<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

                 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended: MARCH 31, 1998

             [ ] 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 Small Business Issuer as Specified in its Charter)

<TABLE>
<S>                                                    <C>
                Texas                                              74-2611034
                -----                                              ----------
(State or Other Jurisdiction of Incorporation)        (IRS Employer Identification Number)
</TABLE>

                       7335 South Lewis Avenue, Suite 302
                              Tulsa, Oklahoma 74136
                              ---------------------
                    (Address of Principal Executive Offices)

                                 (918) 494-0576
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

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


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act 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 April 30, 1998 there were 5,400,330 shares of the Company's Common Stock,
par value $.01, outstanding.

Transitional Small Business Disclosure Format (Check one)

                            Yes         No  X
                                ---        ---

<PAGE>   2
                                   FORM 10-QSB

                                      INDEX



Part I.  Financial Information


   Item 1.  Financial Statements


         Consolidated Balance Sheets
         (March  31, 1998 and September 30, 1997)

         Consolidated Statements of Operations
         (Three months ended March  31, 1998 and 1997)

         Consolidated Statements of Operations
         (Six months ended March  31, 1998 and 1997)

         Consolidated Statements of Cash Flows
         (Six months ended March 31, 1998 and 1997)

         Notes to Unaudited Consolidated Financial Statements

         Report of Review By Independent Accountants


   Item 2.  Management's Discussion and Analysis

Part II.  Other Information

   Item 1.  Legal Proceedings

   Item 2.  Changes In Securities

   Item 4.  Submission of Matters to Vote of Security Holders

   Item 6.  Exhibits and Reports on Form 8-K



<PAGE>   3

                     MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                   AS OF MARCH 31, 1998 AND SEPTEMBER 30, 1997
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                   March            September
                                   ASSETS                                          1998               1997
                                                                                -----------        ----------
<S>                                                                            <C>              <C>
     Current Assets:
Cash and cash equivalents                                                      $  1,354,000      $  2,380,000
Accounts Receivable:
Trade, net of allowance for doubtful accounts
of $123,000                                                                       1,836,000         1,443,000
Other                                                                               306,000           123,000
Inventory                                                                         1,406,000           511,000
Prepaid expenses                                                                    303,000            61,000
Notes receivable                                                                    145,000           286,000
Notes receivable - related parties                                                2,504,000         1,427,000
Due from AGN L.L.C                                                                       --           381,000
Deferred tax asset                                                                   79,000            79,000
                                                                               ------------      ------------

Total current assets                                                              7,933,000         6,691.000
                                                                               ------------      ------------

Restricted cash and cash equivalents                                              1,788,000         1,783,000
Notes receivable - related party                                                  1,010,000         1,010,000
Property and equipment, net                                                       6,003,000         4,970,000
Other assets                                                                         98,000            95,000
Deferred tax asset - non-current                                                      8,000           379,000
Goodwill, net                                                                       458,000           472,000
                                                                               ------------      ------------

      Total assets                                                             $ 17,298,000      $ 15,400,000
                                                                               ============      ============

                        LIABILITIES AND STOCKHOLDERS' EQUITY

  Current liabilities:
      Current portion of long-term debt                                             269,000           395,000
      Accounts payable and accrued expenses                                       3,204,000         1,853,000
      Prize fulfillment fees payable                                                550,000           597,000
                                                                               ------------      ------------
   Total current liabilities                                                      4,023,000         2,845,000
                                                                               ------------      ------------

Long-term debt                                                                      600,000           675,000
Other long-term liabilities                                                       1,603,000         1,603,000

Commitments and Contingencies (Note 3)

Stockholders' equity:
   Preferred stock, Series A, $.01 par value, 2,000,000 shares authorized,
      90,789 and 109,192 shares
      issued and outstanding                                                          1,000             1,000
   Common stock, $.01 par value, 25,000,000 shares
      authorized, 5,406,329 and 4,825,171 shares issued
      and 5,372,330 and 4,791,172 shares outstanding                                 54,000            48,000
   Additional paid-in capital                                                    12,663,000        12,297,000
   Stockholder notes receivable                                                    (721,000)         (596,000)
   Treasury stock, 33,999 shares at cost                                            (87,000)          (87,000)
   Accumulated deficit                                                             (838,000)       (1,386,000)
                                                                               ------------      ------------
   Total stockholders' equity                                                    11,072,000        10,277,000
                                                                               ------------      ------------

Total liabilities and stockholders' equity                                     $ 17,298,000      $ 15,400,000
                                                                               ============      ============
</TABLE>

           See notes to unaudited consolidated financial statements.

<PAGE>   4
\                     MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997

                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                   1998             1997
                                                                   ----             ----
<S>                                                             <C>              <C>
Revenues:
   Gaming revenue                                              $13,814,000      $ 8,265,000
   Electronic player station sales                                      --          403,000
   Electronic player station sales - related party               2,350,000
   Electronic player station lease revenue                         740,000          377,000
   Other                                                             4,000               --
                                                               -----------      -----------
   Total revenues                                               16,908,000        9,045,000
                                                               -----------      -----------

Operating costs and expenses:
   Bingo prizes and related costs                                2,240,000        2,163,000
   Allotments to hall operators                                  8,636,000        4,478,000
   Cost of electronic player station sales                              --          217,000
   Cost of electronic player stations sold - related party       1,162,000               --                 
   Salaries and wages                                              762,000          475,000
   Selling, general and administrative expenses                  2,770,000        1,143,000
   Amortization and depreciation                                   711,000          314,000
                                                               -----------      -----------

   Total operating costs and expenses                           16,281,000        8,790,000
                                                               -----------      -----------
   Operating income                                                627,000          255,000
Interest income                                                     39,000            6,000
Interest expense                                                   (32,000)         (34,000)
                                                               -----------      -----------
Income before income taxes                                         634,000          227,000
Income taxes                                                       243,000               --
                                                               -----------      -----------
Net income                                                     $   391,000      $   227,000
                                                               ===========      ===========
Basic earnings per common share                                $       .07      $       .05
                                                               ===========      ===========
Diluted earnings per common and equivalent share               $       .06      $       .04
                                                               ===========      ===========
</TABLE>

           See notes to unaudited consolidated financial statements.

