<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    Form 10-Q

                 |X| Quarterly Report Under Section 13 Or 15 (d)
                     Of The Securities Exchange Act Of 1934

                For the quarterly period ended: December 31, 2001

             |_| Transition Report Pursuant To Section 13 Or 15 (d)
                     Of The Securities Exchange Act Of 1934

                 For the transition period from ______ to ______

                         Commission File Number: 0-28318

                             Multimedia Games, Inc.
             (Exact Name of Registrant as Specified in its Charter)

              Texas                                   74-2611034
    (State or Other Jurisdiction                    (IRS Employer
        of Incorporation)                       Identification Number)

                        8900 Shoal Creek Blvd., Suite 300
                               Austin, Texas 78757
                    (Address of Principal Executive Offices)

                                 (512) 371-7100
              (Registrant's Telephone Number, Including Area Code)

                     (Former name, former address and former
                   fiscal year, if changed since last report)

Indicate by check whether the Registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days: Yes |X| No |_|

As of December 31, 2001, there were 8,128,675 shares of the Company's Common
Stock, par value $0.01, outstanding (12,193,013 shares outstanding after giving
effect to a three-for-two stock split paid on February 11, 2002).

                                       -1-

<PAGE>
                                    FORM 10-Q

                                      INDEX

<TABLE>
<S>                                                                             <C>
PART I.  FINANCIAL INFORMATION
------------------------------

Item 1.  Financial Statements

Condensed Consolidated Balance Sheets
(As of December 31, 2001 (unaudited) and September 30, 2001 (audited)) ..........3

Unaudited Condensed Consolidated Statements of Income
(For the three months ended December 31, 2001 and 2000) .........................4

Unaudited Condensed Consolidated Statements of Cash Flows
(For the three months ended December 31, 2001 and 2000) .........................5

Notes to Unaudited Consolidated Financial Statements ............................6

Item 2.  Management's Discussion and Analysis
         of Financial Condition and Results of Operations .......................9

Item 3.  Quantitative and Qualitative Disclosures about Market Risk ............13

PART II.  OTHER INFORMATION
---------------------------

Item 1.  Legal Proceedings .....................................................14

Item 5.  Other Information .....................................................15

Item 6.  Exhibits and Reports on Form 8-K ......................................15
</TABLE>

                                       -2-

<PAGE>

                                     PART I
                             FINANCIAL INFORMATION

                             MULTIMEDIA GAMES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                 As of December 31, 2001 and September 30, 2001

<TABLE>
<CAPTION>
                                                                          December 31,          September 30,
                                                                               2001                  2001
                                                                          ------------          -------------
                            ASSETS                                        (Unaudited)             (Audited)
<S>                                                                       <C>                   <C>
CURRENT ASSETS:
   Cash and cash equivalents                                              $  6,809,000          $   4,868,000
   Accounts receivable
     Trade                                                                   5,029,000              3,794,000
     Game reserve                                                                  ---                 81,000
     Other                                                                      84,000                123,000
   Allowance for doubtful accounts                                            (184,000)              (343,000)
   Inventory                                                                 2,491,000              2,634,000
   Prepaid expenses                                                          1,508,000              1,877,000
   Notes receivable                                                          1,010,000                711,000
   Deferred taxes                                                              398,000                765,000
                                                                          ------------          -------------
         Total current assets                                               17,145,000             14,510,000
Restricted cash and long-term investments                                    1,724,000              1,764,000
Inventory - non-current                                                      3,875,000              4,096,000
Property and equipment, net                                                 26,899,000             21,664,000
Deferred taxes                                                               2,248,000              1,895,000
Other assets                                                                 2,290,000                375,000
Goodwill, net                                                                  356,000                363,000
                                                                          ------------          -------------
         Total assets                                                     $ 54,537,000          $  44,667,000
                                                                          ============          =============

                LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current portion of long-term debt                                      $    123,000          $         ---
   Accounts payable and accrued expenses                                     9,739,000              7,673,000
   Federal income tax payable                                                  966,000              1,150,000
   State income tax payable                                                  1,866,000              1,377,000
   Halls' share of surplus                                                     381,000                    ---
   Prize fulfillment fees payable                                              110,000                 99,000
                                                                          ------------          -------------
         Total current liabilities                                          13,185,000             10,299,000
Long-term debt, less current portion                                           276,000                    ---
Other long-term liabilities                                                  1,457,000              2,000,000
                                                                          ------------          -------------
         Total liabilities                                                  14,918,000             12,299,000
                                                                          ------------          -------------
Commitments and contingencies (Note 2)
Stockholders' equity:
   Preferred stock, Series A, $0.01 par value, 2,000,000 shares
     authorized, 9,203 shares issued and outstanding                               ---                    ---
   Common stock, $0.01 par value, 25,000,000 shares authorized
   13,266,752 and 12,983,538 shares issued, and
   12,193,013 and 11,909,799 shares outstanding, respectively                  133,000                130,000
   Additional paid-in capital                                               34,986,000             32,586,000
   Stockholders' notes receivable                                           (1,796,000)            (1,896,000)
   Treasury stock 1,073,739 shares at cost                                  (5,830,000)            (5,830,000)
   Retained earnings                                                        12,126,000              7,378,000
                                                                          ------------          -------------
         Total stockholders' equity                                         39,619,000             32,368,000
                                                                          ------------          -------------
         Total liabilities and stockholders' equity                       $ 54,537,000          $  44,667,000
                                                                          ============          =============
</TABLE>

                  The accompanying notes are an integral part
              of the condensed consolidated financial statements.

