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CUSIP NO. 625453105

The following constitutes the Schedule 13D filed by the undersigned (the “Schedule 13D”).

 

Item 1.

Security and Issuer

 

This statement relates to shares of the Common Stock, $0.01 par value per share (the “Shares”), of Multimedia Games, Inc. (the “Issuer”).  The address of the principal executive offices of the Issuer is 206 Wild Basin Road, Building B, Fourth Floor, Austin, Texas, 78746.

 

Item 3.

Identity and Background.

 

(a) This statement is filed by:

(i)

Dolphin Limited Partnership I, L.P., a Delaware limited partnership (“Dolphin I”);

(ii)

Dolphin Financial Partners, L.L.C., a Delaware limited liability company (“Dolphin Financial Partners”);

 

(iii)

Dolphin Limited Partnership III, L.P., a Delaware limited partnership (“Dolphin III”);

 

(iv)

Dolphin Associates, LLC, a Delaware limited liability company (“Dolphin Associates”), which serves as the general partner of Dolphin I;

(v)

Dolphin Holdings Corp., a Delaware corporation (“Dolphin Holdings”), which serves as the managing member of Dolphin Associates;

(vi)

Dolphin Associates III, LLC, a Delaware limited liability company (“Dolphin Associates III”), which serves as the general partner of Dolphin III;

 

	(vii)	Dolphin Holdings Corp. III, a Delaware corporation (“Dolphin Holdings III”), which serves as the managing member of Dolphin Associates III;
	(viii)	Justin A. Orlando (“Mr. Orlando”), who is Vice President and Managing Director of Dolphin Holdings III; and

 

(ix)

Donald T. Netter (“Mr. Netter”), who is Manager of Dolphin Financial Partners and Chief Executive Officer, President and Senior Managing Director of each of Dolphin Holdings and Dolphin Holdings III.  By virtue of his positions with Dolphin Financial Partners, Dolphin Holdings and Dolphin Holdings III, Mr. Netter has the sole power to vote and dispose of the Issuer’s Shares owned by Dolphin Financial Partners, Dolphin I and Dolphin III.

 

Each of the foregoing is referred to as a “Reporting Person” and collectively as the “Reporting Persons.” Each of the Reporting Persons is party to that certain Joint Filing Agreement, as further described in Item 6.  Accordingly, the Reporting Persons are hereby filing a joint Schedule 13D.

 

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CUSIP NO. 625453105

 

(b)           The address of the principal office of each of Dolphin I, Dolphin Financial Partners, Dolphin Associates, Dolphin Holdings and Mr. Netter is 96 Cummings Point Road, Stamford, Connecticut 06902.  The officers and directors of Dolphin Holdings and their principal occupations and business addresses are set forth on Schedule B and incorporated by reference in this Item 2.

 

The address of the principal office of each of Dolphin III, Dolphin Associates III, Dolphin Holdings III and Mr. Orlando is 156 W 56th Street, Suite 1203, New York, New York 10019.  The officers and directors of Dolphin Holdings III and their principal occupations and business addresses are set forth on Schedule C and incorporated by reference in this Item 2.

 

(c)           The principal business of each of Dolphin I, Dolphin Financial Partners, Dolphin III, Dolphin Associates and Dolphin Associates III is advising on the investment of corporate securities.  The principal business of each of Dolphin Holdings and Dolphin Holdings III is managing partnership entities that advise on the investment of corporate securities.  The principal occupation of Mr. Orlando is Vice President and Managing Director of Dolphin Holdings III.  The principal occupation of Mr. Netter is Manager of Dolphin Financial Partners and Chief Executive Officer, President and Senior Managing Director of each of Dolphin Holdings and Dolphin Holdings III.

 

(d)           No Reporting Person, nor any person listed on Schedule B or Schedule C, each annexed hereto, has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

 

(e)           No Reporting Person, nor any person listed on Schedule B or Schedule C, each annexed hereto, has, during the last five years, been party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

 

(f)           Messrs. Orlando and Netter are citizens of the United States of America.

 

Item 3.

Source and Amount of Funds or Other Consideration.

 

The Shares purchased by Dolphin I, Dolphin Financial Partners and Dolphin III were purchased with working capital (which may, at any given time, include margin loans made by brokerage firms in the ordinary course of business) in open market purchases, except as otherwise noted.  The aggregate purchase cost of the 1,674,557 Shares (including certain call options) beneficially owned in the aggregate by Dolphin I, Dolphin Financial Partners and Dolphin III is approximately $12,056,548, including brokerage commissions.

 

Item 4.

Purpose of Transaction.

 

The Reporting Persons purchased the Shares based on the Reporting Persons’ belief that the Shares, when purchased, were undervalued and represented an attractive investment opportunity.  Depending upon overall market conditions, other investment opportunities available to the Reporting Persons, and the availability of Shares at prices that would make the purchase of additional Shares desirable, the Reporting Persons may endeavor to increase their position in the Issuer through, among other things, the purchase of Shares on the open market or in private transactions or otherwise, on such terms and at such times as the Reporting Persons may deem advisable.

 

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CUSIP NO. 625453105

The Reporting Persons are long-term shareholders of the Issuer.   The Reporting Persons have visited the Issuer’s facilities in Oklahoma, Austin, Texas and Mexico and have conversed in person and by teleconference with members of the Board and senior management.  On numerous occasions, the Reporting Persons have expressed their views on the strategic, operational and financial issues facing the Issuer and have actively encouraged efforts to maximize shareholder value.  Specifically, the Reporting Persons have highlighted the necessity to more efficiently finance the Issuer’s growth opportunities with its key customers and sought to provide assistance to the Issuer in May, 2008 in optimizing its balance sheet.

The Reporting Persons believe that the lack of a coherent business strategy, poor execution and poor capital allocation have contributed to significant deterioration in shareholder value.  Specifically, the Reporting Persons are deeply concerned by the following:

·

On September 30, 2008, the price for the Issuer’s Shares closed at a level at which the Shares traded over eight years ago.

·

Since the beginning of fiscal 2005, the Issuer has invested over $360 million (over 3x the current market capitalization of the Issuer) on capital and other expenditures.  In that time, a $59 million cumulative cash flow loss has contributed to the share price falling over 72%.  (See Chart below).

·

Since the Board was reconstituted in October, 2006, the price of the Issuer’s Shares has declined 54%, while comparable companies, on average, are down only just 7%1.

·

Since its high following the ill-fated Dutch-auction tender in June, 2007, the price of the Issuer’s Shares has fallen 66% while comparable companies2, on average, are down considerably less.

·

At the current share price, the Issuer is trading at just 2.1x Enterprise Value/2009 EBITDA,3 while comparable companies4 average 7.7x -- a 73% discount.

·

At the current share price, the Issuer is trading at just over its tangible book value per share of $4.22.

The Reporting Persons believe the Board of the Issuer has failed to close the significant valuation gap for its long-term investors.  In light of these significant concerns and the erosion of shareholder value and the share price, the Reporting Persons began requesting a change in senior level management in February, 2007. More than a year later, the Issuer finally heeded the Reporting Persons’ calls and made a change in June, 2008.