Multimedia Games Inc. Announces Third Quarter Equipment Sale and Announces Plans to File Suit in California

Business Wire, July 17, 1998

TULSA, Okla.--(BUSINESS WIRE)--July 17, 1998--Multimedia Games Inc. (NASDAQ:MGAM) announced today that in the third quarter ending June 30, 1998, the company sold 263 electronic player stations (EPS), which are installed in Indian bingo halls, to a group of qualified investors for $1.4 million.

All of the cash from this transaction has been collected and will be used primarily to finance the manufacturing and installation of more player stations in the fourth quarter. The contribution to profits from such a sale is approximately 42%.

The company also announced plans to file a claim against the Justice Department in the Northern District of California in the next six days to clarify the Class II status of MegaMania, the company's original interactive game which is already the subject of a lawsuit between the Justice Department, MGAM, and two Indian tribes in the Northern District of Oklahoma and a separate lawsuit between the Justice Department and five tribes in Washington, D.C.

In March, 1998, the Governor of the State of California and the five U.S. Attorneys in California announced that (a) the State had entered into a compact with a non-gaming tribe, the Pala tribe, to introduce Class III video lottery games, and (b) the forty California tribes running 13,000 video poker and video slot machines would have to agree to sign a similar compact and remove the 13,000 existing machines or risk the forfeiture of those machines as illegal Class III gaming devices. In May and June, federal agents visited the approximately 30 Indian facilities that have refused to enter into a Pala style compact, identified all of the machines in question as being subject to forfeiture, and filed in Federal Court seeking such forfeiture.

The federal agent who visited one of those thirty halls was also involved in the Oklahoma MegaMania case. He identified twenty MegaMania player stations at that hall as being subject to forfeiture. MGAM attorneys have been in discussions with the U.S. Attorney's office in the Northern District about the possibility of removing the twenty MegaMania devices from the forfeiture list. The Justice Department informed MGAM this week that they were not willing to remove the twenty MGAM stations from the list, and MGAM has decided to vigorously contest that decision.

A Federal Judge in California ruled recently that the Pala compact was invalid without legislative approval and, consequently, the future of the Pala compact is uncertain. So far the legislature has refused to approve the Pala Compact, consequently, the intentions of the Justice Department to proceed with the forfeiture action is unclear. Nevertheless, the opening up of the question of the Class II status of MegaMania in this new jurisdiction creates new options for MGAM which may expedite the resolution of this issue and may improve the probability of obtaining a summary judgment or winning the case outright or on appeal. The Class II status of MegaMania stations in a number of other California Indian gaming establishments has not been challenged.

This press release and the information incorporated herein by reference contains various "forward looking statements" within the meaning of Federal and state securities laws, including those identified or predicted by the words "believes," "anticipates," "expects," "plans," or similar expressions. Such statements are subject to a number of uncertainties that could cause the actual results to differ materially from those projected.

Multimedia Games Inc., through its wholly owned subsidiary MegaBingo Inc., has exclusive contracts with over 50 Indian nations to provide linked games that are integrated among multiple halls. Multimedia Games Inc. is the nation's leading provider of linked, high-stakes bingo games, electronic based interactive bingo games, and associated data processing services and products to the Indian gaming industry.

    CONTACT:  Gordon Graves, 800/726-2464