                                       -3-

<PAGE>

                             MULTIMEDIA GAMES, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
              For the Three Months Ended December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                               2001                   2000
                                                                         -----------------      ----------------
REVENUES:                                                                   (Unaudited)            (Unaudited)
<S>                                                                      <C>                    <C>

   Gaming revenue - Class II                                             $      56,588,000      $     19,487,000
   Gaming revenue - Class III                                                    1,309,000               917,000
   Player station sale and lease revenue                                           470,000               825,000
   Other                                                                           524,000               377,000
                                                                          ----------------       ---------------
         Total revenues                                                         58,891,000            21,606,000
   Bingo prizes and related costs                                                 (470,000)           (1,115,000)
   Allotments to hall operators                                                (40,041,000)          (13,452,000)
                                                                         -----------------       ---------------
         Net revenues                                                           18,380,000             7,039,000
                                                                         -----------------       ---------------
OPERATING COSTS AND EXPENSES:
   Cost of electronic player stations sold                                         (68,000)               (7,000)
   Selling, general and administrative expenses                                 (7,366,000)           (3,974,000)
   Amortization and depreciation                                                (3,198,000)           (2,331,000)
                                                                         -----------------       ---------------
         Total operating costs and expenses                                    (10,632,000)           (6,312,000)
                                                                         -----------------       ---------------
         Operating income                                                        7,748,000               727,000
Interest income                                                                     64,000                35,000
Interest expense                                                                   (17,000)             (176,000)
                                                                          ----------------       ---------------
Income before income taxes                                                       7,795,000               586,000
Income tax expense                                                              (3,044,000)             (222,000)
                                                                          ----------------       ---------------
         Net income                                                       $      4,751,000       $       364,000
                                                                          ----------------       ---------------
Basic earnings per share                                                  $           0.39       $          0.04
                                                                          ================       ===============
Diluted earnings per share                                                $           0.33       $          0.04
                                                                          ================       ===============
</TABLE>


                   The accompanying notes are an integral part
              of the condensed consolidated financial statements.

                                       -4-

<PAGE>

                             MULTIMEDIA GAMES, INC.
                            STATEMENTS OF CASH FLOWS
              For the Three Months Ended December 31, 2001 and 2000

                Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
                                                                                2001                  2000
                                                                         -----------------     ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:                                       (Unaudited)            (Unaudited)
<S>                                                                      <C>                   <C>
Net income                                                               $       4,751,000     $          364,000
Adjustments to reconcile net income to cash and cash equivalents
   provided by operating activities:
   Amortization and depreciation                                                 3,198,000              2,331,000
   Options issued to consultants                                                    18,000                    ---
   Provision for bad debts                                                         161,000                 43,000
   Inventory reserve                                                               107,000                 61,000
   Deferred taxes                                                                   14,000               (270,000)
   Tax benefit of stock options exercised                                        1,463,000                    ---
   (Increase) decrease in:
     Accounts receivable                                                        (1,054,000)               548,000
     Inventory                                                                  (1,313,000)            (1,078,000)
     Prepaid expenses                                                              369,000                 10,000
     Other assets                                                               (1,876,000)               (25,000)
     Federal and state income tax payable                                       (1,158,000)               550,000
     Prize fulfillment fees payable                                                 11,000                 34,000
     Notes receivable                                                             (299,000)             2,210,000
     Accounts payable and accrued expenses                                       1,566,000               (188,000)
                                                                         -----------------     ------------------
         Net cash provided by operating activities                               5,958,000              4,590,000
                                                                         -----------------     ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment and patents                               (6,895,000)              (382,000)
Increase in restricted cash and long-term investments
   and other long-term liabilities                                                  (3,000)               (11,000)
                                                                         -----------------     ------------------
         Net cash used in investing activities                                  (6,898,000)              (393,000)
                                                                         -----------------     ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options, warrants,
   and related tax benefit                                                       2,385,000                 23,000
Proceeds from (repayments on) note payable, net                                    399,000             (1,549,000)
Principal payments of debt                                                             ---                (30,000)
Payment on NGI lawsuit settlement                                                      ---               (140,000)
Increase (decrease) in stockholders' note receivable                               100,000                 (2,000)
Preferred stock dividends                                                           (3,000)               (24,000)
Purchase of treasury stock                                                             ---               (387,000)
                                                                         -----------------     ------------------
         Net cash provided by (used in) financing activities                     2,881,000             (2,109,000)
                                                                         -----------------     ------------------
Net increase in cash and cash equivalents                                        1,941,000              2,088,000
Cash and cash equivalents, beginning of period                                   4,868,000              1,315,000
                                                                         -----------------     ------------------
Cash and cash equivalents, end of period                                 $       6,809,000     $        3,403,000
                                                                         =================     ==================
SUPPLEMENTAL CASH FLOW DATA:
Interest paid                                                            $          17,000     $          179,000
                                                                         =================     ==================
Federal income tax paid                                                  $       1,322,000     $              ---
                                                                         =================     ==================
NON-CASH TRANSACTIONS:
Transfer of inventory to property and equipment                          $       1,570,000     $          773,000
                                                                         =================     ==================
</TABLE>

                   The accompanying notes are an integral part
              of the condensed consolidated financial statements.

