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, 2006

¨ 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 incorporation or organization)	(I.R.S. Employer Identification No.)

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

(Address of principal executive offices)

(619) 330-4000

(Issuer’s telephone number)

Not Applicable

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

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

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: as of April 30, 2006, 7,221,598 shares of common stock, $.001 par value per share, were outstanding.

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

VENTURE CATALYST INCORPORATED

FORM 10-QSB

FOR THE PERIOD ENDED MARCH 31, 2006

TABLE OF CONTENTS

	Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 2006 (unaudited) and June 30, 2005	1
Statements of Operations (unaudited) - Three months ended March 31, 2006 and March 31, 2005	2
Statements of Operations (unaudited) - Nine months ended March 31, 2006 and March 31, 2005	3
Statements of Cash Flows (unaudited) - Nine months ended March 31, 2006 and March 31, 2005	4
Notes to Financial Statements	5
Item 2. Management’s Discussion and Analysis or Plan of Operation	17
Item 3. Controls and Procedures	29
PART II - OTHER INFORMATION
Item 6. Exhibits	30
Signatures	31

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-QSB contains forward-looking statements reflecting management’s current expectations. Examples of such forward-looking statements include our expectations with respect to our strategy and financial goals. Although we believe that our expectations are based upon reasonable assumptions, there can be no assurances that we will be able to implement our strategy or 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 Part I, 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.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

VENTURE CATALYST INCORPORATED

BALANCE SHEETS

(UNAUDITED)

	March 31, 2006			June 30, 2005
ASSETS
Current Assets:
Cash and cash equivalents	$	4,066,882		$	3,839,310
Accounts receivable, net		777,142			976,680
Accounts receivable-Barona Tribe, net		597,425			476,504
Prepaid expenses and other current assets		176,800			223,252
Deferred tax asset, current		22,000			24,000
Total current assets		5,640,249			5,539,746
Non-Current Assets:
Deferred tax asset, non-current		399,000			436,000
Property, plant and equipment, net		339,140			273,401
Deposits and other assets		12,576			10,241
Restricted cash		—			43,360
Total non-current assets		750,716			763,002
Total assets	$	6,390,965		$	6,302,748
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Billings in excess of costs, uncompleted software contracts	$	966,823		$	580,372
Accrued wages		456,670			716,450
Accounts payable and accrued expenses		432,426			624,302
Deferred revenue		408,782			254,959
Income taxes payable, net		—			852
Total current liabilities		2,264,701			2,176,935
Commitments and Contingencies		—			—
Shareholders’ Equity:
Common stock, $.001 par value, 100,000,000 shares authorized and 7,221,598 shares issued at March 31, 2006 and 7,206,598 at June 30, 2005		7,222			7,207
Additional paid-in-capital		19,622,384			19,616,699
Accumulated deficit		(15,503,342	)		(15,498,093	)
Total shareholders’ equity		4,126,264			4,125,813
Total liabilities and shareholders’ equity	$	6,390,965		$	6,302,748

The accompanying notes are an integral part of these statements.

1

VENTURE CATALYST INCORPORATED

STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the three months ended March 31,
	2006			2005
Revenues:
Consulting services	$	1,942,275		$	1,849,843
Software products and related services		578,398			317,668
Total revenues		2,520,673			2,167,511
Cost of revenues:
Consulting services		813,390			657,866
Software products and related services		396,618			269,910
Total cost of revenues		1,210,008			927,776
Gross profit		1,310,665			1,239,735
Operating expenses:
General and administrative		809,045			1,024,301
Sales and marketing		220,591			136,978
Research and development		53,708			23,472
Total operating expenses		1,083,344			1,184,751
Operating income		227,321			54,984
Other income:
Interest income		39,324			17,780
Other income		39,324			17,780
Net income before income tax provision		266,645			72,764
Income tax provision		(186,599	)		(44,000	)
Net income	$	80,046		$	28,764
Basic and diluted income per share:
Net income per share - basic	$	.01		$	.00
Net income per share - diluted	$	.01		$	.00
Weighted average common shares outstanding:
Basic		7,220,098			7,206,598
Diluted		8,034,812			7,332,028

The accompanying notes are an integral part of these statements.

2

VENTURE CATALYST INCORPORATED

STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the nine months ended March 31,
	2006			2005
Revenues:
Consulting services	$	5,831,011		$	5,299,843
Software products and related services		826,152			356,639
Total revenues		6,657,163			5,656,482
Cost of revenues:
Consulting services		2,384,599			1,901,528
Software products and related services		896,085			939,091
Total cost of revenues		3,280,684			2,840,619
Gross profit		3,376,479			2,815,863
Operating expenses:
General and administrative		2,901,991			2,424,316
Sales and marketing		680,703			509,436
Research and development		177,503			48,447
Total operating expenses		3,760,197			2,982,199
Operating loss		(383,718	)		(166,336	)
Other income:
Interest income		104,069			43,798
Litigation settlement income		347,000			—
Other gains		—			16,606
Other income		451,069			60,404
Net income (loss) before income tax benefit		67,351			(105,932	)
Income tax (provision) benefit		(72,599	)		65,000
Net loss	$	(5,248	)	$	(40,932	)
Basic and diluted loss per share:
Net loss per share - basic	$	(.00	)	$	(.01	)
Net loss per share - diluted	$	(.00	)	$	(.01	)
Weighted average common shares outstanding:
Basic		7,211,032			7,206,598
Diluted		7,211,032			7,206,598

The accompanying notes are an integral part of these statements.

3

VENTURE CATALYST INCORPORATED

STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Nine months Ended March 31,
	2006			2005
Increase (decrease) in cash:
Cash flows provided by (used in) operating activities:
Net loss	$	(5,248	)	$	(40,932	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		85,417			76,760
Increase/(decrease) to deferred tax assets		39,000			65,000
Loss on disposal of asset		—			894
Loss on estimated loss, uncompleted software contracts		—			(36,810	)
Changes in operating assets and liabilities		210,499			89,998
Net cash provided by operating activities		329,668			154,910
Cash flows used in investing activities:
Release of restricted cash		43,360			(43,360	)
Purchase of furniture and equipment		(151,156	)		(214,795	)
Net cash used in investing activities		(107,796	)		(258,155	)
Cash flows provided by/(used in) financing activities:
Payments on long-term notes		—			(4,300,000	)
Proceeds from stock option exercise		5,700			—
Net cash provided by/(used in) financing activities		5,700			(4,300,000	)
Net increase (decrease) in cash		227,572			(4,403,245	)
Cash at beginning of period		3,839,310			8,025,144
Cash at end of period	$	4,066,882		$	3,621,899
Supplemental disclosures of cash flow information:
Interest paid	$	—		$	—
Income taxes paid	$	28,000		$	39,000
Supplemental schedule of non-cash financing activity:
Increase to shareholders equity and debt reduction resulting from debt restructure (See Note. 12)	$	—		$	7,669,443

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

4

VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS

March 31, 2006 (Unaudited)

Note 1. Basis of Presentation and Description of Business

Basis of Presentation

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

In the opinion of management, these financial statements reflect all normal, recurring adjustments and disclosures which are necessary for a fair presentation. The interim unaudited financial statements should be read in conjunction with our Annual Report on Form 10-KSB for the fiscal year ended June 30, 2005 (“fiscal 2005”). Amounts related to disclosure of June 30, 2005 balances within these interim statements were derived from the aforementioned Form 10-KSB. Certain items in the financial statements for fiscal 2005 have been reclassified to conform to the current year’s presentation. Current and future financial statements may not be directly comparable to our historical financial statements. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year.

