<PAGE>   1

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

                     U.S. 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: September 30, 1998


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

         For the transition period from ___________ to ___________


                         Commission File Number: 0-11532



                        INLAND ENTERTAINMENT CORPORATION
        (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.)

        16868 Via Del Campo Court, Suite 200, San Diego, California 92127
                    (Address of principal executive offices)

                    Issuer's telephone number: (619) 716-2100

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

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: as of November 6, 1998,
4,704,186 shares of common stock, $.001 par value per share, were outstanding.

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



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



<PAGE>   2

                        INLAND ENTERTAINMENT CORPORATION
                                   FORM 10-QSB
                     FOR THE PERIOD ENDED SEPTEMBER 30, 1998

                                TABLE OF CONTENTS

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

    ITEM 1.  FINANCIAL STATEMENTS (Unaudited):

             Consolidated Balance Sheets -
             June 30, 1998 and September 30, 1998 .............           3

             Consolidated Statements of Operations -
             Three months ended September 30, 1998 and 1997 ...           4

             Consolidated Statements of Cash Flows -
             Three months ended September 30, 1998 and 1997 ...           5

             Notes to Interim Consolidated Financial Statements           6

      ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
                 OR PLAN OF OPERATION .........................          10

PART II.  OTHER INFORMATION

      ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS .......          16

      ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................          17

SIGNATURES ....................................................          18
</TABLE>



                                       2
<PAGE>   3

                         PART I - FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS.

                        INLAND ENTERTAINMENT CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                      SEPTEMBER 30, 1998 AND JUNE 30, 1997

<TABLE>
<CAPTION>
                                                                  September 30, 1998        June 30, 1998
                                                                     (Unaudited)
                                      ASSETS
<S>                                                               <C>                       <C>
CURRENT ASSETS:
  Cash and cash equivalents ...............................          $ 10,234,264           $  9,205,502
  Short term investments ..................................                    --              1,876,667
  Accounts receivable .....................................               328,493                 51,644
  Prepaid expenses and other current assets ...............               193,042                150,024
                                                                     ------------           ------------
          Total current assets ............................            10,755,799             11,283,837

NONCURRENT ASSETS:
  Restricted cash and other investments ...................             2,115,320              2,115,320
  Employee and other receivables due after one year .......               471,559                478,756
  Property, plant and equipment, net ......................             1,141,457              1,023,620
  Deferred contract costs, net ............................             3,687,799              3,855,427
  Deferred taxes ..........................................               127,982                127,982
  Goodwill, net of amortization ...........................             3,630,568                     --
  Deposits and other assets ...............................               379,713                388,613
                                                                     ------------           ------------
          Total noncurrent assets .........................            11,554,398              7,989,718
                                                                     ------------           ------------

          Total assets ....................................          $ 22,310,197           $ 19,273,555
                                                                     ============           ============

                       LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Advances of future consulting fees -- Barona Casino .....          $  2,565,078           $  2,596,930
  Current portion of long-term debt .......................               400,000                400,000
  Deferred revenues .......................................                96,988                     --
  Accounts payable and accrued expenses ...................             1,113,094              1,150,380
  Income taxes payable ....................................                    --                228,344
                                                                     ------------           ------------
          Total current liabilities .......................             4,175,160              4,375,654

LONG-TERM DEBT, LESS CURRENT PORTION ......................             8,300,000              8,300,000
                                                                     ------------           ------------

          Total liabilities ...............................            12,475,160             12,675,654

SHAREHOLDERS' EQUITY:
  Common stock, $.001 par value, 100,000,000
   shares authorized and 4,699,186 shares outstanding .....                 4,699                  3,924

  Additional paid in capital ..............................             3,131,725                     --
  Retained earnings .......................................             6,773,613              6,683,977
  Deferred compensation ...................................               (75,000)               (90,000)
                                                                     ------------           ------------
          Total shareholders' equity ......................             9,835,037              6,597,901
                                                                     ------------           ------------

          Total liabilities and shareholders' equity ......          $ 22,310,197           $ 19,273,555
                                                                     ============           ============
</TABLE>



                                       3
<PAGE>   4

                        INLAND ENTERTAINMENT CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                         1998                  1997
                                                      -----------           -----------
<S>                                                   <C>                   <C>
REVENUE
     Indian Gaming Consulting ..............          $ 3,097,099           $ 3,932,000
     Other .................................              232,662
                                                      -----------           -----------
                                                        3,329,761             3,932,000
                                                      -----------           -----------

OPERATING EXPENSES:
     General and administrative expenses ...            3,030,075             1,962,297
     Amortization of deferred contract costs              167,628               872,868
                                                      -----------           -----------
                                                        3,197,703             2,835,165
                                                      -----------           -----------

Operating profit ...........................              132,058             1,096,835

Other income and (expense):
     Interest income .......................              170,411               146,307
     Interest expense ......................             (145,833)             (102,319)
                                                      -----------           -----------
                                                           24,578                43,988
                                                      -----------           -----------
Income before income taxes .................              156,636             1,140,823

Income tax provision .......................               67,000               509,000
                                                      -----------           -----------

Net income .................................          $    89,636           $   631,823
                                                      ===========           ===========

Earnings per share - basic .................          $      0.02           $      0.16
                                                      ===========           ===========
Earnings per share - diluted ...............          $      0.02           $      0.15
                                                      ===========           ===========

Shares used in the computation of  income
    per share - basic ......................            4,217,045             3,854,548
                                                      ===========           ===========
Shares used in the computation of  income
    per share - diluted ....................            5,036,045             4,107,794
                                                      ===========           ===========
</TABLE>