                                       -5-

<PAGE>

                             MULTIMEDIA GAMES, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.  SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements should be read in conjunction with the
Company's consolidated financial statements and footnotes contained within the
Company's Annual Report on Form 10-K for the year ended September 30, 2001.

The financial statements included herein as of December 31, 2001 and for each of
the three months ended December 31, 2001 and 2000 have been prepared by the
Company without an audit, pursuant to accounting principles generally accepted
in the United States of America and the rules and regulations of the Securities
and Exchange Commission. They do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. The information presented
reflects all adjustments consisting solely of normal recurring adjustments which
are, in the opinion of management, considered necessary to present fairly the
financial position, results of operations, and cash flows for the periods.
Operating results for the three months ended December 31, 2001 are not
necessarily indicative of the results which will be realized for the year ending
September 30, 2002.

Reclassification - Certain reclassifications were made to the 2000 accounts to
conform to the 2001 financial statement presentation. These reclassifications
did not have an impact on previously reported results.

Accounting Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Examples include provisions
for bad debts and inventory obsolescence, asset lives of equipment, deferred tax
assets, and the provision for and disclosure of litigation and loss
contingencies. Actual results may differ from these estimates in the near term.

Stock Split - The Board of Directors authorized a three-for-two split, effective
February 11, 2002, of the Company's common stock. All references in the
accompanying financial statements to the number of common shares and per-share
amounts have been restated to reflect the stock split.

The total number of options and warrants that are exercisable into common stock
has increased from 2,154,116 to 3,226,745 as a result of the stock split.

Income Per Common Share - Income per common share is computed in accordance with
Statement of Financial Accounting Standards No. 128 ("FAS 128"). Presented below
is the computation of basic and diluted earnings per share.

<TABLE>
<CAPTION>
                                                                            Three Months Ended December 31,
                                                                               2001                2000
                                                                       -------------------  -------------------
<S>                                                                    <C>                  <C>
        Income available to common shareholders - basic                $         4,748,000  $           339,000
                                                                       ==================   ===================
        Income available to common shareholders - diluted              $         4,751,000  $           364,000
                                                                       ===================  ===================
        Weighted average common shares outstanding                              12,020,367            8,219,832
        Effect of dilutive securities:
           Options                                                               2,122,908              804,623
           Warrants                                                                276,486               24,240
           Convertible preferred stock                                              40,897              652,793
                                                                       -------------------  -------------------
        Weighted average common and potential shares outstanding                14,460,658            9,701,488
                                                                       ===================  ===================
        Basic earnings per share                                       $              0.39  $              0.04
                                                                       ===================  ===================
        Diluted earnings per share                                     $              0.33  $              0.04
                                                                       ===================  ===================
</TABLE>





2.  COMMITMENTS AND CONTINGENCIES

Virtually all of the Company's business relates to gaming activities on Native
American Lands. The operation of gaming on Native American Lands is subject to
the Johnson Act and the Indian Gaming Regulatory Act of 1988 ("IGRA"), which
created the National Indian Gaming Commission ("NIGC") to establish federal
standards for gaming on Native American Lands. IGRA identifies three classes of
gaming, each subject to specific degrees of regulation. The Johnson Act
specifies what constitutes "illegal games" and "illegal equipment," which
includes any

                                       -6-

<PAGE>

                             MULTIMEDIA GAMES, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

"machine or mechanical device" designed "primarily" for gambling that, when
operated, delivers money to a player "as the result of the application of an
element of chance."

In addition to the statutory regime, all Native American tribes are required by
IGRA to adopt ordinances to regulate gaming as a condition for their right to
conduct gaming on tribal lands. Individual states are also becoming increasingly
proactive in attempting to regulate Native American gaming conducted within
their borders.

Some fundamental issues relating to the scope and intent of IGRA, the
jurisdiction and authority of the NIGC, other federal agencies, state
authorities and tribal governments and the regulation of gaming on Native
American land remain unresolved and ambiguous. As a result, the legality of the
Company's activities could be subject to regulatory challenges, litigation, and
enforcement actions by multiple regulatory bodies. Any such action could be
costly to defend and could divert management's time and attention away from the
Company's operations.

The Department of Justice has asserted in the past and continues to assert that:

     .   any electronic or mechanical device used in gaming, such as the player
         stations used to play the Company's Class II games, are illegal and in
         violation of the Johnson Act; and

     .   the "spinning reel" design used as a graphic in many of the Company's
         Class II games is a facsimile of a slot machine and, therefore, cannot
         be used in a Class II game.

