MULTIMEDIA GAMES INC
S-3, 1997-06-03
AMUSEMENT & RECREATION SERVICES
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<PAGE>   1
f
         As filed with the Securities and Exchange Commission on June    , 1997
                                                           Registration No. 333-
================================================================================


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             -------------------

                                    FORM S-3
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

                             MULTIMEDIA GAMES, INC.
             (Exact name of registrant as specified in its charter)

                             -------------------


          Texas                   7335 South Lewis Avenue,       74-2611034
(State or other jurisdiction of         Suite 204            (I.R.S. Employer
incorporation or organization)     Tulsa, Oklahoma  74136    Identification No.)
                                       (918) 494-0576

                        (Address, including zip code,
                            and telephone number,
                                  including
                         area code, of registrant's
                        principal executive offices)

                             -------------------

                      Frederick E. Roll, Vice President
                           Multimedia Games, Inc.
                     7335 South Lewis Avenue, Suite 204
                           Tulsa, Oklahoma  74136
                                 (918) 494-0576
           (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

                             -------------------

                                   Copies to:
                                Larry W. Sandel
                 Hall, Estill, Hardwick, Gable, Golden & Nelson
                       320 South Boston Avenue, Suite 400
                             Tulsa, Oklahoma  74103
                                 (918) 594-0400  

                             -------------------

Approximate date of commencement of proposed sale to the public: From time to
         time  after this Registration Statement becomes effective.
<PAGE>   2
       If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, check the following box:
[ ]

       If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [x]

       If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]

       If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]

       If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]

                        CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================
                                                                     Proposed Maximum
  Title of Each Class      Amount to be        Proposed Maximum     Aggregate Offering         Amount of
  of Securities to be       Registered*       Offering Price Per           Price*          Registration Fee*
      Registered                                     Unit*
- ---------------------------------------------------------------------------------------------------------------
 <S>                          <C>                      <C>                   <C>                   <C>
 Common Stock,                135,114                  $11.875               $1,604,478.70         $486.20
 $.01 par value
===============================================================================================================
</TABLE>

* Estimated pursuant to rule 457(c) solely for purposes of calculating the
amount of the registration fee, based upon the average of     the bid and asked
prices of the Registrant's Common Stock on May 27, 1997.

       The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.





                                      -ii-
<PAGE>   3
                                   PROSPECTUS

                             MULTIMEDIA GAMES, INC.

                                 135,114 SHARES
                          COMMON STOCK, $.01 PAR VALUE


       This Prospectus relates to 135,114 shares (the "Shares") of Common
Stock, par value $.01 per share (the "Common Stock"), of Multimedia Games, Inc.
(the "Company") which may be offered and sold from time to time by the Selling
Stockholders named herein (the "Selling Stockholders").  The Shares may be
offered and sold from time to time by the Selling Stockholders, or by pledgees,
donees, transferees or other successors in interest to the Selling
Stockholders, directly or through broker-dealers or underwriters who may act
solely as agents, or who may acquire the Shares as principals.  The
distribution of the Shares may be effected in one or more transactions that may
take place through the Nasdaq Small Cap Market or through privately negotiated
transactions, or through underwritten public offerings, or through a
combination of any such methods of sale, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices.  Usual and customary or specially negotiated brokerage fees
or commissions may be paid by the Selling Stockholders in connection with such
sales.  The Selling Stockholders and any agents, broker-dealers or underwriters
that participate in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), and any commission received by them and any profit on
the resale of the Shares purchased by them may be deemed to be underwriting
discounts or commissions under the Securities Act.  See "Plan of Distribution".

       The Common Stock is traded on the Nasdaq Small Cap Market under the
symbol "MGAM".  On May 27, 1997, the last reported sale price of the Common
Stock was $11.75 per share.

       THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK.  SEE "RISK FACTORS" ON
PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS.


THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.


       The Company will not receive any of the proceeds from the sale of Shares
by the Selling Stockholders.  The Company will bear all costs relating to the
registration of the Shares (including filing fees under the Securities Act)
which are estimated to be approximately $15,000.00.


                 The date of this Prospectus is June  __, 1997.
<PAGE>   4
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDERS.  THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE SHARES TO WHICH IT
RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL.  THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

                             AVAILABLE INFORMATION

       The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files proxy statements, reports and other information with the
Securities and Exchange Commission (the "Commission").  Such proxy statements,
reports and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
in Chicago, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511,
and in New York, Seven World Trade Center, 13th Floor, New York, New York
10048.  Copies of such material can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates.  In addition, the Commission maintains a Web site that
contains proxy statements, reports and other information filed electronically
by the Company with the Commission which can be accessed over the Internet at
http://www.sec.gov.  The Common Stock is quoted on the Nasdaq Small Cap Market.
Reports and information concerning the Company may be inspected at the National
Association of Securities Dealers, Inc., at 1735 K Street, N.W., Washington,
D.C. 20006.

       This Prospectus constitutes a part of a Registration Statement on Form
S-3 (the "Registration Statement") filed on June 3, 1997 by the Company with
the Commission under the Securities Act. This Prospectus omits certain of the
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement and to the exhibits relating thereto for
further information with respect to the Company and the Shares offered hereby. 
Statements contained herein concerning the provisions of any document are not
necessarily complete and, in each instance, reference is made to a copy of such
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission. Each such statement is qualified in its entirety by such
reference.

       The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by an independent accounting
firm.

                      DOCUMENTS INCORPORATED BY REFERENCE

       The following documents previously filed with the Commission by the
Company (Commission File No. 0-28318) for purposes of the information reporting
requirements of the Exchange Act, are incorporated herein by reference:

              1.     the Company's Annual Report on Form 10-KSB for the year
ended September 30, 1996;

              2.     the Company's Quarterly Reports on Form 10-QSB for the
quarters ended December 31, 1996 and March 31, 1997 (two reports), including
Form 10-QSB/A for the quarter ended December 31, 1996;

              3.     the Company's definitive Proxy Materials for the Annual
Meeting of Shareholders held on March 29, 1997 as filed with the Commission on
March 6, 1997; and 



                                      -2-
<PAGE>   5
              4.     the description of the Company's Common Stock contained in
the Company's Registration Statement on Form 8-A dated April 22, 1996 including
any amendments or reports filed for the purpose of updating such description.

       All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Shares shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents.  Any statement contained in a document
incorporated or deemed to be incorporated herein by reference will be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated herein by reference modifies or
supersedes such statement.  Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.

       The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, upon
written or oral request of such person, a copy of any and all of the
information incorporated herein by reference, other than the exhibits to such
information (unless such exhibits are specifically incorporated by reference
into such information). Requests should be directed to Multimedia Games, Inc.
at its principal executive offices, 7335 South Lewis Avenue, Suite 204, Tulsa,
Oklahoma 74136 Attention:  Corporate Secretary (918) 494-0576.





                                      -3-
<PAGE>   6
                                  THE COMPANY

       The Company provides satellite linked, high stakes bingo games and
interactive high speed bingo games played on interconnected electronic player
stations to participating bingo halls owned primarily by American Indian tribes
located throughout the United States.  The Company also provides proxy play
services to bingo players located off Indian lands through its 49% interest in
American Gaming Network, L.L.C.

       Prior to August 1995, the Company's principal business was to  conduct
high stakes bingo games under the names MegaBingo, MegaCash and MegaBingo Lite.
MegaBingo and MegaCash games are played simultaneously at multiple bingo halls
using a closed-circuit television satellite link, thereby allowing a greater
number of players to compete against one another for prizes generally larger
than could be offered by a bingo hall acting alone.  The participating bingo
halls are owned and operated on behalf of American Indian tribes and are
located in the States of Arizona, California, Kansas, Minnesota, New Mexico,
Oklahoma and South Dakota, among others.  MegaBingo Lite provides smaller
prizes to similarly linked Indian bingo halls and is presently delivered to
bingo halls located in the State of Oklahoma.

       In August 1995, the Company introduced MegaMania, a high-speed bingo
game developed by the Company that allows customers to purchase bingo cards and
to play bingo on an interactive electronic player station that requires rapid
decisions and presents game results in a fast-action color video format
featuring graphics and animation accompanied by sound.  The stations are
interconnected with other stations at participating bingo halls through the
Company's computer network, thus allowing players to compete against one
another to win a common pooled prize.

       The Company's revenues emanate from the proceeds of bingo card sales,
with profits derived from revenues remaining after payment of prizes, bingo
hall commissions and operating expenses.  The Company believes that its
MegaBingo, MegaCash and MegaBingo Lite games are the only regularly scheduled
multi-hall, high stakes bingo games in the United States.

