in March 2002, and our current sources of revenues, we do not expect
that such payments will be required for the foreseeable future, therefore all
amounts have been classified as "non-current liabilities". In addition, amounts
previously reported as current liabilities under the Stock Purchase Agreement
have been reclassified as non-current liabilities to conform to the March 31,
2002 presentation.

      If our financial condition improves to the extent that we meet the
financial tests set forth in the Stock Purchase Agreement and the notes and, at
the time a scheduled payment becomes due, we do not have sufficient cash on hand
to pay the scheduled payments and sustain our ongoing operations, we will need
to seek additional capital to repay some or all of this debt. There can be no
assurance that this alternative would be available at the time or on terms
acceptable to us, or, if available, it could have a material adverse affect on
our financial condition or may result in dilution to our shareholders.

     In connection with the proposed merger among VCAT, L. Donald Speer, II, and
Speer Casino Marketing, Inc., the two note holders agreed to restructure VCAT's
obligations to them relating the Stock Purchase Agreement. The note holders have
agreed to reduce VCAT'S outstanding obligations relating to the Stock Purchase
Agreement to $8,333,000 and to exchange the previously issued notes for new
notes representing the reduced debt amount. The restructuring of VCAT's
indebtedness to the note holders is contingent upon the approval of the proposed
merger and certain other conditions. See "Item 5 Other Information" for more
information.

      Restricted cash consists of a $133,000 irrevocable letter of credit issued
to satisfy the terms of the lease agreement for VCAT's prior corporate office.
This space has been subleased; however, as part of the sublease agreement, the
letter of credit remained in place. The letter of credit expires on October 31,
2002, unless cancelled by the lessor.

As of May 8, 2002, our unrestricted cash and cash equivalents balance was
approximately $5,990,000. In addition, we expect to receive tax refunds totaling
$3,651,000 in varying amounts in May and June 2002. We believe that our
unrestricted cash and the anticipated income tax refunds will be sufficient to
meet our known operating and capital requirements as they are currently
scheduled to come due for at least the next 18 months. However, if our cash
needs increase for any reason, such as a change in our business strategy, the
length of time that our current cash would sustain operations could decrease
significantly.

Factors That May Affect Future Results

      The risks described below are not the only ones that we face. Any of the
following risks could seriously harm our business, financial condition or
results of operations. The following risk factors could cause our actual results
to differ materially from those contained in forward-looking statements made in
this Quarterly Report on Form 10-QSB or presented elsewhere by management from
time to time.

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<PAGE>

We are not receiving any revenues from the consulting agreement with the Barona
Tribe and may not receive any consulting fee revenues for the remainder of the
term of the current consulting agreement.

      We have historically derived substantially all of our revenue from
services provided to the Barona Tribe. Although revenues at the Barona Casino
have exceeded expenses, the level of revenues have not been sufficient under the
formula used to calculate our consulting fee to offset the effect of the
significant capital, construction, interest and operating expenses incurred at
the Barona Casino in connection with its interim expansion, the ongoing
development of the Barona Valley Ranch project and the increase of debt by the
Barona Tribe for use in the expansion project. These facts have resulted in a
decline of consulting fees payable to us to zero. Unless the net revenues at the
Barona Casino increase substantially, the formula pursuant to which consulting
fees are paid to us under the current consulting agreement will continue to
result in no fees being paid to us. Based upon current projections provided to
us by the Barona Casino, it does not appear likely that net revenue will
increase sufficiently to allow a fee to be paid to us for the remaining term of
our consulting agreement.

      Unless we are able to renegotiate the terms of the consulting agreement
with the Barona Tribe, identify alternative sources of revenue, and/or identify
a strategic alternative, we could eventually deplete all of our cash and cash
equivalents providing services under the existing consulting contract. To the
extent we do not have sufficient cash or access to other financing, we will not
be able to continue to operate our business. If that should occur, you may lose
your investment.

A deterioration in national and regional economic conditions could further
adversely impact our ability to earn fees under the current consulting agreement
with the Barona Tribe.