Substantially all of the Company's revenues are derived from player stations
that could be subject to these challenges. If any such challenge is made against
the Company it would divert management's time and attention away from operations
and could materially and adversely affect the Company's ability to install and
operate its games, and therefore to generate revenues.

There is no assurance that new laws and regulations will not be enacted or that
existing laws and regulations will not be amended or reinterpreted in a manner
adverse to the Company's business. Any regulatory change could materially and
adversely affect the installation and use of existing and additional player
stations, games, and systems, and the Company's ability to generate revenues
from some or all of its Class II games. Regulatory uncertainty also increases
the cost of doing business. The Company dedicates significant time to and incurs
significant expense for new game development without any assurance that the NIGC
or other federal, state and local agencies or tribal governments will agree that
each of its games meet applicable regulatory requirements. The Company also
devotes significant time and expense toward dealing with federal, state and
tribal agencies having jurisdiction over Native American gaming, and in
complying with the various regulatory regimes that govern its business.

In January 2001, the Company introduced a new Class II game called MegaNanza.
MegaNanza generated approximately $47.5 million, or 36%, of the Company's total
revenues for the fiscal year ended September 30, 2001 and approximately $42.3
million, or 72%, of the Company's total revenues for the quarter ended December
31, 2001. Prior to introducing MegaNanza into each new tribal market, the
Company obtained a determination from the appropriate tribal authority that
MegaNanza was a legal Class II game. There is no assurance that the Company will
be able to obtain similar determinations from future customers or that the
tribal authorities governing existing MegaNanza customers will not alter prior
determinations in a manner adverse to the Company. In December 2000, the Company
submitted MegaNanza to the NIGC to seek its opinion as to whether or not
MegaNanza is a Class II bingo game. There is no assurance that the NIGC will
determine that MegaNanza is a Class II game in its current form, or at all. Even
if the NIGC agrees that MegaNanza is a Class II bingo game, the Department of
Justice may pursue its own independent action against the Company and the
Company may need to seek judicial remedies against the NIGC, the Department of
Justice or both. Any litigation would be time consuming and expensive and would
divert management's attention from the Company's business, and there is no
assurance that the ultimate outcome would be in the Company's favor. A negative
outcome to any such litigation would adversely affect the Company's ability to
generate revenues from its Class II player stations.

License Agreements. In December 1999, the Company entered into a license
agreement with WMS(R) Gaming, Inc. ("WMS") to use certain trademarks, logos and
other audiovisual aids and graphics in the Washington State Class III market.
This agreement will expire on September 12, 2002. As of the end of fiscal 2001,
the Company is in compliance with all provisions of the agreement. The Company's
contract requires it to purchase a minimum number of licenses to operate games
over specified periods.

                                       -7-

<PAGE>

                             MULTIMEDIA GAMES, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In April 2001, the Company entered into a license agreement with Bally Gaming,
Inc., a subsidiary of Alliance Gaming Corporation ("Bally") to use certain of
Bally's trademarks, logos and other audiovisual aids and graphics in the
Washington State Class III market. The Company's contract requires it to
purchase a minimum number of licenses to operate games over specified periods.
During September 2001, Bally extended the license agreement to provide the
Company access to Bally's catalog of game themes for use in Class II bingo
games. This extension also requires the Company to purchase a minimum number of
Class II licenses over a specified period.

                                       -8-

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

Overview

We are the leading supplier of on-line systems and linked, interactive
electronic games and player stations to the rapidly growing Native American
gaming market. We design and develop networks, software and content that provide
our customers with a comprehensive gaming system. Historically, we have focused
our efforts on Class II gaming systems and Class III video lottery terminals
used primarily by Native American tribes.

Recent revenue growth has been driven primarily by our technological innovations
and the increase in the installed base of our player stations. Our technology
platform enables us to regularly launch new games that provide end users with
greater levels of entertainment. We believe that this leads to a greater number
of end users, and to higher end-user spending rates. Prior to May 1996, we
produced and televised MegaBingo a live paper bingo game featuring a live bingo
ball draw, to multiple bingo halls throughout the United States. MegaBingo
enabled players in participating halls to compete with players in other halls in
a single live bingo game to win a large jackpot prize. In May 1996, we
introduced our Class II Legacy platform and the first in a series of high-speed
interactive bingo games played on player stations linked with one another via a
nationwide, on-line telecommunications network. In January 2001, we introduced
our Class II New Generation platform, which plays faster than our Legacy
platform and has generated increased revenues for us and our customers. In June
1999, we installed Class III video lottery terminals in the state of Washington,
which currently is the only state where such terminals are permitted by
tribal-state compact.

Our New Generation platform operates at considerably faster speeds than our
Legacy platform, generally resulting in end users playing a greater number of
games on our New Generation platform than they otherwise could on our Legacy
platform in the same period of time. Because the new generation games have a
faster speed of play and higher payout ratios, we believe that end users derive
a higher level of satisfaction from playing these games. We believe that this
enhanced satisfaction results in end users playing games on our New Generation
platform for longer periods of time than they would play on our Legacy platform,
resulting in a higher hold per day per player station on our New Generation
player stations. We also continue to receive lease payments from the sale of
Class II player stations under lease-purchase arrangements. Under the
lease-purchase arrangements, we receive a series of lease payments based on a
percentage of the customer's revenue generated from the leased player station,
at the end of which arrangement we transfer ownership of the player station to
the customer. Because of the pace at which we introduce new technology into our
games and systems, our Class II customers generally prefer to rent our player
stations under participation arrangements rather than to incur capital costs
that may be lost to obsolescence.

