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corresp

September 8, 2005

Mr. Gary Todd

Securities and Exchange Commission

Division of Corporation Finance

450 Fifth Street, N.W.

Washington, DC 20549-6010

    RE:
    MDI, Inc.

Form 10-K for the Fiscal Year Ended December 31, 2004

Mr. Todd’s Letter dated August 26, 2005

File No. 000-09463

Dear Mr. Todd:

Thank you for your letter dated August 26, 2005 to the attention of Jon Greenwood on behalf of MDI,
Inc. We at MDI are appreciative of your review and the spirit in which your have offered your
comments. It is our goal to closely heed your suggestions in our future filings and we are
appreciative of your making yourself and others at the SEC available should we have questions on
any matter involving our SEC filings.

What follows are our responses to your comments. To the extent additional information and/or
documentation is requested by you or your staff, we stand ready to cooperate.

Specific responses are indexed to your comments.

Form 10-K as of December 31, 2004

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 8

Results of Operations, page 10

    1.

    “Please expand future MD&A to make quantified disclosure about anticipated and actual
cost savings derived from restructuring efforts. Your disclosures should consider the
guidance set forth in the Question under ‘Disclosures’ to SAB Topic 5-P. Refer to the next
to last paragraph to the referenced Question.”

    Response:

    In future filings, the Company will expand MD&A to make quantified disclosure about
anticipated and actual cost savings derived from restructuring efforts. We reviewed SAB Topic
5-P and understand the importance of quantified disclosures related to restructuring and
anticipated cost savings.

Financial condition, liquidity and capital resources, page 12

    2.

    “We see that your operations consumed significant cash in 2004 and 2003. We also see
your decreased liquidity from 2003 to 2004. In future filings please expand to provide a
more thorough discussion of cash flows from operating activities. That expanded analysis
should fully reflect the guidance set forth in FR-72 (Exchange Act release 34-48960). As
noted in the Release, we believe that this discussion should focus on the underlying
drivers of operating cash flows and should provide disclosure about the reasons for changes
in

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    September 14, 2005

    those cash flows from period to period. Please note that the form of the cash flow
statement should drive the substance of the analysis. That is, the discussion should
not essentially repeat information already disclosed on the face of the cash flow
statement.”

    Response:

    In future filings, the Company will expand its disclosures to provide a more thorough
discussion of cash flows from operating activities. We reviewed FR-72 (Exchange Act release
34-48960) and understand the importance of more thorough explanations of the underlying
business factors that affect the sources and uses of cash flows, specifically those material
items which may not be apparent from the Statement of Cash Flows.

    3.

    “You disclose that you ‘should have enough liquidity to satisfy requirements for at
least the next 12 months.’ We also see that cash and cash equivalents for at December 31,
2004 totaled only $3.4 million while you had an operating cash burn in excess of $10
million during that year. Please expand future filings to disclose more detail about how
you intend to fund your business and the bases for your assertion about the sufficiency of
liquid resources. As necessary, quantify specific financing needs and discuss the expected
sources of that financing. Clarify the potential impact if you are unable to obtain any
necessary additional funding.”

    Response:

    In future filings, the Company will expand its disclosures to provide more detail about
how it intends to fund the business and the bases for the assertions about the sufficiency of
liquid resources. We will also provide more information about specific financing needs and we
will discuss the expected sources of that financing. Finally, we will clarify the potential
impact to the business if necessary funding is unavailable.

Item 18. Financial Statements and Supplementary Data, page 15

Note 2: Discontinued Operations, page 24

    4.

    “We note that you sold your SecurityandMore and Industrial Vision Source distribution
businesses to Mace Security International, Inc. in exchange for $5.6 million. With respect
to the disposition, please tell us why you did not file S-X Article 11 pro forma financial
statements on a Form 8-K. For guidance, please refer to the instructions to Form 8-K.”

    Response:

    At the time of the filing of the Form 8-K, it was the belief of the company that it did
not need to file pro forma financial statements related to this sale transaction because the
sold business units were already reported as a separate segment (the DSG Segment) within the
Company’s prior Form 10-K and 10-Q filings and believed the segment disclosures provided
sufficient information for users of the financial statements to understand the effects of the
sale on our continuing business. Upon reviewing the guidance for Form 8-K and S-X Article 11,
the Company recognizes that presentation of pro forma financial statements would lead to more
complete disclosure and should have been included in a Form 8-K. Given the time that has
elapsed since the disposition and because the Company has filed a 10-K since the sale that
presented the operations as discontinued, the Company believes filing an 8-K to include pro
forma financial statements would no longer be of benefit to users of the financial statements.
In the event of future sales, the Company will comply with the requirement to provide
required pro forma financial statements on a Form 8-K.

Note 7: Goodwill, page 32

    5.

    “We see that goodwill is significant to your assets. We also see a recent history of
operating losses, declining revenues, asset and business sales, and negative operating cash
flows. In future filings please expand to more fully describe why you believe your
goodwill is not impaired. Please address the business and operational factors you
considered in preparing the annual impairment evaluation. In that regard, we see that your

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    September 14, 2005

    evaluation is based on a discounted cash flow analysis. Please also expand future
filings to describe how you estimate cash flows and determine the discount rate for that
purpose.”

    Response:

    In future filings, the company will expand its disclosures to more fully describe why we
believe goodwill is not impaired. The Company will also provide more information on the
methods and assumptions used to estimate future discounted cash flows.

Company Acknowledgement Statements

     The Company hereby acknowledges that;

    •

    the Company is responsible for the adequacy and accuracy of the disclosure in the
filing,

    •

    SEC staff comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and

    •

    the Company may not assert staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United
States.

Once again, we are appreciative of the instructive and cooperative nature of your August 26, 2005
letter to us and your offer to allow us to maintain continued contact with you in the future.

Sincerely,

    /s/ Collier Sparks

    J. Collier Sparks

    President and Chief Executive Officer

    /s/ Jon Greenwood

    Jon D. Greenwood

    Chief Financial Officer