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VCAT Reports Results Down for Q3

Results for the Three Months Ended March 31, 2002

Consolidated revenues for the three months ended March 31, 2002 were zero as compared to $77,000 during the same period last year. Revenues for services provided to the Barona Tribe were zero during the period. 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 VCAT's 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 the Barona Casino's interim expansion and the expenses associated with the ongoing development of the Barona Valley Ranch.

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 VCAT's decision to restructure its business and realign its operations to focus solely on the Native American gaming industry. VCAT's decision, made in the second quarter of the fiscal year ended June 30, 2001, was in response to the reduction in demand for its technology and Internet services.

During the three months ended March 31, 2002, cost of services decreased 93% to $120,000 from $1,742,000 and general operating and administrative expenses decreased 40% to $831,000 from $1,377,000 during the same period last year.

During the three months ended March 31, 2002, VCAT reversed $64,000 in restructuring expenses related to the remaining future rent obligations for a closed office in connection with the sublease of the office during the period.

Amortization of intangible assets and stock-based compensation decreased 98% to $3,000 from $193,000. Other net losses during the current period were $64,000, primarily as a result of asset disposals.

In March 2002, as a result of temporary changes in certain tax laws, including an increase in a net operating loss carry-back period from two to five years, VCAT recorded a one-time income tax benefit of $3,651,000.

VCAT reported a loss before income tax benefit, of ($1,156,000). As a result of the tax benefit, VCAT reported net income for the three months ended March 31, 2002, of $2,494,000, or $0.35 per share. This compares with a net loss of ($2,282,000) or ($0.31) per share, for the same period in the prior year.

Weighted average shares outstanding were 7,206,598 for the current period compared to 7,296,540 for the prior year period.

Results for the Nine Months Ended March 31, 2002

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 in the current period 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 month period ended March 31, 2002, the level of revenues were not sufficient under the formula used to calculate VCAT's 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 the Barona Casino's interim expansion and the expenses associated with the ongoing development of the Barona Valley Ranch.

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, as a result of its decision to restructure its business and realign its operations to focus solely on the Native American gaming industry.

During the nine months ended March 31, 2002, cost of services decreased 59% to $2,409,000 from $5,867,000 and general operating and administrative expenses decreased 57% to $2,504,000 from $5,889,000 during the same period last year.

For the nine months ended March 31, 2002, VCAT recorded a loss of $6,956,000 which represents the estimated costs to be incurred in connection with the performance of services under the Barona consulting agreement through the end of the contract term in March 2004. As of March 31, 2002, VCAT had incurred $639,000 of these costs.

During the nine months ended March 31, 2002, VCAT incurred $90,000 in net restructuring expenses in connection with the ongoing restructuring and cost reduction plan.

Amortization of intangible assets and stock-based compensation decreased 98% to $23,000 from $936,000. Other net losses during the nine months ended March 31, 2002, were $182,000, as a result of asset disposals and a loss recorded to fully reduce the carrying value of VCAT's investment in Watchnet, Inc.

During the nine months ended March 31, 2002, VCAT 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.

For the nine months ended March 31, 2002, VCAT reported a loss before income tax benefit of ($12,730,000). As a result of the tax benefit, VCAT reported a net loss for the period of ($9,028,000), or ($1.25) per share. This compares with a net loss of ($12,859,000) or ($1.75) per share, for the same period in the prior year.

Weighted average shares outstanding were 7,206,598 for the current period compared to 7,366,057 for the prior year period.

Liquidity

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

Venture Catalyst Incorporated is a service provider of gaming consulting, infrastructure and technology integration in the California Native American gaming market.

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