We derive our Class II gaming revenues primarily from participation arrangements
with our customers. Under these arrangements, we retain ownership of player
stations installed at our customers' bingo halls and receive revenue based on a
percentage of the hold per day generated by each player station. We report the
hold per day as gaming revenue, and it represents the total amount wagered by
end users on a given player station less the total amount of prizes paid to the
end users. The payments made to the halls for their share of the hold per day
are recorded in our results of operations as "allotments to hall operators,"
which are deducted from our total revenues to arrive at our net revenues. Our
reporting of revenues from our television bingo game show, MegaBingo, which
accounts for the balance of our Class II gaming revenues, differs from this
model. Revenues from MegaBingo are recorded by us prior to the payment of prizes
to the end user and prior to an allotment to hall operators of their share of
MegaBingo revenues.

The majority of our Class III video lottery systems are sold for an up-front
purchase price. In addition, we also receive back-office fees based on a share
of the hold per day. Back-office fees comprise those payments made by our
customers for the service and maintenance of the back-office server installed in
each hall to run our Class III games, and the related player tracking systems.
For those video lottery terminals sold to our customers, the revenue share of
the hold per day is considerably smaller than the share we receive from Class II
player stations being rented. Accordingly, a greater portion of our Class III
revenues are derived from player terminal sales when compared to our Class II
revenues.


We also enter into either participation or lease-purchase arrangements for our
Class III video lottery systems that are similar to those for our Class II
systems; we retain ownership of the player station and receive a revenue share
based on the hold per day generated by each player station. Under the
lease-purchase arrangements, we also receive a series of lease payments based on
the customer's revenue generated from the leased player station, at the end of
which we transfer ownership of the player station to the customer. In addition,
under our Class III lease-purchase arrangements, we receive a back-office fee
based on a share of the hold per day.

                                       -9-

<PAGE>

We also have license agreements with WMS and Bally to use certain trademarks,
logos and graphics in connection with our Class III games. We in turn resell
these licenses to our customers in connection with our placement of applicable
player stations. Revenues from these license fees are included in other income
in our results of operations. We also have a similar license agreement with
Bally in our Class II market, but we do not sell our Class II licenses since we
only place these games with customers on a rental basis.

Besides bingo prizes and related costs and allotments to hall operators, the
next largest cost directly related to our Class II and Class III gaming revenue
is amortization and depreciation. As indicated, we own most of our Class II
player stations and in general, depreciate the cost of these player stations
over two to five years. We also capitalize certain costs related to the design
and development of our gaming products and systems which we amortize generally
over eighteen months to five years. Our cost related to player stations sold is
the smallest component of our costs related to our total revenues and is
commensurate with the contribution made by sales of player stations to our total
revenues.

RESULTS OF OPERATIONS

The following table outlines our installed base for the three months ended
December 31, 2001 and 2000:

                                                   Three Months Ended
                                                      December 31,
                                           --------------------------------
                                                 2001            2000
                                           ---------------  ---------------
Average Installed Base
  Class II
     New-Generation Platform                         2,595              ---
     Legacy Platform                                 3,017            3,920
  Class III                                          1,554            1,308
Installed End of Period:
  Class II
     New-Generation Platform                         2,933              ---
     Legacy Platform                                 2,891            3,876
  Class III                                          1,630            1,308

Three Months Ended December 31, 2001 Compared to Three Months Ended December 31,
2000

Total revenues increased 173% to $58.9 million in the three months ended
December 31, 2001, from $21.6 million in the same period in 2000. This increase
was primarily the result of the introduction of MegaNanza in January 2001. For
the three months ended December 31, 2001, MegaNanza generated revenues of $42.3
million, based on an average of 2,595 electronic player stations in daily
operation during the three months. For the three months ended December 31, 2001,
we had an average of 3,017 Class II Legacy player stations in daily operation, a
23% decrease from 3,920 in the same period of 2000. This decrease was primarily
the result of the replacement of many of our Legacy player stations with our
more profitable MegaNanza and other New Generation player stations. Total
revenues from Class III games increased 42% to $1.3 million for the three months
ended December 31, 2001, from $917,000 for the same period in 2000. Class III
back-office fees increased 62% to $643,000 in the three months ended December
31, 2001 from $396,000 in the same period of 2000. This increase resulted from
an 19% increase in the average number of Class III video lottery systems in
service to 1,554 units for the three months ended December 31, 2001, from 1,308
units in the same period in 2000. Television bingo game show revenues decreased
70% to $325,000 in the three months ended December 31, 2001, from $1.1 million
in the same period of 2000. This decrease was the result of a reduction from the
prior year in both the number of halls participating in MegaBingo and the number
of sessions played per week, as end-users have migrated to our faster Class II
and Class III systems.

