Multimedia Games, Inc.
HOST: Mr. Clifton Lind
DATE: June 18, 2002

This transcript contains forward-looking statements reflecting management's current forecast of certain aspects of our future. It is based on current information which we have assessed but which by its nature is dynamic and subject to rapid and abrupt changes. Forward-looking statements include quotes by Gordon T. Graves and Clifton E. Lind concerning our projected earnings per share; the effects of recent events on our earnings per share and on past projections of our earnings per share; the projected costs and time demands of converting our tribal customers from using the MegaNanza™ game to using the Reel Time Bingo™ game; the effect of recent events on our projected future growth plan; the likely effect on our industry of recent clarifications in Class II gaming rules; the likelihood of the legality of the Reel Time Bingo game being challenged by the National Indian Gaming Commission; the likelihood of competitors gaining some of our floor space due to recent events; and the projected success of the Reel Time Bingo game. The forward-looking statements are generally accompanied by words such as "plan," "estimate," "expect," "believe," "think," "should," "would," "could," "anticipate," or other words that convey uncertainty of future events or outcomes. Our actual results could differ materially from those stated or implied by our forward-looking statements, due to risks and uncertainties associated with our business. These risks are described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2001, and our April 19, 2002 Amended Registration Statement on Form S-3/A, which you should read carefully, and which are incorporated herein by this reference.

OPERATOR: Good afternoon and welcome, ladies and gentlemen, to the Multimedia Games Investor call. At this time - (technical difficulties)

PAUL HURDLOW: … forward-looking statements made by Multimedia Games management on this call. Those statements will be made in reliance upon the safe harbor provisions of securities laws and are subject to a number of risks and uncertainties that could cause outcomes to differ materially from what the company currently expects. Some of those risks and uncertainties are detailed in our public filings which are available at the SEC's website and also in our press releases that we issue from time to time. Investors are encouraged to review those risk factors carefully before making decisions to trade in the company's securities. So with that forward-looking statement warning, I'd like to turn the conference call over to Multimedia Games' Chief Executive Officer, Mr. Gordon Graves.

MR. GRAVES: Thank you, Paul. Clifton and I and the rest of our management team are extremely disappointed with what's happened in the last four days and I know that all of our fellow shareholders out there are real disappointed also. We've taken a pretty big hit here. It's going to have an impact on our earnings for the year. We thought we had this situation with Montie Deer and the NIGC [National Indian Gaming Commission] pretty much under control. And he threw us a curve ball with sending that Notice of Violation out yesterday. That was surprising and extremely disappointing, and of course we've taken a tremendous hit in our market value today.

Things do look better today than they did last night when we put that press release together. So far, only one tribe has received a Notice of Violation and we were disappointed that that tribe did decide that they would stop running MegaNanza immediately, but they did. And so we're in the process of converting them over today. They're running one game and we'll be converting them to another game here a little later on and I'll let Clifton Lind talk about that in a just a few minutes.

As some of you have probably seen, we put out a press release here about 15 minutes ago. Three of our largest tribal customers have just filed a motion to intervene in our lawsuit with the NIGC in Tulsa. It's just been filed a few minutes ago. And in addition, we and the tribes have filed a motion for a temporary restraining order and an injunction to prevent the government from taking further action [against] MGAM or the tribes.

As you know, we've got a suit that we filed in District Court against the NIGC on April the 18th and that's still going on. I think having the tribes join us in this case obviously is a big benefit. The tribes have a very strong position in any federal lawsuit that [makes it] very advantageous to be sitting there side by side with those tribes.

As you know many - this lawsuit is real important to us, but right now our primary focus is on getting all of the MegaNanza games out there, get the machines that have MegaNanza running on them converted over to our new Reel Time Bingo game which does not have the feature that [NIGC Deputy General Counsel] Penny Coleman objected to.

Now it's interesting that in Penny Coleman's Advisory Opinion saying that MegaNanza was not Class II, it was based on a rule which that has now been eliminated with this new set of rules that were issued yesterday. So we're getting kind of strange mixed messages from the NIGC. It's like a schizophrenic type of, almost - but as I said before, you can't expect a regulatory body to act like - or any bureaucracy to really act like a rational person; you know, there's different factions that are pushing different ways. And there certainly is a lot of conflict within the NIGC, as most of you already know.

I think when you look at Reel Time Bingo getting converted over, if you look at it in kind of a worst case basis -Right now, no other tribes that we know of have received violation notices. That doesn't - I've heard rumors another one is going to and that doesn't mean the others won't, but right now there's only that one.

But from a worst case analysis, I said to myself, "Well what happens if all 4,000 of our MegaNanza machines have to be replaced with - I meant the games on those machines - have to be replaced with Reel Time Bingo?" And I said, "Well, let's say in the worst case it takes four weeks to get that done, which, since we don't have to go out and change chips - I won't say it should be easy to do it in that time because Clifton will disagree with me - obviously it's a tough hard job to do that. But anyway I think four weeks is really a pessimistic [estimate of the] time they'd take to do it. And if that's done evenly, that said, we would have an average of 2,000 machines out there for a 30 day period or for a four-week period, let's say for a month, again, to be conservative. That's 50% of what we had out there last quarter, at the end of last quarter. If you look at it on a quarterly basis, that would be a 17% reduction. Last quarter we made 47 cents per share and a 17% reduction would be about 8 to 9 cents. So it's probably in that order of magnitude. It [the reduction] could be bigger than that. It could be as low as 5 [cents]. It could be as high as 15 [cents]. I mean we just really don't quite know yet. But that's the order of magnitude of impact on our earnings per share for the year I think we're looking at. Obviously, you know, I said, worst case. Worst case normally is a little worse than what you think the worst case is, but anyway it's some place in that ball park. I don't think right now we can say any closer than that. I think this is an overall hell standpoint. I think all of this is going to work out. I think in the long term all this is good for Indian Country and will be good for us.

You know we ended last quarter with about $17 million in the bank. We probably have about $19 million in there now. I think that our cash flow for the rest of the year is going to be positive. It won't be as positive as we had hoped it would in that worst scenario case where I had talked about 10 cents a share. That's equivalent to abut $3 million in cash that we won't be getting that we would be getting. But we still have a nice healthy balance sheet. I think our tribes are with us, stronger than ever. And our staff is enthusiastic and again our staff has done a great job. Clifton, I'd like to turn this over to you if I could.

MR. LIND: Thank you, Gordon. First I'd like to start off by thanking the staff for the work that they've done over the last four days. As we've said this took all of Indian Country as well as Multimedia Games by surprise.

While Gordon and Gary and I were out on Friday, Skip, Dirk, Ruby, Tommy, James and others did an extraordinary job working with our customers and explaining the situation and what was happening and hoping to gather information for what was happening, so we appreciate the great job that they did calming the fears of some of the customers at the early stages of this.

Brendan, Jeff, Joe, Bo, Naveen, Troy, and the entire technology team had been working all night to facilitate an earlier release of the New-Generation Reel Time Bingo that we have been modifying and developing and improving and convening focus groups on over the last four weeks and which we're very excited about. I know that team will be working on that again tonight, so we want to thank them for the extraordinary effort that they're making.

And then at 5:05 [p.m.] yesterday, our largest customer got the NOV. I want to thank our legal team and the three tribal legal teams that worked through the night to facilitate a joint filing today in a little over 15 hours, of two motions which will, we hope, give the tribes and MGAM some protection. And without the dedicated support of those legal teams, we'd be having a different conference call here today.

Over the next few days, the sales service teams, customer support teams, the technology teams, the sales and marketing teams will put in countless hundreds of hours as they try to facilitate a smooth roll-out to our customers of Reel Time Bingo. And it's going to be particularly challenging because we're compressing the roll-out schedule for customers who will decide or have decided that they don't want to run the risk of fines until and if the TRO gets issued protecting them as they eagerly await the roll out of Reel Time Bingo in their halls. We are going to have to call on our staff like never before to expedite getting this new game in place.

At a recent user conference meeting, I apologized to our customers for any inconvenience and/or embarrassment that the NIGC advisory opinion had caused them. I've assured our customers that we would not put a game out until our staff, our attorneys, our tribal regulators, and our compliance committee had all agreed that they met the requirements [for a] legal Class II game. That has been our policy in the past and I've pledged to them that that would be our policy in the future. I want to restate that same pledge to our shareholders. We continue to believe that MegaNanza 30 and the other forms of bonanza bingo that we're running are legal Class II games. And we think that the courts will assist us in making yet additional new gaming law for the benefit of our Native American customers. Our customers have been very courageous since the advisory opinions came out and I especially want to thank our largest customer, who has continued to stand by us even though they received in sort of an unprecedented fashion this NOV.