                                       4
<PAGE>   5

                        INLAND ENTERTAINMENT CORPORATION
                            STATEMENTS OF CASH FLOWS
                    FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             1998                   1997
                                                                         ------------           ------------
<S>                                                                      <C>                    <C>
Net cash generated by (used in) operating activities:
     Net income ...............................................          $     89,636           $    631,823
     Adjustments to reconcile net income to net cash
       provided by operating activities:
        Depreciation and amortization .........................               265,792                891,667
        Deferred taxes ........................................                                      106,000
        Compensation for granting of non-employee stock options                15,000
        Changes in operating assets and liabilities ...........              (537,737)               225,814
                                                                         ------------           ------------
Net cash provided by (used in) operating activities ...........              (167,309)             1,856,304
                                                                         ------------           ------------

 Cash flows provided by (used) in investing activities:
     Purchase of Cyberworks, Inc. .............................              (671,513)
     Maturity of short-term investments .......................             1,876,667
     Purchase of furniture and equipment ......................              (103,780)              (259,598)
     Deferred contract costs ..................................                                     (114,678)
                                                                         ------------           ------------
Net cash provided by (used in) investing activities ...........             1,101,374               (374,276)
                                                                         ------------           ------------

Cash flows provided by (used in) financing activities:
    Payment of notes payable ..................................                                     (620,054)
    Loans to employees ........................................                 7,197                (83,000)
    Proceeds from exercise of stock options ...................                87,500
                                                                         ------------           ------------
Net cash provided by (used in) financing activities ...........                94,697               (703,054)
                                                                         ------------           ------------

Increase in cash ..............................................             1,028,762                778,974
Cash, beginning of period .....................................             9,205,502              8,004,078
                                                                         ------------           ------------
Cash, end of period ...........................................          $ 10,234,264           $  8,783,052
                                                                         ============           ============

Supplemental disclosures of cash flow information:

    Interest expense paid .....................................          $    532,655           $    375,624
                                                                         ============           ============
    Income taxes paid .........................................          $    300,000           $    184,000
                                                                         ============           ============

Non-cash investing and financing activities:

    Acquisition of Cyberworks, Inc. ...........................
       Fair value of tangible assets ..........................          $    244,226
       Goodwill ...............................................             3,661,077
       Liabilities assumed ....................................              (188,790)
       Stock issued (750,000 shares) ..........................            (3,045,000)
                                                                         ------------
       Cash paid ..............................................          $    671,513
                                                                         ============
</TABLE>



                                       5
<PAGE>   6

                        INLAND ENTERTAINMENT CORPORATION
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998

1. PRESENTATION OF INTERIM CONSOLIDATED FINANCIAL INFORMATION. The accompanying
interim unaudited consolidated financial statements have been prepared by Inland
Entertainment Corporation, a Utah corporation (the "Company" or "Inland"), 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 the
Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998
and the Current Report on Form 8-K dated September 10, 1998. Current and future
financial statements may not be directly comparable to the Company'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.

2. BARONA CONSULTING AGREEMENT. The Company has provided services to the Barona
Group of Capitan Grande Band of Mission Indians (the "Barona Tribe") since 1991.
The Company provides consulting services in accordance with the terms and
conditions of an Amended and Restated Consulting Agreement (the "Amended and
Restated Consulting Agreement"). During February 1998, the Company and the
Barona Tribe executed Modification #1 to the Amended and Restated Consulting
Agreement (the "Modification") which extended the term for providing consulting
services by an additional 60 months. Unless otherwise stated herein, the Amended
and Restated Consulting Agreement, as amended by the Modification, shall be
referred to herein as the "Barona Consulting Agreement." The Barona Consulting
Agreement expires in March 2004.

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 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 by it with respect to
such agreement was required. The NIGC conducted an investigation of the past
relationship between the Barona Tribe and the Company that resulted in a January
1997 settlement agreement.

In January 1997, the Company submitted the Amended and Restated Consulting
Agreement to the NIGC. In April 1997, the Company received a letter from the
NIGC questioning whether the Amended and Restated Consulting Agreement was in
fact a management contract. The Company believes that the NIGC will ultimately
determine that the Amended and Restated Consulting Agreement is not a management
contract, based on (i) the May 1996 and July 1997 determinations of the NIGC and
BIA respectively, with respect to the Initial Consulting Agreement, (ii) the
NIGC's findings in the January 1997 settlement agreement and (iii) the actual
elements of the relationship between the Barona Casino and the Company. However,
there is no assurance that the NIGC will determine that the Amended and Restated
Consulting Agreement is not a management contract. If such a determination is
not made by the NIGC, the failure of the NIGC to approve the Amended and
Restated Consulting Agreement (and the Modification) could have a material
adverse effect on the business and financial condition of the Company. If the
NIGC concludes that the Amended and Restated Consulting Agreement (and the
Modification) is not a management agreement, the NIGC will forward the Agreement
to the BIA for its review. To the extent that the BIA determines that its
approval is required, there can be no assurance that the BIA will approve such
Agreement, and such failure to approve the Amended and Restated Consulting
Agreement (and the Modification) may have a



                                       6
<PAGE>   7

                        INLAND ENTERTAINMENT CORPORATION
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998

material adverse effect on the business and financial condition of the Company.
The Company is in the process of submitting the Modification to the NIGC.

