Other revenue, primarily comprised of service revenue, was approximately $0.3 million in both the fiscal 2013 and 2012 first quarters.

Total operating expenses for the fiscal 2013 first quarter rose $1.9 million, or 6.0%, year over year to $32.9 million. Total cost of goods sold increased by $2.3 million, driven primarily by an increase in the number of units sold and an increase in the Company’s installed base of participation units reflecting the Company’s expansion into more states. Selling, general and administrative (“SG&A”) expenses rose 5.5%, or $0.6 million, to $11.3 million, primarily reflecting higher benefit costs and non-cash stock compensation costs associated with higher headcount totals versus the prior year. SG&A expenses for the fiscal 2013 and fiscal 2012 first quarter periods include non-cash stock compensation costs of approximately $0.9 million and $0.6 million, respectively. Depreciation and amortization declined to $8.0 million from $9.7 million in the prior-year period primarily reflecting a change in the depreciable lives for gaming operations equipment from 36 months to 48 months as described below. Research and development expense of $4.2 million compares to $3.5 million in the prior-year period and reflects Multimedia Games’ ongoing initiative to develop innovative and differentiated gaming content that delivers a high-value player entertainment experience.

Reflecting the strong year-over-year revenue growth in the fiscal 2013 first quarter as well as improved operating margins and the change in the depreciable lives of the Company’s gaming operations equipment, operating income rose by $7.6 million to $11.4 million and operating margins improved to 25.8% in the quarter compared to 10.9% in the year-ago period. For the fiscal 2013 first quarter, Multimedia Games reported net income of $7.1 million, or $0.24 per diluted share, compared to net income of $5.8 million, or $0.21 per diluted share, in the fiscal 2012 first quarter. Net income and diluted earnings per share for the fiscal 2013 first quarter reflect a tax expense rate of 37.2% while net income and diluted earnings per share in the prior-year period reflect a tax benefit rate of 20.6%.

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