This version of Nightmare represents Michael's grief over the Bite of 83. I wanted him to seem very monstrous, so I made him very lanky with unnatural proportions. I also wanted his eyes to seem like they were glazed over or unthinking, so I didn't give him any pupils. His main accent is red/orange, representing Mike's inner turmoil I think. That's also why he's a fox; Michael doesn't want to believe that he's responsible, but deep down he knows it; he was wearing the fox mask so Nightmare takes the form of a fox. The way it works is essentially Michael is unable to accept his role in the Bite, and he distances himself as much as possible from it. The result of this is the formation of Nightmare, the entity that Michael blames for the Bite. Nightmare is taunting Michael and hangs over him; he's essentially saying, "It was me" all the time, reminding Mike that Nightmare was responsible for his brother's death. This isn't true, of course, and Michael is only able to defeat Nightmare by taking responsibility for the death of his brother and making things right. I imagine this happens in between FNAF 3 and Pizza Sim, as Mike realizes that taking revenge on his father isn't the way to atone for his mistakes, and instead he shifts his goals to freeing the remaining spirits. I think that makes Mike's story pretty satisfying, at least. And of course, the obligatory goop factor. Gotta have that.