Description of Business

We are a provider of consulting services and technology in the gaming and hospitality industry. We operate two business divisions: consulting services and software. Our consulting services division offers comprehensive gaming and hospitality consulting services to clients in the gaming and hospitality industry. We have two primary clients in our consulting services division, the Barona Group of Capitan Grande Band of Mission Indians (the “Barona Tribe”) and the Buena Vista Rancheria of Me-Wuk Indians (the “Buena Vista Tribe”), both of which are federally recognized, sovereign Native American tribes. We have provided services to the Barona Tribe since 1991. We currently provide services to the Barona Tribe in connection with their operation of the Barona Valley Ranch Resort & Casino (the “Barona Valley Ranch”), which is located in Lakeside, California, near San Diego. We have provided services to the Buena Vista Tribe since February 2005. We provide business advisory services to the Buena Vista Tribe in connection with the establishment and operation of a gaming operation on the Buena Vista Tribe’s reservation located near Ione, in Northern California.

Our software division is dedicated to ongoing product and business development related to Mariposa, a fully-integrated customer relationship management (“CRM”), marketing and business intelligence software system for license to businesses in the gaming and hospitality industry. Mariposa consists of a suite of applications designed to operate in conjunction with existing player tracking and other data systems. The various Mariposa applications provide data warehousing, data mining and modeling, analytical processing, campaign management, customer contact management and data visualization. The applications can be licensed individually or as a fully-integrated system.

5

VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS—(Continued)

March 31, 2006 (Unaudited)

Note 2. Summary of Significant Accounting Policies

Revenue Recognition

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

• persuasive evidence of an arrangement exists;

• services have been rendered;

• the fee is fixed or determinable; and

• collectibility is reasonably assured.

Consulting service revenues from the Barona Tribe are recorded monthly, as earned, pursuant to the above referenced guidelines. Additionally, as an incentive to the Barona Tribe to enter into the 2004 Consulting Agreement, we granted the Barona Tribe certain Mariposa profit sharing rights, which are incorporated in the 2004 Consulting Agreement. These profit sharing rights may periodically generate cash obligations from VCAT to the Barona Tribe, and in accordance with Emerging Issues Task Force (“EITF”) Issue No. 01-09 “Accounting for Consideration Given by a Vendor to a Customer”, such obligations will be recorded as a reduction of the revenues earned from the Barona Tribe. We did not generate a profit sharing payment obligation during the nine months ended March 31, 2006.

Advisory service revenues from the Buena Vista Tribe are recorded monthly as earned, pursuant to the above referenced guidelines. For a detailed discussion relating to the terms of the 2004 Consulting Agreement with the Barona Tribe and the terms of the Advisory Agreement with the Buena Vista Tribe see Note 3. “Agreements with the Barona Tribe and Buena Vista Tribe.”

Software Products and Related Services. We derive a portion of our revenues from licensing Mariposa and the sale of related services, including integration, installation and training (collectively, “professional services”) and maintenance and support services (“support services”). We recognize revenue from software licensing and related professional services in accordance with Statement of Position (“SOP”) 97-2, Software Revenue Recognition, as amended by SOP 98-9. As set forth in paragraph 8 of SOP 97-2, revenue recognition may occur when all of the following criteria are met:

• persuasive evidence of an arrangement exists;

• delivery has occurred;

• the fee is fixed or determinable; and

• collectibility is probable.

Our standard software contracts are multiple element arrangements that include both software products and professional services. The professional services are essential to the functionality of the software products, which require significant modification to meet the customer’s purpose; therefore, in accordance with paragraph 69 of SOP 97-2, Accounting Release Bulletin No. 45 and SOP 81-1, contract accounting is applied to both the software

6

VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS—(Continued)

March 31, 2006 (Unaudited)

and service elements of the arrangement. The final determination for revenue recognition and related accounting issues is made based on the specific details for each software contract, which could result in the application of alternative revenue recognition policies for individual contracts.

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

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

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

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

Stock Based Compensation

Employee stock options are accounted for using the intrinsic value method under Accounting Principles Board (“APB”) Opinion No. 25 and related interpretations. Effective March 31, 2003, we adopted Statement of Financial Accounting Standards (“SFAS”) 148 “Accounting for Stock Based Compensation Transition and Disclosure” an amendment of SFAS 123 “Accounting for Stock Based Compensation.” SFAS 148 requires pro forma disclosure of net income or loss per share as if the fair value method of accounting for stock-based compensation had been applied for both employee and non-employee stock option grants. It also requires disclosure of option status on a more frequent basis. The exercise price of each option equals the market price of our common stock on the date of grant; accordingly, under APB No. 25, no compensation costs for employee grants were recognized for the options. Had compensation cost for the options been determined based on the fair value of the options at the grant dates, our net income (loss) and income (loss) per share would have increased to the pro forma net income (loss) and income (loss) per share amounts.

7

VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS—(Continued)

March 31, 2006 (Unaudited)

Below is the calculation of pro forma net income per share for the three months ended:

	Three months ended March 31,
	2006			2005
Net income:
As reported	$	80,046		$	28,764
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		—			—
Deduct: Total stock-based employee compensation expense determined under fair value based method for all option grants, net of related tax effects		(2,149	)		(14,291	)
Pro forma	$	77,897		$	14,473
Net income per share - basic and diluted:
As reported	$	.01		$	.00
Pro forma	$	.01		$	.00

Below is the calculation of pro forma net income loss and income loss per share for the nine months ended:

	Nine months ended March 31,
	2006			2005
Net loss:
As reported	$	(5,248	)	$	(40,932	)
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		—			—
Deduct: Total stock-based employee compensation expense determined under fair value based method for all option grants, net of related tax effects		(29,998	)		(129,924	)
Pro forma	$	(35,246	)	$	(170,856	)
Net loss per share - basic and diluted:
As reported	$	(.00	)	$	(.01	)
Pro forma	$	(.00	)	$	(.02	)

For the above calculation, the fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with no expected dividends. No stock options were granted during the three or nine months ended March 31, 2006. Stock options to purchase 60,000 and 70,000 shares of common stock, respectively were granted during the three and nine months ended March 31, 2005. The weighted average assumptions used for the stock options granted were risk-free interest rate of 3.7%, expected life of 10 years, and volatility of 2.3.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carry-forwards. We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is ‘more likely than not’ to be realized.

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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS—(Continued)

March 31, 2006 (Unaudited)

Cost of Revenues - Software Products and Related Services

The cost of revenues in our software division for the nine months ended March 31, 2006 consists primarily of compensation and other personnel-related expenses, allocated overhead expenses and other direct costs related to our software products and related services. The cost of revenues in our software division for the nine months ended March 31, 2005 consists primarily of costs for services provided by a third-party software development firm in connection with integration, installation and support services for our software products, compensation and other personnel-related expenses and other direct costs related to our software products and services.

We are incurring costs to perform minor enhancements and improvements to the existing Mariposa applications on an ongoing basis. These costs are being recorded as maintenance costs and are included in the cost of revenues for software products and related services as incurred. We expect to continue to incur costs for minor enhancements and improvements to the existing Mariposa applications on an ongoing basis which will continue to be recorded as maintenance cost of revenues.

New Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), which replaces SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) and supercedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the first interim or annual period after June 15, 2005, with early adoption encouraged. The pro forma disclosures previously permitted under SFAS 123, no longer will be an alternative to financial statement recognition. Under SFAS 123R, we must determine the transition method to be used at the date of adoption, the appropriate fair value model to be used for valuing share-based payments and the amortization method for compensation cost. The transition methods include prospective and retroactive adoption options. Under the retroactive options, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. On April 14, 2005, the SEC issued new rules to allow companies to implement SFAS No. 123R effective the first interim period in the fiscal year beginning after June 15, 2005, or, in the case of small business issuers, the beginning of the fiscal year that begins after December 15, 2005. In March 2005, the SEC issued Staff Accounting Bulletin (“SAB”) No. 107. SAB No. 107 covers key topics related to the implementation of SFAS No. 123R which include the valuation models, expected volatility, expected option term, income tax effects of SFAS No. 123R, classification of stock-based compensation cost, capitalization of compensation costs, and disclosure requirements. We are required to adopt SFAS 123R in the first quarter of the fiscal year ending June 30, 2007. We anticipate adopting the prospective method and expect that the adoption of SFAS 123R will have an adverse impact on our results of operations.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS No. 154 changes the requirements for the accounting and reporting of a change in accounting principle. Under previous guidance, changes in accounting principle were recognized as a cumulative affect in the net income of the period of the change. The new statement requires retrospective application of changes in accounting principle, limited to the direct effects of the change, to prior periods’ financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Additionally, this Statement requires that a change in

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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS—(Continued)

March 31, 2006 (Unaudited)

depreciation, amortization or depletion method for long-lived, non-financial assets be accounted for as a change in accounting estimate affected by a change in accounting principle and that correction of errors in previously issued financial statements should be termed a “restatement.” SFAS No. 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. We do not believe the adoption of SFAS No. 154 will have a material impact on our consolidated financial statements.

Note 3. Agreements with the Barona Tribe and Buena Vista Tribe

Agreements with the Barona Tribe

We have provided services to the Barona Tribe since 1991. From April 1996 to March 2004, consulting services were provided to the Barona Tribe pursuant to an Amended and Restated Consulting Agreement dated April 29, 1996, as amended by Modification No. 1 (“Modification No. 1”) on February 17, 1998 (as amended, the “1996 Consulting Agreement”). The 1996 Consulting Agreement expired on March 31, 2004. On May 25, 2004 we entered into an amendment and extension (“Modification No. 2”) to the 1996 Consulting Agreement which was effective April 1, 2004. The 1996 Consulting Agreement, as amended by Modification No. 2, is referred to as the “2004 Consulting Agreement.” The 2004 Consulting Agreement expires March 31, 2009 unless renewed or extended. The Barona Tribe has the right to negotiate an additional five year extension and the right to terminate after giving nine months notice.

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

In connection with a $200,000,000 loan obtained by the Barona Tribe relating to the development of the Barona Valley Ranch (the “Development Loan”), we entered into a Reaffirmation, Consent and Amendment of Intercreditor and Subordination Agreement (the “Subordination Agreement”) in July 2001. In October 2004, we reaffirmed the Subordination Agreement in connection with an amendment and restatement to the Development Loan (the “Loan Agreement”). The Subordination Agreement limits the Barona Tribe’s ability to make payments to us if the debt coverage ratios set forth in the Loan Agreement are not met. No payment may be made if there is a default under the terms of the Loan Agreement that has not been cured or waived. As of March 31, 2006, we are not aware of a default by the Barona Tribe of any of the terms of the Loan Agreement or a failure on the part of the Barona Tribe to meet the debt coverage ratios set forth in the Loan Agreement.

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

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

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

• 25% percent of the first $250,000 of the net profits per quarter;

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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS—(Continued)

March 31, 2006 (Unaudited)

• 30% percent of the second $250,000 of the net profits per quarter;

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

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

Agreement with the Buena Vista Tribe

On January 31, 2005, we entered into a Business Advisory Agreement (the “Advisory Agreement”) with the Buena Vista Tribe. Under the terms of the Advisory Agreement, we will provide business advisory services to the Buena Vista Tribe in connection with the establishment and operation of a gaming operation on the Buena Vista Tribe’s reservation located near Ione, in Northern California. Under the Advisory Agreement, the Buena Vista Tribe will pay us a monthly flat fee of (a) $50,000 per month until groundbreaking on the Buena Vista Tribe’s casino; (b) $100,000 per month from groundbreaking until nine months prior to the planned opening of the casino; and (c) $250,000 per month from nine months prior to the planned opening of the casino until nine months after the opening of the casino. The Advisory Agreement will end on the six month anniversary of the opening of the Buena Vista Tribe’s casino; provided, however, the term may be extended upon the mutual written agreement of the parties, but in no event will the term of the Advisory Agreement exceed six years and eleven months. The Buena Vista Tribe may terminate the Advisory Agreement at any time by providing us with sixty days written notice.

Additionally, pursuant to the terms of the Advisory Agreement, we may enter into a Mariposa license agreement with the Buena Vista Tribe approximately nine months prior to the opening of the Buena Vista Tribe’s casino, which is not expected to occur until the fiscal year ending June 30, 2008.

Gaming Authority Regulations

The operation of any type of gaming casino on Native American land is subject to extensive Federal, state and tribal regulation. The regulatory environment regarding Native American gaming is evolving rapidly. Changes in Federal, state, or tribal law or regulations may limit or otherwise affect Native American gaming and could therefore have a material adverse effect on our operations. In March 1999, the National Indian Gaming Commission (the “NIGC”) commenced a preliminary review of our relationship with the Barona Tribe, including a review of the 1996 Consulting Agreement. The review is currently pending. In addition, the NIGC has not yet approved the 2004 Consulting Agreement. The Advisory Agreement with the Buena Vista Tribe also may be subject to review by the NIGC. The Bureau of Indian Affairs (the “BIA”) determines if a particular consulting agreement must be reviewed and approved by it. The BIA has not yet made a determination whether either the 2004 Consulting Agreement or the Advisory Agreement must be reviewed and approved by it. We have received a determination of suitability from the California Gambling Control Commission and are authorized to participate in the California tribal gaming market, subject to licensing requirements of the tribal gaming agencies.

Note 4. Business Concentration

Historically, a significant portion of our revenue has been earned from the Barona Tribe. Although we expect to generate revenues from (a) software products and related services, (b) other advisory services and (c) the Buena Vista Tribe, we expect the majority of our revenues to be generated from the Barona Tribe for the

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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS—(Continued)

March 31, 2006 (Unaudited)

foreseeable future. During the three and nine months ended March 31, 2006, revenues from the Barona Tribe were $1,792,000 and $5,377,000, respectively, representing 71% and 81% of our total revenues, respectively. During the three and nine months ended March 31, 2005, revenues from the Barona Tribe were $1,725,000 and $5,175,000, respectively, representing 80% and 91% of our total revenues, respectively.

Note 5. Cash and Cash Equivalents

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

Cash equivalents during the nine months ended March 31, 2006, consisted of commercial paper and certificate of deposit (“CD”) instruments. The commercial paper and CD instruments had maturities ranging from 30-days to 90-days. Interest rates earned on such investments ranged from 2.76% to 4.65%. Cash equivalents during the nine months ended March 31, 2005, consisted of auction rate preferred securities, commercial paper and certificate of deposit (“CD”) instruments. The commercial paper and CD instruments had maturities ranging from 15-days to 90-days and the auction rate preferred securities were reset every seven days in an auction process. Interest rates earned during the nine months ended March 31, 2005, ranged from .8% to 1.9%.