I cannot think of another team that I would like to face this opportunity with. I am convinced that the future of this company has never been brighter. We are the only company that we know of that has been able to produce a high-speed standard sequence linked bingo game. We think that the many features that these new games have will be winners with our customers, and we hope that NIGC will be fair-handed and cause the other competitors who are running bonanza bingo games to have to cease running those as well, if we discontinue running our bonanza bingo games. Gordon, at this time I'll turn it back to you and you can handle any questions.

MR. GRAVES: Thanks, Clifton. Craig, you got anything you'd like to add?

CRAIG: No. I mean I was going to just talk about the numbers. I think you've done a great job in talking about the numbers. You know there's a lot of potential impact that could be out there that we're not aware of at this point. But like you said our best guess with the knowledge we know right now we just feel that the earnings per share on a diluted basis should range somewhere from $1.60 to $1.70. But a lot of these preliminary estimates are -

MR. GRAVES: - numbers we're talking about are without the write-off of the offering cost, the one-time expense of the offering cost which is still on the books, right?

CRAIG: That is correct. And it appears likely that we're going to go ahead and make that decision to write off those costs for the third quarter and that would be an additional - about 3 cents per share impact on earnings per share, but that's all I have, Gordon.

MR. GRAVES: Okay. Thanks so much.

CRAIG: Thank you.

MR. GRAVES: I'd like to open it up to questions. I'd like to limit it to no more than two questions per person if we could today, just so everybody gets their whack in.

OPERATOR: The question and answer session will begin now. If you are using a speakerphone, please pick up the handset before pressing any numbers. Should you have a question, please press 1 followed by 4 on your pushbutton telephone. If you would like to withdraw your question, please press 1 followed by 3. Your question will be taken in the order it is received. Please standby for the first question. The first question comes from David Bain. Please state your affiliation followed by your question.

MR. BAIN: Hi, the Seidler Companies. Hi, guys, thanks for setting up the call and helping me clarify things. I was hoping - first, the Temporary Restraining Order (TRO), would that cover the Reel Time Bingo or would you -

MR. GRAVES: The TRO is on the MegaNanza game based originally on the preliminary or the unofficial advisory opinion.

MR. BAIN: Uh-huh.

MR. GRAVES: So the TRO is covering MegaNanza.

MR. BAIN: Okay. So can you speak a little bit to the safeguards on the Reel Time Bingo?

MR. GRAVES: Yeah. I can a little bit. I think that we're just in a unique situation right now where it happens that there was an [Advisory] Opinion letter that was written out there by an attorney [the NIGC Deputy General Counsel] that - attorneys are going to represent their clients the best they can and there's no question the attorney that wrote that Opinion was representing the side that wants to hold back Indian gaming. But an attorney is not going to write something that's not - they can't live with themselves with.

MR. BAIN: Right.

MR. GRAVES: But with these new rules - and so that opinion is already out there.

MR. BAIN: Uh-huh.

MR. GRAVES: So he could take advantage - the [NIGC] Chairman could take advantage of the fact that opinion was out there and use that to take this [NOV] action.

MR. BAIN: Right. Okay.

MR. GRAVES: Does that answer your question?

MR. BAIN: Yeah. I believe so. And that kind of leads into my next question.

MR. GRAVES: So now with these new rules, you're not going to get an attorney with any integrity to go through and do this, again, I don't think, I don't mean - I don't believe Penny Coleman under today's rules would have come to the conclusion she did. Well, I'm sure she wouldn't because one of her strong - if not her strongest argument was something that the new rules has eliminated.

MR. BAIN: Yeah. I was going to ask you about the new rules, if you can expand on that. I've read the documents and it seems to me they talk a lot about linking games, which was a factor in the MegaMania® decision, correct?

MR. GRAVES: Well, it was a factor that was - it was the factor that I think was probably important in the judge's making his opinion.

MR. BAIN: So how do you think that has liberalized the rules going forward in Class II gaming?

MR. GRAVES: Well, I think the most important thing - the biggest argument that those people who have wanted to hold back Indian gaming have used in the past has been a conflict between the law, the Indian Gaming Regulatory Act (IGRA), and a rule that was written in 1992 by the NIGC -

MR. BAIN: Uh-huh.

MR. GRAVES: - that ended up causing a contradiction.

MR. BAIN: Right.

MR. GRAVES: And these new rules get rid of that contradiction.

MR. BAIN: Uh-huh.

MR. GRAVES: So the main argument that has been used in the past is now gone completely.

MR. BAIN: Okay.

MR. GRAVES: That's the main reason. The other - it makes it clear now that bingo - it focuses for the first time on how you really make decisions about what class the game fits in, [which is] how the game outcome is determined.

MR. BAIN: Okay.

MR. GRAVES: What's the game outcome determination process? And the law now makes it clear that if it's a bingo game where people are playing against each other, if that's the game outcome determination process, that's bingo -

MR. BAIN: Right.

MR. GRAVES: - rather than focusing it on the other end, and what [kind of game] it looks like to the layman.

MR. BAIN: Okay.

MR. GRAVES: I hope that answers the question.

MR. BAIN: Yeah. Absolutely. Do you mind if I ask two short questions, two more short questions?

MR. GRAVES: For you - any time.

MR. BAIN: Thanks, Gordon. Yes or no: Would this hamper any future growth plan such as your possibly striking some deals with tribes?

MR. GRAVES: I don't think so. You know it's a little early to tell, but I don't think so.

MR. BAIN: Okay. Great. And any news on the court date seeking judicial declaration of MegaNanza as Class II?

MR. GRAVES: No. That would just be a guess on our part right now.

MR. BAIN: Gotcha. All right. Well, I appreciate it, guys. Thanks a lot.

MR. GRAVES: Okay.

OPERATOR: The next question comes from Jeff Martin. Please state your affiliation followed by your question.

MR. MARTIN: Jeff Martin with Roth Capital Partners. Thank you for taking my question. Gordon, could you address the opportunity that these rule changes really bring forth? And wouldn't this really create a market opportunity or facilitate the selling of Class II games into, for example, the California market?

MR. GRAVES: Yes. I think it will. I'd like to ask Clifton to talk about that if you will, Clifton. He's been following that (indiscernible).

MR. LIND: There is absolutely no question that the clarification of the rules will make it easier for additional tribes in additional jurisdictions to feel good about entering the Class II market. In addition, the roll out of our Reel Time Bingo game, which is a linked game with a conventional sequence whereby the cards are sold and then the balls are drawn, also will make it easier for tribes in other jurisdictions to enter into Class II gaming.

The California tribes had a difficult decision to make because there was not any affirmative opinion from the NIGC concerning bonanza-style bingo games. And so it was an uncomfortable position for a lot of tribes to take the risk of putting in a bonanza-style bingo game without an affirmative ruling from the NIGC or a court case to say that they were a legal form of Class II gaming.

The new Reel Time Bingo and the other games in that new family of games that we're rolling out removes all of those questions. The linking was a feature of the MegaMania cases and a feature that each one of the district judges and the circuit judges pointed to and liked. And so we are happy about returning to linked games not only because we think we have good case law to defend MegaMania-type games with, but also because it gives us a chance to do some exciting things with progressives and jackpots that you can't do with just an in-hall game. So we think not only California, but several other jurisdictions will now find it much easier because of the rules and because of our return to a linked game, to get into Class II gaming.

MR. MARTIN: Great. Thank you for the clarification there. And my second question would be what's the potential for the NIGC or the Department of Justice to come in and raise an issue with Reel Time Bingo? I think that's the pivotal question here.

MR. GRAVES: Clifton, you want to answer that?