<PAGE>   5
                     MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   1998              1997
                                                                   ----              ----
<S>                                                            <C>              <C>
Revenues:
   Gaming revenue                                              $ 25,981,000      $ 14,858,000
   Electronic player station sales                                   44,000           403,000
   Electronic player station sales - related party                2,350,000                --
   Electronic player station lease revenue                        1,431,000           588,000
   Other                                                              6,000             1,000
                                                               ------------      ------------                          
  Total revenues                                                 29,812,000        15,850,000
                                                               ------------      ------------
Operating costs and expenses:
   Bingo prizes and related costs                                 4,697,000         4,379,000
   Allotments to hall operators                                  15,993,000         7,512,000
   Cost of electronic player stations sold                           27,000           217,000
   Cost of electronic player stations sold - related party        1,162,000                --
   Salaries and wages                                             1,447,000           952,000
   Selling, general and administrative expenses                   4,249,000         2,063,000
   Amortization and depreciation                                  1,346,000           603,000
                                                               ------------      ------------
   Total operating costs and expenses                            28,921,000        15,726,000
                                                               ------------      ------------
   Operating income                                                 891,000           124,000
Interest income                                                     141,000            12,000
Interest expense                                                    (58,000)          (99,000)
                                                               ------------      ------------
Income before income taxes                                          974,000            37,000
Income taxes                                                        371,000                --
                                                               ------------      ------------
Net income                                                     $    603,000      $     37,000
                                                               ============      ============
Basic earnings (loss) per common share                         $        .10      $       (.01)
                                                               ============      ============
Diluted earnings (loss) per common and equivalent share        $        .09      $       (.01)
                                                               ============      ============
</TABLE>

           See notes to unaudited consolidated financial statements.

<PAGE>   6

                     MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS 
               For the six months ended March 31, 1998 and 1997
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                   1998              1997
                                                                   ----              ----
<S>                                                           <C>              <C>
Cash flows from operating activities:
Net income                                                     $   603,000      $    37,000
Adjustments to reconcile net income to cash
   provided by (used for) operating activities:
     Amortization and depreciation                               1,346,000          603,000
     Deferred taxes                                                371,000               --
     Other non-cash expenses                                        (3,000)          71,000
(Increase) decrease in:
     Accounts and notes receivable                              (1,512,000)      (1,047,000)
     Inventory                                                    (895,000)         (10,000)
     Prepaid expenses and due from AGN LLC                         139,000          (90,000)
Increase (decrease) in:
     Accounts payable and accrued expenses                       1,351,000          321,000
     Hall's share of surplus                                            --          (27,000)
     Prize fulfillment fees payable                                (47,000)        (320,000)
                                                               -----------      -----------

Net cash provided by (used for) operating activities             1,353,000         (462,000)
                                                               -----------      -----------

Cash flows from investing activities:
     Acquisition of property and equipment                      (2,362,000)      (2,279,000)
     Increase in cash balances in restricted escrow                 (5,000)          (5,000)
                                                               -----------      -----------
     Net cash provided by (used for) investing activities       (2,367,000)      (2,284,000)
                                                               -----------      -----------

Cash flows from financing activities:
     Proceeds from sale of common stock                            244,000        2,108,000
     Increase in long-term debt                                         --          362,000
     Principal repayments of debt                                 (201,000)        (185,000)
     Payment of preferred stock dividends                          (55,000)         (74,000)
                                                               -----------      -----------
     Net cash provided  by (used for) financing activities         (12,000)       2,211,000
                                                               -----------      -----------

Net change in cash and cash equivalents                         (1,026,000)        (535,000)

Cash and cash equivalents, beginning of period                   2,380,000        1,508,000
                                                               -----------      -----------

Cash and cash equivalents, end of period                       $ 1,354,000      $   973,000
                                                               ===========      ===========
</TABLE>

          See notes to unaudited consolidated financial statements.

<PAGE>   7
                     MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS

1.   SIGNIFICANT ACCOUNTING POLICIES

         The accompanying financial statements should be read in conjunction
     with the Company's financial statements for the twelve months ended
     September 30, 1997 contained within the Company's Annual Report on Form
     10-KSB.

         The financial statements included herein as of March 31, 1998 and for
     each of the three and six month periods ended March 31, 1998 and 1997, have
     been prepared by the Company, without an audit, pursuant to generally
     accepted accounting principles and the rules and regulations of the
     Securities and Exchange Commission. The information presented reflects all
     adjustments (consisting solely of normal recurring adjustments) which are,
     in the opinion of management, necessary for a fair statement of results for
     the periods. Results for the three and six months ended March 31, 1998, are
     not necessarily indicative of the results which will be realized for the
     year ending September 30, 1998. The September 30, 1997 consolidated balance
     sheet data was derived from audited financial statements, but does not
     include all disclosures required by generally accepted accounting
     principles.

         INCOME (LOSS) PER COMMON SHARE - Income (loss) per common share is
     computed in accordance with Statement of Financial Accounting Standards No.
     128 ("FAS 128"), which is effective for reporting periods ending after
     December 15, 1997. FAS 128 requires the restatement of prior year's
     earnings (loss) per share to conform to the new standard. Presented below
     is a reconciliation of income (loss) available to common shareholders and
     the differences between actual weighted average shares outstanding, which
     are used in computing basic earnings per share and diluted weighted average
     shares, which are used in computing diluted earnings per share.