3. TRIBAL-STATE COMPACT. In August 1998, a Tribal-State Compact was signed
between the State of California and the Barona Tribe (the "Barona Compact").
Management believes this Compact ended a significant amount of uncertainty and
concern about the future of gaming activities at the Barona Casino.

The Barona Compact was signed by Governor Pete Wilson and the Chairman of the
Barona Tribe, Clifford LaChappa, on August 12, 1998; thereafter, the Barona
Tribal Council voted to submit the Barona Compact to the U.S. Secretary of the
Interior (the "Secretary"). The Secretary's approval of the Barona Compact was
published in the Federal Register on October 22, 1998; however, the State of
California has requested that the Barona Compact not become effective until 
sometime in 1999.

The initial term of the Barona Compact will terminate on January 1, 2009. The
Barona Tribe has the option to renew the Barona Compact for two additional five
(5) year terms upon written notice of renewal to the Governor prior to the
termination date. Such options may be denied if the Barona Tribe has been found
to have engaged in unauthorized Class III gaming on two or more occasions or has
committed violations of the terms of the Barona Compact on five or more
occasions.

In contrast to the electronic gaming machines currently in play at the Barona
Casino, the Barona Compact permits the following two Indian Lottery Games: (i)
Indian Video Lottery Match Game and (ii) Indian Video Lottery Scratcher Game.
These games are based upon the concept that casino patrons are playing against
one another and not the "house", since California prohibits house-banked games
of any kind. The Barona Tribe is allowed to operate 1,057 machines, but, similar
to other tribes, has been allocated only 199 machines. To achieve the maximum
number of gaming machines permissible, the balance of the machines must be
licensed by the Barona Tribe from other Federally-recognized tribes in
California for an annual fee of $5,000 per machine.

The Barona Tribe will be permitted to operate its existing 1,057 electronic
gaming devices for up to six months after the Barona Compact has been signed if
the Indian Lottery Games are not commercially available to the tribes. At the
present time, there are a limited number of prototype Indian Lottery devices
being tested at two Indian gaming facilities in Northern California. The time
limitation for conversion may be extended if the Indian Lottery devices are
still not certified for operation to the tribes or are not commercially
available by that time. In the event the lottery-based devices do not produce an
income stream consistent with that being earned by the machines currently in
play at the Barona Casino, the resulting decline in revenue from operations at
the Barona Casino may have a material adverse impact on the fees paid to the
Company under the Consulting Agreement.

Additionally, under the Barona Compact, employees of tribal casinos must be
provided California worker's compensation, unemployment insurance, disability
insurance and guaranteed the right to engage in collective bargaining
activities. Patrons of such facilities will have the right to require binding
arbitration of player disputes. The Barona Tribe must carry public liability
insurance and agree to a limited waiver of its sovereign immunity for settlement
of patron injury claims.

4. ACQUISITION. On August 27, 1998, the Company acquired all of the outstanding
shares of Cyberworks Inc., a California corporation ("Cyberworks"), an Internet
marketing and web site developer. Under the terms of the agreement, the Company
exchanged 750,000 shares of its common stock and $500,000 in cash for 100% of
the capital stock of Cyberworks. Cyberworks is being operated as a wholly-owned
subsidiary of the Company. The acquisition was accounted for as a purchase and
the accounts of Cyberworks have



                                       7
<PAGE>   8

                        INLAND ENTERTAINMENT CORPORATION
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998

been included in the accompanying financial statements for the period August 27,
1998 to September 30, 1998.

The excess of the total acquisition cost over the fair value of net assets
acquired ("goodwill") of $3,630,058 will be amortized on a straight-line basis
over 10 years. Amortization expense of $30,509 has been recorded as of September
30, 1998. On an ongoing basis, the Company will review the valuation and
recoverability of the unamortized goodwill costs and will expense all or any
portion of unamortized goodwill determined necessary for fair statement.

The following unaudited pro forma consolidated results of operations assume that
the purchase occurred on July 1, 1997:

<TABLE>
<CAPTION>
                                                QUARTER ENDED SEPTEMBER 30,
                                                  1998                    1997
                                             -------------           -------------
<S>                                          <C>                     <C>          
Revenues ..........................          $   3,472,000           $   4,139,000
Net Income (Loss) .................          $     (10,000)          $     585,000
Basic Net Income (Loss) per share .          $        0.00           $        0.13
Diluted Net Income (Loss) per share          $        0.00           $        0.12
</TABLE>


5. RESTRICTED CASH AND OTHER INVESTMENTS. From June 1996 to May 1997, the
Company provided consulting services to the Klamath and Modoc Tribes and the
Yahooskin Band of Snake Indians (collectively, the "Klamath Tribes"). The
Klamath Tribes constructed the Kla-Mo-Ya Casino near Chiloquin, in south central
Oregon, a gaming facility funded by revenue bonds issued by the Klamath Tribes.
In connection with such bond financing, the Company has a net investment of
$464,320 in revenue bonds with a principal face amount of $500,000. In addition,
as a condition of the bond financing, the Company agreed to hold the bonds for a
five-year period. Pre-opening costs and expenses of approximately $1.5 million
were financed by loans made pursuant to a third-party bank credit agreement with
the Klamath Tribes. The Company pledged to such bank a certificate of deposit
for $1,518,000 as collateral for such loans.

If the Klamath Tribes are unable to pay its obligations, the Company may lose
all or a portion of its investment in the revenue bonds it purchased and its
certificate of deposit pledged as collateral for bank loans to the Klamath
Tribes.