      Our consulting fees are dependent upon the revenues generated by the
Barona Tribe's gaming facility, the Barona Casino. Moderate or severe economic
downturns or adverse conditions, nationally and especially in Southern
California, may negatively affect the Barona Casino's operations. During periods
of economic contraction, the Barona Casino's revenues may decrease while some of
its costs remain fixed or, as will be the case for the foreseeable future, its
costs will increase as a result of the expansion project, resulting in decreased
net income for the Barona Casino. In addition, gaming and other leisure
activities offered by the Barona Casino are discretionary expenditures and
participation in such activities may decline during economic downturns because
consumers have less disposable income. Even an uncertain economic outlook may
adversely affect consumer spending in the Barona Casino, as consumers spend less
in anticipation of a potential economic downturn. Accordingly, our business,
assets, financial condition and results of operations could be adversely
affected.

We have reported losses and may not be able to return to profitability.

      We have recently reported significant losses attributable to our
restructuring of our business and material decreases in fees payable to us by
our only client, the Barona Tribe. As a result, as of March 31, 2002, we have a
retained deficit of $21,092,000 and our liabilities exceed our assets. As noted
above, based on projections provided to us by the Barona Casino, fees from the
consulting agreement with the Barona Tribe are expected to be zero for the
balance of the term of the consulting agreement. Accordingly, we are unlikely to
return to profitability for the foreseeable future, if at all. We have a history
of substantial losses and negative cash flows. We expect these losses and
negative cash flows to continue in the future. If we are unable to generate
sufficient revenue from our operations or raise sufficient additional capital,
we may not be able to continue to operate our business, and you may lose your
investment.

Our auditors have expressed doubts about our ability to continue as a going
concern.

      We have received a report from our independent auditors with respect to
the audited financials for June 30, 2001, containing an explanatory paragraph
that expresses substantial doubt about our ability to continue as a going
concern due to our recurring losses from operations, curtailed revenue
expectations from the Barona Tribe and our net capital deficiency.

We have formed a special committee of independent directors to identify
strategic alternatives and address our current financial position; however, we
cannot be assured that their efforts will be successful.

      In October 2001, the Board of Directors formed a special committee of
independent directors to identify strategic alternatives and take steps to
implement one or more initiatives to increase shareholder value. On May 13,
2002, the special committee approved, and we signed, a definitive merger
agreement with L. Donald Speer, II, our Chief Executive Officer, Chief Operating
Officer and Chairman of the Board, and Speer Casino Marketing, Inc., a Delaware
corporation wholly owned by Mr. Speer. Under the terms of the merger agreement,
VCAT will merge into Speer Corporation, and Speer Corporation will be the
surviving entity. Upon the completion of the merger, each issued and outstanding
share of our common stock, other than shares held by Speer Corporation, treasury
shares, and dissenting shares, will be converted into the right to receive $0.65
in cash and additional contingent payments, if earned, over the five year period
following the effective date of the merger. The completion of the merger is
subject to a number of conditions, including the approval of the merger by our
stockholders. There can be no assurance that the merger agreement will be
approved by our stockholders or that the merger will be completed.

We have limited recourse against tribes and tribal assets.

                                       19

<PAGE>

      Our principal recourse from a tribe for collection of indebtedness or
money damages for breach or wrongful termination of a contract is from revenues,
if any, from casino operations. We have agreed to, and in the future may agree
to, subordinate the repayment of a tribe's indebtedness and payment of other
fees due to us from a tribe to other obligations of the tribe, such as
indebtedness to a commercial lender. Accordingly, in the event of a default by a
tribe, a tribe's indebtedness or fees due to us may not be paid, if at all,
until any senior creditors have been repaid in full.

Approval of our consulting agreement with the Barona Tribe by appropriate
regulatory authorities is still pending.

      Appropriate regulatory authorities have not yet approved the consulting
agreement. If the consulting agreement is not approved or is significantly
modified by regulatory authorities to our detriment, such action could have a
further 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. To the extent that we are able to amend
our current consulting agreement with the Barona Tribe so that fees are being
paid to us, such amendment would have to be submitted to the appropriate
regulatory authorities for their approval. Failure by such regulatory
authorities to approve such agreement could have a material adverse effect upon
our business.

There has been an increase in competition for us and for our only client.