MR. LIND: Sure. It's my feeling that there's an incredibly small risk of that happening. I believe that the case law so firmly supports all of the fundamental specifications of Reel Time Bingo that it would be shocking to me to find any analyst who has studied the bingo law and the bingo court cases and the original Congressional soliloquies on the purpose of the National Indian Gaming Regulatory Act - it would shock me for them to find any fault with Reel Time Bingo. Now that is not to say that the Justice Department does not always have a concern and a duty to make sure that there are not Johnson Act violations. But we feel that the new rules firmly clarify that any electronic device that's used to broaden the play of the game in a Class II bingo game is exempted from the Johnson Act. And even without this clarification, all of the federal judges in the two district court cases and the circuit court cases confirmed that position in the past. So I could not feel more positive about the ability of Reel Time Bingo and other conventional-sequence linked bingo games to survive any test that either NIGC or Justice Department might challenge it to. I would not expect that to do it. In fact I think that the vast majority of the staff of the NIGC are dedicated, hardworking public servants who are there to do an extraordinary job both for the U.S. government and to serve the sovereign nations that are out there. And they have no intention of inflicting pain or suffering unnecessarily on sovereign Native American nations. And I can tell you that the staff members that we talked to about Reel Time Bingo are genuinely excited about us bringing the game out because it takes them out of this position of having to worry about harming the tribes by taking the detrimental action that they did on this bonanza-style bingo game. So I could not feel more strongly about the future success and the specifications that we arrived at after literally years of study for this new linked interactive standard-sequence bingo game.

MR. MARTIN: Great. Thank you, Clifton, and thank you, Gordon.

MR. GRAVES: You're welcome.

OPERATOR: Your next question comes from George Boltress. Please state your affiliation followed by your question.

MR. BOLTRESS: Yeah. I had a little trouble getting on the call so you might have touched on this. But I don't understand - apparently in the Federal Register, they've defined what Class II is. And if the Justice Department dismissed the restraining order, whereas the woman had no authority to issue what she did, then why can't the tribes or you get an injunction by a judge against this notice until it's settled by the courts or something?

MR. GRAVES: You did hit on a leg. We have just filed. The tribes have joined us and intervened in the case with us in Tulsa and we together have just filed asking for a temporary restraining order about 30 or 25 minutes ago.

MR. BOLTRESS: Thanks.

MR. GRAVES: You got it.

OPERATOR: Our next question comes from Daniel Davila. Please state your affiliation followed by your question.

MR. DAVILA: Good afternoon. Hibernia Southcoast Capital.

MR. GRAVES: Hello, Danny.

MR. DAVILA: Hi, Gordon. Clifton, if I understood you correctly and then to paraphrase, you were somewhat in shock, certainly dismayed at the events of the past couple of days. What's to say that we won't wake up once upon a time in the future and you won't be equally shocked that Reel Time Bingo has been equally declared, you know, somehow in violation?

MR. LIND: Danny, the difference between the bonanza - we knew when we ran the bonanza bingo game, offered it, and sent the original description of bonanza bingo games to the NIGC in December of 2000 that we were breaking new ground. Although it was based on the judge's comments on the MegaMania cases, it was a departure from the linked games where cards were sold and then balls were drawn, which is considered to be the standard sequence of the bingo game.

There are about 160 computers out there called card minders that today play standard-sequence bingo games, [that] have never been challenged by the government, and in fact have been cited in certain situations by the government as a perfect example of technological aid. So one can never be sure that there's not going to be some cavalier action taken, but we are sure that this game maps very closely to all of the specifications of MegaMania. And again, we have two federal district courts and two circuit courts that have affirmed the principles of using technological aids in support of bingo where they broaden the play of the game and [the game] is linked between halls, and that is the exact premise that this game is built on. In fact this is a form of MegaMania that's played at a higher speed. And simply, technology and our years of expertise have now put us in the position to do something our competitors can't do and we couldn't do in December of 2000. And that was play a conventional bingo game at a high speed.

However there is no certainty - the Justice Department has always been and continues to be concerned about Johnson Act devices. And the question rolls around periodically whether it really exempts Class II gaming from the Johnson Act requirements. It is clear to us especially with this clarification that was published in the Congressional record on Monday, that at least two of the commissioners agree with the courts that it does provide for there to be an exemption for the use of this type of electronic device to assist in the play of electronic bingo games. And so there's just no risk of new ground here, we're based on proven court-tested cases that we've participated in and in other rulings of other federal judges that have been upheld by the circuit courts. We can't have any assurance beyond that that our great court system has affirmed what our legal staff and we believe to be the case.

MR. GRAVES: Let me say this on that. Clifton is always overly conservative and one reason I'm glad he is because that compensates for these types of surprises.

MR. DAVILA: Okay. I guess my follow up question then would be given that two Commissioners have in essence ruled, and the way they have, I think it would be helpful for us out here to understand the defending Commissioner's problem -

MR. GRAVES: All right. Well, let me talk about that.

MR. DAVILA: - with the company, with the device, you know, whatever it is there seems to be a backdrop here. I mean if we had some color on what exactly his problem is and then there's a follow up to that. You know, why the tribe that got the NOV capitulated to him.

MR. GRAVES: Well, I think I could answer that question. Even though the majority - well, first let me talk - it's hard for any of us to do anything but speculate why the Chairman was so dead-set against seeing these new rules passed, which we believe, really clarify the law, and takes out this big contradiction involving the Johnson Act devices. So we can speculate on why he's like he is or why he's doing this, but I mean there's nothing more that we can do than speculate.

You know, I would say that there are a lot of people in the Justice Department, law enforcement people, and I've said this before - John Ashcroft said not too long ago that you can't just change the rules and expect law enforcement people to accept and follow those new rules, it takes a long time for law enforcement people to adjust. He [Commissioner Deer] comes from the Justice Department as a prosecutor and I think that clouds his thoughts a little bit. I think he sees himself as an enforcer more than an enabler, but that's just real speculation.

But certainly, for some reason he feels that he would like to hold back Class II gaming, and [then] the other two Commissioners push through and pass this new rule. And I think that - I don't think that he's taken this action because he's got anything against Multimedia Games, I think it's more that this was kind of his last chance to take a whack at Class II gaming. I think that's more the case. I'm sure he feels just as strongly and sincerely that it's wrong for the tribes to be able to run these types of games, just as strongly as I feel that it is their right to run these games.

So it's hard to speculate exactly why he's like he is or why he's taking this position. But the fact is that he's taken it and why was it this one tribe that got sent the NOV? Well, I think he saw that after he sent out the warning in order to get the tribes to - really no tribes shut down when he sent out this warning or these threats last week. So once a tribe does get a Notice of Violation, that essentially increases the ante because now he can start saying, "Well, if you lose - you can defy me and go to court on this, but if you lose in court, I'm assessing the fine starting today that you'll have to pay if you lose." So it increases the ante for the tribes considerably.

And I think to answer your question "Why did this tribe decide not to continue to run the game?" This tribe is a tribe that I'd say bends over backwards to follow the rules from what I see and know, and they're just meticulous about that. And, again, it's something that's hard for us to speculate. Clifton, do you want to say something about that?

MR. LIND: Sure. Danny, let me go back to the first question. You know, the difference here between the Chairman's and our position and the position of many of the tribes has to do with the interpretation of what the Congressional intent was back when IGRA was passed by Congress, and with many people going back and reading the Congressional records and the testimony that was read into [the record at] the hearings. And good people disagreeing on what Congress intended to have happen. When the Native American Class II gaming leaders read what Congress intended, it was that the Native Americans were entitled to able to use technological aids in any form to broaden the play of the game. That's how we read it and that's how our attorneys read it, that's what we believe to be the law. It is clear that the chairman and other people look back and say, Well, in 1988, Congress surely didn't know what could be done with technological aids in 1995 and 2000 and 2003 and heaven forbid what might be done with technological aids five years from now."

So good people disagree on the interpretation of this and that's why there's a court system for us to turn to. The fact is if you want a good background on what Montie Deer's thoughts were on that, there is no question that Gordon is correct in what he says. You know, Montie Deer feels in his heart that he is right and he is pursuing his charge of trying to do his job and execute it well. But I urge you to go to the Congressional record or to the NIGC website and read his dissent that he filed. And I'll also encourage you to read the preamble that the other commissioners filed.

I find that they are both well-reasoned and they're both heartfelt and it's just different interpretations of what the Congressional intent was. We are fortunate and believe we're right that the courts will continue to agree with our interpretation and go back to the law. And all four of the judges said, "What is the law? Don't tell me what you think the interpretation was, but what was the law?" That's what our court system is based on and why we had so much confidence in when our legal team tells us we've got a legal game and that we can put it out there without significant risk.