Additionally, the Company issued an irrevocable letter of credit for $133,000 to
satisfy the terms of its corporate office lease agreement. Such letter of credit
will automatically renew on an annual basis until October 31, 2002 unless
canceled by the lessor.

6. NET INCOME PER SHARE. Below is the reconciliation of the components of the 
calculation of basic and diluted earnings per share for the past two quarters
indicated:

<TABLE>
<CAPTION>
                                                         FOR THE THREE MONTHS ENDED
                                                               SEPTEMBER 30,
                                                          1998                1997
                                                       ----------          ----------
<S>                                                    <C>                 <C>       
Net income available to common shareholders .          $   89,636          $  631,823
                                                       ==========          ==========
Weighted average shares outstanding-- Basic .           4,217,045           3,854,548
Effect of stock options .....................             819,000             253,246
                                                       ----------          ----------
Weighted average shares outstanding-- Diluted           5,036,045           4,107,794
                                                       ==========          ==========
</TABLE>



                                       8
<PAGE>   9

                        INLAND ENTERTAINMENT CORPORATION
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998

    Options to purchase 365,000 shares of common stock at prices ranging from
$4.00 to $4.13 a share were outstanding during the first quarter of Fiscal 1999.
They were not included in the computation of diluted EPS because the options'
exercise price was greater than the average market price of the common shares.
The options, which expire on various future dates through April 2008 were still
outstanding at September 30, 1998.



                                       9
<PAGE>   10

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

OVERVIEW

Inland Entertainment Corporation (the "Company" or "Inland") provides services
for gaming operations under consulting agreements with Native American Tribes.
The Company has provided services to the Barona Group of Capitan Grande Band of
Mission Indians (the "Barona Tribe") since 1991. The Company is currently
providing consulting services to the Barona Tribe at the Barona Casino under the
terms of Modification #1 (the "Modification") to the Amended and Restated
Consulting Agreement (as amended by the Modification, the "Barona Consulting
Agreement" or the "Consulting Agreement") which was executed in February 1998.
The Modification, among other things, extended the terms of the Amended and
Restated Consulting Agreement for an additional 60 months. The Company provided
certain personnel, at its expense, to facilitate the activities at the Barona
Casino, and it entered into agreements such as leases or other contracts for the
benefit of the Barona Casino in which the Company was the obligor (e.g., leases
for gaming equipment, the Big Top lease, etc.).

In addition to its obligations under the Consulting Agreement, the Company's
consulting activities include assisting the Barona Tribe in arranging financing
to support casino construction projects and monitoring of Indian Gaming
legislative and litigation matters. The financing costs have been recognized as
an asset in the financial statements of the Company, designated as deferred
contract costs, and are being amortized to expense over the remaining life of
the Consulting Agreement through March 2004. The recovery of these deferred
costs is achieved through the fees earned by the Company pursuant to agreements
with the Barona Tribe. However, given the nature of the asset, if the
recoverability is determined not to be probable, the Company will charge to
expense the unamortized portion.

In August 1998, a Tribal-State Compact was signed between the State of
California and the Barona Tribe (the "Barona Compact"). The Barona Compact was
signed by Governor Pete Wilson and the Chairman of the Barona Tribe, Clifford
LaChappa, on August 12, 1998; thereafter, the Barona Tribal Council voted to
submit the Barona Compact to the U.S. Secretary of the Interior (the
"Secretary"). The Secretary's approval of the Barona Compact was published in
the Federal Register on October 22, 1998; however, the State of California has
requested that the Barona Compact not become effective until sometime in 1999.
Management believes this Compact ended a significant amount of uncertainty and
concern about the future of gaming activities at the Barona Casino.

In March 1998, the Company established a wholly-owned foreign subsidiary,
Worldwide Media Holdings N.V. ("WMH"), a Curacao, Netherland Antilles
corporation. WMH provides consulting services related to Internet casinos
including the development of casino-style games and marketing and promoting of
Internet casinos through web-site development, Internet advertising and
conventional advertising. Currently, WMH is providing consulting and marketing
services to the following international Internet casinos: "Casino Australia,"
the "Kenny Rogers Casino" and "The Good Luck Club." WMH does not operate any of
these casinos and none of the casinos accept wagers from the United States or
its territories. WMH earns marketing fees to promote and market such casinos
based on a percentage of the net profits of the on-line casinos.

In August 1998, the Company purchased Cyberworks, Inc., a California corporation
("Cyberworks"), a web site developer and on-line marketing company with existing
clients in gaming and non-gaming industries to further the Company's strategic
growth into the on-line marketplace. Cyberworks was acquired for an aggregate
purchase price, excluding acquisition costs, of $3,560,000 consisting of
$500,000 cash and 750,000 shares of the Company's common stock, $.001 par value
per share. The acquisition was accounted for as a purchase and is being operated
as a wholly-owned subsidiary of the Company. There is only approximately one
month of Cyberworks' operating results in the Company's current quarter ending
September 30, 1998; however, management expects Cyberworks will have a more
material impact on the 



                                       10
<PAGE>   11

Company's future financial statements. Accordingly, current and future financial
statement may not be directly comparable to the Company's historical financial
statements. (See Notes to Interim Consolidated Financial Statements, Note 4.
Acquisition.)