Player station sale and lease revenue decreased by 43% to $470,000 for the three
months ended December 31, 2001 from $825,000 in same period of 2000. This
decrease was primarily the result of a decrease in the number of Class III
player stations sold in 2001 and a shift in preference of our Class II customers
to renting our player stations under participation arrangements.

Other revenue, which consisted primarily of service and maintenance fees and
licensing fees, increased 39% to $524,000 for the three months ended December
31, 2001 from $377,000 in the same period of 2000. This increase was related to
a greater number of player stations in place and the corresponding growth in
revenue from Class III licensing fees.

                                       -10-

<PAGE>

Bingo prizes and related costs decreased 57% to $470,000 for the three months
ended December 31, 2001 from $1.1 million in the same period of 2000. This
decrease was caused primarily by the decrease in MegaBingo revenues discussed
above.

Allotments to hall operators increased 196% to $40.0 million for the three
months ended December 31, 2001 from $13.5 million in the same period of 2000.
This increase was attributable to the increase in hall commissions related to
our Class II gaming and is commensurate with the overall increase in our Class
II gaming revenue. Hall commissions related to television bingo game shows
decreased 44% to $92,000 for the three months ended December 31, 2001 to
$163,000 in the same period of 2000. This decrease was caused primarily by the
decrease in MegaBingo revenues discussed above.

Cost of player stations sold increased 871% to $68,000 for the three months
ended December 31, 2001 from $7,000 in the same period of 2000. This increase
was commensurate with the overall increase in our player stations sold.

Selling, general and administrative expenses increased 85% to $7.4 million for
the three months ended December 31, 2001 from $4.0 million in the same period of
2000. Software expenses increased as a result of increased Class III video
lottery systems placement in the first quarter of 2002 compared to the same
quarter in 2001. Salaries and wages increased primarily as a result of
additional personnel hired to address our Class II electronic gaming network
needs and the pursuit of new business, including the Class III video lottery
business. Employee benefits increased as a result of performance-based
incentives covering substantially all employees and an increase in health and
life insurance premiums due to a greater number of employees. Advertising and
promotions expenses increased primarily as a result of our enhanced effort to
advertise and promote certain games in 2001, which included hiring a marketing
director and creating a marketing department. Legal and professional fees
increased primarily as a result of increased legal and professional services for
research into new products and markets. Consulting and contract labor increased
primarily due to our increased emphasis on the development, upgrade and
maintenance of games and systems.

Amortization and depreciation expense increased 39% to $3.2 million for the
three months ended December 31, 2001 from $2.3 million for the same period of
2000, primarily as a result of depreciation on a greater number of player
stations in service.

Interest income increased 83% to $64,000 for the three months ended December 31,
2001 from $35,000 in the same period of 2000. The increase in interest income
was primarily the result of stockholder notes receivable increasing 130% to $1.8
million as of December 31, 2001 from $782,000 as of December 31, 2000.

Interest expense decreased 90% to $17,000 for the three months ended December
31, 2001 from $176,000 in the same period of 2000. This decrease related to the
decrease in our outstanding debt, primarily from the payment of the remaining
balance on our existing credit facility in September 2001.

Income tax expense increased 1,264% to $3.0 million for the three months ended
December 31, 2001, from $222,000 in the same period of 2000. This represented an
effective tax rate of 39% and 38% for the three months ended December 31, 2001
and 2000, respectively.

The trademarks and tradenames used by us in our Class II and Class III games
include: Betnet(TM), Players Passport(TM), MegaBingo(R), MegaCash(TM),
MegaMania(R), FlashCash(TM), Big Cash Bingo(TM), Flash 21 Bingo(TM), Spin &
Shout(TM), Freedom 7's(TM), Red Hot Diamonds(TM), Fruit Cocktail(TM), Fruit
Cocktail Deluxe(TM), Diamond Cherry Bell Magic(TM), Spinning Cherries
Royale(TM), Meltdown(TM), Keno Madness(TM), High Noon Poker(TM), Diamond Crown
Jewels(TM), Wild Spinner(TM) and Vortex(TM). All references herein to those
trademarks and tradenames are deemed to include the applicable tradename or
trademark designation.

                                      -11-

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2001, we had unrestricted cash and cash equivalents of $6.8
million, compared to $4.9 million at September 30, 2001. Our working capital at
December 31, 2001 was $4.0 million, compared to $4.2 million at September 30,
2001.

As of December 31, 2001, total contractual cash obligations were as follows:

                                                    Less Than
                                    Total             1 Year          1-3 Years
                                -------------    --------------    -------------
            Long-term debt(1)   $     399,000    $      123,000    $     276,000
            Operating leases(2)       848,000           373,000          475,000
                                -------------    --------------    -------------
                 Total          $   1,247,000    $      496,000    $     751,000
                                =============    ==============    =============

            (1) Long-term debt represents a three-year auto-purchase loan
                that has an annual interest rate of 8% and matures in
                December 2004.

            (2) Operating leases for our facilities and office equipment that
                expire at various times throughout 2004

Cash provided by operating activities was $6.0 million for the three months
ended December 31, 2001, compared to $4.6 million for the same period in 2000.
This increase was the result of improved operations for 2001, partially offset
by an increase in accounts receivable and inventory, and a decrease in accounts
payable and accrued expenses.