       American Gaming Network, L.L.C.,  accepts orders and purchases bingo
cards at  Indian bingo halls and plays those cards at the bingo halls on behalf
of proxy play participants who are located off the Indian lands.  To date,
revenues from proxy play bingo have been insignificant.

       MegaBingo(R), MegaCash(R), MegaBingo Lite(TM) and MegaMania(TM) are
registered trademarks and tradenames of the Company, and all references thereto
in this Prospectus shall be deemed to include the applicable tradename or
trademark designation.

       Multimedia Games, Inc. was incorporated under the laws of the State of
Texas on August 30, 1991. Unless the context otherwise requires, the term 
"Company" includes Multimedia Games, Inc., and its subsidiaries - TV Games,
Inc., MegaBingo, Inc., and Multimedia Creative Services, Inc., as well as the
activities conducted by the Company through its 49% interest in American Gaming
Network, L.L.C. ("AGN"). The Company's executive offices are located at 7335
South Lewis Avenue, Suite 204, Tulsa, Oklahoma 74136, and its telephone number
is (918) 494-0576.





                                      -4-
<PAGE>   7
                                  RISK FACTORS

       PROSPECTIVE PURCHASERS OF THE SHARES SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS BEFORE MAKING AN INVESTMENT IN THE SHARES.

GOVERNMENT REGULATION; POSSIBLE ILLEGALITY OF COMPANY ACTIVITIES

       In doing business with Indian tribes and participating in tribal gaming
activities, the Company is subject to various Federal regulations and laws
regarding the manner in which business can be transacted.  The operation of
gaming on Indian lands is subject to the  Indian Gaming Regulatory Act of 1988
(the "Gaming Act"),  which also established the National Indian Gaming
Commission ("NIGC") with the authority to promulgate rules and regulations to
enforce certain aspects of the Gaming Act and to protect tribal interests
involved in gaming activities.  The NIGC has previously given favorable rulings
regarding the Company's Integrated Gaming Service Agreements with the tribes
and has determined them to be service contracts rather than management
contracts, thereby allowing the Company to obtain more favorable terms than
would have been permitted had the agreements been determined to be management
contracts.  See "Risk Factors - Dependance Upon Tribal Contracts."

       On July 10, 1996, the NIGC issued its opinion that the Company's
MegaMania game is a Class II rather than a Class III gaming activity.  This
opinion was of significance because, generally speaking, Class II gaming may be
conducted on Indian lands if the state in which the Indian land  is located
permits such gaming for any purpose by any person.  Class III gaming, on the
other hand, which includes gaming such as video casino games, slot machines,
most table games (e.g., blackjack and craps) and keno, may only be conducted
pursuant to a compact reached between the Indian tribe and the state in which
the tribe is located.  MegaMania was designed and is operated by the Company as
a Class II game within the definition of bingo set forth in the Gaming Act, and
the Company has relied upon the opinion of the NIGC in operating its MegaMania
game.

        On October 16, 1996,  the Office of the U.S. Attorney in Tulsa,
Oklahoma (the "U.S. Attorney"), orally informed the Company that the U.S.
Attorney was conducting an independent investigation to determine whether, in
the opinion of the U.S. Attorney, the Company's MegaMania bingo game
constituted Class III or Class II gaming as defined in the Gaming Act, and was
therefore in violation of the law or not.  The Company believes that its
MegaMania game meets all of the requirements of a Class II game of bingo and
that the NIGC has the regulatory authority to make final and binding
determinations on the classification of games.  However, in order to resolve
any differences between the NIGC and the U.S. Attorney, on April 8, 1997, the
Company entered into a Memorandum of Understanding with the NIGC to implement
certain changes to its MegaMania game.  These changes generally require the
bingo card holder to take certain actions in order to daub the card and to
indicate a bingo win, and also require the drawing of bingo numbers using a
physical ball blower or as a result of some other human activity rather than
the use of electronically randomly generated numbers.

       The Memorandum of Understanding allowed the Company until July 15, 1997,
to make the agreed changes but indicated the willingness of the NIGC to grant
appropriate extensions if the Company was unable to institute the changes for
technical reasons or for reasons beyond the control of the Company.  In
addition to the Memorandum of Understanding, the NIGC issued a letter to the
Company dated April 9, 1997, concluding that the modified MegaMania game
conformed to the definition of bingo in the Gaming Act and thus was a Class II
game.

       On May 12, 1997, the Company received a letter from the Acting Chair of
the NIGC declaring that the NIGC would not necessarily be bound by the
Memorandum of Understanding, that the NIGC would not in the





                                      -5-
<PAGE>   8
future pre-approve proposed changes to the Company's games, and that the NIGC
would make its determination on the Class II status of the modified MegaMania
game only after the Company had completed its changes and submitted the
modified version of the game to the NIGC.  The May 12, 1997 letter still gave
the Company until July 15, 1997, to make the agreed changes but also stated
that the Company was expected to cease operation of the current MegaMania game
by July 15, 1997, unless the NIGC had specifically approved the modified
version of the game by that time.

       The Company intends to comply with the terms of the Memorandum of
Understanding and to submit the modified version of the MegaMania game to the
NIGC before July 15, 1997.  No assurances can be given that the NIGC will honor
the determination made in its April 9, 1997, letter and accept the modified
version of the game as a Class II game.  If the Company is not able to
implement the agreed changes to MegaMania by July 15, 1997, or if completed on
time the NIGC does not honor the determination made in its April 9, 1997
letter, the Company intends to vigorously defend its position that MegaMania is
a Class II game; however, if the Company is not successful in these efforts, it
may be necessary to discontinue the operation of MegaMania.

       In entering into the Memorandum of Understanding and agreeing to a
timetable for the implementation of changes to its current MegaMania game, the
Company believed that any remaining interpretive disagreements with the U.S.
Attorney over the Class II status of MegaMania would be resolved.  However, the
Company has not been advised of this resolution by the U.S. Attorney.  On the
other hand, the Company has also never received written confirmation from the
U.S.  Attorney that the Company was, in fact, the subject of an investigation.

       The inquiry and on-site inspection that, at the Company's invitation,
was conducted by the U.S. Attorney several months ago has not appeared to have
developed into any other action on the part of the U.S. Attorney, at least of
which the Company has notice.  However, on May 6, 1997, in response to an
inquiry by the Absentee Shawnee tribe of Oklahoma, and with no knowledge of the
NIGC opinions issued to the Company or of the Memorandum of Understanding
between the Company and the NIGC, the First Assistant U.S. Attorney for the
Office of the U.S. Attorney in the Western District of Oklahoma issued a letter
to the tribe stating that the Company's current MegaMania bingo game was
considered by that Office to be an illegal Class III gaming activity.  As a
result of this letter, the Absentee Shawnee tribe has suspended the play of
MegaMania on its reservation.  The First Assistant U.S. Attorney has now been
provided with the NIGC opinions and the Memorandum of Understanding, but there
is no assurance that the First Assistant U.S. Attorney will reverse his
previous position. Revenues from the play of Megamania at the Absentee Shawnee
Tribe accounted for approximately 3% of the Company's total Megamania revenues
for the quarter ended March 31, 1997.

       Over time, the Company does not believe that the planned changes to its
MegaMania game will materially and adversely affect consumer interest and
acceptance of MegaMania, although no assurances in that regard can be given.
There is evidence to suggest that existing players of the current game will
reduce the level of their play until the requirements of the new version become
familiar.

       There can be no assurance that the NIGC, either on its own initiative or
as the result of pressure from or cooperation with other agencies such as the
Department of Justice, will adhere to the terms of the Memorandum of
Understanding.  There also can be no assurances that the U.S. Attorney, the
First Assistant U.S. Attorney or the Department of Justice will accept any of
the opinions or actions of the NIGC regarding the Company's activities, and not
seek to challenge the legality of the Company's activities.

       If adverse determinations or actions are taken by the NIGC, the U.S.
Attorney, the First Assistant U.S. Attorney or the Department of Justice, the
Company intends to vigorously defend its position that MegaMania is a Class II
game.  No assurances can be given that the Company will be successful on the
merits.  If





                                      -6-
<PAGE>   9
MegaMania is ultimately determined to be Class III gaming, the loss of the
MegaMania business would have a material adverse effect upon the Company's
financial condition and results of operation.