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1998. REVENUE. Revenue decreased 15.3% from $3,932,000 for the
three months ended September 30, 1997 to $3,329,761 for the three months ended
September 30, 1998, primarily due to lower consulting fees earned from the
Barona Casino. Despite revenue and operating income growth at the Barona Casino,
the consulting fees were lower in part as a result of lower profit margins at
the Barona Casino due to an increase in operating expenses at their facility. In
the three months ended September 30, 1998, the Company had two other sources of
revenue, (i) $163,108 was earned by Cyberworks from web site development and
on-line marketing for approximately one month, and (ii) $69,555 was earned by
WMH for marketing and consulting related to on-line and Internet gaming. The
Company's revenue for the three months ended September 30, 1997 was
predominately from fees earned from Indian Gaming consulting.

OPERATING EXPENSES. General and administrative expenses increased 54.4% from
$1,962,297 for the three months ended September 30, 1997 to $3,030,075 for the
three months ended September 30, 1998, resulting primarily from increases in (i)
start up costs, advertising, promotion and customer support of the on-line
casinos; (ii) professional services related to the development of WMH's
businesses; (iii) compensation due to increase in number of employees primarily
from the acquisition of Cyberworks which was partially offset by decreases in
Inland's compensation expense; (iv) facilities costs; and (v) various utilities,
phone, and Internet connection fees.

Amortization of deferred contract costs decreased 80.8% from approximately
$873,000 for the three months ended September 30, 1997 to approximately $168,000
for the three months ended September 30, 1998. In February 1998, a new
consulting agreement was entered into with the Barona Tribe that extended the
term of the contract by an additional 60 months. Therefore, the deferred
contract costs amortization period has been increased by an additional 60
months.

OTHER INCOME AND EXPENSE. For the three months ended September 30, 1998,
interest income was approximately $170,000 compared to approximately $146,000
for the three months ended September 30, 1997. The increase was due to the
increase in the Company's investments and cash equivalents.

Interest expense increased from approximately $102,000 for the three months
ended September 30, 1997 to approximately $146,000 for the three months ended
September 30, 1998, primarily as a result of an increase in notes payable to two
major shareholders, including a former director of the Company, in connection
with the repurchase of shares of the Company's common stock.

INCOME TAX PROVISION. The income tax provision decreased 86.8% from $509,000 for
the three months ended September 30, 1997 to $67,000 for the three months ended
September 30, 1998, based on decreased operating profit in the current quarter.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal source of liquidity at September 30, 1998 consisted of
unrestricted cash of $10,234,264, future revenues generated from operations and
advances of future fees under the Consulting Agreement with the Barona Tribe.
The Company finances its operations through cash provided by its operations and
advances of future fees, all (in the case of future fees) or substantially all
(in the case of cash provided by operations) derived from agreements with the
Barona Tribe. The Company believes that these sources of liquidity will be
sufficient to meet the Company's operating and capital requirements for the
foreseeable future.



                                       11
<PAGE>   12

During the three months ended September 30, 1998, the Company's cash position
increased approximately $1,029,000 from the June 30, 1998 balance of
approximately $9,206,000, to $10,234,000 at September 30, 1998. The increase was
provided by net cash generated by investing activities of approximately
$1,101,000 during the period, reduced by cash flows used in operating activities
of approximately $167,000 and financing activities of approximately $95,000.
Cash flows used in operating activities include: (i) increases in accounts
receivable of approximately $116,000 primarily due to Cyberworks' billings in
September 1998 for services performed; (ii) decreases in income tax payable of
approximately $228,000 due to the reduction in income tax provision as a result
of decreased operating profit in the current quarter; and (iii) decreases in
accounts payable and accrued expenses of approximately $202,000.

Cash flows provided by operating activities include: (i) an increase in deferred
revenues of approximately $73,000 which represents payments received for future
services such as maintenance contracts or down payments for design and
development work attributable to Cyberworks; and (ii) a decrease in amortization
of net deferred contract costs of approximately $168,000 which decreased net
deferred contract costs from approximately $3,855,000 at June 30, 1998 to
approximately $3,688,000 at September 30, 1998.

Cash flows provided by investing activities of approximately $1,877,000 resulted
from short-term investments maturing during the three months ended September 30,
1998. These investments were comprised of Euro-dollar time deposits, commercial
paper, and banker's acceptances with original maturities greater than three
months. The Company currently has similar investments with no maturities greater
than three months as of September 30, 1998 and, therefore, are classified as
cash and cash equivalents in the financial statements.

Cash flows used by investing activities include: (i) net investments in fixed
assets of approximately $104,000, consisting primarily of computer equipment,
software and a telephone system to support the WMH business; and (ii) a $500,000
cash payment and $171,513 in acquisition related expense payments for the
purchase of Cyberworks. (See Notes to Interim Consolidated Financial Statements,
Note 4.  Acquisition.)

From June 1996 to May 1997, the Company provided consulting services to the
Klamath and Modoc Tribes and the Yahooskin Band of Snake Indians (collectively,
the "Klamath Tribes"). The Klamath Tribes constructed the Kla-Mo-Ya Casino near
Chiloquin, in south central Oregon, a gaming facility funded by revenue bonds
issued by the Klamath Tribes. In connection with such bond financing, the
Company has a net investment of $464,320 in revenue bonds with a principal face
amount of $500,000. In addition, as a condition of the bond financing, the
Company agreed to hold the bonds for a five-year period. Pre-opening costs and
expenses of approximately $1.5 million were financed by loans made pursuant to a
third-party bank credit agreement with the Klamath Tribes. The Company pledged a
certificate of deposit for $1,518,000 as collateral for such loans. If the
Klamath Tribes are unable to pay its obligations, the Company may lose all or a
portion of its investment in the revenue bonds it purchased and its certificate
of deposit pledged as collateral for bank loans to the Klamath Tribes.

