<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-28294
SILICON GAMING, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0357939
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2800 W. BAYSHORE ROAD
PALO ALTO, CA 94303
(Address of principal executive offices)
TELEPHONE: (415) 842-9000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
10,644,638 shares of Common Stock, $.001 par value, were outstanding as
of July 31, 1996
================================================================================
<PAGE>
SILICON GAMING, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets -- December 31, 1995 and
June 30, 1996 3
Consolidated Statements of Income -- Three Months and
Six Months Ended September 30, 1995 and June 30, 1996
and cumulative 4
Consolidated Statements of Cash Flows -- Six Months
Ended September 30, 1995 and June 30, 1996
and cumulative 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
</TABLE>
-2-
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SILICON GAMING, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
--------- -----------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents.......................... $ 2,399 $ 11,031
Prepaids and other............................ 292 775
------- --------
Total current assets....................... 2,691 11,806
PROPERTY AND EQUIPMENT, NET...................... 734 1,562
OTHER ASSETS, NET................................ 61 52
------- --------
$ 3,486 $ 13,420
======= ========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable.............................. $ 365 $ 948
Payable to related party...................... 5
Accrued liabilities........................... 239 183
Current portion of capital
lease obligations.......................... 55 171
------- --------
Total current liabilities.................. 664 1,302
------- --------
CAPITAL LEASE OBLIGATIONS........................ 272 830
------- --------
REDEEMABLE CONVERTIBLE PREFERRED STOCK--
20,192,802 shares authorized; shares
outstanding: December 31, 1995--
8,534,997; June 30, 1996--11,676,997........ 8,496 23,203
------- --------
SHAREHOLDERS' DEFICIENCY:
Common stock, $.001 par value; 16,666,667
shares authorized; shares outstanding:
December 31, 1995--2,737,989; June 30,
1996--3,616,289............................. 109 274
Notes receivable from shareholders............ (75) (226)
Deficit accumulated during the
development stage........................... (5,980) (11,963)
-------- -------
Total shareholders' deficiency.............. (5,946) (11,915)
------- --------
$ 3,486 $ 13,420
======= ========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
SILICON GAMING, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
CUMULATIVE
THREE MONTHS SIX MONTHS FROM
ENDED ENDED INCEPTION
--------------------- ----------------------- (JULY 27, 1993)
SEPTEMBER JUNE 30, SEPTEMBER JUNE 30, THROUGH
30, 1995 1996 30, 1995 1996 JUNE 30, 1996
---------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
Research and development $ 934 $2,680 $1,518 $4,245 $ 9,000
Selling, general and administrative 407 1,033 575 1,805 3,100
------ ------ ------ ------ -------
Loss from operations 1,341 3,713 2,093 6,050 12,100
Interest income, net 20 66 38 67 137
------ ------ ------ ------ -------
NET LOSS $1,321 $3,647 $2,055 $5,983 $11,963
====== ====== ====== ====== =======
PRO FORMA NET LOSS PER SHARE $(0.16) $(0.32) $(0.26) $(0.59)
====== ====== ====== ======
PRO FORMA SHARES USED IN COMPUTATION 8,230 11,516 8,056 10,222
====== ====== ====== ======
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
SILICON GAMING, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
CUMULATIVE
FROM INCEPTION
SIX MONTHS ENDED (JULY 27, 1993)
---------------------------------- THROUGH
SEPTEMBER 30, 1995 JUNE 30, 1996 JUNE 30, 1996
----------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................ $(2,056) $(5,983) $(11,963)
Reconciliation to net cash used in operating activities:
Depreciation and amortization..................................... 70 230 414
Deferred rent..................................................... --- 66 66
Common and preferred stock issued for services.................... 263 267
Accrued interest exchanged for preferred stock.................... --- --- 10
Changes in assets and liabilities:
Prepaids and other................................................ (19) (482) (775)
Other assets, net................................................. (23) 8 (30)
Accounts payable.................................................. 362 577 948
Accrued liabilities............................................... (129) (57) 183
------- ------- --------
Net cash used in operating activities.......................... (1,795) (5,378) (10,880)