<TABLE>
<CAPTION>
                                                                 FOR THE THREE MONTHS ENDED
                                                                          3/31/98
                                            
   
                                                                                           Per Share
                                                    Income             Shares               Amount
                                                ----------------------------------------------------------
<S>                                            <C>                   <C>                  <C>
Net income (loss)                                $391,000
Less: preferred stock dividends                   (25,000)
            Basic EPS:                      
                                                 -------- 
Income (loss) available to                  
common shareholders                               366,000             5,369,772              $ .07
                                                                                             =====
            Effect of Dilutive Securities:  
Options                                                                 373,015
Warrants                                                                373,398
Convertible preferred stock                        25,000               435,195
            Diluted EPS:                    
                                                 --------            ---------- 
Income (loss) available to common           
Shareholders plus assumed conversions            $391,000             6,551,380              $ .06
                                                 ========            ==========              =====
</TABLE>                                    
    
                                            

<PAGE>   8
                     MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                          FOR THE THREE MONTHS ENDED
                                                                                   3/31/97

                                                                                                    Per Share
                                                             Income             Shares               Amount
                                                         ---------------------------------------------------------
<S>                                                     <C>                   <C>                <C>
Net income (loss)                                          $227,000
Less: preferred stock dividends                             (37,000)
            Basic EPS:
                                                           --------  
Income (loss) available to
common shareholders                                         190,000         4,040,642                 $.05
                                                                                                     =====
            Effect of Dilutive Securities:
Options                                                                       245,057
Warrants                                                                      210,350
Contingent shares                                                             368,834
Convertible preferred stock                                  37,000           652,840
            Diluted EPS:
                                                           --------         --------- 
Income (loss) available to common
shareholders plus assumed conversions                      $227,000         5,517,723                $ .04
                                                           ========         =========                =====
</TABLE>

<TABLE>
<CAPTION>
                                                                       FOR THE SIX MONTHS ENDED
                                                                               3/31/98

                                                                                                  Per Share
                                                               Income           Shares             Amount
                                                            ---------------------------------------------------
<S>                                                        <C>               <C>           <C>
Net income                                                  $603,000
Less: preferred stock dividends                              (55,000)
            Basic EPS:
                                                            -------- 
Income available to
common shareholders                                          548,000        5,270,175                $ .10
                                                                                                     =====
            Effect of Dilutive Securities:
Options                                                                       454,429
Warrants                                                                      659,692
Convertible preferred stock                                   55,000          448,942
            Diluted EPS:
                                                            --------        ---------
Income available to common
shareholders plus assumed conversions                       $603,000        6,833,238                $ .09
                                                            ========        =========                =====
</TABLE>

<PAGE>   9

                     MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                       FOR THE SIX MONTHS ENDED             
                                                                               3/31/97                          
                                                                                                             
   
                                                                                                    Per Share       
                                                             Income             Shares               Amount         
                                                         ---------------------------------------------------------  
<S>                                                      <C>                    <C>                  <C>    
Net income (loss)                                         $  37,000                                             
Less: preferred stock dividends                             (74,000)                   
            Basic EPS:                                                                                         
                                                          ---------                                           
Income (loss) available to                                                                                     
common shareholders                                         (37,000)          3,789,855               $(.01) 
                                                                                                      =====   
            Effect of Dilutive Securities:                                                                    
Options                                                                                                       
Warrants                                                                                                      
Convertible preferred stock                                                                                   
            Diluted EPS:                                                                                      
                                                          ---------          ----------                       
Income (loss) available to common                                                                             
shareholders plus assumed conversions                     $ (37,000)          3,789,855               $(.01) 
                                                          =========          ==========               =====   
    

</TABLE>

     ADVANCE TO RELATED PARTY - On December 31, 1997, the Company made a
     $1,000,000 temporary advance to a related party. This temporary advance was
     repaid on January 26, 1998.
    
2.   AMERICAN GAMING NETWORK

         American Gaming Network L.L.C. and its predecessors ("AGN") was
     originally formed by the Company and a 50% third party partner in July 1995
     to pursue the development of gaming opportunities on the Internet.

         In July 1996, the Company purchased the 50% interest of the third party
     partner through a newly formed entity ("AGN Venturers L.L.C."), for
     consideration that included a $400,000 note payable by the new entity to
     the third party partner (the "$400,000 Note"). Contemporaneously, the
     Company sold AGN Venturers L.L.C. to a group of investors ("Investors"),
     for $100,000, the agreement of the Investors to contribute $400,000 to AGN
     and a several guarantee of each Investor of AGN's note payable to the
     Company in the amount of $336,000, which evidenced working capital advances
     previously made to AGN by the Company. One of the Investors is Gordon T.
     Graves, the Company's Chairman of the Board and Chief Executive Officer,
     who acquired 10% of AGN Venturers L.L.C. At September 30, 1997, in addition
     to the $336,000 note, AGN owed the Company $45,000. The $336,000 note was
     paid off in October 1997.

         Simultaneously with the sale of AGN Venturers L.L.C., the Company and
     AGN Venturers L.L.C. entered into a Put and Call Agreement pursuant to
     which AGN Venturers L.L.C. had the right to "put" back to the Company its
     51% interest in AGN and repay the $336,000 note in exchange for 278,667
     shares of Common Stock. The Put and Call Agreement further provides that
     the Company would issue AGN Venturers L.L.C. an additional 133,333



<PAGE>   10
                     MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS


     shares upon the payment by AGN Venturers L.L.C. of a $400,000 note due the
     former partner in AGN which was guaranteed by AGN. In October 1997, AGN
     Venturers L.L.C. exercised its "put" right with respect to the 278,667
     shares and in December 1997 paid the $400,000 note and exercised its "put"
     right with respect to the 133,333 shares. As a result, beginning in the
     first quarter of fiscal 1998, AGN is 100% owned by the Company. As a result
     of the exercise of the put rights by AGN Venturers, Mr. Graves acquired
     41,200 shares of Common Stock.

3.   COMMITMENTS AND CONTINGENCIES

     MegaMania Litigation

         On December 31, 1997, the U.S. Attorney for the Northern District of
     Oklahoma (the "Tulsa U.S. Attorney") filed a civil forfeiture action in the
     Federal District Court for the northern District against the player
     stations and centralized computer equipment used to play MegaMania located
     in the Northern District. On that same day, agents of the Federal Bureau of
     Investigation entered the Company's headquarters in Tulsa, Oklahoma and
     seized the Company's central computer system, which caused the play of
     MegaMania to cease throughout the Company's nationwide MegaMania network.
     Agents also entered the bingo halls of the Cherokee Nation and
     Seneca-Cayuga tribe in the Northern District and seized approximately 300
     MegaMania player stations. Agents also entered the bingo hall of the
     Choctaw nation in the Eastern District of Oklahoma and seized the Company's
     bingo ball blower that was used to draw numbers for the play of MegaMania.
     No other seizure or enforcement action was taken outside the Northern
     District.