      The recent expansion of gaming activities in California has resulted in
experienced gaming companies negotiating or entering into contracts with Native
American tribes in California. As California gaming operations grow, there will
be increasing competition from other gaming consulting or management companies
for new clients. This could result in fewer potential clients or less profitable
potential arrangements that could have a material adverse effect on our attempts
to obtain additional clients or generate additional revenue sources. There has
been an increase in the number of Native American casinos open and operating in
the San Diego marketplace. The number of casinos has grown from 4 to 9 since the
year 2000 and there may be additional casinos that attempt to open in this area,
all of which may be competing for customers. This increased competition could
reduce the profit levels achieved at the Barona Casino and further reduce the
likelihood of fees to us under the consulting agreement or the likelihood that
we will be able to amend our current agreement with the Barona Tribe.

We may not be able to successfully market the CRM software product to other
clients.

       We are currently beta-testing our CRM software product at the Barona
Casino. There can be no assurance that the CRM software will perform
satisfactorily, that we will be able to license it to customers and that it will
produce revenues.

We may have difficulty attracting and retaining key employees; We have limited
resources to grow our business.

      We have taken several steps, such as reducing overhead and staffing to
control expenses, and may take additional steps to further reduce expenses.
However, this may reduce our ability to attract and retain employees or to
pursue or exploit additional business opportunities. If we are unable to attract
and retain qualified employees or pursue or exploit future business
opportunities, it could have a material adverse effect on our business and
financial condition, and we may not be able to continue to operate our business.

We are dependent upon our Chairman and Chief Executive Officer.

      Our success largely depends upon the continued contributions of L. Donald
Speer, II, the Chairman of the Board and Chief Executive Officer of VCAT. The
loss of Mr. Speer's services, for any reason, may have a material adverse effect
on our prospects. We have not entered into any employment agreements with Mr.
Speer and there is nothing preventing him from departing at any time from
employment with us. There can be no assurance that we will be able to find a
suitable replacement. To the extent that Mr. Speer's services become unavailable
or if Mr. Speer were to resign, such loss could result in the termination of
the consulting agreement and the loss of other service opportunities with other
Native American Tribes. There can be no assurance that we would be able to
retain the Barona Tribe as a client.

Our stock has been delisted from the Nasdaq Stock Market.

      On August 15, 2001, our common stock was delisted from the Nasdaq National
Market for failure to comply with the $1.00 minimum bid price and the $5 million
market value of public float requirements. Our common stock currently trades on
the Over-The-Counter ("OTC") Bulletin Board. This generally is considered to be
a less efficient trading market and our stock price as well as liquidity in our
common stock may be adversely effected. Low-priced stocks are subject to
additional risks, including additional

                                       20

<PAGE>

state regulatory requirements and the potential loss of effective trading
markets.

      The trading price of our common stock has been, and will likely continue
to be, subject to wide fluctuations because of regulatory developments,
quarterly variations in our operating results, the market where our common stock
trades, announcements of new services or business activities by us or our
competitors, general market fluctuations, and other events and factors. These
factors, coupled with the small public float, have in the past, and could in the
future, result in wide fluctuations in the market-trading price.

Inflation

      To date, inflation has not had a material impact on our financial
condition or our results of operations. However, that may change in the future
and the impact could be material to our results of operations or financial
condition.

                                       21

<PAGE>

                           PART II--OTHER INFORMATION

Item 5.  Other Information

       On May 13, 2002 we signed a definitive merger agreement (the "Merger
Agreement") with L. Donald Speer, II, our Chief Executive Officer, Chief
Operating Officer and Chairman of the Board, and Speer Casino Marketing, Inc.
("Speer Corporation"), a Delaware corporation wholly owned by Mr. Speer.

       At a special meeting on May 13, 2002, the Special Committee of our Board
of Directors (the "Special Committee") determined that the Merger Agreement is
fair to and in the best interests of the public stockholders of VCAT. The
Special Committee unanimously approved the Merger Agreement and recommended that
our Board of Directors also approve the Merger Agreement. At a subsequent
meeting, the members of the Board, other than Mr. Speer who abstained from
voting in light of his personal interest in the merger, determined that the
Merger Agreement and the transactions contemplated thereby are fair to and in
the best interests of the public stockholders of VCAT and unanimously approved
the Merger Agreement.