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment............................... (346) (1,057) (1,974)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of redeemable convertible preferred stock,
net of issuance costs............................................ 6,268 14,457 20,881
Sale of common stock, net of notes receivable....................... 2 2 6
Collection of note receivable....................................... 13 --- 13
Proceeds from notes payable to shareholders......................... 500 --- 2,186
Payment on notes payable to shareholders............................ --- (136)
Proceeds from sale/leaseback of property and equipment.............. --- 667 1,000
Repayment of capital lease obligation............................... --- (59) (65)
------- ------- --------
Net cash provided by financing activities........................ 6,783 15,067 23,885
------- ------- --------
NET INCREASE IN CASH AND EQUIVALENTS.................................... 4,642 8,632 11,031
Beginning of period................................................. 241 2,399 ---
------- ------- --------
End of period....................................................... $ 4,883 $11,031 $ 11,031
======= ======= ========
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest............................ $ --- $ 26 $ 26
======= ======= ========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common and preferred stock for notes receivable......... $ --- $ 151 $ 234
======= ======= ========
Cancellation of preferred stock and related notes receivable........ $ 12 $ --- $ 12
======= ======= ========
Conversion of note payable to shareholder to preferred stock........ $ 1,250 $ --- $ 2,050
======= ======= ========
Issuance of common warrants......................................... $ --- $ --- $ 25
======= ======= ========
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE>
SILICON GAMING, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying balance sheet as of June 30, 1996, the statements of
operations for the three- and six-month periods ended September 30, 1995 and
June 30, 1996 and cumulative, and the statements of cash flows for the six
months ended September 30, 1995 and June 30, 1996 and cumulative are unaudited.
In the opinion of management, these financial statements have been prepared on
the same basis as the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments and accruals, necessary for the
fair presentation of the financial position and operating results as of such
date and for such periods. The unaudited three- and six-month information should
be read in conjunction with the audited consolidated financial statements of
Silicon Gaming, Inc. ("Silicon Gaming" or the "Company") and the notes thereto
included in the Company's Registration Statement on Form S-1, as amended, filed
with the Securities and Exchange Commission.
2. PRO FORMA NET LOSS PER SHARE
In connection with the filing by the Company of a Registration
Statement with the Securities and Exchange Commission for its initial public
offering of Common Stock (Note 4), certain shares of Redeemable Convertible
Preferred Stock will automatically convert into 3,528,349 shares of Common
Stock. During the twelve-month period prior to the effectiveness of its
Registration Statement (Note 4), the Company has sold Redeemable Convertible
Preferred Stock and issued options and warrants to purchase Preferred and Common
stock at prices less than the initial offering price. Accordingly, the Company
has included pro forma net loss per share information as it believes this
information is the most meaningful under the circumstances. Pro forma net loss
per share is presented for each of the interim periods reported and is based on
(i) the weighted average number of shares of Common Stock outstanding; (ii) the
weighted average number of shares of Redeemable Convertible Preferred Stock
issued more than one year prior to the effective date on an as-converted basis
and (iii) all Redeemable Convertible Preferred Stock issued, Common Stock issued
and options and warrants to purchase shares of Common and Redeemable Convertible
Preferred Stock granted during the twelve-month period preceding the effective
date which, under the Rules and Regulations of the SEC, must be considered
outstanding (using the treasury stock method at the initial offering price of
$10.50) for all periods presented.
3. SHAREHOLDERS' EQUITY
During April 1996, holders of 1,998,332 Series A Redeemable
Convertible Stock converted their shares into Series A1 Nonvoting Redeemable
Convertible Preferred Stock, and holders of 4,386,141 Series B Redeemable
Covertible Preferred Stock converted their shares into Series B1 Nonvoting
Redeemable Covertible Preferred Stock.