       There can be no assurance that the NIGC, either on its own initiative or
as the result of pressure from or cooperation with other agencies such as the
Department of Justice, will not enact additional regulations or reinterpret
existing regulations in a manner that would have a material and adverse effect
upon the Company, including requiring the Company to restructure its existing
arrangements with Indian tribes or requiring changes in the way the Company's
games are conducted so that such games are classified as Class II. Any such
restructuring of the Company's games has the additional risk that such games
will no longer appeal to consumers or be acceptable to the Tribes. There can
also be no assurance that the Gaming Act or other Federal laws will not be
amended in response to pressure from state and local sources in such a manner
so as to limit the authority of tribes to self-regulate Class II gaming or to
change the definition of Class II gaming.

DEVELOPING OPERATING ENVIRONMENT

       The environment in which the Company conducts its business is relatively
new and presents significant operating challenges and uncertainties.  The
Gaming Act was adopted in 1988 and the development of the Federal, State and
tribal infrastructure to regulate the proliferation of Indian gaming activities
has occurred only since that time.  Fundamental issues concerning the scope and
intent of the Gaming Act remain unresolved, as do issues relating to the
jurisdiction and authority of different Federal, State, local and tribal
governments and agencies.  The NIGC was not fully operational until February
1993, and prior to that the Bureau of Indian Affairs was responsible for
certain functions now performed by the NIGC.  As a result, the adoption and
implementation of regulations in furtherance of the Gaming Act have moved
cautiously and there is a comparative lack of case law or interpretation of
such regulations or of the Gaming Act.  Moreover, the Company is on the leading
edge of the rapid advancement of technological innovation in gaming, and issues
relating, for example, to the use of technological aids for the playing of
games and gaming on the Internet are either novel or lack historical precedent
sufficient to enable the Company to predict with certainty the outcome of
planned actions or the response of regulatory authorities.

TRIBAL REGULATION

       Each Federally recognized Indian tribe has the standing of a sovereign
nation.  As such, without approval from the tribes, the tribes cannot be sued
or otherwise held accountable under any but tribal laws.  Each tribe which is a
party to the Company's integrated service agreements has waived its sovereign
immunity to the Company as it relates to equipment used in the conduct of games
or to the revenues of the gaming facility.  Although the Company has never
experienced any difficulties in this regard, there can be no assurance that a
particular tribe will not invoke its sovereign immunities with respect to
obligations and/or contracts with the Company which could have the effect of
rendering the Company's contracts unenforceable.

       In addition, gaming on Indian lands is generally closely administered by
tribal officials.  Most tribes have established a regulatory framework to
administer the conduct of gaming on Indian lands.  These regulations generally
include licensing and approval procedures and reporting and audit requirements.
Not all constituencies within each Indian tribe view gaming favorably, and
changes in officials have in the past, and could in the future, result in a
more difficult environment in which to conduct the Company's business at a
particular Tribe.  Moreover, perceptions and attitudes concerning the integrity
and morality of gaming are highly sensitive matters with most Tribes and
seemingly minor or irrelevant matters, including rumor and innuendo about
practices or personnel employed by the Company, can and have been used by
competing tribal constituencies as a basis for changing or attempting to change
existing relationships between tribes and their





                                      -7-
<PAGE>   10
vendors.  The Company expects this environment to continue in the future but
believes that its sensitivity to these matters, and the personnel and policies
it has in place, will enable it to effectively manage the issues that will
inevitably arise.

DEPENDANCE UPON TRIBAL CONTRACTS

       Virtually all of the Company's revenues are derived from contracts with
Indian tribes.  The Company has written agreements with approximately 45 Indian
tribes that provide the Company with the exclusive right to conduct bingo
operations in their respective Indian lands, of which approximately 15
contracts are on a month-to-month basis.  No assurances can be given that any
of such contracts will be renewed upon the expiration of their term or that, if
renewed, the terms and conditions thereof will be favorable to the Company, nor
can any assurances be given that a tribe or tribes will not cancel any of such
agreements prior to the expiration of their stated term.  A failure to renew
such contracts upon terms favorable to the Company or the cancellation of a
significant number of such contracts would have a material adverse effect upon
the Company's business and results of operations.

CUSTOMER DEMAND; COMPETITION

       The Company's product development and marketing activities are based
upon the Company's assessment of customer demand for gaming services in
establishments in which the Company provides services. Significant changes in
customer demand or preference for gaming products in a given geography,
including competing gaming and other leisure activities, could have an adverse
impact on the Company's business and results of operations.  Significant
competition to the Company's MegaMania game should be expected based upon the
initial popularity of that game.

FUTURE FINANCING

       The Company's future business plans are dependent upon its ability to
find financing on a timely basis with which to fund the Company's activities,
including the placement of additional MegaMania player stations and related
equipment and the development of new products.  Any inability to obtain
additional financing when needed could have a material adverse effect on the
Company's ability to achieve its long-term objectives.  Moreover, any
additional financing may involve substantial dilution to the Company's then
existing shareholders.

TECHNOLOGICAL INNOVATION

       The Company believes that an important factor to its future success will
include its continued development of new products that appeal to the tastes of
consumers and the introduction of such products in a timely manner.  Successful
product development and introduction depends upon a number of factors,
including the identification of products expected to appeal to consumer
preferences and the timely completion of design and testing.  Importantly, any
new or modified gaming products will be designed and operated to meet the
requirements of Class II gaming.  The Company expects to continue to solicit
the approval of the NIGC that any new or modified gaming products meet the
requirements of Class II gaming so the interpretations and policies of the NIGC
with respect to the requirements for Class II gaming will also affect the
timing and nature of any new products; however, the Company does not always
expect to be able to obtain such approval prior to the introduction of new
products.  As a result of these and other factors, there can be no assurance
that the Company will continue to develop and introduce new products in a
timely manner that will achieve commercial success.





                                      -8-
<PAGE>   11
ACCUMULATED DEFICIT; UNCERTAIN PROFITABILITY

       Although the Company achieved net income of $40,000 in the fiscal year
ended September 30, 1996 (as compared to $505,000 in the prior fiscal year),
and net income of $37,000 for the six months ended March 31, 1997, the Company
has incurred an accumulated deficit of $2,574,000 since its inception in August
1991 through September 30, 1996.  No assurances can be given that the Company
will be able to maintain profitable operations in the future.  In addition,
such profits, if any, are not expected to be commensurate or proportional with
any increases in revenues as the Company expects to continue to experience
significant general and administrative expenses associated with addressing the
regulatory and other operating uncertainties facing the Company in the
developing operating environment in which the Company conducts its business.

PRIZE FULFILLMENT

       The prizes awarded under the Company's bingo games are based upon
attaining an assumed level of gross game receipts and statistical assumptions
as to the frequency of winners.  To date, the Company has not experienced a
"game deficit" where prize allocations have exceeded game revenues; however, no
assurances can be given that the Company will not experience abnormally high
rates of jackpot prize wins in the future.

SIGNIFICANT OUTSTANDING OPTIONS AND WARRANTS

       As of March 31, 1997, there were outstanding immediately exercisable
stock options to purchase an aggregate of 145,000 shares of Common Stock at
exercise prices ranging from $1.50 to $4.00 per share, immediately exercisable
warrants to purchase an aggregate of 380,536 shares of Common Stock at exercise
prices ranging from $2.00 to $6.60 per share, and shares of the  Company's
Series A Preferred Stock that are immediately convertible into 652,840 shares
of Common Stock.  In addition , there were outstanding additional warrants to
purchase 2,042,143 shares of Common Stock at an exercise price of $8.00 per
share which become exercisable on August 12, 1997,  options to purchase 528,000
shares of Common Stock at exercise prices ranging from $1.50 to $5.50 per
share, that are generally exercisable in equal annual increments over the next
four years commencing in July 1997, and an option to exchange interests in AGN
for up to 412,000 shares of Common Stock at the equivalent of $3.00 per share
that becomes exercisable on August 14, 1997.  To the extent that such options,
warrants and Series A Preferred Stock are exercised or converted, dilution to
the Company's shareholders will occur.  Moreover, the terms upon which the
Company will be able to obtain additional equity capital may be adversely
affected, since the holders of such options, warrants and Series A Preferred
Stock can be expected to exercise or convert them at a time when the Company
would, in all likelihood, be able to obtain any needed capital on terms more
favorable to the Company than the exercise terms provided in such securities.

CONTINUED NASDAQ QUOTATION

       The Company's Common Stock is quoted on the Nasdaq Small Cap Market;
however, there can be no assurance that the Company will meet the criteria for
continued quotation on Nasdaq. The minimum continued quotation criteria
include, among other things, that the Company have total assets of at least
$2,000,000 and capital and surplus of at least $1,000,000; that the minimum 
bid price for the Common Stock be $1.00 per share; and that the minimum market
value of the "public float" (i.e. the shares held by non-insiders) of the Common
Stock be at least $1,000,000. If the Company's Common Stock were excluded from
Nasdaq, it would adversely affect the price of the Common Stock and the ability
of holders to sell shares of Common Stock.