         About 18 hours following the seizure actions, the Company was again
     operating MegaMania throughout its MegaMania network through the use of
     back-up systems, except at the bingo halls in the Northern District where
     the MegaMania player stations were seized, and such play has continued
     without interference or interruption since that time. No other seizure or
     enforcement actions have been instituted or taken against the Company or
     any of its customers regarding MegaMania since the initial actions taken on
     December 31, 1997.

         On January 5, 1998, the Company and the Seneca-Cayuga tribe filed a
     Complaint For Declaratory Relief in the Northern District seeking a
     declaration by the courts that MegaMania is a legal Class II bingo game as
     permitted by the Indian Gaming Regulatory Act of 1988 (the "Gaming Act").
     On January 12, 1998, the Choctaw Nation of Oklahoma, the Chickasaw Nation
     of Oklahoma and the Cheyenne-Arapaho Tribe of Oklahoma filed a similar
     Complaint For Declaratory Relief in the Federal Court for the District of
     Columbia seeking a declaration by the courts that MegaMania is a legal
     Class II bingo game.

<PAGE>   11

                     MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS


         On January 23, 1998, the Company, the Seneca-Cayuga tribe and the
     Cherokee Nation entered into a standstill agreement with the Tulsa U.S.
     Attorney and the other U.S. Attorneys in Oklahoma which allowed the bingo
     halls of the Seneca-Cayuga's and Cherokee's to immediately commence playing
     MegaMania, assured the Company and the tribes that no other seizure or
     enforcement action would be taken in Oklahoma, and agreed to a speedy trial
     on the merits of MegaMania within 120 days, which was subsequently extended
     to early Fall. As a result of the standstill agreement, the Company
     believes there will be no seizure or enforcement actions taken against
     MegaMania in any of the United States during the pendency of the trial on
     the merits of MegaMania as a Class II bingo game. On May 5, 1998, the
     Company, the Seneca-Cayuga tribe and the Cherokee Nation filed a Motion for
     Partial Summary Judgment seeking a declaration by the court that MegaMania
     is a Class II game. The Tulsa U.S. Attorney has 30 days to respond to the
     Motion. Discovery is about to commence in the action. The Company intends
     to vigorously defend its position that MegaMania is a Class II game;
     however, no assurances can be given that the Company will be successful on
     the merits. If MegaMania is ultimately determined to be Class III gaming,
     the loss of the MegaMania business would have a material adverse effect
     upon the Company's financial condition and results of operation. Even if
     the Company is successful on the merits, the legal fees and expenses to be
     incurred by the Company related to the MegaMania litigation will be
     significant and are expected to materially and adversely affect the
     Company's reported earnings during the periods in which legal services are
     rendered and the related costs are incurred by the Company.

     Network Gaming Litigation

         On February 2, 1998, a complaint was filed by Network Gaming
     International Corporation ("NGI") in the Federal District Court for the
     Northern District of Oklahoma against the Company alleging, among other
     things, breach of contract, misappropriation of trade secrets, fraud and
     interference with prospective advantage. The complaint, which seeks $62
     million in damages and other specified and unspecified relief, also names
     Gordon T. Graves, the Company's Chairman of the Board, and Larry D.
     Montgomery, the Company's former President, as individual defendants. On
     January 23, 1998, the Company had filed its own action in the Court against
     NGI for breach of contract.

         The dispute arises out of a series of related agreements entered into
     between the parties in December 1995 and May and June 1996. In general,
     these agreements contemplate the cross-licensing of certain intellectual
     property and equipment distribution rights. In its January 23 complaint,
     the Company alleges that NGI failed to perform certain obligations owed the
     Company under a Licensing and Distribution Agreement wherein the Company
     licensed certain rights to NGI with respect to Canada and China and that
     NGI failed to perform certain obligations owed the Company under a
     Licensing and Distribution Agreement wherein NGI licensed certain rights to
     the Company with respect to the United States. In its February 2 complaint,
     NGI alleges just the opposite - that the Company failed to perform the
     obligations owed by it to NGI under both contracts.

         These actions are in the very  preliminary  stages and no discovery 
     has yet been taken by either party. The Company intends to vigorously
     defend against the claims of NGI and to prosecute its own claim. While the
     Company believes that it will ultimately prevail on the



<PAGE>   12

                     MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS


     merits, no assurances to that effect can be given. In any event, the cost
     of defending the actions could be substantial. In connection with the
     December 1995 transaction, the Company capitalized the $500,000 cost of the
     license acquired from NGI, which the Company is amortizing over the five
     year term of the related License and Distribution Agreement. As of March
     31, 1998, the unamortized amount, including certain additional software
     development costs, was $420,000, which the Company is continuing to
     amortize. The Company believes that the most likely conclusion of the
     dispute with NGI will include an affirmation of the Company's right to use
     the NGI license in connection with the Company's planned business. As a
     result, the Company has determined that it is only reasonably possible that
     this asset has been impaired and accordingly has recorded no reduction in
     the carrying value of the asset as of March 31, 1998, other than normal
     amortization. However, subsequent events may occur which would cause the
     Company to determine that it is necessary and appropriate to reduce, or to
     accelerate the rate of amortization of, all or a portion of such
     capitalized cost. Any such reduction or acceleration will have an adverse
     effect upon the reported earnings of the Company for the period in which
     such action is taken which could, depending upon the period involved and
     the earnings of the Company for such period, be material. See Notes 4 and 5
     of Notes to Consolidated Financial Statements contained within the
     Company's Annual Report on Form 10-KSB for the fiscal year ended September
     30, 1997.

