According to Midway Games, Inc.'s Form 10-K for the fiscal year ended December 31, 2004, on August 27, 2004, the District Court entered an order granting defendants' motion dismissing all of plaintiffs' claims with prejudice. The time for appeal has expired, and the judgment is final.
In the Company's Form 8-K report dated April 6, 2004, three putative securities class actions were consolidated in January 2004. The court ordered the Company to answer the Consolidated Complaint or serve a motion to dismiss and accompanying memorandum in support by April 22, 2004. Discovery has not yet commenced, and no trial date has been set.
The original complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between December 11, 2001 and July 30, 2003, thereby artificially inflating the price of Midway's common stock. The Complaint alleges the statements were materially false and misleading because they failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company was experiencing material disruptions in its internal studios such that it would be unable to meet the expected release dates for its major new game titles; (2) that the Company's inability
to develop new game titles in a timely manner was negatively impacting its ability to increase revenues and earnings; (3) that the Company was experiencing decreased consumer demand for its released products; and (4) as a result of the foregoing, defendants lacked a reasonable basis for their earnings projections for the Company, which were therefore materially false and misleading.
The Class Period begins on December 11, 2001, when Midway filed with the SEC, on Form S-3/A, a registration statement containing alleged misrepresentations with respect to the Company's offering of 4.5 million shares of common stock.
The truth began to emerge on July 29, 2003, when the Company announced its results for the third quarter ended March 31, 2003. To the shock of the investment community, Midway disclosed that it generated a mere $5 million,
failing to meet its guidance estimates of $7-11 million. The revenue decline was attributed to the delay in the release of a number of titles and decreasing consumer demand for its released titles. The Company also announced that David F. Zucker succeeded Neil D. Nicastro as chief executive officer and president
of Midway Games, Inc. Midway's July 29, 2003 announcement shocked the markets, causing the Company's already depressed shares to slide downwards more than 28%, or $0.97 a share, to close at $2.42 per share on July 30, 2003.