Now the second question is, "Why did the tribe discontinue running this game?" There was a court case several months ago in Oklahoma where a judge ruled that the NIGC could begin assessing fines from the time that it put out a notice of violation. And that it did not have to wait until the courts had finally resolved the issue in order to levy or even collect fines. And so there has been a recent court ruling which has made it more dangerous for the tribes to continue running games because they can a) be forced to give up 100% of the revenue. And, b) be fined in addition to that. So once a tribe is hit with an NOV, it is a very risky and expensive thing now to continue to run a game. And the easier thing for the tribe to do and the politically correct thing for the tribe to do is switch out to another game.

Fortunately, we've used all of this time in the last five weeks to run focus groups and tests and refine the pay tables and the graphics and the graphical user interface that the players use on our new conventional-sequence games. And even though this was a week sooner than we had planned, we thought, we're going to rise to the occasion and get this new game out there for the tribe and so we're going to try minimize the loss of revenue that it has by running our Legacy games until we get this new game out there. I mean, it's understandable to us why the tribe made the decision that it did and it's not in any way a reflection of their loyalty, lack of loyalty. They continue to be dedicated to our company, and we're converting every one of those games as we speak to another one of our games, and by the end of the week hope to have them all converted to the new Reel-Time game which we feel so good about.

MR. DAVILA: Thank you very much, gentlemen.

MR. LIND: Danny, just one last thing. I mean the Chairman's abandoning the protocol of government-to-government discussions was a surprise to everyone including the tribe. In the past, if the Chairman, who is in charge of the staff, and therefore in charge of the enforcement, had a problem with the tribe running the game, they gave them verbal notice. And if the tribe had not responded in two weeks to verbal notice they typically gave them 14 days' written notice before a Notice of Violation was issued.

So the tribe and Multimedia were taken by surprise with this abandonment of protocol. And that's why we believed [what we did] yesterday [when] we put out a press release. We believed that there was not the risk that this would happen because protocol from years of NIGC's dealing with the tribes dictated that it wouldn't happen and that it would not happen precipitously, and we were surprised by that and the tribe was surprised by that. And regrettably, a lot of our shareholders have been hurt and we want to rectify that by returning the tribal income and our income to the level that it was as soon as possible.

MR. DAVILA: Thank you very much.

MR. GRAVES: A lot of shareholders including us. It's hurt us all.

OPERATOR: Our next question comes from Macon Rudisill. Please state your affiliation followed by your question.

MR. RUDISILL: Keene Capital Management. Hi, guys, how you doing?

MR. GRAVES: Well, we're doing pretty good.

MR. RUDISILL: Good.

MR. GRAVES: We put in a hard four days, but everybody is doing great.

MR. RUDISILL: Okay. Just one final question. On the replacement cycle, you know, it's hard I guess to clearly get your hands around the exact time that this would take place and it looks like you've kind of given yourself some room there with about a month. Have you ever had any periods in the past where you've had to do this type of upgrade for the number, you know, on the worst case scenario, [for the number] the units you placed? I mean I'm just trying to get a feel for how conservative -

MR. GRAVES: Yeah. We (indiscernible) how long this takes. Clifton, do you want to answer that question?

MR. LIND: As a matter of course, we do software upgrades throughout the month. And as you know, we have three different primary servers and computer systems involved in our games. There's the host computer that runs the game. There are the in-hall servers that communicate between the hall and the player station and the hall and the host computer. And then there are the player stations in the halls themselves. On a major upgrade like this, we prefer to do them not with a download of software, but with a visit to the halls, because any time you roll out a new system there is training required that we need to do with the staff for a number of days.

Now we have rolled out network-wide changes in very short periods of time, meaning in a matter of hours, by downloading it remotely from central. This is going to be a more systematic roll-out because it involves actually changing out the in-hall server. We're going to remove the MegaNanza server and we're going to put in a more powerful server to communicate with our game host and facilitate the running of a linked game. So there has to be a hardware change there.

We have to change out glass in many of the games where the pay tables and the bingo patterns will have changed because of the new game that we're running. Someone always asks, "What does a glass change cost?" It costs $40 to $50 per machine to do a glass change. And then it takes five minutes for us to load - to erase the old hard drive, load new software on it, and run the verification on the new software to make sure it loaded correctly. So we can do one major hall a day or we can do several minor halls a day with the same installation team as it moves around from hall to hall.

So if everything went perfectly, we could take care of the entire system in a little over two weeks. A more convenient time, without working people 24 hours a day, is probably three weeks, and a worst-case estimate would be four weeks. But we're fortunate enough that the tribes that have been affected are primarily Oklahoma tribes, and we have field staff across the United States, so we're flying in additional resources tomorrow to help us with the roll out of these new games. So we expect it to go smoothly and expect it to go quickly with a lot dedicated hard work from our field service staff.

MR. RUDISILL: And just a clarification on a couple of the analyst notes, [which] mentioned that the down times might create an opportunity for some of your competitors. How do you rebut against those comments.

MR. LIND: Gordon, may I handle that? There is no question that we have competitors who have machines sitting in warehouses that we have displaced. So there are many of those competitors who are in our customers' halls today trying to get our customers to take out our machines and put in their machines. And some of those competitors will be successful because - I just got off a sales call before I got on this call and there are customers who are concerned about the NOV being issued or saying, "Can you be in our hall tomorrow and be changing out our games?" And the answer is, of course, that we cannot be in all the halls tomorrow changing out all the games.

So there is no question that we will lose some floor space initially to competitors. They are competitors that we have displaced before and we intend to displace again when we get all of the game faces changed over to Reel Time Bingo. We think we will do just what we've done over the last 12 months and that's move competitors' machines out of the hall and move our machines back in. So yes, there will be an initial loss of floor space. Yes, less desirable games will go into the hall and I will tell you we have a more desirable game in Reel Time Bingo to replace them yet. And our field tests, our focus groups, and I think our history will show that. The transition from a bonanza bingo game to a conventional sequence game will be nearly transparent to the player, and therefore we think we will get back the floor space that we might lose here in the next two or three weeks by not being able to respond quickly.

Right now, we have had only one large tribe and a number of small locations who have stopped running the game. And only one of those tribes is on schedule right now to have all of those machines replaced with our new Reel Time Bingo. And if we're successful in receiving the standstill order from the courts, we may have more time and roll these games out over a longer period and may not have to have any other tribal customers lose revenue by going to a competitor's game. So we're hopeful that the courts will give us some latitude here and give the tribe some latitude. But we intend to get the floor space back exactly the way we got it the first time and that is to earn it back with better games.

MR. GRAVES: Thanks, Clifton.

MR. RUDISILL: Thank you.

OPERATOR: Our next question comes from Louis Corrigan. Please state your affiliation followed by your question.

MR. CORRIGAN: Hi. Aesop Capital. I had a few questions. First, I'd be interested to know if there has been any insider buying or selling in the last week?

MR. GRAVES: Any insider?

MR. CORRIGAN: Yes.

MR. GRAVES: Not that I know of. I don't know. Clifton, do you know of any?

MR. LIND: My family has been buying stock, Gordon.

MR. GRAVES: Okay.

MR. CORRIGAN: In the last few days?

MR. LIND: Yes.

MR. CORRIGAN: Okay. In talking to the NIGC, it sounds to me as if there's nothing holding them back from issuing an NOV to every single one of your customers. Would you agree with that?

MR. GRAVES: Yeah. I think that's right.

MR. CORRIGAN: Okay.

MR. GRAVES: The only thing keeping them from it is if they don't have the resources, I think. But if they got the resources from some place, then that's the reason we put those numbers out there, is assuming that did happen.

MR. CORRIGAN: Okay. And the numbers of 8 to 10 cents impact in Q3, does that factor in the added cost of having to upgrade all the games?

MR. GRAVES: Yeah.

MR. LIND: Uh-huh.

MR. GRAVES: Yeah. I think so.

MR. CORRIGAN: It's not just the revenue impact?

MR. GRAVES: No. I think it includes it all.

MR. LIND: We consistently expense glass replacements, and we as a normal course of business do upgrades and glass replacements as part of our normal maintenance. Fortuitously, our most popular games out there do not require a glass change. We have duplicated the pay tables [on screen] at least to the extent that they're displayed on the glass flares and so there will not be any glass changes required on over half the machines, so it's an easy transition for us to the new games.

MR. CORRIGAN: So you wouldn't expect to have to capitalize or take any sort of one-time charge for this?

MR. LIND: That is correct.

MR. CORRIGAN: Okay.