     FlashCash Litigation

           In February 1998, the Company introduced FlashCash, a bingo game
     played on interconnected electronic player stations located at
     participating Indian bingo halls. The Company has submitted FlashCash to
     the NIGC for approval of the game as Class II gaming; no determination has
     yet been made by the NIGC. The Company also submitted FlashCash to the
     Tulsa U.S. Attorney and requested a letter from the U.S. Attorney that
     FlashCash was a legal Class II bingo game. The Tulsa U.S. Attorney declined
     to issue an opinion and in February 1998, the Company filed a Complaint for
     Declaratory Relief in the Northern District of Oklahoma seeking a
     declaration by the court that FlashCash is a legal Class II bingo game as
     permitted by the Gaming Act. No discovery has commenced and the matter
     remains in a very preliminary stage. The Company intends to vigorously
     defend its position that FlashCash is a Class II bingo game; however, no
     assurances can be given that the Company will be successful on the merits.
     To date, FlashCash has been well received by customers so that, if
     FlashCash is ultimately determined to be Class III gaming, the loss of the
     FlashCash business could have a material and adverse effect upon the
     Company's financial condition and results of operations. Even if successful
     on the merits, the Company will incur legal fees and expenses in defending
     its position, which could be significant and which could, therefore, have a
     material and adverse effect upon the Company's reported earnings for the
     periods in which such legal services are rendered and the related costs are
     incurred by the Company.

<PAGE>   13

                     MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS


     Other Litigation

         The Company is a party to various other lawsuits and claims arising out
     of the ordinary course of its business. No accrual for potential loss has
     been made in the accompanying financial statements, as management does not
     believe that the likelihood of a material loss is probable at this time.

4.   RELATED PARTY TRANSACTIONS

         In March 1998, the Company entered into an agreement to sell gaming
     equipment to a third party. The sales price was approximately $2.4 million,
     payable on or before April 30, 1998. Subsequent to March 31, 1998, the
     third party purchaser assigned its right under the purchase agreement to a
     newly-formed limited liability company ("EPLLC-2"), that includes as an
     investor an affiliate of Gordon T. Graves, the Company's Chairman of the
     Board and Chief Executive Officer as to a 10.5% interest in the new entity
     and other management of the Company as to a 10.5% interest. Mr. Graves also
     owns and controls the company having management authority over EPLLC-2. The
     terms of the sale which was assigned to EPLLC-2 are the same as the
     original terms entered into in March 1998. 



<PAGE>   14
                         INDEPENDENT ACCOUNTANT'S REPORT




         To the Board of Directors and Stockholders
         Multimedia Games, Inc.

                  We have reviewed the accompanying consolidated balance sheet
         of Multimedia Games, Inc. and Subsidiaries as of March 31, 1998, and
         the related consolidated statements of operations for the three and six
         month periods ended March 31, 1998, and the consolidated statement of
         cash flows for the six month period ended March 31, 1998. These
         financial statements are the responsibility of the Company's
         management.

                  We conducted our review in accordance with standards
         established by the American Institute of Certified Public Accountants.
         A review of interim financial information consists principally of
         applying analytical procedures to financial data and making inquiries
         of persons responsible for financial and accounting matters. It is
         substantially less in scope than an audit conducted in accordance with
         generally accepted auditing standards, the objective of which is the
         expression of an opinion regarding the financial statements taken as a
         whole. Accordingly, we do not express such an opinion.

                  Based on our review, we are not aware of any material
         modifications that should be made to the accompanying financial
         statements for them to be in conformity with generally accepted
         accounting principles.

                  We have previously audited, in accordance with generally
         accepted auditing standards, the consolidated balance sheet as of
         September 30, 1997, and the related consolidated statements of
         operations, stockholders' equity and cash flows for the year then ended
         (not presented herein); and in our report dated December 23, 1997, we
         expressed an unqualified opinion on those consolidated financial
         statements. In our opinion, the information set forth in the
         accompanying consolidated balance sheet as of September 30, 1997 is
         fairly stated in all material respects in relation to the consolidated
         balance sheet from which is has been derived.




         COOPERS & LYBRAND L.L.P.


         Tulsa, Oklahoma
         May 13, 1998




<PAGE>   15

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

        GENERAL

             The Company provides satellite linked, high stakes bingo games and
        interactive high-speed bingo games played on interconnected electronic
        player stations to participating bingo halls owned primarily by American
        Indian tribes located throughout the United States. The Company also
        provides proxy play services for its MegaBingo and MegaCash games to
        bingo players located off Indian lands.

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

             In August 1995, the Company introduced MegaMania, a high-speed
        bingo game developed by the Company that allows customers to purchase
        bingo cards and to play bingo on an interactive electronic player
        station that requires rapid decisions and presents game results in a
        fast-action color video format featuring graphics and animation
        accompanied by sound. In February 1998, the Company introduced another
        Class II game similar to MegaMania called FlashCash. In both games, the
        stations are interconnected with other stations at participating bingo
        halls through the Company's computer network, thus allowing players to
        compete against one another to win a common pooled prize.

             Significant revenue generation for FlashCash did not begin until
        March 1998. As of March 31, 1998, MegaMania and FlashCash are played at
        56 independently owned American Indian bingo halls, located in 11
        different states, primarily Oklahoma.

        RESULTS OF OPERATIONS

        The Three Months Ended March 31, 1998 and 1997:

             The Company's total operating revenues were $16,908,000 and
        $9,045,000 for the three months ending March 31, 1998 and 1997
        respectively, or an increase of $7,863,000. The increase was primarily a
        result of an increase in gaming revenue of $5,549,000, an increase in
        electronic player station sales of $1,947,000 which were made to a
        related party and an increase in electronic player station lease revenue
        of $363,000. The increase in gaming revenue was driven by increased
        MegaMania gaming revenues of $5,337,000, and revenues of $773,000 from
        FlashCash that was introduced during the quarter ended March 31, 1998,
        which were partially offset by MegaBingo revenue decreases. The Company
        had an average of approximately 2,100 electronic player stations in
        operation during the three months ended March 31, 1998 compared to an
        average of approximately 1,110 during the same three months of 1997,
        which accounts for a substantial portion of the increase in gaming
        revenues during the current period.



<PAGE>   16
             Bingo prizes and related costs were $2,240,000 and $2,163,000 for
        the three months ended March 31, 1998 and 1997 respectively, or an
        increase of $77,000. The increase resulted from a change in the
        MegaBingo prize structure partially offset by decreased MegaBingo
        operations during the period.