       In the event that the Company is unable to satisfy Nasdaq's continued
quotation criteria, trading, if any, in the Common Stock would thereafter be
conducted in the "pink sheets" or the NASD's Electronic Bulletin Board. In the
absence of the Common Stock being quoted on Nasdaq, or the Company having
$2,000,000 in net tangible assets, trading in the Common Stock would be covered
by Rule 15g-9 promulgated under the Exchange Act for non-Nasdaq and
non-exchange listed securities. Under such rule, broker dealers who recommend
such securities to persons other than established customers and accredited
investors must make a special written suitability determination for the
purchaser and receive the purchaser's written agreement to a transaction prior
to sale. Securities are exempt from this rule if the market price is at least
$5.00 per share.

       The Commission has adopted regulations that generally define a penny 
stock to be any equity security that has a market price of less than $5.00 per
share, subject to certain exceptions. Such exceptions include an equity
security listed on Nasdaq and an equity security issued by an issuer that has
(i) net tangible assets of at least $2,000,000, if such issuer has been in
continuous operation for three (3) years, (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than three
(3) years, or (iii) average revenue of at least $6,000,000 for the preceding
three (3) years.  Unless an exception is available, the regulations require the
delivery, prior  to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.

       If the Company's Common Stock was subject to the regulations on penny
stocks, the market liquidity for the Common Stock would be severely and
adversely affected by limiting the ability of broker-dealers to sell the Common
Stock in the public market. There is no assurance that trading in the Company's
securities will not be subject to these or other regulations that would
adversely affect the market for such securities.

ABSENCE OF DIVIDENDS

       The Company has never declared or paid any cash dividends on its Common
Stock.  The Company intends to retain its earnings, if any, to finance the
growth and development of its business and therefore does not anticipate paying
any cash dividends on its Common Stock in the foreseeable future.





                                      -9-
<PAGE>   12
SHARES AVAILABLE FOR FUTURE SALE; SALES BY AFFILIATES

       Of the 4,040,307 shares of Common Stock outstanding at March 31, 1997,
3,024,124 shares are either held by non- affiliates and are freely traded in
the public market or are currently registered  under the Securities Act for
sale to the public by the holders thereof.  The remaining 1,016,183 shares may
be deemed "restricted securities" as that term is defined under the Securities
Act, and in the future may be sold pursuant to a registration under the
Securities Act, in compliance with Rule 144 under the Securities Act, or
pursuant to another exemption therefrom.  Rule 144 provides that, in general, a
person holding restricted securities for a period of one year may, every three
months thereafter, sell in brokerage transactions an amount of shares which
does not exceed the greater of one percent (1%) of the Company's then
outstanding Common Stock or the average weekly trading volume of the Common
Stock during the four calendar weeks prior to such sale.  Rule 144 also
permits, under certain circumstances, the sale of shares without any quantity
limitations by a person who is not an affiliate of the Company and was not an
affiliate at any time during the 90 day period prior to sale and who has
satisfied a two year holding period.  Virtually all of such 1,016,183
restricted shares have been held for more than one year and are, therefore,
eligible for immediate sale under Rule 144, subject to the volume limitations
described above.

        In addition, 652,840 shares of Common Stock are issuable upon
conversion of the Series A Preferred Stock and are eligible for resale under
Rule 144 without regard to such volume limitations, except as to 416,755 of
such shares that are held by affiliates of the Company.  The Company has also
granted registration rights to the holders of 412,000 shares of Common Stock
issuable upon the exercise of a put and call agreement with the majority owners
of AGN (the "Put and Call Agreement").  The Company has also currently
registered 313,250 shares under the Securities Act for sale to the public that
are issuable upon the exercise of outstanding stock options.

AUTHORIZATION OF PREFERRED STOCK

       The Company's Certificate of Incorporation authorizes the issuance of
"blank check" preferred stock with such designation, rights and preferences as
may be determined from time to time by the Board of Directors.  The Company has
designated a class of shares of preferred stock as Series A Cumulative
Convertible Preferred Stock  (the "Series A Preferred Stock"). As of March 31,
1997, there were 134,318 shares of Series A Preferred Stock outstanding, of
which 80,175 shares are owned by Gordon T. Graves, the Chairman and Chief
Executive Officer of the Company, and his affiliated company, and an aggregate
of 3,176 shares are owned by four other officers or directors of the Company.
The Series A Preferred Stock has a liquidation preference of $10 per share plus
accrued and unpaid dividends and is currently convertible, at the option of the
holder, at a rate of five shares of Common Stock for each one share of Series A
Preferred Stock.  The holders of the Series A Preferred Stock have the right to
elect a majority of the Board of Directors in the event the Company is in
arrears in the payment of two consecutive quarterly dividend payments.
Although the Company has never been in arrears in the payment of two
consecutive quarterly dividends, it has historically remained in arrears as to
one quarterly dividend payment.  The Board of Directors is empowered, without
shareholder approval, to make additional issuances of preferred stock with
dividend, liquidation, conversion, voting or other rights which could adversely
affect the voting power or other rights of the holders of the Company's Common
Stock. In the event of additional issuances, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company.  Although the Company has no
present intention to issue any additional shares of its preferred stock, there
can be no assurance that the Company will not do so in the future.





                                      -10-
<PAGE>   13
                           FORWARD LOOKING STATEMENTS

       This Prospectus 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 predicated by the words
"believes," "anticipates," "expects" or similar expressions.  Such statements
are subject to a number of uncertainties that could cause the actual results to
differ materially from those projected.  Such factors include, but are not
limited to, those described under "Risk Factors".  Given these uncertainties,
prospective purchasers are cautioned not to place undue reliance upon such
statements.

                                USE OF PROCEEDS

       The Company will not receive any of the proceeds from the sale of any of
the Shares by the Selling Stockholders.





                                      -11-
<PAGE>   14
                              SELLING STOCKHOLDERS

       The following table sets forth for each Selling Stockholder, as of March
31, 1997, the number of shares of Common Stock beneficially owned by such
Selling Stockholder prior to this offering, the maximum number of Shares to be
offered and sold from time to time by such Selling Stockholder and the number
of shares of Common Stock to be beneficially owned by such Selling Stockholder
after this offering.  Except as otherwise indicated, the number of shares to be
offered and sold constitute all of the shares of Common Stock beneficially
owned by the Selling Stockholder.

<TABLE>
<CAPTION>
                                                                                 Shares                           Shares
                                                                           Beneficially         Shares      Beneficially
                                                                            Owned Prior          Being       Owned After
                                                                            to Offering        Offered      Offering (1)
- -----------------------------------------------------------------------------------------------------------------------------
Name                                                                             Number         Number            Number
<S>                                                                             <C>            <C>                <C>
Harold Atkinson                                                                   2,187          2,187                --
Bear Stearns International Limited                                               10,000         10,000                --
Martin L. Dehan                                                                   1,400          1,400                --

Ronald W. Eldred                                                                 10,000          9,000             1,000

Brenda Eades Hammond                                                              5,000          5,000                --

Tom Heinzen                                                                         817            817                --
Lyle Rick Johnson                                                                 9,073          9,073                --
Robert R. Lanier                                                                  1,506            839               667

Thomas J. Larson                                                                  1,050          1,050                --

Henry F. Legas                                                                      530            530                --

Gerald L. Michand                                                                45,000         45,000                --
Thomas J. McIntyre                                                                  160            160                --

Phil Nofi                                                                         1,259          1,259                --

Frank T. Nickell                                                                108,497         45,682            62,815

John H. Parks                                                                     1,360          1,360                --
James Reznick                                                                     1,090          1,090                --

Richard Rosenberg                                                                   667            667                --    
                                                                            -----------    -----------        ----------

                 Total                                                          199,596        135,114            64,482
</TABLE>

- --------------------

(1)      Assumes the sale of all Shares offered hereby.  Does not include
         shares of Common Stock that are subject to rights to purchase that are
         not exercisable within the next 60 days. Based upon 4,040,307 shares
         of Common Stock outstanding on March 31, 1997. All of the Shares were
         issued and became outstanding subsequent to March 31, 1997, pursuant
         to the exercise of warrants at exercise prices ranging from $2.00 to
         $6.00 per share.





