Effective October 1, 2012, Multimedia Games has moved from a 36-month depreciable life for its installed base of gaming operations equipment to a 48-month depreciable life. The end of Fiscal 2012 marked the third-year anniversary of the introduction of the Company’s award-winning wide body dual video cabinet, and management is now confident that its products have a useful life in excess of three years. Additionally, the change to the depreciable lives is now consistent with the standard used by the majority of the gaming equipment suppliers in the industry and is consistent with the current age of the Company’s equipment in the field. The change lowers total depreciation expense, therefore increasing operating income, net income and diluted earnings per share, but does not impact EBITDA, a non-GAAP financial metric commonly used in the gaming industry.

Balance Sheet

Multimedia Games ended the quarter with $73.3 million in cash and net cash (total cash in excess of debt) of $40.9 million, versus net cash of $40.5 million and $17.7 million as of September 30, 2012, and December 31, 2011, respectively. The fiscal 2013 first quarter represents the sixteenth consecutive quarter Multimedia Games has grown net cash or reduced net debt. Capital expenditures in the fiscal 2013 first quarter were $12.7 million compared to $8.0 million a year ago, primarily reflecting the Company’s continued investment in the expansion and maintenance of its installed base.

During the fiscal 2013 first quarter, Multimedia Games entered into a development agreement with its largest customer that will add approximately 150 expansion units at the Winstar World Resort in Oklahoma. The Company made its first installment payment of $3.3 million in December 2012, with the second installment payment of $3.2 million due in the current quarter. Multimedia Games expects to record initial revenues from these units in its fiscal 2013 fourth quarter.

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