Note 6. Restricted Cash

We issued an irrevocable letter of credit for $43,000 to satisfy terms of the lease agreement for our office located in Las Vegas, Nevada. Such letter of credit was going to automatically renew on an annual basis until September 30, 2009, unless cancelled by the lessor. Pursuant to the lease terms, in January 2006, the letter of credit was cancelled as a result of VCAT meeting certain financial milestones.

Note 7. Uncompleted Software Contracts

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

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

	March 31, 2006		June 30, 2005
Number of uncompleted software contracts		5		3
Gross contracts amount	$	4,280,000	$	1,090,300
Uncompleted software contracts with billings in excess of costs:
Billings		1,209,000		582,540
Costs incurred		242,177		2,168
Billings in excess of costs, uncompleted software contracts	$	966,823	$	580,372

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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS—(Continued)

March 31, 2006 (Unaudited)

Note 8. Other Income - Litigation Settlement Income

We filed a lawsuit in January 2005 against multiple parties (the “Defendants”) for breach of contract, trade secret misappropriation, unfair business practices, copyright infringement and other related claims, each relating to Mariposa. The Defendants were hired by us to provide software development, support, installation and integration services for VCAT pursuant to development and services agreements. During the course of the lawsuit counterclaims were filed against VCAT and three of its officers.

In July 2005, we reached a comprehensive settlement of our suit against certain Defendants and related third parties, whereas the Defendants paid us $47,000. In December 2005, we reached a comprehensive settlement of our suit against the remaining Defendants, Pursuant to the settlement, the Defendants and related third parties (a) paid $300,000 in monetary damages to us; (b) consented to a stipulated injunction and dismissal with prejudice under which they are enjoined from participating in certain prohibited activities related to our business and products until September 1, 2007; and (c) stipulated to the dismissal of all of their claims, counterclaims and cross claims in the action that they had against VCAT and its officers. In addition, under the terms of the settlement in December 2005, the parties agreed to a mutual release of actual or potential claims related to the action, and agreed upon a procedure to be in place until September 1, 2007 addressing future claims by us against the defendants and certain related parties for patent infringement on any currently pending VCAT patent application.

Note 9. Stock Options

The following table summarizes stock option activity under our 1995 Stock Option Plan and 1996 Non-employee Directors Stock Option Plan (collectively the “Plans”) for the nine months ended March 31, 2006:

	Options Outstanding		Options Price Per Share
Outstanding, July 1, 2005	5,668,250		$	0.13 -$12.50
Granted	—			—
Exercised	(15,000	)	$	.38
Cancelled	(736,500	)	$	0.38 -$  4.13
Outstanding, March 31, 2006	4,916,750		$	0.13 -$12.50

Note 10. Net Income (Loss) Per Share

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

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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS—(Continued)

March 31, 2006 (Unaudited)

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

	March 31,
	2006		2005
Net income available to common shareholders	$	80,046	$	28,764
Weighted average shares outstanding - basic		7,220,098		7,206,598
Effect of dilutive options		814,714		125,430
Weighted average shares outstanding - diluted		8,034,812		7,332,028
Net income per common share - basic	$	.01	$	.00
Net income per common share - diluted	$	.01	$	.00

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

	March 31,
	2006			2005
Net loss available to common shareholders	$	(5,248	)	$	(40,932	)
Weighted average shares outstanding - basic		7,211,032			7,206,598
Effect of dilutive options		—			—
Weighted average shares outstanding - diluted		7,211,032			7,206,598
Net income loss per common share - basic	$	(.00	)	$	(.01	)
Net income loss per common share - diluted	$	(.00	)	$	(.01	)

Options to purchase 4,916,750 shares of our common stock with exercise prices ranging from $0.13 to $12.50 per share were outstanding at March 31, 2006, which expire on various future dates through 2014. During the three months ending March 31, 2006, options to purchase 4,033,861 shares of common stock with exercise prices greater than the average fair market value of our stock of $1.52 were not included in the calculation of EPS because the effect would have been anti-dilutive. During the nine months ending March 31, 2006, options to purchase 4,916,750 shares of common stock were not included in the calculation of EPS because the effect would have been anti-dilutive.

During the three months ended March 31, 2005, options to purchase 5,095,583 shares of common stock with exercise prices greater than the average fair market value of our stock of $.37, were not included in the calculation of EPS because they were anti-dilutive. During the nine months ended March 31, 2005 options to purchase 5,668,250 shares of common stock were not included in the calculation of EPS because they were anti-dilutive.

Note 11. Segment Reporting

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

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VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS—(Continued)

March 31, 2006 (Unaudited)

The segment results reflect an allocation of operating expenses consistent with the basis and manner in which we internally disaggregate financial information for the purpose of assisting in making internal operating decisions. We do not evaluate performance based on return on assets at the segment level and do not identify or allocate our assets by operating segments. As such, segment asset information is not disclosed. Information on segments and a reconciliation to the operating profit (loss) and operating profit (loss) before other expense for the three and nine months ended March 31, 2006 and 2005 is as follows:

	Consulting Services		Software Products and Related Services			Total
Three months ended March 31, 2006:
Revenues	$	1,942,275	$	578,398		$	2,520,673
Cost of revenues		813,390		396,618			1,210,008
Allocated operating expenses		478,064		605,280			1,083,344
Operating profit (loss)	$	650,821	$	(423,500	)	$	227,321
Three months ended March 31, 2005:
Revenues	$	1,849,843	$	317,668		$	2,167,511
Cost of revenues		657,866		269,910			927,776
Allocated operating expenses		833,139		351,612			1,184,751
Operating profit (loss)	$	358,838	$	(303,854	)	$	54,984
	Consulting Services		Software Products and Related Services			Total
Nine months ended March 31, 2006:
Revenues	$	5,831,011	$	826,152		$	6,657,163
Cost of revenues		2,384,599		896,085			3,280,684
Allocated operating expenses		1,698,200		2,061,997			3,760,197
Operating profit (loss)	$	1,748,212	$	(2,131,930	)	$	(383,718	)
Nine months ended March 31, 2005:
Revenues	$	5,299,843	$	356,639		$	5,656,482
Cost of revenues		1,901,528		939,091			2,840,619
Allocated operating expenses		1,990,397		991,802			2,982,199
Operating profit (loss)	$	1,407,918	$	(1,574,254	)	$	(166,336	)

Note 12. Stock Repurchase/ Long-Term Debt

In September 1996, we entered into a Stock Purchase and Settlement and Release Agreement (the “Stock Purchase Agreement”) with two of our shareholders (the “Note Holders”). In connection with the Stock Purchase Agreement, we issued unsecured promissory notes, bearing interest at a rate of 10% per annum, to the Note Holders. As of June 30, 2004, the outstanding principal amount of debt and accrued interest was $11,969,000. In addition, the principal amount of the notes could have increased by an additional $4,856,000 if certain contingencies were met. All payments pursuant to the Stock Purchase Agreement and the notes were subject to our ability to meet certain financial tests, including tests provided under applicable law. Because of our financial condition, we were not required to make payments under the notes in September 2003, 2002 and 2001 and, based upon our shareholders’ deficit balance at June 30, 2004, and our current sources of revenues, we did not expect that we would be obligated to make a payment of principal or interest for the foreseeable future. Although our failure to make payments under the notes in such circumstances did not constitute an event of default, the unpaid interest on the notes was added to the outstanding principal, which continued to accrue interest.