In addition to the $1,518,000 pledged as collateral for loans noted above and
the Company's net investment of $464,000 in revenue bonds noted above,
restricted cash and other investments of approximately $2,115,000 includes an
irrevocable letter of credit for $133,000 to satisfy the terms of the corporate
office lease agreement. Such letter of credit will automatically renew on an
annual basis until October 31, 2002 unless canceled by the lessor. (See Notes to
Interim Consolidated Financial Statements, Note 5. Restricted cash and other
investments.)

WMH has entered into a long-term contract that obligates it to purchase $120,000
a year for marketing services related to the promotion of on-line casinos. The
Company has entered into or is in the process of entering into other
miscellaneous short-term contracts for consulting services with commitments to
vendors totaling approximately $293,000 as of September 30, 1998.

At September 30, 1998, outstanding advances of future fees from the Barona
Casino totaled $2,565,078. 



                                       12
<PAGE>   13

Advances do not bear interest and are due on demand. Debt at September 30, 1998
included $1,200,000 due to the Barona Tribe related to the NIGC Settlement
Obligation of which $400,000 is currently payable.

The Barona Casino is currently in the initial stages of a large expansion
project for which the Company has agreed to provide approximately half of the
costs incurred, on an unsecured basis, until financing is obtained by the Barona
Tribe. Based upon current information, the Company's commitment is estimated to
be approximately $3 million, and is expected to all be incurred and re-paid
during this fiscal year ending June 30, 1999.

SUBSEQUENT EVENTS

In October 1998 the Company made a $500,000 contribution to support "The Tribal
Government Gaming and Economic Self Sufficiency Act of 1998" (otherwise referred
to in California and herein as "Proposition 5" or the "Initiative") on the
November 1998 California General Election ballot. The Initiative was proposed by
several Indian Nations in California, together with support from certain
California State Legislators. Under Proposition 5, the Governor is authorized to
execute a gaming compact containing the terms prescribed therein. However,
unlike the Barona Compact, the Initiative does not limit the number of gaming
machines state-wide or per tribe. Proposition 5 was approved by the California
electorate on November 3, 1998; however, at this time, it is undeterminable what
effect, if any, such approval will have on existing tribal-state compacts. In
addition to the above referenced contribution, in October and November 1998 the
Company made approximately $300,000 in additional political contributions
relating to the November 1998 election.

FORWARD-LOOKING STATEMENTS AND CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

Included in this Item 2, and in the Notes to the Interim Consolidated Financial
Statements are certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 reflecting the Company's
current expectations. Although the Company believes that its expectations are
based on reasonable assumptions, there can be no assurance that the Company's
financial goals or expectations will be realized. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company, or
industry results, to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. Numerous
factors may affect the Company's actual results and may cause results to differ
materially from those expressed in forward-looking statements made by or on
behalf of the Company. The Company assumes no obligation to update or revise any
such forward-looking statements or the factors listed below to reflect events or
circumstances that may arise after this report is filed, and that may have an
effect on the Company's overall performance.

    - DEPENDENCY ON REVENUES FROM THE BARONA CASINO

    The Company historically and currently has derived substantially all of its
    income from services provided to the Barona Tribe. While the Company is
    taking steps to diversify its business activities and resulting revenues,
    those activities are producing revenues significantly lower than revenues
    provided from the Company's services to the Barona Casino. Accordingly, any
    material reduction in fees payable to the Company, whether as a result of
    (i) market acceptance of the new Indian Gaming Lottery devices; (ii)
    decreased operating profits due to machine device licensing fees to be
    incurred by the Barona Casino under the terms of the Barona Compact in order
    to operate at a level of 1,057 machines; (iii) a modification to the
    Consulting Agreement between the Company and the Barona Tribe as a result of
    regulatory compliance requirements; (iv) weakness in the operations in the
    Barona Casino or (v) otherwise, could have a material adverse affect on the
    business and financial condition of the Company, if the Company could not
    either reduce expenses or increase revenues from other sources.



                                       13
<PAGE>   14

    - THE BARONA CONSULTING AGREEMENT

    Appropriate regulatory authorities have not yet approved the Consulting
    Agreement. If the Consulting Agreement is not approved or is significantly
    modified from the standpoint of consulting revenue, such action would have a
    material adverse effect on the business and financial condition of the
    Company. (See Notes to Consolidated Financial Statements, Note 2. -- Barona
    Consulting Agreement.)

    - UNCERTAINTIES CONCERNING INTERNET GAMING

    Many of the laws and regulations concerning the regulation of the business
    of Internet gaming in the United States and in other countries are currently
    being developed. The evolution of the laws and statutes regarding Internet
    gaming will have a significant impact on the Company's business venture to
    market world-wide Internet gaming. It is not known at what rate or direction
    the evolution of such gaming regulations and statutes will take place. The
    Company is competing with other entities, some of which have been in the
    market longer than the Company. In addition, certain current competitors and
    potential future competitors have, or may have greater resources than the
    Company to devote further technologies and new product developments to the
    development of Internet gaming. There can be no assurance that existing or
    future competitors will not develop or offer technologies that provide
    significant economic, technological, creative or strategic advantages over
    those offered by the Company. The Company's future success in the Internet
    gaming field is dependent on the evolving regulatory and competitive
    environment. There is no assurance that the Company's present and
    contemplated services provided to "Internet gaming casinos" will achieve or
    maintain sufficient commercial acceptance, or if they do, that regulatory
    developments will not diminish the full economic potential of such virtual
    gaming sites.