             Allotments to hall operators were $8,636,000 and $4,478,000 for the
        three months ended March 31, 1998 and 1997 respectively. The increase of
        $4,158,000 resulted from the increase in gaming operations.

             Costs of electronic player stations sold were $1,162,000 and
        $217,000 for the three months ended March 31, 1998 and 1997,
        respectively, or an increase of $945,000. The entire cost of electronic
        player stations sold in 1998 were from sales to EPLLC-2, a related
        party.

             Salaries and wages were $762,000 and $475,000 for the three months
        ended March 31, 1998 and 1997 respectively, or an increase of $287,000.
        Salaries and wages increased during the three months ended March 31,
        1998 due to additional staff needed for the increased MegaMania and
        FlashCash operations.

             Selling, general and administrative expenses were $2,770,000 and
        $1,143,000 for the three months ending March 31, 1998 and 1997,
        respectively, or an increase of $1,627,000. The increase is primarily
        due to an increase in legal and professional fees of approximately
        $1,099,000 primarily as a result of the MegaMania litigation, an
        increase in business meals and travel of approximately $83,000, an
        increase in contract labor and services of approximately $57,000,
        increased advertising expenses of approximately $130,000 and other costs
        of approximately $249,000 primarily as a result of increased MegaMania
        and FlashCash activity and the cost of the annual report to
        shareholders.

             Amortization and depreciation was $711,000 and $314,000 for the
        three months ending March 31, 1998 and 1997 respectively, or an increase
        of $397,000. The increase results from the acquisition of additional
        MegaMania and FlashCash electronic player stations and computer software
        costs capitalized during 1997.

        The Six Months Ended March 31, 1998 and 1997:

             The Company's total operating revenues were $29,812,000 and
        $15,850,000 for the six months ended March 31, 1998 and 1997
        respectively, or an increase of $13,962,000. The increase was primarily
        a result of an increase in gaming revenue of $11,123,000, an increase in
        electronic player station sales of $1,991,000, which were made to a
        related party and an increase in electronic player station lease revenue
        of $843,000. The increase in gaming revenue was driven by increased
        MegaMania gaming revenues of $13,860,000 and revenues of $773,000 from
        the introduction of FlashCash in the current period, partially offset by
        MegaBingo revenue decreases. The Company had an average of approximately
        1,900 electronic player stations in operation during the six months
        ended March 31, 1998 compared to an average of approximately 1,000
        during the same six months of 1997, which accounts for a substantial
        portion of the increase in gaming revenues during the current period.

             Bingo prizes and related costs were $4,697,000 and $4,379,000 for
        the six months ended March 31, 1998 and 1997 respectively, or an
        increase of $318,000. The increase resulted from a change in the
        MegaBingo prize structure partially offset by decreased MegaBingo
        operations during the period.

<PAGE>   17
             Allotments to hall operators were $15,993,000 and $7,512,000 for
        the six months ended March 31, 1998 and 1997 respectively. The increase
        of $8,481,000 resulted from the increase in gaming operations.

             Costs of electronic player stations sold were $1,189,000 and
        $217,000 for the six months ended March 31, 1998 and 1997, respectively,
        or an increase of $972,000. Of the costs of electronic player station
        sales in 1998, $1,162,000 was attributed to EPLLC-2, a related party.

             Salaries and wages were $1,447,000 and $952,000 for the six months
        ended March 31, 1998 and 1997 respectively, or an increase of $495,000.
        Salaries and wages increased during the six months ended March 31, 1998
        due to additional staff needed for the increased MegaMania and FlashCash
        operations.

             Selling, general and administrative expenses were $4,249,000 and
        $2,063,000 for the six months ending March 31, 1998 and 1997,
        respectively, or a increase of $2,186,000. The increase is primarily due
        to an increase in legal and professional fees of approximately
        $1,162,000, primarily as a result of the MegaMania litigation and of
        increased legal and regulatory activity, an increase in contract labor
        and service expenses of approximately $134,000 related primarily to
        increased MegaMania activity, an increase of $193,000 for advertising
        and the annual report to stockholders, and an increase in business meals
        and travel of approximately $211,000.

             Amortization and depreciation was $1,346,000 and $603,000 for the
        six months ending March 31, 1998 and 1997 respectively, or an increase
        of $743,000. The increase resulted primarily from the acquisition of
        additional MegaMania and FlashCash electronic player stations and
        computer software costs capitalized during 1997.

        LIQUIDITY AND CAPITAL RESOURCES

             At March 31, 1998, the Company had $1,354,000 in unrestricted cash
        and cash equivalents, a decrease of $1,026,000 from September 30, 1997.
        During the six month period ended March 31, 1998, the Company had
        positive cash flow from operations of $1,353,000 versus negative cash
        flow of $462,000 in the same period of the prior year. The primary
        components of cash flows from operations in the current six month period
        include an increase in accounts and notes receivable of $1,512,000, an
        increase in inventory of $895,000, an increase in deferred taxes of
        $371,000, a decrease in prize fulfillment fees payable of $47,000,
        primarily offset by an increase in amortization and depreciation to
        $1,346,000 and an increase in accounts payable and accrued expenses of
        $1,351,000. As a result, at March 31, 1998, the Company had positive
        working capital of $3,910,000.

             In March 1998, the Company entered into an agreement to sell gaming
        equipment to a third party. The sales price was approximately $2.4
        million, payable on or before April 30, 1998. Subsequent to March 31,
        1998, the third party purchaser assigned its right under the purchase
        agreement to EPLLC-2, a newly formed entity that includes as an
        investor an affiliate of Gordon T. Graves, the Company's Chairman of the
        Board and Chief Executive Officer as to a 10.5% interest and other
        management of the company as to a 10.5% interest.  Mr. Graves also
        owns and controls the Company having management authority over
        EPLLC-2.  The terms of the sale which was assigned to EPLLC-2 are
        the same as the original terms entered into in March 1998.