MR. LIND: We will not take any one-time charge and we will not capitalize any glass changes. Now, as a normal course of business, we upgrade call servers once a year and we're using this opportunity and have scheduled as part of our normal maintenance, an opportunity to go to dual-processor servers. And so we will go ahead and accelerate this with the game change, but server replacement once a year is a normal part of our business.

MR. CORRIGAN: Okay. And in your press releases you continually refer to the fact that Chairman Deer is the ex-prosecutor for the Justice Department. And I guess that's there for the reasons that you've mentioned on the call, but I guess a larger issue is do you think he is acting in some way out of the desire of the Justice Department to shut you down or to cause you and your customer so much pressure that you have to stop selling the games all together?

MR. GRAVES: Well, I think that's a common tactic that law enforcement people have used in the past. Again it's hard for us to speculate on that.

MR. CORRIGAN: Have you received any sort of notification or anything like that from the Justice Department?

MR. GRAVES: No.

MR. CORRIGAN: Okay. And finally you had mentioned in your press release that the new ruling from the NIGC ought to create enhanced competition on the market. And since you have disproportionate share of the Class II market at the current point, do you foresee the need to trim your guidance for next year or to adjust -

MR. GRAVES: No. Definitely not.

MR. CORRIGAN: So you would not expect to see actually that your competitors -

MR. GRAVES: - but I don't think we'll see - you never know, but I'm not expecting to see - I don't - if it'll be anything it'll be higher next year. It'll take longer than that for the competition to get in there and have an impact in my guess, but that's a wild guess, you don't know, we don't know this, but that's my guess. Some of the analysts have talked about this and if you look at some of the things they've written on this it's pretty good.

MR. CORRIGAN: Okay. Thanks very much.

MR. GRAVES: Uh-huh.

OPERATOR: Our next question comes from Steve Neren. Please state your affiliation followed by your question.

MR. NEREN: Fahnestock and Company. Gordon, you and Clifton have spent a lot of time kind of defending this Chairman here. I would like you to discuss if possible the Justice Department's response to your lawsuit, which I believe came out on Friday, which I believe is in direct confrontation with what Mr. Deer did. And also possibly if you would give us some feeling about the conflict between Mr. Deer's action over the past few days which seems to be contrary to what the Commission vote was on Wednesday with his two fellow Commissioners.

MR. GRAVES: Steve, I'm going to run catch an airplane here and I apologize for having to run. But I'm going to duck out and let Clifton answer that question.

MR. NEREN: You're trying to get off on that one.

MR. GRAVES: First, I find it a very good question. Clifton, if you'd answer that I'd appreciate that and I really appreciate everybody's support and Brendan and I are going to run and catch an airplane.

MR. NEREN: Clifton, can you help us on that?

MR. LIND: Sure, Steve. First, it is correct on Saturday, our lawyer received notice that the government had filed a motion to dismiss our lawsuit, among other things. The government claimed that NIGC had not taken final action insofar as MegaNanza was concerned. Obviously, it is again speculation, but it would appear reasonable to interpret that as meaning there was a disconnect between what was going on at NIGC and what was going on at their law office, the Justice Department. And so I think that it would be more difficult for them at this time to use that as part of their pleading. They also pleaded that we did not have standing because NIGC does not have any authority over us. And of course we've seen today and we saw when the Advisory Opinion came out, that even a government agency that doesn't have authority over a commercial enterprise can have a huge financial impact on its future by making an advisory opinion. So we did feel when we filed the lawsuit and [still] feel today that it is right for the courts to decide, certainly since the tribes have intervened. And that is based upon these threatening actions of last Friday and the NOV being issued yesterday. You know, our team believes and the tribes' legal teams believe that they now have standing to enter this case. And so we think that the court will not be very sympathetic with the Justice Department's motion to dismiss our lawsuit.

Your second question had to do with the apparent disconnect between the Chairman and the two Commissioners. And if you again read his dissent that he filed to their adoption of these rules and the publication of these rules, which will become law or become official in 29 days now, it's very clear that there's just a disconnect. He did not feel that the original rules were ambiguous and he felt that they clearly - Congress clearly intended to give the NIGC the right to pursue the Johnson Act and other facsimile issues. Quite frankly, good people disagree on that, not only our legal team as you would expect, but the tribal legal team as you would expect. Many judges and scholars have disagreed -

MR. NEREN: Clifton, these rules that were pronounced in the Federal Register, written in the Federal Register on Monday, become official in 29 days. He's going to be gone by then or he's going to be gone shortly thereafter.

MR. LIND: Well, sir, we understand that he'll be gone some time during August and so he's not going to be around to se this challenge through to a conclusion. That is correct.

MR. NEREN: So what's to guarantee that there will be a challenge? I mean if the two members of the commission who will still be there have voted to establish these new rules, the person who is challenging these rules is going to be gone.

MR. LIND: Well, these rules we believe will become official rules. We are told by our counsel that [halting the process] would take something tantamount to Congress stepping in right now and stopping these from becoming the new rules and becoming effective, so we don't believe there will be an effective challenge to these rules.

MR. NEREN: In that case, to some degree, the very changes you're making here, I'm not saying you shouldn't do it [make the changes], but the fact is, that the way I read the rules is it makes MegaNanza legal under the present conditions anyway.

MR. LIND: Yes. We certainly felt it [MegaNanza] was legal before and we think that argument is only improved by these rules. And so certainly in the pleadings that were filed today, the tribes and Multimedia both asked the judge to give heavy consideration to the fact that these new rules clearly, in our opinion, make MegaNanza a legal - if not a bingo game as we contend, [then] a game similar to bingo under our reading of the rules. So, Steve, I think you're on target there, but that doesn't solve the problem that we're in today that the chairman has issued an NOV to one of our customers and we have to respond to that. It is not clear what the future holds for MegaNanza. Reel Time Bingo may prove to be so popular that it's not necessary to pursue this from Multimedia's standpoint, and the tribes now have standing and they also have a decision to make and a role to play in their decision whether or not we go forward and make new law concerning Class II gaming.

MR. NEREN: By the way, just before I forget this, there has been concern here, somebody raised it before about some of your competitors coming in and getting floor space. The way I understand it - the competition, even though [Mr. Deer] didn't issue an NOV on any competitor of yours, they have the same problems with their machines as supposedly you have with MegaNanza.

MR. LIND: I mean, we have tried to take the high road and not knock any of our competition out there. But we clearly think there are gray-area machines that are being run and wonder why the Chairman chose to pick on MegaNanza when there might be other machines that aren't as clearly bingo games or games similar to bingo. But certainly, there are four small companies probably five who have knocked off [copied] MegaNanza now. As you know, Steve, it is our goal every 18 months to obsolete any bingo system that we put out there. You know we've been running this system for nearly 18 months now, so we expected it to be knocked off. That's why we've been working since January of last year on Reel Time Bingo.

MR. NEREN: Thank you, Clifton. I hate to say this, but there's something capricious about what this man did and it's almost too bad that you can't sue him or at least try - I know you can question whether his actions were truly because he believed that there was something wrong here.

MR. LIND: Well, Steve, I understand that's the way it appears. I choose to believe that Chairman Deer has no evil in his heart and I think he's a man of honor and integrity, and he may be frustrated by the fact that his view has not been shared either by the other Commissioners or that Indian Country (SIDE ONE ENDS) - I'm sure that the chairman found that very frustrating.

MR. NEREN: Well, the fact that he's leaving in a matter of five or six weeks certainly would indicate that it's his last hurrah.

MR. LIND: I understand. Steve, he's been a loyal dedicated public servant for many years now and I wish him well in his new endeavors.

MR. NEREN: Thank you.

OPERATOR: Our next question comes from Ronald Rotter. Please state your affiliation followed by your question.

MR. RONNER: Ron Rotter with RLR Partners. Hi. It appears it's possible the future of the company might be with Reel Time Bingo versus MegaNanza. So I'd like you to tell us if you could, Clifton, to the player, what the difference in the play is going to be? And also if you could address the question, you had indicated in the release that it indicated that the hold was going to be 96% versus 93%, which would indicate that you need almost as much as double the play just to get the same net win to the company. Is that correct? And what makes you believe that you can get that much additional playing, if you could just describe to the layperson, to the player, how it's going to appear different.