    - VOLATILITY OF STOCK PRICE

    The trading price of the Company's Common Stock has been, and will likely
    continue to be, subject to wide fluctuations because of Indian gaming
    regulatory developments, quarterly variations in the Company's operating
    results, announcements of new products or business activities by the Company
    or its 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.

    - YEAR 2000 READINESS DISCLOSURE

    Many of the world's computer systems currently record years in a two-digit
    format. Such computer systems will be unable to properly interpret dates
    beyond the year 1999, which could lead to business disruptions in the U.S.
    and internationally (the "Year 2000 issue"). The potential costs and
    uncertainties associated with the Year 2000 issue will depend on a number of
    factors, including software, hardware and the nature of the industries in
    which the Company and its subsidiaries operate. Additionally, companies must
    coordinate with other entities with which they electronically interact, such
    as customers and creditors.

    The Company and its subsidiaries are in the process of evaluating the full
    scope and related costs to insure that their systems continue to meet their
    internal needs and those of their customers. The Company is addressing the
    following business areas: (i) internal financial and administrative systems,
    (ii) Cyberworks web-site development business, (iii) the impact to their
    most significant customer, the Barona Casino; and (iv) the impact to WMH's
    on-line gaming computer software vendor.

    The critical systems and related software used in the Cyberworks business as
    well as Inland's internal financial and administrative systems are Year 2000
    compliant or are not adversely impacted by the Year 2000 issue. However, the
    Company will continue to evaluate all system upgrades, new hardware and



                                       14
<PAGE>   15

software purchases through the Year 2000.

The Barona Casino has formed a committee to address the Year 2000 issue. It has
a strategy which includes an analysis phase, project plan, testing phase,
implementation phase (if necessary) and a risk contingency plan. The Company
plans to review their strategic plan and make formal inquiries as to their
progress during the second quarter of Fiscal 1999. Their anticipated findings
related to Year 2000 compliance are not known at this time.

The on-line gaming casinos marketed and promoted by WMH are dependent on the
computer software supplier. The software supplier provides both the gaming
casino software as well as the electronic commerce system that handles all
wagers. The Company is in the process of requesting Year 2000 compliance and
contingency plan information on this supplier as well as other major suppliers
and customers of the Company and it's subsidiaries to assess the potential risks
of non-compliance and the resulting impact on the Company. This process will
continue throughout 1999. However, the Company will not be able to independently
verify that such external suppliers and customers are, in fact, Year 2000
compliant.

The Company's plan to evaluate the status of suppliers' and customers' efforts
is a means of managing risk but cannot eliminate the potential for disruption
due to third party failure. If it is determined that any of the Company's or its
subsidiaries' vendors, major suppliers, customers or other parties with which
the Company or its subsidiaries conduct business, has an issue with Year 2000
compliance, the Company will pursue alternative business relationships (with the
exception of the Barona Casino) to minimize the impact, if any, that such a
relationship(s), will have on the Company and its subsidiaries' operations. If
it is determined that the Barona Casino has as issue with Year 2000 compliance,
the Company would actively support their efforts to gain compliance in a timely
manner to mitigate system failures causing disruptions in their operations. The
cost or the likelihood of this event occurring is not known at this time.

Costs for Year 2000 compliance evaluation will be expensed as incurred and are
not expected to have a material impact on the Company's consolidated results of
operations.

The information set forth above under this caption "Year 2000 Readiness
Disclosure" relates to the Company's efforts to address the Year 2000 concerns
regarding the Company's (a) operations; (b) services, products and technologies
sold to third parties; and (c) major suppliers and customers. Such statements
are intended as Year 2000 Statements and Year 2000 Readiness Disclosures and are
subject to the Year 2000 Information Readiness Act.



                                       15
<PAGE>   16

                           PART II - OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

SHARES OF UNREGISTERED SECURITIES

    During the first quarter of the fiscal year ending June 30, 1999, the
Company acquired 100% of the outstanding equity of Cyberworks, Inc., a
California corporation ("Cyberworks"). Cyberworks is an interactive marketing
and design company whose principal business is marketing and developing internet
and intranet websites.

    Pursuant to an Agreement and Plan of Reorganization dated August 25, 1998,
by and among the Company, Inland Acquisition Corporation ("Acquisition Corp."),
Cyberworks and Richard T. Harrison, the sole shareholder of Cyberworks (the
"Reorganization Agreement"), on August 27, 1998 (the "Effective Date")
Acquisition Corp., a wholly-owned subsidiary of the Company formed to effect the
merger, was merged with and into Cyberworks, with Cyberworks being the surviving
corporation and becoming a wholly-owned subsidiary of the Company (the "Merger
Transaction").

    On the Effective Date and pursuant to the Merger Transaction, the Company
acquired 100% of the outstanding shares of Cyberworks in connection with the
conversion of each share of Cyberworks common stock into the right to receive
seven hundred fifty (750) shares of Inland common stock together with five
hundred dollars cash ($500.00). Richard T. Harrison, as the sole shareholder of
Cyberworks, received 750,000 shares of newly-issued Inland common stock, $.001
par value per share, and $500,000 in cash. For purposes of the Merger
Transaction, the fair market value of a share of Inland common stock was
determined to be $4.08 per share, this price being established pursuant to a
formula set forth in the Reorganization Agreement. Inland used its general
working capital to fund the cash portion of merger consideration. The Merger
Transaction is being accounted for as a "purchase" transaction.