In May 1996, the Board of Directors of the Company approved an
increase in the number of authorized shares of preferred stock to 20,417,802 and
the designated number of shares of Series C Redeemable Convertible Preferred
Stock to 3,225,000. During April and May 1996, the Company sold an additional
1,492,000 shares of Series C Redeemable Convertible Preferred Stock for cash
consideration of $7,460,000, issued 50,000 shares of Series C Redeemable
Convertible Preferred Stock for other consideration of $250,000 and incurred an
additional $500,000 of issuance costs.
On May 28, 1996, the Board of Directors adopted the following, which
was approved by shareholders on June 12, 1996 and effected on July 25, 1996:
-6-
<PAGE>
. A two-for-three reverse split of the outstanding shares of common
stock. All share and per share amounts in these financial statements
have been adjusted to reflect this split.
. An increase in the number of authorized shares of Common Stock to
50,000,000.
. The authorization of 500,000 additional shares of preferred stock
having such rights, preferences and privileges as may be determined
from time to time by the Board of Directors, subject to the
effectiveness of the Registration Statement described below.
. An increase in the number of shares reserved under the 1994 Stock
Option Plan to 2,866,667.
. The 1996 Employee Stock Purchase Plan and reserved 300,000 shares of
Common Stock for sale to employees at a price no less than 85% of
the lower of fair market value at the beginning of the 24-month
offering period or the end of each six-month purchase period.
. The 1996 Outside Directors Stock Option Plan and reserved 200,000
shares of Common Stock for grants of options to each outside
directors to purchase 15,000 shares of Common Stock at fair market
value as of the grant date, as well as additional option grants for
5,000 shares to be issued in each subsequent year.
4. SUBSEQUENT EVENTS
On July 25, 1996, the Company effected a two-for-three reverse split
of the outstanding shares of common stock. All share and per share amounts in
these financial statements have been adjusted to reflect this split.
On July 31, 1996, the Company effected an initial public offering in
which it issued 3,500,000 shares of its Common Stock at $10.50 per share.
Concurrent with the offering, all outstanding shares of Redeemable Convertible
Preferred Stock, other than Series A1 and B1, were automatically converted into
3,528,349 shares of Common Stock. The number of authorized shares of Preferred
Stock was reduced to 6,884,473 effective with this offering. At the closing of
the offering on August 5, 1996, the Company received proceeds, net of
underwriting discounts and offering expenses, of $32,928,000.
The pro forma effect of the above subsequent events at June 30, 1996 is as
follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, PRO FORMA PRO FORMA
1996 ADJUSTMENTS BALANCES
-------- ----------- ---------
<S> <C> <C> <C>
Cash and equivalents $11,031 $ 32,928 (1) $43,959
Redeemable convertible preferred stock 23,203 (16,748) (2) 6,455(3)
Common stock, net of notes receivable 48 32,298 (1) 49,094
16,748 (2)
</TABLE>
Pro Forma Adjustments:
- ----------------------
(1) To reflect the net proceeds of the Company's initial public offering.
(2) To reflect the conversion of certain preferred stock to common stock.
(3) Reflects Series A1 and B1 Nonvoting Redeemable Convertible Preferred Stock
(Note 3) which were not converted at the initial public offering's
effective date.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
THIS DISCUSSION INCLUDES A NUMBER OF FORWARD-LOOKING STATEMENTS WHICH
REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL
PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
HISTORICAL RESULTS OR THOSE ANTICIPATED. IN THIS DISCUSSION, THE WORDS
"ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "FUTURE" AND SIMILAR
EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF
THE DATE HEREOF.
The following discussion should be read in conjunction with the
unaudited consolidated financial statements and notes thereto included in Part
I--Item 1 of this Report and the audited consolidated financial statements and
notes thereto included in the Company's Registration Statement on Form S-1, as
amended, filed with the Securities and Exchange Commission.