15

VENTURE CATALYST INCORPORATED

NOTES TO FINANCIAL STATEMENTS—(Continued)

March 31, 2006 (Unaudited)

On July 19, 2004, we entered into an agreement with the Note Holders to restructure our indebtedness to them (the “Restructuring Agreement”). Pursuant to the terms of the Restructuring Agreement, our aggregate outstanding debt under the notes was reduced from $11,969,000 to $4,300,000. Under the Restructuring Agreement, the Note Holders exchanged all the outstanding notes for new promissory notes in the aggregate principal amount of $4,200,000 and $100,000 in additional obligations. The principal due under the new notes was paid in two installments, in July 2004 and in September 2004. No further payments are due under the notes. The new notes did not bear interest.

The original notes were recorded as additional consideration when issued pursuant to the Stock Purchase Agreement and were recorded as a reduction to shareholders’ equity at the time of issuance. In July 2004, we reduced the carrying amount of the debt by $7,669,000, the amount of the aggregate debt reduction under the terms of the Restructuring Agreement, which was recorded as an increase to our shareholders’ equity through an increase to our additional-paid-in capital account.

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

Overview

We are a provider of consulting services and technology in the gaming and hospitality industry. We operate two business divisions: consulting services and software. Our consulting services division offers comprehensive gaming and hospitality consulting services and our software division is dedicated to the ongoing product and business development of Mariposa, a fully-integrated customer relationship management (“CRM”), marketing and business intelligence software system for the gaming and hospitality industry. As used in this Report, the terms “we,” “us,” “our” and “VCAT” refer to Venture Catalyst Incorporated. This Report should be read in conjunction with Management’s Discussion and Analysis or Plan of Operation set forth in our Annual Report on Form 10-KSB for the year ended June 30, 2005 (“fiscal 2005”).

Our Consulting Services Division.

As of March 31, 2006, our consulting services division had two primary clients, the Barona Tribe and the Buena Vista Tribe, both of which are federally recognized, sovereign Native American tribes. We currently provide services to the Barona Tribe pursuant to a consulting agreement in connection with the Barona Tribe’s operation of the Barona Valley Ranch located in Lakeside, California, near San Diego. We provide business advisory services to the Buena Vista Tribe in connection with the establishment and operation of a gaming operation on the Buena Vista’s reservation located near Ione, in Northern California. Our consulting fees resulting from our consulting services to the Barona Tribe are VCAT’s principal source of revenues and liquidity.

We have provided services to the Barona Tribe since 1991. From April 1996 to March 2004, consulting services were provided to the Barona Tribe pursuant to an Amended and Restated Consulting Agreement dated April 29, 1996, as amended by Modification No. 1 on February 17, 1998 (as amended, the “1996 Consulting Agreement”). The 1996 Consulting Agreement expired on March 31, 2004. On May 25, 2004, we entered into an amendment and extension (“Modification No. 2”) to the 1996 Consulting Agreement which was effective April 1, 2004. The 1996 Consulting Agreement, as amended by Modification No. 2, shall hereinafter be referred to as the “2004 Consulting Agreement.” The 2004 Consulting Agreement expires March 31, 2009 unless renewed or extended. The Barona Tribe has the right under the 2004 Consulting Agreement to negotiate an additional five year extension and a right to terminate after giving nine months notice.

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

In connection with a $200,000,000 loan obtained by the Barona Tribe relating to the Development of the Barona Valley Ranch (the “Development Loan”), we entered into a Reaffirmation, Consent and Amendment of Subordination Agreement in July 2001 (the “Subordination Agreement”). In October 2004, we reaffirmed the Subordination Agreement in connection with an amendment and restatement to the Development Loan (the “Loan Agreement”). The Subordination Agreement limits the Barona Tribe’s ability to make payments to us if the debt coverage ratios set forth in the Loan Agreement are not met. No payments may be made if there is a default under the terms of the Loan Agreement that has not been cured or waived. As of March 31, 2006, we are not aware of a default by the Barona Tribe of any of the terms of the Loan Agreement or a failure on the part of the Barona Tribe to meet the debt coverage ratios set forth in the Loan Agreement. Our consulting fees under the 2004 Consulting Agreement continue to be subject to the Subordination Agreement.

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In January 31, 2005, we entered into a Business Advisory Agreement (the “Advisory Agreement”) with the Buena Vista Tribe. Under the terms of the Advisory Agreement, we will provide business advisory services to the Buena Vista Tribe in connection with the establishment and operation of a gaming operation on the Buena Vista Tribe’s reservation located near Ione, in Northern California. Under the Advisory Agreement, the Buena Vista Tribe will pay us a monthly flat fee of (a) $50,000 per month until groundbreaking on the Buena Vista Tribe’s casino; (b) $100,000 per month from groundbreaking until nine months prior to the planned opening of the casino; and (c) $250,000 per month from nine months prior to the planned opening of the casino until nine months after the opening of the casino. The Advisory Agreement will end on the six month anniversary of the opening of the Buena Vista Tribe’s casino, however, the term may be extended upon the mutual written agreement of the parties, but in no event will the term of the Advisory Agreement exceed six years and eleven months. The Buena Vista Tribe may terminate the Advisory Agreement at any time by providing us with sixty days written notice.

Additionally, pursuant to the terms of the Advisory Agreement, we may enter into a Mariposa license agreement with the Buena Vista Tribe approximately nine months prior to the opening of the Buena Vista Tribe’s casino, which is not expected to occur until the fiscal year ended June 30, 2008.

We have offered to pay the Barona Tribe a fee equal to 17.5% of the fees received by us pursuant to the Advisory Agreement, if they provide us with opportunity to use some of the Barona Valley Ranch personnel to perform services under the Advisory Agreement. If the Barona Tribe accepts this proposal, we believe that we will be in a better position to provide a wider scope of services to the Buena Vista Tribe without the need for us to add a number of resources and costs.

Our Software Division.

Our software division is dedicated to the ongoing product and business development of Mariposa, a fully-integrated CRM, marketing and business intelligence software system for the gaming and hospitality industry. Mariposa consists of a suite of functionally distinct applications, each designed to address a specific set of requirements within the gaming and hospitality industry. The applications may be licensed and deployed as an integrated solution or individually, depending upon the customer’s needs and financial resources. We have made, and may continue to make, material organizational changes, including adding staff, to cultivate qualified sales leads and to install, support and continue development of Mariposa and/or related software products. This may involve material increases to our expenses and additional capital. At this time, we are uncertain whether we will be able to generate enough revenue to absorb the additional expenses.

As of March 31, 2006, we had five uncompleted software contracts that, if completed, will result in additional aggregate revenues of $4,280,000, exclusive of any potential support fees, at the time of their completion. There can be no assurance that we will complete all of the software contracts or that, if all of the software contracts are completed, they will be completed pursuant to existing terms. We expect to incur additional costs to complete each of the software contracts, however, we believe that the costs will be less than the revenues to be recognized under each of the software contracts.

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

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

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

• 25% percent of the first $250,000 of the net profits per quarter;

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• 30% percent of the second $250,000 of the net profits per quarter;

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

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

During the three and nine month periods ended March 31, 2006 and 2005, the above-referenced profit sharing arrangement did not result in a profit sharing payment obligation to the Barona Tribe.