             During the quarter ended March 31, 1998, the Company incurred legal
        fees and expenses of approximately $1,288,000, or an increase of
        $1,099,000 when compared to the quarter ended December 31, 1997. Most of
        the current quarter increase was incurred in the month of January 1998,
        as the Company responded to the December 31, 1998 actions by the Tulsa
        U.S. Attorney in attempting to shut-down the Company's MegaMania bingo
        game. While legal fees and expenses related to MegaMania and other
        litigation involving the Company will continue to be significant and
        will continue to materially and adversely effect the Company's reported
        earnings for the periods in which the legal services are performed and
        the related costs are incurred by the Company, such fees and expenses
        should "normalize" and are not expected to approach the levels seen in
        January 1998. The Company believes that its current operations,
        including "normalized" legal fees and expenses and the purchase,
        assembly and installation of approximately 250 player 



<PAGE>   18
        stations per month, can be sustained from cash from operations. However,
        the purchase, assembly and installation of additional electronic player
        stations to further expand the Company's MegaMania and FlashCash
        operations will require funding from external sources. Such funding is
        expected to be obtained from additional sales of electronic player
        stations to private investors, which may include related parties, rather
        than from more traditional sources of equipment financing. The Company
        does not anticipate being able to access the more traditional sources of
        equipment financing pending a satisfactory outcome of the MegaMania
        litigation. Accordingly, any sales of electronic player stations to
        private investors will likely have an effective cost to the Company that
        is significantly greater than could otherwise be obtained through
        traditional financing sources. No assurances can be given that the
        Company will be able to obtain such funding on a timely basis or upon
        terms satisfactory to the Company.

        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, those described under "Item 1. Description of Business -
        Risk Factors" contained in the Company's Annual Report on Form 10-KSB
        for the fiscal year ended September 30, 1997, 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.


<PAGE>   19

                                     PART II

                                OTHER INFORMATION



ITEM 1.     LEGAL PROCEEDINGS

         On December 31, 1997, the U.S. Attorney for the Northern District of
Oklahoma (the "Tulsa U.S. Attorney") filed a civil forfeiture action in the
Federal District Court for the Northern District against the player stations and
centralized computer equipment used to play MegaMania located in the Northern
District. On that same day, agents of the Federal Bureau of Investigation
entered the Company's headquarters in Tulsa, Oklahoma and seized the Company's
central computer system, which caused the play of MegaMania to cease throughout
the Company's nationwide MegaMania network. Agents also entered the bingo halls
of the Cherokee Nation and Seneca-Cayuga tribe in the Northern District and
seized approximately 300 MegaMania player stations. Agents also entered the
bingo hall of the Choctaw nation in the Eastern District of Oklahoma and seized
the Company's bingo ball blower that was used to draw numbers for the play of
MegaMania. No other seizure or enforcement action was taken outside the Northern
District.

         About 18 hours following the seizure actions, the Company was again
operating MegaMania throughout its MegaMania network through the use of back-up
systems, except at the bingo halls in the Northern District where the MegaMania
player stations were seized, and such play has continued without interference or
interruption since that time. No other seizure or enforcement actions have been
instituted or taken against the Company or any of its customers regarding
MegaMania since the initial actions taken on December 31, 1997.

         On January 5, 1998, the Company and the Seneca-Cayuga tribe filed a
Complaint For Declaratory Relief in the Northern District seeking a declaration
by the courts that MegaMania is a legal Class II bingo game as permitted by the
Indian Gaming Regulatory Act of 1988 (the "Gaming Act"). On January 12, 1998,
the Choctaw Nation of Oklahoma, the Chickasaw Nation of Oklahoma and the
Cheyenne-Arapaho Tribe of Oklahoma filed a similar Complaint For Declaratory
Relief in the Federal Court for the District of Columbia seeking a declaration
by the courts that MegaMania is a legal Class II bingo game.

         On January 23, 1998, the Company, the Seneca-Cayuga tribe and the
Cherokee Nation entered into a standstill agreement with the Tulsa U.S. Attorney
and the other U.S. Attorneys in Oklahoma which allowed the bingo halls of the
Seneca-Cayuga's and Cherokee's to immediately commence playing MegaMania,
assured the Company and the tribes that no other seizure or enforcement action
would be taken in Oklahoma, and agreed to a speedy trial on the merits of
MegaMania within 120 days, which was subsequently extended to early fall. As a
result of the standstill agreement, the Company believes there will be no
seizure or enforcement actions taken against MegaMania in any of the United
States during the pendency of the trial on the merits of MegaMania as a Class II
bingo game. On May 5, 1998, the Company, the Seneca-Cayuga tribe and the
Cherokee Nation filed a Motion for Partial Summary Judgment seeking a
declaration by the court that MegaMania is a Class II game. The Tulsa U.S.
Attorney has 30 days to respond to the Motion. Discovery is about to commence in
the action. The Company intends to vigorously defend its position that MegaMania
is a Class II game; however, no assurances can be given that the Company will be
successful on the merits. If MegaMania is ultimately determined to be Class III
gaming, the loss of the MegaMania business 


<PAGE>   20

would have a material adverse effect upon the Company's financial condition and
results of operation. Even if the Company is successful on the merits, the legal
fees and expenses to be incurred by the Company related to the MegaMania
litigation will be significant and are expected to materially and adversely
affect the Company's reported earnings during the periods in which legal
services are rendered and the related costs are incurred by the Company.

         On February 2, 1998, a complaint was filed by Network Gaming
International Corporation ("NGI") in the Federal District Court for the Northern
District of Oklahoma against the Company alleging, among other things, breach of
contract, misappropriation of trade secrets, fraud and interference with
prospective advantage. The complaint, which seeks $62 million in damages and
other specified and unspecified relief, also names Gordon T. Graves, the
Company's Chairman of the Board, and Larry D. Montgomery, the Company's former
President, as individual defendants. On January 23, 1998, the Company had filed
its own action in the Court against NGI for breach of contract.

         The dispute arises out of a series of related agreements entered into
between the parties in December 1995 and May and June 1996. In general, these
agreements contemplate the cross-licensing of certain intellectual property and
equipment distribution rights. In its January 23 complaint, the Company alleges
that NGI failed to perform certain obligations owed the Company under a
Licensing and Distribution Agreement wherein the Company licensed certain rights
to NGI with respect to Canada and China and that NGI failed to perform certain
obligations owed the Company under a Licensing and Distribution Agreement
wherein NGI licensed certain rights to the Company with respect to the United
States. In its February 2 complaint, NGI alleges just the opposite - that the
Company failed to perform the obligations owed by it to NGI under both
contracts.