MR. LIND: Ron, certainly you ask if something is correct, I can't give a yes or no answer to what you said. Let me say that the future does we think lie with Reel Time Bingo and other linked games because of the progressive opportunities - both regional and nationwide progressives that these games offer that the other games, the in-hall games did not. When we first brought out MegaNanza 65 and then replaced it with MegaNanza 30, our target payout was 96%. As you as a devotee of MegaNanza probably know, we played under a very strict game definition that the game would always end on 30 balls. And that the game-ending pattern would be achieved on 30 balls and that there were always the same number of cards, 253 cards in the deck. That game was a very popular game. It was also a game that very astute players could play a strategy and improve their likelihood of winning.

Over the last six months, we have deployed several revisions to that game and during that six-month period the hold has gradually fallen and that is because we introduced a larger number of bingo cards and therefore there were larger standard deviations and statistical variations in the actual pay-outs that were achieved. So actually the hold has been falling, and at the same time our focus groups have shown that our players are very astute. That if we change the payout by one-half of 1% of the players, our very dedicated players can recognize that.

So one of the things we're most excited about is we're going to get the payout on Reel Time Bingo back up to where the payout was on MegaNanza when we first brought it out. The game plays just as fast as MegaNanza 30, and so we expect to see holds actually go up from their current level because the higher the payout the more prizes you can play, the more the customers enjoy it, the more fun they have, the more it becomes entertainment as the number of winning experiences goes up. So we're excited about the payout and we expect to see the hold go up. Our average player comes to the hall with X amount to lose and we find that they play more and they spend more if the payout is higher on their game and they can have an hour and a half or two-hour experience rather than having the 30-minute experience. So we're excited about the higher holds.

Number two, you asked what difference will the players see. The players will see these same game faces. However this is not a 30-ball game. This is a game that will vary depending on the number of cards that are sold, and let's say one game may have an expected winner on the 19th ball. And in another game it might be the 45th ball. All of those games are spit out in very rapid sequence, and so to the player there will be no delay. The balls are being spit out in a time that the player has normally been waiting to daub the ball, so the design staff and the technology team have done an excellent job in concealing the delay, so that the player sees no game delay at all. The only change in the game face they'll see is the spinning reels will be the same themes that they have always seen before. But in addition, we're getting ready to introduce a whole new line of Bally themes including a couple Bally progressives.

I'm sure you're familiar with the Bally game faces and we think that they will help us, particularly in the progressive area. But other than that, the only difference a player will see is the different colored bingo card and the fact that the bingo flashboard as we call it will show not 30 balls, but the actual number of balls it takes for the winner to achieve a winning pattern. So as I've said before, it will almost be transparent to the player. That is why we always have our - and it would likely be transparent to a regulator who can't see behind the screen to what the real fundamental bingo game is that's going on. So that is why we have all of our games certified by gaming laboratories, so that we could give regulators an independent description of how the game is actually working.

MR. RONNER: Thanks, Clifton.

OPERATOR: Our next question comes from Joel Raman. Please state your affiliation followed by your question.

MR. RAMAN: Berger Capital. A question just on the numbers, I want to make sure I understand how this works and you guys get to the 8 to 10 cents. If you're saying that in a worst case the sort of 4,000 machines go down for four weeks, right, and we're talking about like, a $180 hold, let's say just to make the math easy. How do you get to the 8 to 10 cents? I mean can you just walk us through that a little bit more, because I get 4,000 machines times 180 bucks is, you know, $720,000 a day times call it a month, that's 30 days which gets me to, like, $21 million in revenue, which over the I guess, 30% hold we get on that gets us to $6.5 million, which on the 14.8 million shares or whatever it is gets us to a higher number than the 8 to 10 cents. So can you just kind of walk us through how you guys get to the 8 to 10 cents that you guys were talking about before?

MR. LIND: Yeah. I think that was Gordon's example. And the fundamental thing that you missed in Gordon's example, it was not my example or Craig's example, by the way, but Gordon's example is certainly one way to look at it, was that he was assuming that we shut all 4,000 machines down today and that we had them all running again in 30 days. So that the average number of machines was 2,000 that was down. And so that was the biggest disconnect in your numbers and his numbers because we're immediately rolling out the new games. So even if all 4,000 of them shut down today, which is far, far from the case - remember we've only had one major tribe and a number of small tribes that have taken the precaution of shutting down the games. But even if that were the case, we immediately began rolling out the games. And so new games come online immediately, so that the average would only be 2,000. Actually, based upon the support that we've had today, we don't think it's going to be anywhere near that number of machines that get shut down, and we just go in and do a reinstall of the software.

MR. RAMAN: Okay. I just want to be clear. So the 8 to 10 cents doesn't exactly - because even if I use the 2,000 machines, right, and take that as an average instead, that still comes to twice that 8 to 9 cents number. There's not actually - is there sort of any kind of top down math that you guys can run real quick, just back of the envelope that gets us to the 8 to 9 cents that Gordon was talking about?

MR. LIND: Well, we of course - Craig and I run bottoms up math and we stayed up nearly all night last night doing forecasts and different scenarios. So the range that Craig gave you was based on thorough analysis and -

MR. RAMAN: Can you just walk us through the analysis? I would probably be helpful for all of us.

MR. LIND: Well, first I don't on the top of my head agree with your math and again wasn't following - Gordon had done that math in his head and I am not familiar with what calculations he did to get to there. But needless to say your right calculations are correct, but I think - I mean are you missing the fact that we're only talking about having on the average in that worse case 2,000 machines down for one month of the quarter?

MR. RAMAN: No. I think I'm running exactly that. I thought maybe you guys could just give a little more color on that 8 to 9 cents number because I just couldn't tie to it. But it's okay, no big deal.

MR. LIND: Okay. Well, let me say that Craig and I put considerable effort into running multiple scenarios from the bottoms up and that we support and stick with the range that was discussed.

MR. RAMAN: Okay. But you don't want to walk through it right now.

MR. LIND: Not from the top down and I want to say that as a result of today I am more confident that the delta from our previous guidance is going to be smaller rather than larger insofar as that range is concerned, because of the number of tribes who intend to continue to run these games. And, again, Gordon's example assumed a worst case that all 4,000 of them got shut down.

MR. RAMAN: Okay. Sounds good. And I didn't mean to spend so much time on that.

MR. LIND: Okay. No problem.

MR. RAMAN: How many machines are installed in Chickasaw halls?

MR. LIND: There were a little over 1,200 machines in the Chickasaw halls.

MR. RAMAN: And can you give us sort of how many are installed between the Cherokee and the Choctaw as well?

MR. LIND: That is confidential information, but let me say that they are the third and the fourth largest customers that we have after the Chickasaws.

MR. RAMAN: Who is the second?

MR. LIND: It is another Oklahoma tribe that wishes to remain confidential.

MR. RAMAN: Okay. And there's only one of those tribes have removed the games - have sort of shut down the games thus far, right?

MR. LIND: Only the Chickasaw tribe and five smaller operations that are all under the advice of one gaming commissioner. And so none of the larger tribes, none of other our major customers have shut down.

MR. RAMAN: And in the feedback that you're getting from the Chickasaws, what percentage of the machines, the MegaNanza machines that they had, so of the 1,200 machines, how many do you think they will turn over to the Reel Time Bingo?

MR. LIND: As of this time they have asked us to reinstall Reel Time Bingo on every one of them.

MR. RAMAN: Okay. So 100%.

MR. LIND: Uh-huh.

MR. RAMAN: Okay. Good. And then if you could just provide a little bit more color on - because the last time we spoke about this it was more of a flip of a switch kind of thing that we were talking about, and now obviously it's something that takes a little bit longer than flipping the switch. Is the difference in sort of flipping of switch and in the four weeks that you guys are conservatively giving us - is that just because it kind of all happened at once and it's going to take time to kind of go to each place and do that?

MR. LIND: Yeah. In the Notice of Violation, the chairman has issued a list of steps that this tribe has to go through to avoid a fine. And one of the steps that it has to go through is that the machines that were plain MegaNanza have to be physically removed from the halls. So we included in this time enough time for us to go and remove the machine and replace it with another machine.

MR. LIND: (indiscernible)

MR. RAMAN: The machine then is basically the same machine, but with a different glass and all that stuff you're talking about before?

MR. LIND: We will remove the machines from this particular hall that is under this NOV and only this machine. And we will comply with the letter of the law for this tribe so that the Chairman cannot come back and say they didn't comply with the NOV.

MR. RAMAN: Okay. So you do have to put in new machines, like actual new units of machines, it's not just a software and a server thing?