Debt Restructuring

On July 19, 2004, we entered into an agreement to restructure $11,969,000 of debt owed to two former shareholders (the “Restructuring Agreement”). Pursuant to the terms of the Restructuring Agreement, our aggregate outstanding debt owed to them was reduced from $11,969,000 to $4,300,000. The principal due under the new notes was paid in two installments, in July 2004 and in September 2004. No further payments are due under the notes and our long-term debt balance was zero as of March 31, 2006.

Critical Accounting Policies and Estimates

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

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

Revenue Recognition-Consulting Services.

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

• persuasive evidence of an arrangement exists;

• services have been rendered;

• the fee is fixed or determinable; and

• collectibility is reasonably assured.

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

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

Revenue Recognition-Software Products and Related Services

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

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

• persuasive evidence of an arrangement exists;

• delivery has occurred;

• the vendor’s fee is fixed or determinable; and

• collectibility is probable.

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

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

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

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

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

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Deferred Income Taxes.

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

Results of Operations

Three Months Ended March 31, 2006 Compared with the Three Months Ended March 31, 2005.

Revenues

Revenues for the three months ended March 31, 2006 increased 16% to $2,521,000, compared to $2,168,000 during the same period last year.

During the three months ended March 31, 2006, we earned $1,942,000 in revenues in our consulting services division consisting of (a) $1,792,000 in fees for consulting services provided to the Barona Tribe, and (b) $150,000 in revenues from advisory services provided to the Buena Vista Tribe. During the three months ended March 31, 2005, we earned (a) $1,850,000 in revenues in our consulting services division consisting of (a) $1,725,000 in fees for consulting services provided to the Barona Tribe, (b) $100,000 in fees for advisory services provided to the Buena Vista Tribe, and (c) $25,000 in other revenues primarily resulting from out-of-pocket expenses re-billed to customers.

Revenues from our software products and related services for three months ended March 31, 2006 increased 82% to $578,000 compared to $318,000 earned in the prior year period. The revenues in the current year period resulted from (a) $411,000 from completed software contracts and change orders; (b) $130,000 in support fees; (c) $30,000 from business intelligence services; and (d) $7,000 in other revenues from out-of-pocket expenses re-billed to customers. In the prior year period, revenues consisted of (a) $300,000 from completed software contracts; (b) $13,000 in support fees; and (c) $5,000 in other revenues from out-of-pocket expenses re-billed to customers.

Cost of Revenues

The cost of revenues for the three months ended March 31, 2006 increased 30% to $1,210,000, compared to $928,000 during the same period last year.

The cost of revenues in our consulting services division consisted primarily of compensation and other personnel-related expenses, costs of services provided by third-party consultants, client relations expenses, allocated overhead expenses and other direct costs related to providing consulting services to the Barona Tribe and Buena Vista Tribe. The cost of revenues during the three months ended March 31, 2006 in the consulting services division increased 24% to $813,000, compared to $658,000 recorded during the same period last year. The increase was primarily the result of an increase in (a) compensation and other personnel-related expenses of $153,000, primarily due to additional personnel in the consulting services division; (b) allocated overhead expenses of $50,000; (c) client relations expenses of $26,000; and (c) other direct costs of $6,000. The increase was partially offset by a reduction in (a) third-party consultants and service providers of $60,000 and (b) costs incurred in connection with providing software support services to the Barona Tribe of $19,000.

The cost of revenues in our software division in the current year period consisted primarily of compensation and other personnel-related expenses, allocated overhead expenses, and other direct costs related to our software products and related services. The cost of revenues in our software division in the prior year period consist primarily of costs for services provided by a third-party software development firm engaged by us in connection

21

with installation and maintenance and support services for our software products and compensation and other personnel-related expenses. The cost of revenues in the software division during the three months ended March 31, 2006 increased 47% to $397,000, compared to $270,000 during the same period last year. Expenses during the current year period in our software division increased primarily as a result of increases in (a) compensation and other related expenses of $92,000 resulting from additional software engineering personnel; (b) costs incurred in connection with maintenance and support services provided to customers of $48,000; (c) costs for personnel providing business intelligence services of $44,000; (d) allocated overhead expenses and other direct costs related to our software products and services of $22,000. The increases were partially offset by a decrease in costs incurred in connection with providing integration, installation and training services of $115,000. Additionally, in the prior year period the cost of revenues were lower due to a reduction relating to the loss recorded for a software contract of $37,000 in the prior year period.

General Operating and Administrative Expenses

General and administrative expenses include costs associated with our finance, human resources, legal and other administrative functions. These costs consist primarily of compensation and other personnel-related expenses, professional service fees, facilities, depreciation, insurance costs, allocated overhead expenses and other general and administrative costs. General operating and administrative expenses for the three months ended March 31, 2006 decreased 21% to $809,000, compared to $1,024,000 during the same period last year. The decrease was primarily attributable to decreases in (a) professional services of $226,000, primarily due to legal fees incurred in connection with the software related litigation in the prior year period; (b) allocated overhead expenses of $123,000, resulting primarily from an increase in expenses included in allocated overhead to other divisions; (c) fees incurred in connection with shareholder communication costs of $9,000; and (d) outside accounting and tax compliance services of $5,000. The decreases were partially offset by increases in (a) compensation and other personnel-related expenses of $145,000 and (b) other general and administrative costs of $3,000.

Sales and Marketing

Sales and marketing expenses consist primarily of compensation and other personnel-related expenses, costs of marketing programs, including trade shows and advertising, allocated overhead expenses and travel and lodging expenses in connection with sales efforts. Sales and marketing expenses during the three months ended March 31, 2006 increased 61% to $221,000, compared to $137,000 during the same period last year. The increase was primarily a result of an increase in (a) compensation and other personnel-related expenses of $21,000; (b) printing costs of $15,000 for new product brochures; (c) travel and lodging expense in connection with sales efforts of $14,000; (d) other direct costs related to sales efforts of $14,000; (e) allocated overhead expenses of $14,000; and (f) costs for tradeshows and related expenses of $6,000.

Research and Development

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

During the three months ended March 31, 2006, research and development expenses increased 135% to $54,000, compared to $23,000 during the same period last year. The increase was primarily the result of an increase in (a) compensation and other personnel-related expenses of $21,000, which resulted from an increase in the time internal software engineers allocated to research and development efforts, and (b) allocated overhead expenses of $9,000.

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Other Income and Expense

For the three months ended March 31, 2006, interest income increased 117% to $39,000, from $18,000 for the same period last year, primarily as a result of higher interest rates during the current year period as compared to the prior year period.

Income Tax Provision

We recorded an income tax provision during the three months ended March 31, 2006 of $187,000 as a result of (a) applying the estimated annual effective tax rate of 57% to the net income for the period, and (b) recording additional income tax expense of $34,000 to adjust the estimated fiscal 2005 income taxes due to the actual amounts due. The estimated annual effective tax rate of 57% is higher than the statutory tax rate due to permanent non-deductible differences and an increase in our valuation allowance for originating deferred tax assets. We recorded an income tax provision of $44,000 during the three months ended March 31, 2005, as a result of applying our estimated annual effective tax rate in the prior year period to the income recorded in the prior year period.

Nine months Ended March 31, 2006 Compared with the Nine months Ended March 31, 2005.

