896400--12/14/2006--MULTIMEDIA_GAMES

related topics

{customer, product, revenue}

{regulation, change, law}

{capital, credit, financial}

{personnel, key, retain}

{product, market, service}

{condition, economic, financial}

{cost, contract, operation}

{property, intellectual, protect}

{acquisition, growth, future}

{regulation, government, change}

We believe diversification from Native American gaming activities is critical to our growth strategy. Our expansion into non-Native-American gaming activities will present new challenges and risks that could adversely affect our business or results of operations. Our new markets are also subject to extensive legal and regulatory uncertainties. We face legal and regulatory uncertainties that threaten our ability to conduct our business and to effectively compete in our Native American gaming markets, that increase our cost of doing business and that divert substantial management time away from our operations. We currently face risks related to regulation of our magnetic stripe gaming card system. Our future performance will depend on our ability to develop and introduce new gaming systems and to enhance existing games that are widely accepted and played. We are dependent upon a few customers who are based in Oklahoma. As states enter into compacts with our existing Native American customers to allow Class III gaming, our results of operations could be materially harmed. We are seeking to expand our business by lending money to new and existing customers to develop or expand gaming facilities, primarily in the state of Oklahoma. We may not realize a satisfactory return, if any, on our investment, and we could lose some or all of our investment. We compete for customers and end users with other vendors of gaming systems and player terminals and with other forms of entertainment. Our business requires us to obtain and maintain various licenses, permits and approvals from state governments and other entities that regulate our business. We may not be successful in protecting our intellectual property rights, or avoiding claims that we are infringing upon the intellectual property rights of others. We rely on software licensed from third parties, and technology provided by third-party vendors, the loss of which could increase our costs and delay deployment of our gaming systems and player terminals. We also rely on technology provided by third-party vendors which, if disrupted, could suspend play on some of our player terminals. We do not rely upon the term of our customer contracts to retain the business of our customers. Changes in regulation or regulatory interpretations could require us to modify the terms of our contracts with customers. If our key personnel leave us, our business could be materially adversely affected. Enforcement of remedies or contracts against Native American tribes could be difficult. Governing and Native American Law. We may incur prize payouts in excess of game revenues. Our business prospects and future success rely heavily upon the integrity of our employees and executives and the security of our gaming systems. Any disruption in our network or telecommunications services, or adverse weather conditions in the areas in which we operate could affect our ability to operate our games, which would result in reduced revenues and customer down time. Worsening economic conditions may adversely affect our business.

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896400--12/14/2006--MULTIMEDIA_GAMES_INC