                                      -12-
<PAGE>   15
                              PLAN OF DISTRIBUTION

         The Company will not receive any proceeds from the sale of the Shares
by a Selling Stockholder.  Each of the Selling Stockholders may sell his, her
or its Shares directly or through broker-dealers or underwriters who may act
solely as agents, or who may acquire shares as principals.  The Shares may be
sold from time to time by the Selling Stockholders, or by pledgees, donees,
transferees or other successors in interest to the Selling Stockholders.  The
distribution of the Shares may be effected in one or more transactions that may
take place through the Nasdaq Small Cap Market, including block trades or
ordinary broker's transactions, or through privately negotiated transactions,
or through an underwritten public offering, or through a combination of any
such methods of sale, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices.  Usual
and customary or specifically negotiated brokerage fees or commissions may be
paid by the Selling Stockholders in connection with such sales.

         The aggregate proceeds to the Selling Stockholders from the sale of
the Shares will be the purchase price of the Shares sold less the aggregate
agents' commissions and underwriters' discounts, if any, and other expenses of
issuance and distribution not borne by the Company.  The Selling Stockholders
and any dealers or agents that participate in the distribution of the Shares
may be deemed to be "underwriters" within the meaning of the Securities Act,
and any profit on the sale of the Shares by them and any commissions received
by any such dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act.

         The Selling Stockholders may effect transactions by selling the Shares
directly or through broker-dealers acting either as principal or as agent, and
such broker-dealers may receive compensation in the form of usual and customary
or specifically negotiated underwriting discounts, concessions or commissions
from the Selling Stockholders.

         The Company will bear all of the  expenses of registration of the
Common Stock under the Federal and state securities laws, including filing
fees.  Such expenses payable by the Company are currently estimated to be
$15,000.

         The Company has advised the Selling Stockholders that the
anti-manipulative provisions of Regulation M under the Exchange Act may apply
to their sales in the market, has furnished each Selling Stockholder with a
copy of Regulation M and has informed them of the need for delivery of copies
of this Prospectus.  There can be no assurance that any of the Selling
Shareholders will sell any of the shares of Common Stock offered by them
hereunder.


                                    EXPERTS

         The consolidated balance sheet of the Company as of September 30,
1996, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the two years in the period
ended September 30, 1996, incorporated by reference in this Prospectus and in
the Registration Statement of which this Prospectus forms a part, have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.


         With respect to the unaudited interim financial information as of and
for the periods ended December 31, 1996 and March 31, 1997, incorporated by
reference in this Prospectus, the independent accountants have reported that
they have applied limited procedures in accordance with professional standards
for a review of such information. However, their separate report included in
the Company's quarterly reports on Form 10-QSB for the quarters ended December
31, 1996 and March 31, 1997, and incorporated by reference herein, states that
they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports on
such information should be restricted in light of the limited nature of the
review procedures applied. The accountants are not subject to the liability
provisions of Section 11 of the Securities Act of 1933 for their report on the
unaudited interim financial information because that report is not a "report"
or a "part" of the registration statement prepared or certified by the
accountants within the meaning of Sections 7 and 11 of the Act.

                                 LEGAL MATTERS

         The validity of the shares of Common Stock offered hereby has been
passed upon for the Company by Hall, Estill, Hardwick, Gable, Golden & Nelson,
PC, Tulsa, Oklahoma.  Attorneys who are shareholders or employed by Hall,
Estill, Hardwick, Gable, Golden & Nelson, PC who have provided advice with
respect to this offering in the aggregate own less than $50,000 in value of the
Company's securities.





                                      -13-
<PAGE>   16
              DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
                         FOR SECURITIES ACT LIABILITIES

         The Company's By-Laws authorize the Company to indemnify any present
or former director, officer, employee, or agent of the Company, or a person
serving in a similar post in another organization at the request of the
Company, against expenses, judgments, fines, and amounts paid in settlement
incurred by him in connection with any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, to the fullest extent not prohibited by the Texas Business
Corporation Act, public policy or other applicable law.  Article 202 of the
Texas Business Corporation Act authorizes a corporation to indemnify its
directors, officers, employees, or agents in terms sufficiently broad to permit
such indemnification under certain circumstances for liabilities (including
provisions permitting advances for expenses incurred) arising under the Act.

         Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, or persons controlling
the registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.





                                      -14-
<PAGE>   17
                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

         The following are the estimated expenses in connection with the
distribution of the securities being registered:

<TABLE>
<S>                                                                                                 <C>
Securities and Exchange Commission Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . .    486.20
Accounting Fees and Expenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4,000.00
Attorneys' Fees and Expenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5,000.00
Printing Fees and Expenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1,500.00
Blue Sky Fees and Expenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1,000.00
Nasdaq Listing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1,351.14 
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1,662.66 

                        Total   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,000.00
</TABLE>

ITEM 15.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

  See "Disclosure of Commission Position on Indemnification For Securities Act
Liabilities" in the Prospectus.

  The directors and officers of the Company are entitled to indemnification by
the Selling Stockholders against any cause of action, loss, claim, damage, or
liability to the extent it arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in this
Registration Statement and the Prospectus contained herein, as the same shall
be amended or supplemented, made in reliance upon or in conformity with written
information furnished to the Company by such Selling Shareholder.

ITEM 16.  EXHIBITS

  5.1              Opinion of Hall, Estill, Hardwick, Gable, Golden & Nelson

  10.1             July 10, 1996 letter from the NIGC to the Company

  10.2             April 9, 1997 letter from the NIGC to the Company

  10.3             May 12, 1997 letter from the NIGC to the Company

  15.1             Letter regarding unaudited interim financial information

  23.1             Consent of Coopers & Lybrand L.L.P.

  23.2             Consent of Hall, Estill, Hardwick, Gable, Golden & Nelson
                   (included in Exhibit 5.1)

  25.1             Power Of Attorney (contained on page II-4)


ITEM 17.  UNDERTAKINGS

         (a)     The undersigned Registrant hereby undertakes:

                 (1)      To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration Statement to;

                 (i)      include any prospectus required by Section 10(a)(3)
         of the Securities Act of 1933;

                 (ii)     reflect in the prospectus any facts or events arising
         after the effective date of the registration statement (or the most
         recent post-effective amendment thereof) which, individually or in the
         aggregate, represent a fundamental change in the information set forth
         in the registration statement.  Notwithstanding the





                                      II-1
<PAGE>   18
         foregoing, any increase or decrease in volume of securities offered
         (if the total dollar value of securities offered would not exceed that
         which was registered) and any deviation from the low or high end of
         the estimated maximum offering range may be reflected in the form of
         prospectus filed with the Commission pursuant to Rule 424(b) if, in
         the aggregate, the changes in volume and price represent no more than
         a 20 percent change in the maximum aggregate offering price set forth
         in the "Calculation of Registration Fee" table in the effective
         registration statement; and

                 (iii) include any additional or changed material information
         with respect to the plan of distribution not previously disclosed in
         the registration statement or any material change to such information
         in the registration statement.

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) or the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.

                 (2)      That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

                 (3)      To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.

         (b)     The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

         (c)     Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.  In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.





                                      II-2
<PAGE>   19
                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement, or amendment thereto, to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tulsa, State of Oklahoma
on the 30th day of May, 1997.

                                      MULTIMEDIA GAMES, INC.



                                      By: /s/ GORDON T. GRAVES
                                         -------------------------------------
                                             Name: Gordon T. Graves
                                             Title: Chairman of the Board






                                      II-3
<PAGE>   20
                               POWER OF ATTORNEY

      Know all men by these presents, that each person whose signature appears
below constitutes and appoints Frederick E. Roll and Gordon T. Graves, and each
of them singly, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities (including his or her capacity
as a director or officer of Multimedia Games, Inc.) to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.

      Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.