Revenues

Revenues for the nine months ended March 31, 2006 increased 18% to $6,657,000, compared to $5,656,000 during the same period last year.

During the nine months ended March 31, 2006, we earned $5,831,000 in revenues in our consulting services division consisting of (a) $5,377,000 in fees for consulting services provided to the Barona Tribe; (b) $450,000 in fees for advisory services provided to the Buena Vista Tribe; and (c) $4,000 primarily resulting from out-of-pocket expenses re-billed to customers. During the nine months ended March 31, 2005, we earned $5,300,000 in revenues in our consulting services division consisting of (a) $5,175,000 in fees for consulting services provided to the Barona Tribe; (b) $100,000 in fees for advisory services provided to the Buena Vista Tribe; and (c) $25,000 in other revenues primarily resulting from out-of-pocket expenses re-billed to customers.

Revenues from our software products and related services during the nine months ended March 31, 2006 increased 131% to $826,000 compared to $357,000 earned in the same period last year. The revenues in the current year period resulted from (a) $416,000 from completed software contracts; (b) $368,000 in support fees; (c) $30,000 from business intelligence services; and (d) $12,000 from out-of-pocket expenses re-billed to customers. In the prior year period, revenues consisted of (a) $300,000 from completed software contracts; (b) $38,000 in support fees; and (c) $19,000 from out-of-pocket expenses re-billed to customers.

Cost of Revenues

Cost of revenues for the nine months ended March 31, 2006 increased 15% to $3,281,000, compared to $2,841,000 during the same period last year.

Cost of revenues in our consulting services division consisted primarily of compensation and other personnel-related expenses, costs of services provided by third-party consultants, client relations expenses, allocated overhead expenses and other direct costs, related to providing consulting services to the Barona Tribe and Buena Vista Tribe. The cost of revenues during the nine months ended March 31, 2006 in the consulting services division increased 25% to $2,385,000, compared to $1,902,000 recorded during the same period last year. The increase was primarily the result of an increase in (a) compensation and other personnel-related expenses of $349,000, primarily due to additional personnel in the consulting services division; (b) client relations expenses of $213,000; (c) other direct costs of $77,000, primarily resulting from an increase in travel

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and lodging expenses, business meals and entertainment and charitable contributions; and (d) allocated overhead expenses of $55,000. The increase was partially offset by a reduction in (a) professional services of $155,000; (b) costs incurred in connection with providing software support services to the Barona Tribe of $35,000; and (c) out-of-pocket expenses re-billed to customers of $20,000.

The cost of revenues in our software division in the current year period consisted primarily of compensation and other personnel-related expenses, allocated overhead expenses and other direct costs related to our software products and related services. The cost of revenues in our software division in the prior year period consist primarily of costs for services provided by a third-party software development firm engaged by us in connection with installation and maintenance and support services for our software products and compensation and other personnel-related expenses. The cost of revenues in the software division during the nine months ended March 31, 2006 decreased 5% to $896,000, compared to $939,000 during the same period last year. Expenses during the current year period in our software division decreased primarily as a result of decreases in (a) professional services of $190,000 for services provided by third-party development firm including a one-time fee of $117,000 paid in connection with an agreement allowing us to hire four of their engineers; and (b) integration, installation and training services of $122,000. The decreases were partially offset by an increase in (a) costs for personnel providing business intelligence services of $92,000; (b) compensation and other related expenses of $70,000 for software engineering personnel; (c) costs incurred in connection with maintenance and support services provided to customers of $56,000; and (d) other direct costs related to our software products and services of $13,000. Additionally, in the prior year period the cost of revenues were lower due to a reduction to the loss recorded for a software contract of $37,000 in the prior year period.

General Operating and Administrative Expenses

General and administrative expenses include costs associated with our finance, human resources, legal and other administrative functions. These costs consist primarily of compensation and other personnel-related expenses, professional fees, facilities, depreciation, insurance costs, allocated overhead expenses and other general and administrative costs. General operating and administrative expenses for the nine months ended March 31, 2006 increased 20% to $2,902,000, compared to $2,424,000 during the same period last year. The increase was primarily attributable to increases in (a) professional services of $315,000, primarily comprised of legal fees and forensic expert services incurred in connection with the software related litigation; (b) compensation and other personnel-related expenses of $238,000; and (c) other general and administrative costs of $33,000. The increase was partially offset by a decrease in (a) allocated overhead expenses of $50,000, resulting primarily from an increase in expenses included in allocated overhead to other divisions; (b) fees for outside accounting and tax compliance services of $30,000; and (c) costs incurred in connection with shareholder communications of $29,000.

Sales and Marketing

Sales and marketing expenses consist primarily of compensation and other personnel-related expenses, costs of marketing programs, including trade shows and advertising, allocated overhead expenses and travel and lodging expenses in connection with sales efforts. Sales and marketing expenses during the nine months ended March 31, 2006 increased 34% to $681,000, compared to $509,000 during the same period last year. The increase was primarily a result of an increase in (a) compensation and other personnel-related expenses of $109,000; (b) advertising and marketing expenses, including tradeshows and related expenses of $28,000; (c) travel and lodging expense in connection with sales efforts of $15,000; (d) allocated overhead expenses of $14,000; (e) business meals and entertainment of $10,000; (f) printing costs resulting primarily from new product brochures of $9,000; and (g) other direct costs related to sales efforts of $9,000. The increase was partially offset by a decrease in professional services of $22,000, primarily the result of website development services incurred in the prior year period.

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Research and Development

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

During the nine months ended March 31, 2006, research and development expenses increased 271% to $178,000, compared to $48,000 during the same period last year. The increase was a result of the increase in (a) compensation and other personnel-related expenses of $119,000, which resulted from an increase in the time internal software engineers allocated to research and development efforts, and (b) allocated overhead expenses of $10,000.

Other Income and Expense

For the nine months ended March 31, 2006, interest income increased 136% to $104,000 from $44,000 for the same period last year, primarily as a result of higher interest rates and an increase in our average cash balances during the current year period as compared to the prior year period. For the nine months ended March 31, 2006, other income was $347,000 as result of cash consideration received in connection with settlement of litigation. Other income in the prior year period included $17,000 resulting from the sale of assets.

Income Tax Provision / Benefit

We recorded an income tax provision of $73,000 during the nine months ended March 31, 2006, as a result of applying the estimated annual effective tax rate of 57% to the net income for the period, and (b) recording additional income tax expense of $34,000 to adjust the estimated fiscal 2005 income taxes due to the actual amounts due. The estimated annual effective tax rate of 57% is higher than the statutory tax rate due to permanent non-deductible differences and an increase in our valuation allowance for originating deferred tax assets. We recorded an income tax benefit of $65,000 during the nine months ended March 31, 2005, as a result of applying our estimated annual effective tax rate to the loss recorded in the prior year period.

Liquidity and Capital Resources

Our principal sources of liquidity at March 31, 2006 to fund ongoing operations are cash provided from operations and unrestricted cash and cash equivalents of $4,067,000. During the nine months ended March 31, 2006, our cash position increased by $228,000 from the June 30, 2005 balance of $3,839,000. The increase was a result of cash provided by operating activities of $330,000 and cash provided by financing activities of $6,000 partially offset by cash used in investing activities of $108,000.