The Company was incorporated on July 27, 1993 to design, develop,
manufacture, distribute, and market interactive gaming devices that implement
advanced multimedia technologies using state-of-the-art off-the-shelf
components. Since its formation, the Company has been in the development stage,
and its principal activities have consisted of assembling a technical, marketing
and executive staff, developing its gaming platform, raising capital, and
initiating applications for regulatory approvals in Nevada and other
jurisdictions to manufacture, distribute and sell its gaming devices. To date,
the Company has generated no sales or other revenue and has had negative cash
flow.
Effective April 1, 1995, the Company changed its fiscal year end
from March 31 to December 31.
On July 31, 1996, the Company effected an initial public offering of
its Common Stock which yielded net proceeds, after underwriting discounts and
offering expenses, of $32,928,000. The proceeds from this offering will be used
for the continued development, marketing, introduction and roll-out of the
Company's gaming machine and for general corporate purposes. A portion of the
proceeds may also be used to acquire or invest in complementary businesses or
products or to obtain the right to use complementary technologies.
The Company expects its first commercial product to be approved for
shipment in one or more jurisdictions in late 1996. Subject to such approval,
the Company expects to commence production of commercial products and customer
product evaluations in the fourth quarter of 1996, although the Company does not
expect to generate revenue from such activities in 1996. As is industry
practice, gaming devices are typically installed on a trial basis on casino
floors for a period of 30 to 90 days before a sales decision is made by the
customer. In 1997, the Company intends to transition from the development stage.
Future revenue, profits, and cash flows will depend on market acceptance of the
Company's products, the ability of such products to generate higher revenues for
casinos as compared to competitive products, and the technical performance of
the Company's products. Additionally, among other things, the Company must
continue to attract, retain and motivate qualified personnel and meet all the
initial and ongoing licensing requirements in key jurisdictions.
RESULTS OF OPERATIONS
The Company is in the development stage and has not generated any
revenue to date. As of June 30, 1996, the Company had net losses since inception
of $11,963,000. To date, the Company has focused its resources on product
development, including system hardware and software, and game concept
development and software coding. The Company expects to complete development of
the initial version of its gaming device and begin production in the fourth
quarter of 1996. In addition to continuing and increasing expenditures in
research and development, the Company will need to incur significant expenses
-8-
<PAGE>
and other costs associated with manufacturing. In 1996, units will be
manufactured solely for testing and engineering, continued game development,
licensing approval, regulatory field trials and customer evaluations. The
Company does not expect any product sales in 1996 and therefore expects to
generate no revenue in 1996 and only limited revenue in 1997. Moreover, the
Company expects to incur substantial losses and negative cash flows at least
through the second quarter of 1998.
Amounts for the three- and six-month periods ended September 30, 1995
and June 30, 1996 may not be comparable due to the growth of the Company over
the periods and the Company's change in fiscal year. The Company believes that
operating expenses will increase in the future as it continues to develop its
product and emerges from the development stage to begin commercial operations,
including manufacturing, marketing and sales.
The Company's future results will depend on a number of factors, including, but
not limited to, dependence upon a single product, risk of technical errors,
uncertain market acceptance, regulatory approvals, risks associated with a
development stage company, competition, management of growth, dependence on key
personnel, limited protection of intellectual property rights and the risk of
litigation, rapidly changing technology, ability to obtain capital resources,
limited manufacturing experience, dependence on single-source suppliers, gaming
industry trends, volatility of the Company's Common Stock and control by
existing shareholders. As a result, the Company's operating results may
fluctuate significantly, especially when measured on a quarterly basis. For
further discussion of risk factors, this Report should be read in conjunction
with the "Risk Factors" section in the Company's Registration Statement on Form
S-1, as amended, filed with the Securities and Exchange Commission.