MR. LIND: No. The only thing that is required is a software change and some glass changes, but as a courtesy to this tribe and out of respect for the Commissioner, we intend to actually remove the machines, put in other machines that are coming off the line, and then take these machines and put them elsewhere where MegaNanza - where the tribe is not under the mandate to remove the machines.

MR. RAMAN: So to try to qualify it a little better. You were given sort of a $40 to $50 for the glass kind of cost. If that sort of necessitates then 1,200 new machines to be installed, what's kind of the cost of those 1,200 new machines that you're going to have to put in there for you guys?

MR. LIND: Well, we always in our model - it varies depending on whether we manufacture it or whether we buy it from a manufacturer. But we've always assumed in all of our models $5,000 a machine, but I mean we have in the pipeline - these machines are ready to go to fill orders, firm orders that we have for either casinos that are open now or casinos that we expect to open in the next 120 days. So this is no additional cost; remember all of our machines are rental machines and so we'll just pull the old one off of the floor, refurbish them, clean them, and put them out in a new location.

MR. RAMAN: Got it. And then the last question is originally I think you guys had given I think in one of the press releases I think a June 15th date for when the Reel Time Bingo games would be ready. What sort of happened between then and now to push it back a little bit?

MR. LIND: In our original focus groups that we had at each of the tribal locations, the players made suggestions that we thought were worthy of incorporating in the new graphical user interfaces, so that took us some time. In addition, two weeks ago I made the decision to raise the pay tables on these games and it was my fault for delaying that decision and it caused a one-week delay in the game because we had to recalculate the math and determine new patterns to agree with the math. And so changing the pay tables has cost us another week. Totally my fault.

MR. RAMAN: Got it. Okay. And then just to summarize then you guys are sort of saying a $1.60 to $1.70 for the year not including the 3 cents from the offering and next year sort of maintain where it was prior to all of this?

MR. LIND: Right.

MR. RAMAN: Excellent. Thanks very much for having the call.

OPERATOR: Our next question comes from Rob Knight. Please state your affiliation followed by your question.

MR. KNIGHT: Hi, gentlemen. How are you today?

MR. LIND: Fine, thank you.

MR. KNIGHT: And thanks for taking the call. Did the tribe that got the NOV join you in your lawsuit today?

MR. LIND: Yes, they did.

MR. KNIGHT: They did. Okay. Can you also give me an idea whether you'll have to capitalize any software costs for the Reel Time Bingo?

MR. LIND: Under standard FASB rules there are a minimum - any time costs are specific to a new system or a new product, it is our policy to be very aggressive in writing off software costs we have typically, and Craig is here. But I would say 85% of all of our software costs get written off. If any costs are capitalized, if they're associated with a game and they get written off over the next 12 months. If they're associated with the system, they get written off over 18 months. And so we have very little in the way of capitalized software.

MR. KNIGHT: How much do you have in capitalized software now if I could ask?

MR. LIND: I would say that certainly less than a million dollars. Craig thinks $500,000.

MR. KNIGHT: Okay. The Chickasaw hall, is that managed by -?

MR. LIND: They're all self-managed by an outstanding in-house manager.

MR. KNIGHT: Okay. You had a management agreement though for your machines there, did you not?

MR. LIND: No. No.

MR. KNIGHT: You didn't?

MR. LIND: No. We are not a management company. We again supply machines under rental agreements.

MR. KNIGHT: Okay. So there was never a management agreement with Chickasaw hall?

MR. LIND: That is correct.

MR. KNIGHT: Okay. Thank you.

OPERATOR: Our next question comes from Richard Klein. Please state your affiliation followed by your question. Mr. Klein, your line is live.

MR. KLEIN: Hello.

MR. LIND: Hello.

MR. KLEIN: Hi. Kensington Management. You got it, I'm worn out and my questions are all answered, but thanks for having the call.

MR. LIND: Thank you.

OPERATOR: Our next question comes from Dave Scially. Please state your affiliation.

MR. SCIALLY: West Highland Capital. My appreciation as well for the call. A couple of questions for you. First of all, I had a hard time understanding if Reel Time Bingo is a generic family of games or is it a specific game itself?

MR. LIND: Reel Time Bingo is the first game of our new standard sequence games. Just like when we came out with a MegaNanza 65, and then a MegaNanza 30, and then a Count Down Bingo™ and a Two-Step Bingo™, all of which were in the bonanza family of games.

MR. SCIALLY: Okay. That helps me understand that. And then secondly, Clifton, and this is probably not going to be a good time to ask this question, but you said that your family had been buying stock. Can you give us any color about the timing of those purchases and what size we're talking about?

MR. LIND: It is both my extended family. Let me just say my family has, ever since the Advisory Opinion came out, we have felt that the stock was a value.

MR. SCIALLY: Okay. That's fair enough. And then you had mentioned I guess a movement or a motion by the NIGC or Montie Deer to dismiss -

MR. LIND: Yeah. Actually filed by NIGC through the Justice Department's lawyer.

MR. SCIALLY: What would be the time frame for the judge in the matter to render a decision about that motion?

MR. LIND: They just filed their motion for dismissal on Friday. I believe we have 20 days to respond to that, and so we of course, have had our legal team devoted to the other matters since Friday. And if we can get Tony and our other members of our team some sleep tonight, I'm sure tomorrow they'll start working on the response for that. We'll have it filed in a timely manner and then it will take the judge sometime to respond to it. However, I mean there is little question among our legal team that the actions since last Friday will make it difficult for a judge to be very sympathetic with the Justice Department's motion to dismiss.

MR. SCIALLY: Thank you for that answer. And then lastly would your Board consider a buy-back using some of the cash that you have on hand?

MR. LIND: There is no question that we have been a purchaser of stock in the past. And there is no question that our Board and our management team feels the stock is of value today. Gordon and I have approved ,along with Craig, the authorization to do some repurchases. We have never wanted to influence the market direction of the stock by our purchases, so we have not repurchased any stock at this time, but we certainly feel that it's underpriced. And with the cash that we have, we are looking very carefully at our cash needs, particularly in light of the fact that we may choose to not go forward with any sort of secondary offering at the present time. So we want a few more days to study our cash needs.

Gordon and Brendan and most of the team are on the airplane right now to go visit with the New York Lottery. We have other lottery opportunities that we are working on and we don't want to buy back stock today and then force ourselves to have to go borrow money here and the immediate future, so we're going to study that very carefully. But suffice it to say that management and the Board feel the stock is undervalued at the present time.

MR. SCIALLY: Terrific. Thank you so very much for hosting this call.

OPERATOR: Our next question comes from Todd York. Please state your affiliation followed by your question.

MR. YORK: Hi, guys. I still have a couple of questions about some of these Oklahoma gaming facilities particularly the Cheyenne Arapaho facility and the Seneca Cayuga facility -

MR. LIND: Right.

MR. YORK: - have they decided to shut down using any of their Multimedia games?

MR. LIND: They discontinued today running the MegaNanza games. Those two facilities - we are under a memorandum of understanding and a test with those. It is our understanding from discussions with their lawyer today that they are challenging NIGC from the standpoint that those three tribes feel -

MR. YORK: I just mentioned two tribes.

MR. LIND: Well, there are a group of four locations that are patrolled by the same gaming commission and attorney. And they all feel that they have the right of self-determination and I am paraphrasing. I'm not a tribal lawyer right now, but their lawyer told our lawyer this morning that they are petitioning NIGC to be allowed to continue to play the games without threat of a fine because they are under the agreement with us, that memorandum of understanding and confidentiality agreement, whereby they are conducting a test of our games. And there is a provision under IGRA to allow tribes to conduct tests of games and so they feel that they should not be subject to any threat. But we are told by their attorney to avoid any fines. They have asked the NIGC for clarification of that.

MR. YORK: So are you saying that these are the sites that are testing the Reel Time Bingo right now?

MR. LIND: These are sites that are in a test for Two Step Bingo, which is a bonanza bingo game that we specifically developed to their gaming commission specification.

MR. YORK: But go back to what you said at the beginning. So they went ahead and shut down these games.

MR. LIND: This morning. That is correct.

MR. YORK: So, can you give us a number about these four tribes? About how many games it is in addition to the Chickasaw.

MR. LIND: Just a round number, it appears to be about 250 games.

