Mail Stop 4561
January 6, 2006
Deborah K. Fulton, Esq.
Senior Vice President
Secretary and General Counsel
Midway Games, Inc.
2704 West Roscoe Street
Chicago, Illinois 60618
Re: Midway Games, Inc.
Form S-3 filed December 5, 2005
File No. 333-130134
Form 10-K for the year ended December 31, 2004
Form 10-Q for the period ended September 30, 2005
File No. 1-12367
Dear Ms. Fulton:
We have completed our review of your Form S-3 and related
filings
have the following comments that supplement our letter dated
December
30, 2005. That prior letter addressed the financial statements
and
related disclosure issues.
General
1. We note your disclosure in a Form 8-K filed December 14, 2005
regarding a restructuring plan that will involve and 8 to 11%
reduction in forces though the company plans to continue to grow
its
product development employee base in 2006. Given your past
restructuring efforts and the changes in staff relating to
acquisitions and closings, please address the status of your
restructuring plan and the impact on the company of the recurring
fluctuations in staff in a recent developments section.
Cover Page
2. Rather than using vague phrases such as "in certain
circumstances"
in discussing required or optional changes in the conversion rate,
provide a concise description of the circumstances and tell the
shareholders the page of the filing where the details you
reference
may be found. You should consider using bullet points or another
presentation that makes the most important information readily
accessible, instead of dense and lengthy textual paragraphs.
3. Please advise why you believe that a reference to the PORTAL
market is necessary on your cover page given that the notes will
not
be eligible for trading on the PORTAL market once they are
registered.
Market, Ranking and Other Data, page ii
4. Move this section to a part of the prospectus that is not
subject
to Rule 421(d). The prospectus summary should follow the inside
cover page which should contain only the table of contents.
Further,
it appears here that you are adopting the industry data cited as
your
own yet elsewhere in the prospectus you attribute the industry
data
to a third party. Please clarify whether or not you have adopted
the
data as your own and revise so that the disclosure is consistent.
Summary, page 1
5. Please clarify what is meant by the term "properties" in
reference
to entertainment, television, and film properties as referenced in
the summary paragraph.
6. We note your inclusion of selected license agreements and
"animated film properties." What is the basis for selecting the
specific examples you cite? Do your license agreements with
Warner
Bros. Interactive Entertainment or the animated film properties
generate a material portion of your revenues for example?
7. Please identify the "leading third-party development groups"
with
which you have "partnered" and clarify what is meant by
"partnering"
in this context.
8. Supplementally provide us with a marked copy of the IDC report
and
any other research reports you reference in the summary and
business
sections. Tell us whether the IDC report you cite is generally
available to the public at nominal or no payment.
Risk Factors, page 9
9. Revise the introduction to the risk factors section to
eliminate
the statement that the risks identified are the material risks "of
which we are currently aware" and statement that begins
"Additional
risks and uncertainties not currently known to us...." Item 503
of
Regulation S-K requires disclosure of known material risks.
A significant amount of our total net revenues is attributable . .
..
page 14
10. Revise the subheading to quantify the aggreagate percentage of
revenues attributable to your top five largest customers for most
recent year.
Rating systems for interactive entertainment software . . . page
14
11. Please clarify the extent to which restricting sales to under-
17
audiences would affect your sales of your "M" rated products. Are
a
material amount of your "M" rated products currently being sold to
below-age audiences? While you state that "making M-rated games
for
consumers age 17 and older plays to one of [y]our historic
strengths," we note you do not discuss the potential disadvantages
associated with this focus in your business discussion. Please
consider expanding the disclosure to address this issue.
Lawsuits alleging damages as a result of our video games . . .
page
15
12. Please tell us the circumstances, including the name of the
court, the date instituted, the principal parties thereto and
description of the factual basis alleged and the damages awarded
if
successful, relating to any wrongful death claims made against
you.
Description of the Notes, page 34
13. Please eliminate the phrase from the introductory paragraph
that
the summary information "is qualified in its entirety" by
reference
to other more detailed sections of the prospectus. The
information
you provide in the prospectus must be materially complete and the
words "in its entirety" suggest that the prospectus may not be
materially complete.