The cash provided by operating activities of $330,000 in the nine months ended March 31, 2006, resulted primarily from revenue received from the Barona Tribe and Buena Vista Tribe, payments from clients pursuant to software contracts, and payments received in connection with the settlement of litigation, less cash expenditures in the period. Cash provided by financing activities of $6,000 resulted from proceeds from the exercise of options. Cash used in investing activities resulted from the purchase of fixed assets of $151,000 partially offset by the release of a $43,000 letter of credit issued in connection with an office lease.

We believe our cash and cash equivalents, together with cash provided from operations, will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months; however, there can be no assurance that we will not be required to seek other financing sooner or that such financing, if required, will be available on terms satisfactory to us.

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Factors That May Affect Future Results

Risks Related to our Financial Condition

We have limited resources to grow our business.

As of March 31, 2006, our unrestricted cash and cash equivalents were $4,067,000. Our limited cash and cash equivalent reserves may limit our ability to pursue other business opportunities unless we obtain additional funds from operations or from other sources. If we are unable to pursue or exploit future business opportunities, it could have an adverse effect on the growth of our business.

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

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

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

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

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

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

In March 1999, the National Indian Gaming Commission (the “NIGC”) commenced a preliminary review of our relationship with the Barona Tribe, including a review of the 1996 Consulting Agreement. Such review is still pending. In addition, the NIGC, and the Bureau of Indian Affairs (the “BIA”), if the BIA believes such review to be necessary, have not yet approved the 2004 Consulting Agreement. If the 2004 Consulting Agreement is not approved or is significantly modified by regulatory authorities to our detriment, or if the review by the NIGC of our relationship with the Barona Tribe is adverse to us, such action(s) could have a material adverse effect on our business and financial condition. In addition, the regulatory review could result in our being required to pay fines or incur additional expenses, all of which could have a material adverse effect on our business and financial condition.

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

The recent expansion of gaming activities in California has resulted in experienced gaming companies negotiating or entering into contracts with Native American tribes in California. There has been an increase in the

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

Risks Related to Mariposa and our Software Business

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

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

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

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

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

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

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

• fail to achieve broad market acceptance of Mariposa.

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

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

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Mariposa could contain undetected errors or failures.

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

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

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

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

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

Other Risks

Our business is subject to strict regulation by gaming authorities.

We operate in a highly regulated industry and our ability to operate in certain jurisdictions could be subject to extensive federal, state, local and foreign regulation by various gaming authorities. Although the laws and regulations of the various jurisdictions in which we may operate vary in their technical requirements, and are subject to amendment from time to time, virtually all these jurisdictions could require licenses, permits, documentation of the qualification, including evidence of integrity and financial stability, and other forms of

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approval for us, as well as for our officers, directors, major shareholders and key personnel. We will attempt to obtain all licenses, permits, registrations, findings of suitability and approvals necessary; however, there can be no assurance those licenses, permits, registrations, findings of suitability or approvals will be granted. Additionally, there can be no assurance that any regulatory agency will not enact new rules or change regulations that would negatively impact our ability to operate within such jurisdictions.

Approval of the Advisory Agreement with the Buena Vista Tribe may be subject to review by the NIGC and the BIA.

The Advisory Agreement with the Buena Vista Tribe may be subject to review by the NIGC and the BIA. If the Advisory Agreement is subject to review and is not approved or is significantly modified by regulatory authorities to our detriment, such action could have a material adverse effect on our business and financial condition. In addition, the regulatory review could result in our being required to pay fines or incur additional expenses, all of which could have a material adverse effect on our business and financial condition.

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

Our success largely depends upon the continued contributions of L. Donald Speer, II, VCAT’s Chairman of the Board. The loss of Mr. Speer’s services, for any reason, would have a material adverse effect on our success and prospects. We have not entered into an employment agreement with Mr. Speer. If Mr. Speer were to leave VCAT or his services to us became unavailable, there can be no assurance that we will be able to find a suitable replacement, particularly in connection with our ability to perform consulting services to the Barona Tribe.

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

Our common stock is subject to wide fluctuations.

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. 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 affected. Low-priced stocks are subject to additional risks, including additional state regulatory requirements and the potential loss of effective trading markets.

Item 3. Controls and Procedures

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

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

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PART II - OTHER INFORMATION

Item 6. Exhibits

(a) Exhibits.

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

Exhibit No.	Description
3.1	Articles of Amendment of Articles of Incorporation of VCAT, filed with the Secretary of State of Utah on December 10, 1999, previously filed as Exhibit 3.1 to VCAT’s Quarterly Report on Form 10-QSB for the Quarterly Period Ended December 31, 1999, filed with the Commission on February 14, 2000 (File No. 0-11532), which is incorporated herein by reference.
3.2	Amended and Restated Articles of Incorporation of VCAT (formerly known as Twin Creek Exploration Co., Inc.), previously filed as Exhibit 3.1 to VCAT’s Annual Report on form 10-KSB for the Fiscal Year Ended June 30, 1995, filed with the Commission on October 12, 1995 (File No. 0-11532), which is incorporated herein by reference.
3.3	Amended and Restated Bylaws of VCAT, as amended, previously filed as Exhibit 3.1 to VCAT’s Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 2003, filed with the Commission on May 13, 2003 (File No. 0-11532), which is incorporated herein by reference.
31.1	Certification of Chief Executive Officer of Venture Catalyst Incorporated, pursuant to Rule 13a-14 of the Securities Exchange Act.
31.2	Certification of Chief Financial Officer of Venture Catalyst Incorporated, pursuant to Rule 13a-14 of the Securities Exchange Act.
32.1	Certification of Chief Executive Officer of Venture Catalyst Incorporated, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer of Venture Catalyst Incorporated, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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, 2006	By:	/s/ GREG SHAY
		Greg Shay Chief Executive Officer, President and Chief Operating Officer (Authorized Signatory, Principal Executive Officer)

Date: May 15, 2006	By:	/s/ KEVIN MCINTOSH
		Kevin McIntosh Senior Vice President, Chief Financial Officer, Secretary and Treasurer (Authorized Signatory, Principal Financial and Accounting Officer)

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Exhibit Index

Exhibit No.	Description
3.1	Articles of Amendment of Articles of Incorporation of VCAT, filed with the Secretary of State of Utah on December 10, 1999, previously filed as Exhibit 3.1 to VCAT’s Quarterly Report on Form 10-QSB for the Quarterly Period Ended December 31, 1999, filed with the Commission on February 14, 2000 (File No. 0-11532), which is incorporated herein by reference.
3.2	Amended and Restated Articles of Incorporation of VCAT (formerly known as Twin Creek Exploration Co., Inc.), previously filed as Exhibit 3.1 to VCAT’s Annual Report on form 10-KSB for the Fiscal Year Ended June 30, 1995, filed with the Commission on October 12, 1995 (File No. 0-11532), which is incorporated herein by reference.
3.3	Amended and Restated Bylaws of VCAT, as amended, previously filed as Exhibit 3.1 to VCAT’s Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 2003, filed with the Commission on May 13, 2003 (File No. 0-11532), which is incorporated herein by reference.
31.1	Certification of Chief Executive Officer of Venture Catalyst Incorporated, pursuant to Rule 13a-14 of the Securities Exchange Act.
31.2	Certification of Chief Financial Officer of Venture Catalyst Incorporated, pursuant to Rule 13a-14 of the Securities Exchange Act.
32.1	Certification of Chief Executive Officer of Venture Catalyst Incorporated, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer of Venture Catalyst Incorporated, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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