1022080--3/14/2006--MIDWAY_GAMES

related topics

{customer, product, revenue}

{property, intellectual, protect}

{product, market, service}

{stock, price, share}

{competitive, industry, competition}

{debt, indebtedness, cash}

{acquisition, growth, future}

{financial, litigation, operation}

{system, service, information}

{product, candidate, development}

{personnel, key, retain}

{provision, law, control}

{operation, international, foreign}

{stock, price, operating}

{loss, insurance, financial}

If our new products fail to gain market acceptance, we may not have sufficient revenues to pay our expenses and to develop a continuous stream of new games. Product development schedules are long and frequently unpredictable, and we may experience delays in introducing new products, which may adversely affect our revenues. Our market is subject to rapid technological change, and if we do not adapt to, and appropriately allocate our new resources among, emerging technologies, our revenues would be negatively affected. If consumers defer purchasing our products or the prices for our products decrease as a result of the current home console transition period, our revenues and margins would be adversely affected. Our operating results may fluctuate from quarter to quarter, making our results difficult to predict. Restrictive debt covenants in our credit facility limit our operating flexibility, and all amounts outstanding under our credit facility, including our term loan, and our convertible senior notes may become immediately payable if we default under the facility. Increased leverage may harm our results of operations and financial condition. If in the future we need to seek additional capital due to continuing operating losses or otherwise, we may incur additional expenses in the form of periodic interest or other debt service payments, or our stockholders may suffer dilution in their percentage ownership of common stock. Our market is highly competitive. If we are unable to compete effectively, our business, results of operations and financial condition would be adversely affected. If product returns and price adjustments exceed our allowances, we will incur additional charges, which would have an adverse effect on our results of operations. If game platform manufacturers refuse to license their platforms to us or do not manufacture our games on a timely basis or at all, our revenues would be adversely affected. Approximately half of our total net revenues are attributable to our five largest customers. A business failure by any of our major customers could have an adverse effect on our revenues and our ability to collect receivables. Rating systems for interactive entertainment software, potential legislation and vendor or consumer opposition could inhibit sales of our products. Lawsuits alleging damages as a result of our video games may require significant expenditures, divert the attention of management and generate negative publicity, and thereby have an adverse effect on our results of operations. We are dependent on third parties to manufacture our products, and any increase in the amounts we have to pay to have our products manufactured or any delay or interruption in production would negatively affect both our ability to make timely product introductions and our results of operations. We have limited control over the personnel, scheduling and use of resources by third parties that develop certain of our game titles, and our revenues may be adversely affected by delays caused by these developers. If we are not able to maintain or acquire licenses for intellectual property necessary to the success of some of our games, or if that intellectual property does not achieve market acceptance, our revenues would be adversely affected. We may experience increased costs to continue to attract and retain senior management and highly qualified software developers. If our products contain errors, our reputation, results of operations and financial condition may be adversely affected. If we are unsuccessful in protecting our intellectual property, our revenues may be adversely affected. If we infringe the intellectual property of others, our costs may rise and our results of operations may be adversely affected. We face risks associated with doing business in foreign countries, including our ability to generate international demand for our products. We may face limitations on our ability to find suitable acquisition opportunities or to integrate any additional acquired businesses. Through their control of over 85% of our outstanding common stock, Sumner M. Redstone and his related parties decide the outcome of votes of our stockholders and are able to control our business strategies and policies. Decisions by Mr. Redstone and his related parties with respect to their ownership or trading of our common stock could have an adverse effect on the market value of our common stock and our convertible senior notes. Effects of anti-takeover provisions could inhibit a change in control of Midway and could adversely affect the market price of our common stock.

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1022080--3/14/2006--MIDWAY_GAMES_INC