Selling Securityholders, page 67
14. Please confirm that you will identify the natural person or
persons who have voting or investment control over each of the
non-
public selling shareholder entities identified in the selling
shareholder table. Tell us how and when you will provide this
information and whether you will be relying on Rule 430B(b) to
provide such information in a manner consistent with that rule.
See
interpretation 4S of the Regulation S-K portion of the March 1999
supplement to the publicly available telephone interpretation
manual,
as well as interpretation I.60 of the July 1997 version of the
telephone interpretation manual.
15. Tell us whether any of the selling shareholders are affiliates
of
broker-dealers, such as Aristeia Trading LLC, and the UBS O`Connor
LLC entities. If so, advise us whether their shares were received
as
compensation for investment banking services or as investment
shares.
16. To the extent any of the selling shareholders are affiliates
of
broker-dealers and received investment shares, please include a
representation in the document that these sellers purchased the
shares in the ordinary course of business and at the time of the
purchase of the securities to be resold, the sellers had no
agreements or understandings, directly or indirectly, with any
person
to distribute the securities.
Form 10-K for the year ended December 31, 2004
Business
Product Development, page 7
17. Tell us and disclose whether you are dependent on one or a few
independent third-party developers the loss of whom would
materially
adversely affect your business.
Marketing and Distribution, page 8
18. Quantify the portion of your revenues that are derived outside
of
the North American market.
Competition, page 9
19. We note that your discussion here focuses on identifying
factors
on which competition in the industry is based. Please also
provide
an assessment of your competitiveness with respect to the
principal
competitive factors, such as price, shelf space, product quality
and
brand recognition, that are most significant to your competitive
position. You should address key advantages you may have and
balance
the discussion, as appropriate, by describing any material
competitive disadvantages relative to the products and services
offered by your competitors.
Licenses and Intellectual Property, page 11.
20. State the duration of your platform licenses, patents and
trademarks. To the extent you are more heavily dependent on one or
a
few, please expand to discuss their importance to your business.
Management`s Discussion and Analysis
21. In your discussion of the operating results, you sometimes
refer
to two or more factors that contributed to a material change or
offsetting effect without indicating the amount of the change
attributable to the offsetting factor. One example would be your
discussion of selling and marketing expense for the years ended
2003
and 2004 where you state that the decrease in selling and
marketing
overhead costs was "offset by increased sales commissions and
bonuses." In future filings, please quantify changes in results
from
one period to the next, including offsetting items.
22. In your response letter, tell us whether there is a
discernable
trend with regard to the company`s reliance on third-party
software
developers to generate new products. You state in your risk
factors
that approximately half of your games currently under development
are
being developed by third parties and that the number varies from
quarter to quarter. Does external versus internal or organic
growth
affect management`s assessment of its ability to timely meet
performance goals and if so, how?
Form 10-Q for the period ended September 30, 2005
Certifications (Exhibit 31)
23. Please be advised that the certifications required by Item
601(b)(31) of Regulation S-K should read exactly as set forth in
that
item. In this regard, you have included the titles of the
certifying
officers. The first line that reads "I, David F. Zucker, Chief
Executive Officer of Midway Games Inc., certify that" in the case
of
the chief executive officer`s certification, should omit the
certifying officer`s title. Please ensure that your
certifications
conform to the requirements of Item 601.
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. We may have
additional comments based on reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
Furnish requests for acceleration on behalf of the company
and
the underwriters at least two days prior to the requested
effective
date. Refer to Rules 460 and 461 of Regulation C of the
Securities
Act of 1933 and Rule 15c2-8 of the Securities and Exchange Act of
1934 regarding distribution of the preliminary prospectus,
requests
for acceleration and notification of NASD review and concurrence.
You may contact April Coleman at 202-551-3458 or Megan Akst
at
202-551-13407 if you have questions regarding comments on the
financial statements and related matters. Please address all
other
comments to Maryse Mills-Apenteng at 202-551-3457. If you require
further assistance you may contact the undersigned at 202-551-
3462.
If you still require further assistance, please contact Barbara C.
Jacobs, Assistant Director, at 202-551-3730.
Sincerely,
Mark P. Shuman
Branch Chief - Legal
cc: Via facsimile 312 782-8585
Elizabeth C. Kitslaar, Esq.
Jones Day
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Deborah K. Fulton, Esq.
Secretary and General Counsel
January 6, 2006
Page 6