MR. YORK: So we're looking at 1,450 games plus these other small tribes that you were talking about or these small tribes -

MR. LIND: There are a total of 1,400 machines that as we speak are not running. The Chickasaw games are in the process of conversion, but there are 1,404 that were shut down since the rule came out on Friday. We're in the process of putting the 1,200 plus Chickasaw games back up even as we speak. That started this morning. So if we get all 1,200 plus of the Chickasaw games then there will be only 200 to 300 machines that aren't running today.

MR. YORK: And let me ask you a question about the Reel Time Bingo. Just real fast to address what Penny Coleman put in her opinion. I'm just looking in here about the drawing. You know part of - in her opinion she said that the games were drawing the bingo cards before the players were playing now. I know it says real-time in the game, but can you assure us that the real-time is doing this, so when a customer plays - puts their money in, then the cards are drawn or are the cards still drawn beforehand?

MR. LIND: No. The player buys his card and then the balls are drawn. That is for Reel Time Bingo. That is the reverse of what happens in bonanza bingo games where the balls are drawn and then the cards are sold to the player.

MR. YORK: Now do you also anticipate anything here about - here it says if the player fails to daub their card within a specific short three to ten-second time period, any prizes they may have won during the game are forfeited to a progressive prize or to a fund that is given to a charity. Do you foresee any problem with that?

MR. LIND: That is not consistent with the versions of the games that are running today. That is -

MR. YORK: But it will be consistent with what's being installed at the Chickasaws as of today right now?

MR. LIND: The games that are being installed at the Chickasaws today are MegaMania, and if a player fails to daub -

MR. YORK: So they're not installing Reel Time Bingo. I guess I was misunderstanding. They're going to be installing old MegaMania games.

MR. LIND: I told you that today they were installing Legacy bingo games, which is primarily MegaMania. They're going to run those for 24 hours, and tomorrow we're going to begin installing Reel Time Bingo.

MR. YORK: Okay. Thank you.

OPERATOR: Our next question comes from Fred Overhausen. Please state your affiliation followed by your question. Mr. Overhausen, your line is live.

MR. LIND: I think we should go on to the next.

OPERATOR: Okay. Our next question comes from Charles Dietz. Please state your affiliation followed by your question.

MR. DIETZ: Private Investor. Question. Has there been any feedback from New York? I heard that some of your executives are flying there. Have they expressed any concern about what's going on with the current situation?

MR. LIND: They are fully apprised of the current situation. We would be surprised if there wasn't some concern about the current situation. The fact is that it would certainly be one of the topics that we discuss in our meetings tomorrow, but we are moving ahead toward contract.

MR. DIETZ: Thank you.

OPERATOR: Our next question comes from Steven Angeli. Please state your affiliation followed by your question.

MR. ANGELI: Wellington Management. What is your best guess as to when you could typically in this kind of scenario, and you've gone through it in the past I believe, get the temporary injunction against the NIGC's enforcement?

MR. LIND: Well, our lawyers are arguing that right now even as we speak, and I have a message from them. Regrettably, the judge who is handling the MegaMania case is out of town for the week, and a magistrate has been assigned to hear the pleadings today. We would be surprised if a magistrate would take action in the absence of the judge. The judge will be back in town by Monday. However, we hope that the magistrate will confer with the judge and that there will be some resolution this week, but we just can't speak to it.

MR. ANGELI: Okay. Thank you.

OPERATOR: Our next question comes from Marty Dehen. Please state your affiliation followed by your question.

MR. DEHEN: Capital Suisse Securities. Hi, Clifton.

MR. LIND: Hi, Marty.

MR. DEHEN: I wanted to ask a couple of questions. One, how big is the potential size of the New York Lottery deal? How many machines?

MR. LIND: Well, Marty, the New York Lottery contract was divided into two different acquisitions. We were the successful winner of the central system. Again, we are foreclosed from providing any machines.

MR. DEHEN: Okay.

MR. LIND: We get a fee for operating the central system and providing the network for the player stations to hook up to. There has been various forecasts. The lottery asked all of the bidders to assume that there would be 9,750 machines hooked up to the central system. There are also forecasts that will show during the last of the contract that [number] will grow to over 20,000 machines. But other vendors, the usual suspects, will be providing those machines and causing them to interface to our communication protocol. And we will be providing the outcome to the machines and then they will be displayed in the normal video lottery manner.

MR. DEHEN: Is your fee based on the number of machines?

MR. LIND: Our fee is based on revenue.

MR. DEHEN: Okay. I haven't heard much about the Seminole deal. They provided a big part of the earnings per share in the quarter ending in December. What's the likelihood of getting the Seminoles going with the Reel Time Bingo?

MR. LIND: We had a very successful test, which was what we had agreed, is to run a test for 90 days, since the Seminoles are very successful. Regrettably, we were not able to come up with a business model that fit our needs and was acceptable to the great Seminole nation. We have an extraordinary high degree of respect for their tribal leaders and particularly their gaming operators. But we do not have any business from the Seminole nation in our forecast for either this year or for next year. We continue to try to work on that and we'll continue to try to work on that, but I think it is not likely that we will find a business model that suits both of us.

MR. DEHEN: And the last question, the Reel Time Bingo, you aren't expecting any resistance in California on that are you?

MR. LIND: Reel Time Bingo is so clearly a Class II bingo game and supported by the MegaMania cases that we expect absolutely zero resistance to that. Now each one of the tribes in California that has a dilemma with a limit of 2,000 machines and has more players than it has machines, will make its own independent decision on whether or not it will put in Class II gaming. We, of course, think that it is in their interest to do so. All of the tribes have a contract renegotiation coming up next year, and we know some of the tribes will choose not to put in Class II games because they don't want it to affect their contract negotiations. Others are very enthusiastic about us putting in Reel Time Bingo in the immediate future. So we expect the tribes to make different decisions depending on their independent situations, and we respect both their sovereignty and their right to view that situation, you know, in what is their own best interest.

MR. DEHEN: Their restriction is only on Class III slot machines. They're really unlimited in number of Class II machines. Is that correct?

MR. LIND: I'm sorry, Marty, you bleeped out.

MR. DEHEN: Oh. Okay. I said the -

MR. LIND: I think your question - what I heard was whether or not their restriction was on Class II machines or it was on total number of machines. Is that correct?

MR. DEHEN: Yes. And I also wondered if there were any limitations on the number of Class II machines.

MR. LIND: Well, of course it is - many of the tribes feel that the state compact applied only to the Class III compacted machines. In the past there has been some - in the state government who have viewed that the restriction was on all machines whether they were Class II or Class III. The tribes that we're talking with do not accept the state's view of that. There's not a clear answer to your question. The tribes think there is no limit on Class II machines. Some members of the state regulatory agencies feel that there are.

MR. DEHEN: So the rules that came out yesterday don't really pertain to California or did they help clarify it?

MR. LIND: They clarified to Class II gaming throughout the United States, but I thought your question was were there any restrictions on the number of Class II machines that the California tribes can run in addition to their Class III machines. And I've said that our tribes that we're dealing with say there are no restrictions, but there are some state regulators in California who think that possibly there are restrictions. That the 2,000 machine limit should apply to all machines whether they're Class II or Class III.

MR. DEHEN: Okay. Thanks, Clifton.

MR. LIND: Thank you, Marty.

OPERATOR: Gentlemen, our final question comes from Richard Keim. Please state your question, sir. Mr. Keim, your line is live.

MR. KEIM: This seems to be a duplicate [question] with the frustration of trying to get on, but thanks again.

MR. LIND: Sorry about your frustration there. Thank you so much. Okay. Well, we thank everybody for spending these two hours with us here. We appreciate your loyalty in the past. We ask for your loyalty in the future. I can assure you management and the entire staff is working diligently to not only preserve MegaNanza in the other halls, but also to get Reel Time Bingo out there. We appreciate the support of our tribes. We want to welcome our new shareholders onboard and we're sorry for those that took this bad news to heart and are no longer our shareholders. We think that they've missed an opportunity. We are committed to rebuilding shareholder value and look forward to our next conference call when we'll be talking about the third fiscal quarter earnings. Thank you very much.

OPERATOR: Ladies and gentlemen, a replay of this call will be available starting today, June 18th, running through June 25th. To access this rebroadcast you may do so by dialing 1-800-428-6051, international dialers, 973-709-2089 with a pin number of 247925. That concludes our conference call for today. Thank you all for participating and have a nice day. All parties may now disconnect.

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