<TABLE>
<S>                                   <C>                                    <C>
/s/ GORDON T. GRAVES                  Chairman of the Board                  Dated:  May 30, 1997
- -------------------------             Chief Executive     
Gordon T. Graves                      Officer and Director
                                                          


/s/ LARRY D. MONTGOMERY               President and Director                 Dated:  May 30, 1997
- -------------------------
Larry D. Montgomery



/s/ FREDERICK E. ROLL                 Vice President and                     Dated:  May 30, 1997
- -------------------------             Chief Financial Officer
Frederick E. Roll                                            



/s/ DANIEL J. SARNOFF                 Vice President and Director            Dated:  May 30, 1997
- -------------------------
Daniel J. Sarnoff



/s/ GREGORY STERN                     Director                               Dated:  May 30, 1997
- -------------------------             
Gregory Stern
</TABLE>




                                      II-4
<PAGE>   21
                              INDEX TO EXHIBITS

 EXHIBIT
 NUMBER      DESCRIPTION
 -------     -----------
   5.1       Opinion of Hall, Estill, Hardwick, Gable, Golden & Nelson
   
  10.1       July 10, 1996 letter from the NIGC to the Company

  10.2       April 9, 1997 letter from the NIGC to the Company

  10.3       May 12, 1997 letter from the NIGC to the Company

  15.1       Letter regarding unaudited interim financial information

  23.1       Consent of Coopers & Lybrand L.L.P.

  23.2       Consent of Hall, Estill, Hardwick, Gable, Golden & Nelson
             (included in Exhibit 5.1)

  25.1       Power of Attorney (contained on page II-4)





                                      II-5

<PAGE>   1
EX-5.1
Opinion of Hall, Estill & Hardwick




                                  May 30, 1997



Multimedia Games, Inc.
7335 South Lewis Avenue
Tulsa, Oklahoma 74136

                 RE:      REGISTRATION STATEMENT ON FORM S-3

Ladies and Gentlemen:

                 We have examined the Registration Statement on Form S-3 to be
filed by you with the Securities and Exchange Commission  in connection with
the registration under the Securities Act of 1933, as amended, of 135,114
shares of your Common Stock (the "Shares") to be offered for sale for the
benefit of certain selling shareholders. The Shares are to be sold from time to
time by the selling shareholders as described in the Registration Statement. As
your counsel in connection with this transaction, we have examined the
proceedings taken and proposed to be taken in connection with the issuance and
sale of the Shares.

                 It is our opinion that the Shares are legally and validly
issued, fully paid, and nonassessable.

                 We consent to the use of this opinion as an exhibit to the
Registration Statement, including the prospectus constituting a part thereof,
and any amendment thereto.

                               Very truly yours,

                               HALL, ESTILL, HARDWICK, GABLE, GOLDEN & 
                               NELSON





                                      II-6

<PAGE>   1
                                                                 EXHIBIT 10.1
                                 July 10, 1996



Mr. Larry Montgomery
President & C.O.O.
Multimedia Games, Inc.
7335 South Lewis, Suite 204
Tulsa, OK  74136

Dear Mr. Montgomery:

Thank you for your letter of February 2, 1996, on behalf of Multimedia Games,
Inc., requesting an advisory opinion on whether the "MegaMania System" is a
Class II or Class III game under the Indian Gaming Regulatory Act (IGRA).
Specifically, Multimedia Games, Inc. has requested the National Indian Gaming
Commission (NIGC) to determine whether the game as presented below is
consistent with the definition of "Bingo" as a form of Class II gaming.  As you
know, the game of bingo is defined in the IGRA.  In addition, IGRA requires
that all Class II gaming be conducted on Indian lands.  25 U.S.C. Section  2710
(b)(1).  We have reviewed the materials submitted.  For the reasons outlined
below, we conclude that the MegaMania System is a Class II game.

MegaMania is generally understood to be a bingo game whereby not less than
twelve players, situated in one or more of several Indian  bingo halls, each of
which have paper cards or Electronic Player Stations (EPS) which are
electronically interconnected, may simultaneously play the same game of bingo.
Using paper or an EPS, each player pays the same entry fee or price per bingo
card played therein, and the players compete against one another for the same
prizes.  Individual features of this game will be addressed further during the
course of this opinion.

As shown and described in the informational packet provided by Multimedia
Games, Inc., an EPS unit consists of a computer and a computer monitor.  The
player of MegaMania must purchase bingo cards to play the game.  Cards are
purchased from a clerk at the bingo hall.  The clerk enters the amount paid by
the player into the computer system and gives the player a PIN number to enter
into the EPS.  The player then sits in front of the EPS computer monitor.  The
monitor indicates when the bingo game will start, the  amount of credit
remaining, the game pattern to be played, and displays up to four bingo cards.
The monitor also displays images of the three balls drawn and the corresponding
numbers are automatically daubed on each card.  The monitor will also indicate
when the player has won a consolation prize, e.g. matching the first two or
three balls drawn.  The monitor also shows how many cards are in play and
previous numbers that have been drawn.  In
<PAGE>   2
addition, the monitor will indicate that a bingo has occurred, at what site the
bingo has occurred, the serial number of the winning cards, and the amount won.

The IGRA, 25 U.S.C. Section  2703, defines Class II bingo games as follows:

         (7)(A)  The term "Class II gaming" means-

                 (i)      The game of chance commonly known as bingo (whether
         or not electronic, computer, or other technological aides are used in
         connection therewith)-

                               (I)   Which is played for prizes, including
                 monetary prizes, with cards bearing numbers or other
                 designations,

                              (II)   In which the holder of the card covers
                 such numbers or designations when objects, similarly numbered
                 or designated, are drawn or electronically determined, and

                             (III)   In which the game is won by the first
                 person covering a previously designated arrangement of numbers
                 or designations on such cards.

The IGRA defines Class III games as all forms of gaming that are not Class I
gaming or Class II gaming.  25 U.S.C.  Section  2703 (8).

Your company provided the NIGC with a packet of information which  contains
printed material and exhibits explaining the specific features and
characteristics of the MegaMania System.  As described in the literature
provided, the MegaMania System enables Indian bingo halls to offer an
enhancement to the chip-up or ante-up bingo game.  The MegaMania System also
allows customers to have the choice of playing on paper or using EPS's.
Further, MegaMania allows the EPS to be used during regular bingo sessions, or
immediately preceding or following the regular bingo session.  MegaMania also
uses the multi-hall linking technology of the MegaBingo System.  MegaBingo was
determined to be a Class II game by the NIGC on July 26, 1995.

The information you submitted describes the specific features of MegaMania.
The system is set to require a minimum of 12 players before the EPS's can be
utilized.  Thus players play against each other and not a machine.  In the
legislative history of IGRA, the





                                      -2-
<PAGE>   3
Senate Select Committee on Indian Affairs discussed the definition of Class II
gaming:

         "The Committee intends that tribes be given the opportunity to take
         advantage of modern methods of conducting class II games and the
         language regarding technology is designed to provide maximum
         flexibility.

         In this regard, the Committee recognizes that tribes may wish to join
         with other tribes to coordinate their class II operations and thereby
         enhance the potential of increasing revenues. . . Simultaneous games
         participation  between and among reservations can be made practical by
         use of computers and telecommunications technology as long as the use
         of such technology does not change the fundamental characteristics of
         the bingo or lotto games and as long as such games are otherwise
         operated in accordance with applicable Federal communications law.  In
         other words, such technology would merely broaden the potential
         participation levels and is readily distinguishable from the use of
         electronic facsimiles in which a single participant plays a game with
         or against a machine rather than with or against other players."

Senate Report No. 100-446 at 9.

The integrated system of linking multiple halls enables the MegaMania to be
played with no less than 48 card faces in play.  This ensures that the winning
of any low-tier prizes will be funded by the players in that low-tier game.
The system also ensures that all players in any of the halls located throughout
the country will be playing for the same prizes based on numbers being drawn at
one location.  Thus each player simultaneously is playing the same game.

Utilization of the EPS does not transform the MegaMania system into a gambling
device which would be prohibited pursuant to the Johnson Act.  25 U.S.C.
Section  1171(a).  The EPS merely links participant players located at various
Indian casinos into a bingo game played live at another location.  While
Johnson Act machines, e.g. slot machines, may be linked together to build large
jackpot prizes, in  MegaMania the bingo numbers or designations are selected at
one location and are downloaded simultaneously to all participating EPS's.  The
EPS is merely a screen projecting the game that is conducted live at Creek
Nation where actual bingo balls are being  drawn.  The EPS displays the numbers
being drawn, marks the numbers matched, and records the amount of winnings
received when a jackpot or consolidation prize is won.  This does not change
the fact that





                                      -3-
<PAGE>   4
one bingo game is being played and does not alter the fundamental
characteristics of that bingo game.

As noted by the NIGC in explaining 25 C.F.R. Section  502, regarding
Electronic, Computer or Other Technologic Aid:

         "In the view of the Commission, Congress intended to classify as Class
         II gaming such technology that would enhance the playing of Class II
         theme games, but not technology that would constitute a gambling
         device under the Johnson Act.  For example, the Commission recognizes
         as falling within the scope of Class II technology devices that would
         allow bingo players to keep track of cards, bingo blowers, or similar
         devices that may help in performing one function of bingo."

Definitions Under the Indian Gaming Regulatory Act; Rule, 57 Fed. Reg. 12,386
(1992).

Bingo card hinders, on which MegaMania and other bingo games are played, are
designed specifically to ensure that all participating players are playing from
the same numbers or designations that are downloaded simultaneously to all
EPS's.  Players can not play different numbers than are being played by others
in the game.  As stated before, MegaBingo has already been determined to be a
Class II game by the NIGC.

