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VCAT Results Down

Results for the Three Months Ended December 31, 2001:

Consolidated revenues for the three months ended December 31, 2001 were zero as compared to $2,008,000 during the same period last year. Revenues for services provided to the Barona Tribe for the current period were zero as compared with $1,553,000 earned during the same period last year. Although revenues at the Barona Casino exceeded expenses for the three month period ended December 31, 2001, 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 the 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. As previously reported, based upon financial projections provided to us by the Barona Casino in August 2001, we believe that based upon the current formula for calculating our compensation under the consulting agreement, no consulting fees will be paid to us under the existing agreement 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 December 31, 2001 were zero as compared to $455,000 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.

During the three months ended December 31, 2001, cost of services decreased 44% to $1,168,000 from $2,103,000 and general operating and administrative expenses decreased 62% to $859,000 from $2,253,000 during the same period last year.

In the three month period ended December 31, 2001, we recorded a loss of $6,956,000 representing 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. 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 the consulting agreement with the Barona Tribe.

Amortization of intangible assets and stock-based compensation decreased 98% to $9,000 from $398,000. Other net losses during the current period were $58,000, primarily as a result of a loss recorded to fully reduce the carrying value of our investment in Watchnet, Inc.

VCAT reported a net loss for the three months ended December 31, 2001, of $9,142,000, or $1.27 per share. This compares with a net loss of $9,930,000, or $1.34 per share, for the same period in the prior year.

Weighted average shares outstanding were 7,206,598 for the current period compared to 7,415,741 for the prior year period.

Results for the Six Months Ended December 31, 200:

Consolidated revenues for the six months ended December 31, 2001 were zero as compared to $8,563,000 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 six month period ended December 31, 2001, 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.

Revenues for services provided to clients other than the Barona Tribe for the six months ended December 31, 2001 were zero as compared to $1,694,000 earned during the same period last year, as a result of our decision to restructure our business and realign our operations to focus solely on the Native American gaming industry.

During the six months ended December 31, 2001, cost of services decreased 45% to $2,288,000 from $4,125,000 and general operating and administrative expenses decreased 63% to $1,673,000 from $4,511,000 during the same period last year.

For the six months ended December 31, 2001, we 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.

Amortization of intangible assets and stock-based compensation decreased 98% to $20,000 from $743,000. Other net losses during the six months ended December 31, 2001 were $118,000, primarily as a result of a loss recorded to fully reduce the carrying value of our investment in Watchnet, Inc. and fixed asset disposals.

During the six months ended December 31, 2001, we incurred $154,000 in restructuring expenses in connection with the ongoing restructuring and cost reduction plan. VCAT reported a net loss for the six months ended December 31, 2001, of $11,522,000, or $1.60 per share. This compares with a net loss of $10,577,000, or $1.43 per share, for the same period in the prior year.

Weighted average shares outstanding were 7,206,598 for the current period compared to 7,400,094 for the prior year period.

Liquidity:

As of February 8, 2002, our unrestricted cash and cash equivalents balance was approximately $7,853,000. We believe that our unrestricted cash will be sufficient to meet our known operating and capital requirements as they are currently scheduled to come due for at least the next 12 months. However, if our cash needs increase for any reason, such as a change in our business strategy or the pursuit of a strategic transaction, the length of time that our current cash would sustain operations could decrease significantly.

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