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THURSDAY, JULY 25, 2002

Wall Street benefited from a surge in stock prices on Wednesday but the rally largely bypassed a casino company with close ties to the $10 billion Indian gaming industry.

Shares in Multimedia Games Inc. (NASDAQ: MGAM) of Texas rose by 0.29, or 1.55 percent yesterday. Closing price was 19.05, a nearly 50 percent drop from its 52-week high of 37.05.

Trading in MGAM stock was moderate on the floor yesterday, when the company announced third quarter earnings. Diluted earning per share (EPS) were 0.47, which was pitched as 194 percent increase from the same period in 2001.

"This quarter we did a lot better, I think," said chairman and chief executive Gordon T. Graves during a conference call with investors.

Executives said they expected the fiscal year 2002 EPS would be on the "upper end" of 1.60 to 1.70. Earnings guidance was recently revised in response to a financial crisis brought on by federal Indian regulators who said a flagship Multimedia product was illegal in Oklahoma, the company's key tribal market.

"Quarter performance is particularly impressive in light of lost revenue . . . from the way the National Indian Gaming Commission challenged the legality of our most successful new generation bingo game, Megananza," said Graves.

Multimedia has sued to reclassify Megananza, which the NIGC considers a Class III game that cannot be operated without a state-tribal compact. The company won a preliminary injunction which prevents regulators from taking action while the lawsuit proceeds.

But company executives were extremely reluctant to talk about the litigation yesterday. President and chief operating officer Clifton E. Lind acknowledged that the case was "unlikely" to be resolved quickly.

Executives also shied from naming the tribes affected by the dispute, citing confidentiality protections. The Chickasaw, Choctaw and Cherokee nations have asked permission to intervene in the suit while several other Oklahoma tribes carry Multimedia products. Some have replaced the offending machine with a new one called Reel Time Bingo.

Lind, however, said changes in NIGC policy would benefit the company and Indian Country. He cited regulations that relax the definition of casino games and a recent decision to scrap classification procedures that were opposed by tribes.

"We believe the new NIGC rules," said Lind, "will bring additional clarity to the Native American game market. . . NIGC's decision to rescind [the classification procedures] will further support tribal sovereignty and tribal authority to self-regulate."

Company executives they were confident in the long run but said the case was "inherently unpredictable." Multimedia tried to force settlement talks in order to take advantage of NIGC members who were split on the issue of Class II games.

But former commissioner Liz Homer, a Clinton appointee, departed her post before the company could get to the table. The talks have since been delayed.

The company also faces a patent infringement suit by the Oneida Nation of New York. Lind said the dispute could take up to two years to resolve.

Discussion on Multimedia:
Yahoo! Finance Message Board

Relevant Links:
Multimedia Games - http://www.multimediagames.com
National Indian Gaming Commission - http://www.nigc.gov

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