Research and Development
------------------------
Research and development ("R&D") expenses include payroll and
related costs of employees engaged in ongoing design and development activities,
fees to outside contractors, prototype development expenses, overhead costs,
equipment depreciation and supplies. To date, the Company has expensed all costs
associated with the research, design and development of its products. R&D
expenses were $934,000 and $2,680,000 for the quarters ended September 30, 1995
and June 30, 1996, respectively, and $1,518,000 and $4,245,000 for the six-month
periods ended September 30, 1995 and June 30, 1996, respectively. Increases over
the periods have resulted from the incremental hiring of personnel, increased
usage of engineering consultants and fees to acquire outside technologies. The
Company believes that a significant level of R&D expenses is required due to the
technical nature of the product and the elaborate requirements of the game
development process. Accordingly, the Company anticipates devoting substantial
resources, including additional personnel, to R&D and that these costs will
continue to increase in absolute dollars in future periods.
Selling, General and Administrative
-----------------------------------
Selling, general and administrative ("SG&A") expenses include
payroll and related costs for administrative and executive personnel, overhead
costs, legal and associated costs, corporate and product licensing costs in
various jurisdictions and fees for professional services. SG&A expenses were
$407,000 and $1,033,000 for the quarters ended September 30, 1995 and June 30,
1996, respectively, and $575,000 and $1,805,000 for the six-month periods ended
September 30, 1995 and June 30, 1996, respectively. Increases over the periods
result from the incremental hiring of personnel and expenses associated with
applying for corporate and product licensing in various jurisdictions. SG&A
expenses are expected to increase substantially in absolute dollars as the
Company invests in sales and marketing activities to launch its products and in
administrative personnel to support its growing infrastructure and comply with
regulatory requirements.
-9-
<PAGE>
Income Taxes
------------
The Company has had net losses since inception and therefore the
income tax benefit has been offset by a valuation allowance. As of June 30,
1996, the Company had net operating loss carryforwards of approximately
$11,800,000 for federal purposes and $1,700,000 for state purposes. These loss
carryforwards will expire beginning in 2000, if not utilized. The Company also
has R&D credit carryforwards of approximately $100,000 for federal purposes and
$50,000 for state purposes as of June 30, 1996, which expire beginning in 2000.
A valuation allowance has been recorded for these deferred tax assets as a
result of uncertainties regarding the realization of these assets due to the
lack of earnings history of the Company. Due to changes in ownership, as defined
by Section 382 of the Internal Revenue Code, resulting from the sale of Series B
and Series C Redeemable Preferred Stock and Common Stock in the Company's
initial public offering, the annual deductibility of a substantial portion of
the federal net operating loss and tax carryforwards will be limited.
LIQUIDITY AND CAPITAL RESOURCES
From inception through June 30, 1996, the Company financed its
operations primarily through the private placements of Redeemable Convertible
Preferred Stock and loans from shareholders which were subsequently converted to
Redeemable Convertible Preferred Stock. As of June 30, 1996, the amounts raised
in the private placements of Redeemable Convertible Preferred Stock, net of
issuance costs, totaled approximately $23,203,000. As of June 30, 1996, the
Company had $11,031,000 of cash on hand to fund operations. In August 1996, the
Company consummated an initial public offering of its Common Stock, through
which it raised $32,928,000, net of underwriting discounts and issuance costs.
During April and May 1996, the Company sold 1,492,000 shares of
Series C Redeemable Convertible Preferred Stock for cash consideration of
$7,460,000, issued 50,000 shares of Series C Redeemable Convertible Preferred
Stock for other consideration of $250,000 and incurred issuance costs of
$50,000.
The Company's operating activities used cash of $1,795,000 and
$5,378,000 for the six-months ended September 30, 1995 and June 30, 1996,
respectively. Cash used in operating activities primarily reflected net losses,
partially offset by depreciation and amortization, stock issued for services and
changes to working capital.