Cash used in investing operations was $6.9 million for the three months ended
December 31, 2001, compared to $393,000 for the same period in 2000. The
increase was the result of an increase in the acquisition of property and
equipment to $6.9 million for the quarter ended December 31, 2001, compared to
$382,000 for the same quarter in 2000.

Cash provided by financing activities was $2.9 million for the three months
ended December 31, 2001 compared to cash used in financing activities of $2.1
million for the same period in 2000. For the three months ended December 31,
2001, we received proceeds from the exercise of stock options and warrants and
the related tax benefit totaling $2.4 million. The cash flow used in financing
activities for the three months ended December 31, 2000 related primarily to the
repayment of debt totaling $1.7 million and the purchase of treasury stock
totaling $387,000.

Our Board of Directors authorized us to repurchase 450,000 shares of our common
stock, effective April 2000, and an additional 1,500,000 shares of our common
stock, effective September 2001. The timing and total number of shares
repurchased will depend on prevailing market conditions and other investment
opportunities. During fiscal 2000 and 2001, we repurchased 190,875 and 831,866
shares of our common stock at an average cost of $2.67 and $6.31, respectively.
No shares were repurchased by us during the quarter ended December 31, 2001.

On July 29, 1999, we entered into a $10 million revolving credit facility with
Coast Business Credit, a division of Southern Pacific Bank. The credit facility
was paid in full and terminated September 28, 2001.

Effective September 28, 2001, we entered into a new revolving credit facility
with Washington Mutual Bank, FA. Under this credit agreement, we may borrow up
to $14.0 million, subject to the condition that we maintain an equivalent amount
of cash and cash equivalents on hand to collateralize any borrowings. Interest
at prime is payable monthly on this credit agreement, with all principal and
interest due on September 27, 2002. To date, there have been no borrowings under
this credit agreement, and the agreement was terminated effective February 2002.
We are evaluating opportunities to secure additional borrowing capacity under
new facilities. There can be no assurance that we will enter into any such
facility.

We have not filed state tax returns for the states of California and Oklahoma
for the tax years 1995 through 2001. For 1995 through 1997, we do not expect to
owe taxes, as we had net operating losses during those years. For the tax years
1998 through 2001, we have accrued $1.9 million for the estimated state tax
liability, including interest at an assumed rate of 10%. While we have not been
assessed the taxes from these two states, we are in the process of completing
the state tax returns, and will pay all taxes due during 2002. We believe that
the penalties for the failure to timely file will be waived, therefore, we have
not accrued such amounts. However, there can be no assurance that the amount of
actual state tax liability will be equal to or less than the amount we have
accrued, or that the penalties will be waived.

                                      -12-

<PAGE>

At December 31, 2001, we had approximately 3.2 million options and warrants
outstanding, with exercise prices ranging from $1.67 to $10.67 per share. Of the
options and warrants outstanding, approximately 677,000 were exercisable at
December 31, 2001.

Our projected capital expenditures for the next year will consist primarily of
player stations that are placed with our Class II customers under rental
agreements. The total capital expenditures will depend upon the number of player
stations that we are able to place in service during the year. Additional
capital expenditures may be required for player stations if we are successful in
introducing our games to new markets such as the charity market. In addition to
manufacturing our own player stations, we also purchase player stations and
licenses from Bally and WMS.

We believe that our current operations can be sustained with cash from
operations. There can be no assurance, however, that our business will continue
to generate cash flow at current levels. Our performance and financial results
are, to a certain extent, subject to general conditions in or affecting the
Native American gaming industry and to general economic, political, financial,
competitive, and regulatory factors beyond our control. There can be no
assurance that sufficient funds will be available to enable us to make necessary
capital expenditures and to make discretionary investments in the future.

CONTINGENCIES

For information regarding contingencies, see "PART II - Item 1. Legal
Proceedings."

INFLATION AND OTHER COST FACTORS

Our operations have not been, nor are they expected to be, materially affected
by inflation. However, our operational expansion is affected by the cost of
hardware components, which are not considered to be inflation sensitive, but
rather, sensitive to changes in technology and competition in the hardware
markets. In addition, we expect to continue to incur increased legal and other
similar costs associated with regulatory compliance requirements and the
uncertainties present in the operating environment in which we conduct our
business.

SEASONALITY

We believe our operations are not materially affected by seasonal factors,
although we have experienced fluctuations in our revenues from period to period.
After the holiday season, our revenues generally build steadily, with our last
fiscal quarter (July through September) traditionally being our strongest
quarter.

FUTURE EXPECTATIONS AND FORWARD-LOOKING STATEMENTS

This Quarterly Report 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," "plans," 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, the uncertainties inherent to the outcome of any litigation of
the type described in this quarterly report under "PART II - Item 1. Legal
Proceedings," as well as those other factors as described under "Item 1.
Business - Risk Factors," contained in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2001, which are incorporated herein by this
reference. Given these uncertainties, readers of this Quarterly Report are
cautioned not to place undue reliance upon such statements.

ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Except for the effects of short-term interest rates under our line of credit,
which we do not consider material, we are not subject to any other interest
rate, exchange rate, or commodity price risks.

                                      -13-

<PAGE>

                                     PART II
                                OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

Virtually all of our business relates to gaming activities on Native American
Lands. The operation of gaming on Native American Lands is subject to the
Johnson Act and IGRA, which created the NIGC to establish federal standards for
gaming on Native American Lands. IGRA identifies three classes of gaming each
subject to specific degrees of regulation. The Johnson Act specifies what
constitutes "illegal games" and "illegal equipment," which includes any "machine
or mechanical device" designed "primarily" for gambling that, when operated,
delivers money to a player "as the result of the application of an element of
chance."

In addition to the statutory regime, all Native American tribes are required by
IGRA to adopt ordinances to regulate gaming as a condition to their right to
conduct gaming on tribal lands. Individual states are also becoming increasingly
proactive in attempting to regulate Native American gaming conducted within
their borders.

Some fundamental issues relating to the scope and intent of IGRA, the
jurisdiction and authority of the NIGC, other federal agencies, state
authorities and tribal governments and the regulation of gaming on Native
American land remain unresolved and ambiguous. As a result, the legality of our
activities could be subject to regulatory challenges, litigation, and
enforcement actions by multiple regulatory bodies. Any such action could be
costly to defend and could divert management's time and attention away from our
operations.

The Department of Justice has asserted in the past and continues to assert that:

     .  any electronic or mechanical device used in gaming, such as the player
        stations used to play our Class II games, are illegal and in violation
        of the Johnson Act; and

     .  the "spinning reel" design used as a graphic in many of our Class II
        games is a facsimile of a slot machine and, therefore, cannot be used
        in a Class II game.

Substantially all our revenues are derived from player stations that could be
subject to these challenges. If any such challenge is made against us it would
divert management's time and attention away from our operations and could
materially adversely affect our ability to install and operate our games, and
therefore to generate revenues.

We cannot assure you that new laws and regulations relating to our business will
not be enacted or that existing laws and regulations will not be amended or
reinterpreted in a manner adverse to our business. Any regulatory change could
materially and adversely affect the installation and use of existing and
additional player stations, games, and systems and our ability to generate
revenues from some or all of our Class II games. Regulatory uncertainty also
increases our cost of doing business. We dedicate significant time and incur
significant expense on new game development without any assurance that the NIGC
or other federal, state and local agencies or tribal governments will agree that
each of our games meet applicable regulatory requirements. We also devote
significant time and expense toward dealing with federal, state and tribal
agencies having jurisdiction over Native American gaming and in complying with
the various regulatory regimes that govern our business.

In January 2001, we introduced a new Class II game called MegaNanza. MegaNanza
generated approximately $47.5 million, or 36%, of our total revenues for fiscal
year ended September 30, 2001 and approximately $42.3 million, or 72%, of our
total revenues for the quarter ended December 31, 2001. Prior to introducing
MegaNanza into each new tribal market in which we operate, we obtained a
determination from the appropriate tribal authority that MegaNanza was a legal
Class II game. We cannot assure you that we will be able to obtain similar
determinations from future customers or that the tribal authorities governing
existing MegaNanza customers will not alter prior determinations in a manner
adverse to us. In December 2000, we submitted MegaNanza to the NIGC to seek its
opinion as to whether or not MegaNanza is a Class II bingo game. We cannot
assure you that the NIGC will determine that MegaNanza is a Class II game in its
current form, or at all. Even if the NIGC agrees that MegaNanza is a Class II
bingo game, the Department of Justice may pursue its own independent action
against us and we may need to seek judicial remedies against the NIGC, the
Department of Justice or both. Any litigation would be time consuming and
expensive and would divert management's attention from our business, and we
cannot assure you that the ultimate outcome would be in our favor. A negative
outcome to any such litigation would adversely affect our ability to generate
revenues from our Class II player stations.

                                       -14-

<PAGE>

In addition to the threat of litigation relating to the Class II or Class III
status of our games and player stations, we are the subject of various pending
and threatened claims arising out of the ordinary course of business. We believe
that any liability resulting from these claims will not have a material adverse
effect on our results of operations or financial condition.

ITEM 5.   OTHER INFORMATION

In January 2002, we announced a three-for-two split of our common stock that was
paid in the form of a stock dividend on February 11, 2002. The effect of the
stock split was to increase our total number of shares of common stock
outstanding on an as-adjusted basis as of December 31, 2002 to 12,193,013
shares, which does not include 3,240,226 shares reserved for issuance upon the
exercise or conversion of options, warrants and Series A preferred stock
outstanding at December 31, 2002. Since December 31, 2001, all of our Series A
preferred stock has been converted into 40,898 shares of our common stock.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(b)  No reports on Form 8-K were filed during the period.

                                      -15-

<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Dated February 13, 2002                 Multimedia Games, Inc.



                                        By:     /s/ Craig S. Nouis
                                           ------------------------------------
                                           Craig S. Nouis
                                           Chief Financial and Principal
                                             Accounting Officer

                                       -16-