         These actions are in the very preliminary stages and no discovery has
yet been taken by either party. The Company intends to vigorously defend against
the claims of NGI and to prosecute its own claim. Which the Company believes
that it will ultimately prevail on the merits, no assurances to that effect can
be given. In any event, the cost of defending the actions could be substantial.
In connection with the December 1995 transaction, the Company capitalized the
$500,000 cost of the license acquired from NGI, which the Company is amortizing
over the five year term of the related License and Distribution Agreement. As of
March 31, 1998, the unamortized amount, including certain additional software
development costs, was $420,000, which the Company is continuing to amortize.
The Company believes that the most likely conclusion of the dispute with NGI
will include an affirmation of the Company's right to use the NGI license in
connection with the Company's planned business. As a result, the Company has
determined that it is only reasonably possible that this asset has been impaired
and accordingly has recorded no reduction in the carrying value of the asset as
of March 31, 1998, other than normal amortization. However, subsequent events
may occur which would cause the Company to determine that it is necessary and
appropriate to reduce, or to accelerate the rate of amortization of, all or a
portion of such capitalized cost. Any such reduction or acceleration will have
an adverse effect upon the reported earnings of the Company for the period in
which such action is taken which could, depending upon the period involved and
the earnings of the Company for such period, be material. See Notes 4 and 5 of
Notes to Consolidated Financial Statements contained within the Company's Annual
Report on Form 10-KSB for the fiscal year ended September 30, 1997.



<PAGE>   21
         In February 1998, the Company introduced FlashCash, a bingo game played
on interconnected electronic player stations located at participating Indian
bingo halls. The Company has submitted FlashCash to the NIGC for approval of the
game as Class II gaming; no determination has yet been made by the NIGC. The
Company also submitted FlashCash to the Tulsa U.S. Attorney and requested a
letter from the U.S. Attorney that FlashCash was a legal Class II bingo game.
The Tulsa U.S. Attorney declined to issue an opinion and in February 1998, the
Company filed a Complaint for Declaratory Relief in the Northern District of
Oklahoma seeking a declaration by the court that FlashCash is a legal Class II
bingo game as permitted by the Gaming Act. No discovery has commenced and the
matter remains in a very preliminary stage. The Company intends to vigorously
defend its position that FlashCash is a Class II bingo game; however, no
assurances can be given that the Company will be successful on the merits. To
date, FlashCash has been well received by customers so that, if FlashCash is
ultimately determined to be Class III gaming, the loss of the FlashCash business
could have a material and adverse effect upon the Company's financial condition
and results of operations. Even if successful on the merits, the Company will
incur legal fees and expenses in defending its position, which could be
significant and which could, therefore, have a material and adverse effect upon
the Company's reported earnings for the periods in which such legal services are
rendered and the related costs are incurred by the Company.

         The Company is a party to various other lawsuits and claims arising out
of the ordinary course of its business. No accrual for potential loss has been
made in the accompanying financial statements, as management does not believe
that the likelihood of a material loss is probable at this time.


ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS

         During the three months ended March 31, 1998, the Company issued 2,328
shares of Common Stock. The shares were issued at a price of $2.00 per share
upon the exercise of warrants originally granted in January, 1995. Net proceeds
from the issuance of such shares was used by the Company for general working
capital purposes, in transactions exempt for registration under the Securities
Act of 1933, as amended, pursuant to Section 4(2).

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         On March 4, 1998, the Company held its 1998 Annual Shareholder Meeting.
The meeting involved the election of four nominees to be Directors, and the
following persons were elected, constituting all of the members of the Board of
Directors of the Company: Gordon T. Graves, Larry D. Montgomery, Gregory N.
Stern and Thomas W. Sarnoff.

      A separate tabulation with respect to each nominee is as follows:

<TABLE>
<S>                     <C>                      <C>
Gordon T. Graves         4,664,111 votes for       27,250 votes against or withheld
Larry D. Montgomery      4,663,011 votes for       28,300 votes against or withheld
Gregory N. Stern         4,662,211 votes for       29,150 votes against or withheld
Thomas W. Sarnoff        4,660,661 votes for       30,700 votes against or withheld
</TABLE>                                        
                       
         1.   In addition to the election of directors, a proposal to ratify and
approve the appointment of Coopers & Lybrand L.L.P. as the Company's independent
auditors was voted upon at the Meeting and received the requisite number of
votes necessary to pass, as follows:



<PAGE>   22
               4,653,961 votes for           22,600 votes against or withheld

               4,800 votes abstaining

         2.   A proposal to amend the Company's 1996 Stock Incentive Plan was 
not approved. There was not the majority needed to pass the proposal


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) The exhibits filed as part of this Quarterly Report on Form
10-QSB are listed in the attached Index to Exhibits.

         (b) The following reports on Form 8-K were filed by the Company during
the quarter ended March 31, 1998:

         (1) On January 6, 1998, the Company filed a Report on Form 8-K
reporting under Item 5. Other information, the institution of a civil forfeiture
action by the U.S. Attorney for the Northern District of Oklahoma against the
Company's MegaMania bingo game, and the Complaint for Declaratory Relief filed
by the Company in response thereto.

         (2) On February 6, 1998, the Company filed a Report on Form 8-K
reporting under Item 5. Other Information, the filing of a complaint against the
Company by Network Gaming International, alleging breach of contract and seeking
damages from the Company in excess of $62 million.

                                   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 May 13, 1998          Multimedia Games, Inc.



                                     By: /s/ FREDERICK E. ROLL
                                         ---------------------------------
                                         Frederick E. Roll, Vice President and
                                         Chief Financial Officer


<PAGE>   23

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                     DESCRIPTION
-------                    -----------
<S>                    <C>
15                     Letter regarding Unaudited Interim Financial Information

27                     Financial Data Schedule
</TABLE>