       Under the terms of the Merger Agreement, VCAT will merge into Speer
Corporation, and Speer Corporation will be the surviving entity. Upon the
completion of the merger, each issued and outstanding share of VCAT's common
stock, other than shares held by Speer Corporation, treasury shares, and
dissenting shares, will be converted into the right to receive $0.65 in cash and
additional contingent payments, if earned, over the five year period following
the effective date of the merger. The contingent payments for each year will be
calculated based on the following: (i) the amount by which Speer Corporation's
revenues from business relationships, arrangements and contracts with the Barona
Group of Capitan Grande Band of Mission Indians (the "Barona Tribe") exceed
certain specified thresholds, (ii) interest, dividends, sales proceeds and other
payments earned by Speer Corporation in connection with securities held for
investment by VCAT immediately prior to the closing of the merger, and (iii)
specified percentages of sales proceeds, licensing fees and other payments
earned by Speer Corporation in connection with the sale or license of VCAT's
customer relations management software. The maximum contingent payments that may
be paid to VCAT's shareholders may not exceed $45 million.

       The merger is subject to the approval of VCAT's shareholders and other
closing conditions, including Speer Corporation obtaining financing for the
purchase of the outstanding shares of VCAT common stock in connection with the
merger. An additional condition to the proposed merger is that VCAT's
outstanding obligations to two VCAT shareholders in the aggregate principal
amount of $9,663,000 plus accrued interest (as of March 31, 2002) relating to a
1996 stock repurchase shall have been restructured to reduce the outstanding
debt by more than $1,000,000.

       There can be no assurance that the proposed merger will be completed.


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

       (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 May 13, 2002 by and among
            L. Donald Speer, II, Speer Casino Marketing, Inc. and Venture
            Catalyst Incorporated.

   10.1     Fourth Extension to Promissory Note dated March 31, 2002 between
            Venture Catalyst Incorporated and L. Donald Speer, II and Kelly
            Elizabeth Speer.

   10.2     Sublease dated January 15, 2002 between Venture Catalyst
            Incorporated and Metapa, Inc.

   10.3     Restructuring Agreement dated as of May 13, 2002 by and among
            Venture Catalyst Incorporated, Jonathan Ungar and Alan Woods.

   10.4     Form of Acknowledgment and Agreement by and among L. Donald Speer,
            II, Jonathan Ungar and Alan Woods.

   10.5     Form of Class A Contingent Promissory Note between Venture Catalyst
            Incorporated and Jonathan Ungar.

   10.6     Form of Class A Contingent Promissory Note between Venture Catalyst
            Incorporated and Alan Woods.

       (b) Reports on Form 8-K.

       During the three month period ended March 31, 2002, VCAT filed no Current
Reports on Form 8-K with the Commission.

                                       22

<PAGE>

                                   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: May 15, 2002          By:    /s/   L. DONALD SPEER, II
                                   ---------------------------------------------
                                   L. Donald Speer, II
                                   Chairman of the Board and Chief
                                   Executive Officer
                                   (Authorized Signatory, Principal
                                   Executive Officer)

Date: May 15, 2002          By:    /s/   KEVIN MCINTOSH
                                   ---------------------------------------------
                                   Kevin McIntosh
                                   Senior Vice President, Chief
                                   Financial Officer, Secretary and
                                   Treasurer
                                   (Authorized Signatory, Principal
                                   Financial and Accounting Officer)

                                       23

<PAGE>


                                  Exhibit Index

Exhibit No.                           Description
-----------                           -----------

    2.1      Agreement and Plan of Merger dated May 13, 2002 by and among
             L. Donald Speer, II, Speer Casino Marketing, Inc. and Venture
             Catalyst Incorporated.

   10.1      Fourth Extension to Promissory Note dated March 31, 2002 between
             Venture Catalyst Incorporated and L. Donald Speer, II and Kelly
             Elizabeth Speer.

   10.2      Sublease dated January 15, 2002 between Venture Catalyst
             Incorporated and Metapa, Inc.

   10.3      Restructuring Agreement dated as of May 13, 2002 by and among
             Venture Catalyst Incorporated, Jonathan Ungar and Alan Woods.

   10.4      Form of Acknowledgment and Agreement by and among L. Donald Speer,
             II, Jonathan Ungar and Alan Woods.

   10.5      Form of Class A Contingent Promissory Note between Venture Catalyst
             Incorporated and Jonathan Ungar.

   10.6      Form of Class A Contingent Promissory Note between Venture Catalyst
             Incorporated and Alan Woods.

                                       24