The game plays to a jackpot or consolation winner every time, based on a
pregame announced number of balls called.  Although the game is fast, the
players are playing toward a straight-line bingo and the requirement of
covering the designated number or pattern is present.  Additionally, the player
at any EPS is only allowed to play four cards per game.  If the player decides
not to ante-up on a particular card, that card is irreclaimable for play for
the remainder of that specific game.  The prize is paid to the first person
covering the announced numbers or patterns.

Bingo, defined as Class II gaming in 25 U.S.C. Section  2703 (7)(A)(i), also
allows games which are "commonly known as bingo."  MegaMania includes low-tier
prizes which are awarded during the ascension to the high-tier straight bingo
game.  There are many examples of random number games being played in bingo
(similar to the first 10, 5 or first number covered being a winner) which meet
the definition of the IGRA and the NIGC regulations.

As exhibited in bingo manuals, catalogs, and handbooks which predate the IGRA,
many games designate a winner of a pregame consolation if such player has the
first designation of numbers





                                      -4-
<PAGE>   5
called.  As explained in the Bingo King Idea Book, Copyright 1979,  while
playing toward a regular predetermined pattern on the bingo card, the bingo
manager may add the possibilities of pregame consolations for players "who get
the first series of numbers covered on one card as a winner, and this pregame
is for the players who cannot make a straight Bingo."  See Bingo King Idea Book
at 13.

Another example is taken from the Bingo Manager's Textbook, Copyright 1984.
This textbook describes a method that bingo managers can add variety and
excitement to a regular bingo game.  One such game is described as "Odd or
Even":

         "If the first ball pulled from the machine is an even number, then the
         caller tells the players to cover all numbers ending in even numbers.
         The players then go on to play for a 3-line Bingo or a coverall."

See Bingo Manager's Textbook at 88.

Further, the 1996 Bingo King, Inc. catalog indicates a single random number
"Star" game which can be utilized by bingo halls in a variety of ways to
enhance the game of bingo.  See Bingo King, Inc. Catalog No. 991 at 13.  There
is also a description of a "Quick Shot" game which can potentially award a
prize to the player who has no numbers on his card called during the regular
bingo game.  Id. at 21:  Indisputably, these types of designations have been a
part of the game of bingo well before the IGRA was enacted and continue to be
utilized today.  Therefore, the feature of the MegaMania system which awards
the player $.25 if two of the three balls drawn matches any two numbers on a
single card in play, or awards the player $2.50 if three of the balls drawn
match any three numbers on a single card in play, conforms to these pregame
prizes which are part of the game commonly known as bingo.

For the above mentioned reasons, we conclude that the MegaMania system conforms
with the IGRA definition of "bingo." Therefore, MegaMania is a Class II game.
Further, the EPS utilized to link players and bingo halls is a technologic aid
as defined in25 C.F.R. Section  502.  If you have any questions regarding this
letter please feel free to contact our office.

                              Sincerely,



                              Harold A. Monteau
                              Chairman
                              National Indian Gaming Commission






                                      -5-

<PAGE>   1
                                                                 EXHIBIT 10.2
                                 April 9, 1997


Larry Montgomery
President
Multimedia Games, Inc.
7335 South Lewis, Suite 204
Tulsa, OK  74136

Dear Mr. Montgomery:

This letter is in response to your letter of April 1, 1997.  Your letter was
submitted in response to our letter of March 28, 1997.  In our letter of March
28, 1997.  In our letter of March 28, we indicated that there were concerns
that certain elements of the MegaMania game, as currently configured, could be
viewed as Class III.  We requested that you make specific changes to the game,
and submit the new version of the game, along with appropriate documentation,
to the NIGC for review.  We also requested that you stop play of the MegaMania
game as currently configured within 14 days.

In your letter of April 1, you submitted the new version of MegaMania with
documentation.  The new MegaMania game is identical to the MegaMania game
reviewed on July 10, 1996, with the exception of the following changes, as
requested in our letter of March 28:

                 1)       the numbers or objects drawn for the bingo game are
         drawn with a bingo blower instead of by an electronic number generator
         or other similar device;

                 2)       an act is required by the card holder, after the
         balls are drawn, to daub the cards, instead of a fully automatic
         daubing system;

                 3)       an act is required by the card holder to indicate a
         bingo to win, instead of a fully automatic system; and

                 (4)      the "consolidation game" is deleted from the game,
         and replaced by a "four corners" game that requires players to match
         two, three or four of four corners of the bingo card to win.

We have reviewed these changes and the materials you submitted and conclude
that the new version of MegaMania described in your letter of April 1, 1997,
qualifies as a Class II game.  Further, we have prepared a Memorandum of
Understanding (MOU) between MultiMedia Games and the NIGC that 1) creates a
timeframe for MultiMedia Games





                                      -6-
<PAGE>   2
to implement the changes to the MegaMania game, and 2) states that the NIGC
will not issue a Notice of Violation, Civil Fine or Temporary Closure Order
during the pendency of the changes to the MegaMania game.  The MOU is attached.
Please execute the MOU and return it to the NIGC immediately.

The Indian Gaming Regulatory Act (IGRA), 25 U.S.C. Section  2703, defines Class
II bingo games as follows:

         (7)(A)  The term "Class II gaming" means-

                 (i)      The game of chance commonly known as bingo (whether
         or not electronic, computer, or other technological aides are used in
         connection therewith)-

                               (I)   Which is played for prizes, including
                 monetary prizes, with cards bearing numbers or other
                 designations,

                              (II)   In which the holder of the card covers
                 such numbers or designations when objects, similarly numbered
                 or designated, are drawn or electronically determined, and

                             (III)   In which the game is won by the first
                 person covering a previously designated arrangement of numbers
                 or designations on such cards.

The NIGC defined "technologic aid" in its regulations, 25 C.F.R. Section
502.7, to mean:

         Electronic, computer or other technologic aid means a device such as a
         computer, telephone, cable, television, satellite or bingo blower that
         when used-

                          (a)     Is not a game of chance but merely assists a
                 player or the playing of the game;

                          (b)     Is readily distinguishable from the playing
                 of a game of chance on an electronic or electromechanical
                 facsimile; and

                          (c)     Is operated according to applicable Federal
                 communications law.

In the legislative history of IGRA, the Senate Select Committee on Indian
Affairs discussed the definition of Class II gaming:





                                      -7-
<PAGE>   3
         The Committee intends that tribes be given the opportunity to take
         advantage of modern methods of conducting class II games and the
         language regarding technology is designed to provide maximum
         flexibility.  In this regard, the Committee recognizes that tribes may
         wish to join with other tribes to coordinate their class II operations
         and thereby enhance the potential of increasing revenues. . .
         Simultaneous games participation between and among reservations can be
         made practical by use of computers and telecommunication technology as
         the use of such technology does not change the fundamental
         characteristics of the bingo or lotto games and as long as such games
         are otherwise operated in accordance with applicable Federal
         communications law.  In other words, such technology would merely
         broaden the potential participation levels and is readily
         distinguishable from the use of electronic facsimiles in which a
         single participant plays a game with or against a machine rather than
         with or against other players.

Senate Report No. 100-466 at 9.

According to the materials and information submitted by Multimedia Games,
MegaMania is a live bingo game conducted at the Cheyenne & Arapaho Tribes'
Lucky Star Bingo Hall.  Each MegaMania game is electronically transmitted from
the Lucky Star to "remote hall" computers located at participating Indian bingo
halls.  The "remote hall" computers transfer the live bingo game to Electronic
Player Stations (EPS) located at the participating bingo halls.  The "remote
hall" computers transfer the live bingo game to Electronic Player Stations
(EPS) located at the participating bingo halls.  Thus, the MegaMania system
links Indian bingo halls so that local players from different halls may
participate in one live game.  MegaMania requires at least twelve players, each
playing four cards (48 cards), situated in one or more of the participating
Indian bingo halls.  Each player pays the same entry fee per bingo card played,
and players compete against each other for the same prize.

To play MegaMania, a person purchases bingo cards from a clerk at  the local
bingo hall.  The clerk enters the amount paid by the player into the local
computer system and gives the player a PIN number to enter into the EPS.  Once
the PIN is entered, the computer monitor indicates when the bingo game will
start, the amount of credit remaining, the game pattern to be played, and up
to four bingo cards.  The monitor also displays images of the three balls
drawn.  Balls are drawn with a traditional bingo blower and the information is
transferred electronically.  Three balls are drawn in quick succession.  After
the three balls are drawn, the player is required to touch the screen to daub
any matching numbers





                                      -8-
<PAGE>   4
on the player's cards in play.  The player is also required to decide whether
to keep the card in play by purchasing an additional three balls or "dropping"
the card.  If no player wins the bingo game after three balls are drawn,
another three balls are drawn, and so forth, until a player wins the bingo.
The monitor shows how many cards are in play and previous numbers that have
been drawn.  The monitor indicates when a bingo has occurred, at what site the
bingo has occurred, the serial number of the winning cards, and the amount won.
Winners of the bingo must touch the screen of the monitor to win and claim
their prize.  In addition to the main bingo game, a simultaneous "four corners"
game is played in which players are required to cover two or three or four of
the four corners on the card to win.