    On the Effective Date, Richard T. Harrison, the former President and Chief
Executive Officer of Cyberworks, was appointed a director of Inland. In
addition, on the Effective Date, Mr. Harrison entered into an Employment
Agreement and Noncompetition Agreement with the Company and Cyberworks relating
to Mr. Harrison's service as President and Chief Operating Officer of Cyberworks
following the Merger Transaction.

    The above-referenced shares of Inland Common Stock were issued in reliance
on the private offering exemption set forth in Section 4(2) of the Securities
Act of 1933, as amended, on the basis that they were issued under circumstances
not involving a public offering.



                                       16
<PAGE>   17

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.

<TABLE>
<CAPTION>
    EXHIBIT
      NO.                                 DESCRIPTION
      ---                                 -----------
<S>                  <C>
      2.1            Agreement and Plan of Reorganization by and among the
                     Company, Inland Acquisition Corporation, Cyberworks, Inc.,
                     and Richard T. Harrison dated August 25, 1998, previously
                     filed as Exhibit 2.01 to the Company's Current Report on
                     Form 8-K dated September 10, 1998, filed with the
                     Commission on September 11, 1998 (File No. 0-11532) (the
                     "September 11, 1998 Current Report"), which is hereby
                     incorporated herein by reference.

      2.2            Agreement of Merger by and between Cyberworks, Inc. and
                     Inland Acquisition Corporation dated August 27, 1998,
                     previously filed with the Commission as Exhibit 2.02 to the
                     September 11, 1998 Current Report, which is hereby
                     incorporated herein by reference.

      2.3            Articles of Merger by and between Cyberworks, Inc. and
                     Inland Acquisition Corporation dated August 27, 1998,
                     previously filed with the Commission as Exhibit 2.03 to the
                     September 11, 1998 Current Report, which is hereby
                     incorporated herein by reference.

     10.1            Employment Agreement by and among Inland Entertainment
                     Corporation, Cyberworks, Inc. and Richard T. Harrison dated
                     August 27, 1998, previously filed with the Commission as
                     Exhibit 99.01 to the September 11, 1998 Current Report,
                     which is hereby incorporated herein by reference.

     10.2            Noncompetition Agreement by and among Inland Entertainment
                     Corporation, Cyberworks, Inc. and Richard T. Harrison dated
                     August 27, 1998, previously filed with the Commission as
                     Exhibit 99.02 to the September 11, 1998 Current Report,
                     which is hereby incorporated herein by reference.

     10.3            Standard Industrial Growth Lease dated April 23, 1997 by
                     and between Sorrento Business Complex, a Limited
                     Partnership and Cyberworks, a California Corporation.

       27            Financial Data Schedule.
</TABLE>

  (b) Reports on Form 8-K. During the Company's first quarter ended September
30, 1998, the Company filed one Current Report on Form 8-K dated September 10,
1998 with the Commission on September 11, 1998, reporting under "Item 5. Other
Events" (a) the acquisition of Cyberworks, Inc., a California corporation, on
August 27, 1998 and (b) the signing of the Barona Compact between the Barona
Tribe and the State of California.



                                       17
<PAGE>   18

                                   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.

                                            INLAND ENTERTAINMENT CORPORATION,
                                            a Utah Corporation



Date:         November 13, 1998             By:  /S/ ANDREW B. LAUB
                                               ---------------------------------
                                            Andrew B. Laub
                                            Executive Vice President,
                                            Chief Financial Officer and 
                                            Treasurer
                                            (Principal Financial Officer)



                                       18
<PAGE>   19

                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
    EXHIBIT
      NO.                                 DESCRIPTION
      ---                                 -----------
<S>                  <C>
      2.1            Agreement and Plan of Reorganization by and among the
                     Company, Inland Acquisition Corporation, Cyberworks, Inc.,
                     and Richard T. Harrison dated August 25, 1998, previously
                     filed as Exhibit 2.01 to the Company's Current Report on
                     Form 8-K dated September 10, 1998, filed with the
                     Commission on September 11, 1998 (File No. 0-11532) (the
                     "September 11, 1998 Current Report"), which is hereby
                     incorporated herein by reference.

      2.2            Agreement of Merger by and between Cyberworks, Inc. and
                     Inland Acquisition Corporation dated August 27, 1998,
                     previously filed with the Commission as Exhibit 2.02 to the
                     September 11, 1998 Current Report, which is hereby
                     incorporated herein by reference.

      2.3            Articles of Merger by and between Cyberworks, Inc. and
                     Inland Acquisition Corporation dated August 27, 1998,
                     previously filed with the Commission as Exhibit 2.03 to the
                     September 11, 1998 Current Report, which is hereby
                     incorporated herein by reference.

     10.1            Employment Agreement by and among Inland Entertainment
                     Corporation, Cyberworks, Inc. and Richard T. Harrison dated
                     August 27, 1998, previously filed with the Commission as
                     Exhibit 99.01 to the September 11, 1998 Current Report,
                     which is hereby incorporated herein by reference.

     10.2            Noncompetition Agreement by and among Inland Entertainment
                     Corporation, Cyberworks, Inc. and Richard T. Harrison dated
                     August 27, 1998, previously filed with the Commission as
                     Exhibit 99.02 to the September 11, 1998 Current Report,
                     which is hereby incorporated herein by reference.

     10.3            Standard Industrial Growth Lease dated April 23, 1997 by
                     and between Sorrento Business Complex, a Limited
                     Partnership and Cyberworks, a California Corporation.

       27            Financial Data Schedule.
</TABLE>



                                       19