From inception through June 30, 1996, the Company has acquired a total
of approximately $1,974,000 in fixed assets, primarily computer equipment. The
Company has a $1,000,000 lease line to finance the acquisition of fixed assets,
which has been fully drawn upon as of the date of this Report.
The Company believes that its cash, including the proceeds from its
initial public offering, is sufficient to meet its anticipated cash needs for
working capital, capital expenditures and business expansion through the middle
of 1998.
-10-
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Inapplicable.
ITEM 2. CHANGES IN SECURITIES
In May 1996, the Company amended its Articles of Incorporation to increase the
number of authorized Series C Redeemable Convertible Preferred Stock by 225,000
shares and to increase the number of authorized shares of Preferred Stock by
225,000 shares.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Inapplicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In June 1996, the holders of 5,630,530 shares of the Company's Common Stock
(as adjusted to reflect the subsequent two-for-three reverse stock split and the
subsequent conversion of the Company's outstanding Series A, Series B and Series
C Redeemable Convertible Preferred Stock into Common Stock) took the following
action by written consent without a meeting:
a. Approval of a two-for-three reverse split of the Common Stock;
b. Approval of the amendment and restatement of the Company's Articles of
Incorporation to (i) increase the authorized number of shares of the
Company's Common Stock from 16,666,667 shares to 50,000,000 shares and
(ii) create and authorize a class of undesignated Preferred Stock,
consisting of 500,000 shares, with the Board of Directors having
authority to issue such Preferred Stock in one or more series and to
fix the designations, powers, preferences, privileges and relative
participating, optional or special rights and the qualifications,
limitations or restrictions thereof;
c. Approval of the amendment and restatement of the Company's 1994 Stock
Option Plan to (i) increase the number of shares reserved for issuance
thereunder by 810,000 shares, (ii) provide for automatic annual
increases in the number of shares reserved for issuance thereunder
equal to 4% of the Company's outstanding Common Stock at the end of
each fiscal year, and (iii) make certain other modifications to the
plan;
d. Approval of the Company's 1996 Outside Directors Stock Option Plan and
the reservation of 200,000 shares of the Company's Common Stock for
issuance thereunder; and
e. Approval of the Company's 1996 Employee Stock Purchase Plan and the
reservation of 300,000 shares of the Company's Common Stock for
issuance thereunder.
ITEM 5. OTHER INFORMATION
Inapplicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
NUMBER EXHIBIT DESCRIPTION
------ -------------------
11.1 Statement Regarding Computation of Pro Forma
Loss Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
-11-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SILICON GAMING, INC.
By /s/ Thomas E. Carlson
-------------------------------------
Thomas E. Carlson
Vice President--Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
Date: August 14, 1996
-12-
<PAGE>
EXHIBIT 11.1
SILICON GAMING, INC.
STATEMENT REGARDING COMPUTATION OF PRO FORMA LOSS PER SHARE
(In thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
------------------------ ------------------------
SEPTEMBER 30, JUNE 30, SEPTEMBER 30, JUNE 30,
1995 1996 1995 1996
------------ -------- ------------- --------
<S> <C> <C> <C> <C>
Net loss........................................................... $(1,321) $(3,647) $(2,055) $(5,983)
======= ======= ======= =======
Weighted average common shares outstanding......................... 2,023 3,605 2,015 3,420
Weighted average preferred shares outstanding, as if converted..... 679 679 679 679
Common shares, redeemable convertible preferred shares and options
and warrants to purchase shares of common and redeemable convertible
preferred shares granted (using the treasury stock method
assuming on initial public offering price of $10.50)
since July 31, 1995 included pursuant to Securities and
Exchange Commission Rules........................................ 5,528 7,232 5,362 6,123
------- ------- ------- --------
Weighted average pro forma common and equivalent shares....... 8,230 11,516 8,056 10,222
======= ======= ======= ========
Pro forma net loss per share.................................. $ (0.16) $ (0.32) $ (0.26) $ (0.59)
======= ======= ======= ========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,031
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
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0
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