The MegaMania game, in its altered form, squarely falls within the definition
of Class II gaming under IGRA.  MegaMania is the game of chance commonly known
as bingo.  The game is played for monetary prizes, with cards bearing numbers
or other designations.  The holder of the card is required to cover numbers
when bingo balls, which are similarly numbered, are drawn.  The main game and
the "four corners" game prizes are won by the first person(s) covering a
previously designated arrangement of numbers on the cards.

The EPS used to link players and bingo halls is a technologic aid as defined in
25 C.F.R. Section  502.7.  Use of a computer/EPS system to link participant
players located at various Indian bingo halls into one live bingo game does not
alter the fundamental characteristics of the bingo game.  The MegaMania
computer/EPS system utilizes computers, telephone lines, and a bingo blower to
allow remote players located at other Indian bingo halls to play the game.
Further, MegaMania is not a stand-alone game and may not be played one-on-one
against a machine.  As described above, a minimum of twelve players, each
holding four cards, is required to start a MegaMania game.  Such use of
technology was anticipated as discussed in the legislative history of IGRA
noted above.  The use of such technology is readily distinguishable from the
playing of a game of chance on an electronic or electromechanical facsimile.

Thus, we conclude that MegaMania, as described above, conforms with the IGRA
definition of bingo and thus is a Class II game.  We look forward to working
with you, pursuant to the terms of the attached Memorandum of Understanding.

                                                   Sincerely,


                                                   Ada E. Deer
                                                   Acting Chair





                                      -9-

<PAGE>   1
                                                                 EXHIBIT 10.3
                                  May 12, 1997



Mr. Larry Montgomery
President
Multimedia Games, Inc.
7335 S. Lewis, Suite 204
Tulsa, OK  74136

Dear Mr. Montgomery:

The purpose of this letter is to respond to your letter of April 30, 1997, and
to clarify the position of the National Indian Gaming Commission (NIGC) with
regard to the Memorandum of Understanding (MOU) entered into on April 9, 1997.

It is the duty of the NIGC to regulate lawful Indian gaming.  It has been our
practice in dealing with tribes to make every attempt to gain voluntary
compliance with the law.  We extend the same courtesy to you because you are
contracting with tribes.  Based on your letter of April 30, 1997, and further
study of the specifications submitted describing the proposed MegaMania game,
it is clear that we have not had a meeting of the minds with regard to the
proposed changes to the MegaMania game.

On April 9, 1997, I entered into an MOU with Multimedia Games that outlined
specific changes and timeframes for those changes to be made to MegaMania.  My
understanding from the information provided by you was that the modified
MegaMania game involved simply the electronic communication of a live game of
bingo.

I believed the changes agreed to in the MOU were designed to ensure that this
be the case, that MegaMania be a live bingo game, conducted at an Indian bingo
hall, and linked electronically to other Indian gaming facilities so that more
persons from a variety of halls could participate in the game.  The live bingo
blower and the player participation requirements (that players daub their cards
when matching balls are called and that players declare "bingo" to win) where
included in the MOU to ensure that MegaMania would not be considered a Class
III electronic facsimile of bingo under IGRA or a gambling device under the
Johnson Act, but rather IGRA-sanctioned bingo enhanced by electronic aids.

Your letter of April 30, 1997, however, indicates that, due to problems in
implementing the manual daubing feature agreed to in the MOU, you have decided
not to implement this change.  Your letter of April 30, 1997, states that:





                                      -10-
<PAGE>   2
         [M]any Tribes have complained that installing a system whereby their
         customers are required to "manually" daub on the electronic player
         machines for MegaMania is creating problems for them.  Their customers
         are extremely unhappy with this change and many have stopped playing.

You further indicate that neither "[t]he Tribes nor their customers see clearly
that IGRA requires such manual action" and that:

         [t]he biggest problem seems to be that when players must manually daub
         during the play of MegaMania, they cannot also play a paper game
         simultaneously.  There isn't time to manually daub the electronic card
         and the paper cards simultaneously.

You further state that:

         We have had previous comments from players that they have found it
         difficult to make decisions to "drop" or "keep" MegaMania cards if
         they are also daubing paper cards simultaneously in a regular bingo
         game.

Your letter indicates that in response to those "problems" you have "developed
a MegaMania Proxy Player (MMP) that the customer can instruct to "daub" or
"keep" their MegaMania cards. . . ."  You state that "this software has been
designed and the code has been written.  It is in final test plan and we plan
to introduce it soon."  Finally, your letter states that:

         If a player opts to use the MMP, it will not only make "drop/keep"
         decisions but will daub those cards if the decision is to "keep."
         This will allow the customer to devote almost full time to daubing
         paper cards.

Clearly, this is not what was contemplated under the MOU.  The MOU clearly
states that Multimedia Games will alter the MegaMania game so that "[a]n act
will be required by the card holder to daub the cards, after the numbers or
objects are identified, rather than the present fully automatic system."  Your
development and planned implementation of the "MegaMania Proxy Player" software
that automatically makes the decision for the player to drop or keep cards and
automatically daubs the bingo cards violates the letter and spirit of the MOU.
I consider this unilateral change of a key provision of the MOU a material
breach of the MOU.  Thus, the MOU is null and void and of no effect.





                                      -11-
<PAGE>   3
Further, we are extremely concerned about allegations that the computer
terminal used for MegaMania has been modified so that it is a gambling device.
These allegations, along with statements by your counsel in unrelated
litigation that MegaMania is a gambling device, requires us to review
completely the game and the devices used to play it.

While I am no longer willing to work with your company pursuant to  the terms
outlined in the MOU, I am willing to review MegaMania to determine whether it
qualifies as a Class II game once you have implemented all the changes that you
believe are necessary.  The modified game should be submitted to the NIGC for
on-site physical examination and inspection prior to implementation of any
changes and operation of the game.  Accordingly, before July 15, 1997, we
expect that Multimedia Games will submit its modified version of MegaMania to
the NIGC for approval prior to any play of the game.  Moreover, it is fully
expected that Multimedia will cease operation of the current MegaMania game by
July 15, 1997, unless there has been specific approval of the modified game
based upon physical examination, inspection and legal analysis.  Otherwise,
Multimedia Games operation of MegaMania could become the subject of an
enforcement action.

Determination of what modifications should be made to MegaMania is solely
within the discretion of Multimedia Games.  I believe I have made the concerns
of the NIGC clear through this and previous correspondence.  Thus, the NIGC
will not participate in any further discussion nor otherwise suggest how
MegaMania should be revamped.  Likewise, there will be no prior approval of any
of the proposed modifications to MegaMania.

                                                   Sincerely,



                                                   Ada E. Deer
                                                   Acting Chair





                                      -12-

<PAGE>   1
EXHIBIT 15.1
MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION



Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re:     Multimedia Games, Inc.
        Registration on Form S-3

We are aware that our reports dated February 7, 1997 and May 6, 1997 on our
reviews of the interim financial information of Multimedia Games, Inc. for the
periods ended December 31, 1996 and March 31, 1997, are incorporated by
reference in the Prospectus constituting part of this Registration Statement on
Form S-3. Pursuant to Rule 436 (C) under the Securities Act of 1933, this
report should not be considered a part of the registration statement prepared
or certified by us within the meaning of Sections 7 and 11 of that Act.



COOPERS & LYBRAND L.L.P.


Tulsa, Oklahoma
June 2, 1997

<PAGE>   1
EXHIBIT 23.1
CONSENT OF COOPERS & LYBRAND L.L.P.




                       CONSENT OF INDEPENDENT ACCOUNTANTS


We consent to the incorporation by reference in the Prospectus constituting
part of this Registration Statement on Form S-3 of our report dated 
December 18, 1996, on our audits of the consolidated financial statements of
Multimedia Games, Inc. and Subsidiaries as of September 30, 1996 and for the
years ended September 30, 1996 and 1995, which report is included in the
Company's annual report on Form 10-KSB for the year ended September 30, 1996. 
We also consent to the reference to our firm under the caption "EXPERTS."


COOPERS & LYBRAND L.L.P.

Tulsa Oklahoma
June 2, 1997





                                      II-7


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