<PAGE>
FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-69369
250,000 SHARES
SILICON GAMING, INC.
COMMON STOCK
This prospectus relates to the non-underwritten public offering of 250,000
shares of our common stock issuable upon exercise of warrants issued to B III
Capital Partners, L.P., a Delaware Limited Partnership, the selling shareholder,
in connection with our sale of the warrants and $17,250,000 principal amount of
senior discount notes due September 30, 2002, to the selling shareholder, which
was consummated on July 8, 1998.
The selling shareholder may sell all or a portion of its SGI common stock
from time to time in The Nasdaq National Market, at prices determined by the
prevailing market price for the shares or in negotiated transactions.
We will not receive any of the proceeds from the sale of the shares of common
stock in connection with this prospectus.
The shares have not been registered for sale under the securities laws of any
state or jurisdiction as of the date of this prospectus. Brokers or dealers
effecting transactions in the shares should confirm the registration of the
shares under the securities laws of the states in which such transactions occur,
or the existence of any exemptions from such registration.
Our common stock is quoted on The Nasdaq National Market under the symbol
"SGIC." On January 27, 1999, the last sales price of our common stock as
reported on The Nasdaq National Market was $1.50.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
Neither the Nevada gaming commission, the Nevada state gaming control board,
the Mississippi gaming commission, the Colorado limited gaming control
commission, the Missouri gaming commission, the New Jersey Casino Control
Commission nor any other gaming authority has passed upon the accuracy or
adequacy of this offering memorandum or the investment merits of the common
stock hereby. Any representation to the contrary is unlawful.
---------------
The date of this prospectus is February 1, 1999.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and/or copy any document we file at the
SEC's public reference rooms in Washington, D.C., Chicago, Illinois or New York,
New York. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
the SEC's Website at "http://www.sec.gov." Our common stock is traded on The
Nasdaq National Market and as such reports and other information concerning SGI
can also be inspected at the offices of the National Association of Securities
Dealers, Inc. in Washington, D.C.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13a, 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until our
offering is completed.
1. The description of SGI's securities contained in SGI's Registration
Statement on Form 10 filed on April 24, 1996 as amended on June 13, 1996 and
October 25, 1996;
2. Annual Report on Form 10-K for the year ended December 31, 1997;
3. Quarterly Reports on Form 10-Q for the three month periods ended
March 31, 1998, June 30, 1998 and September 30, 1998;
4. Definitive Proxy Statement dated April 16, 1998; and
5. Current Report on Form 8-K filed July 21, 1998.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Silicon Gaming, Inc.
2800 West Bayshore Road
Palo Alto, CA 94303
Attn: Investor Relations
(650) 842-9000
You should rely only on the information incorporated by reference or
provided in this prospectus or the prospectus supplement. We have authorized no
one to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus or the prospectus supplement is
accurate as of any date other than the date on the front of the document.
2
<PAGE>
THE COMPANY
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. Actual results could differ materially from those projected in these
forward-looking statements as a result of a variety of factors, including those
set forth below and elsewhere in this prospectus.
We are engaged in the design, development, production, marketing and sale
of what we believe will be the next generation of interactive slot machines for
use in casinos and other gaming establishments. Our first product, Odyssey(R),
combines an advanced multimedia gaming platform with software-based games that
we believe will be more engaging and entertaining than other gaming devices
currently available and will, as a result, generate increased gaming revenue per
device, otherwise known as "win per machine," for the casino operator. We
recently announced our new product, Quest(TM), which is designed as a lower-
priced, single-game product to further meet the needs of casino operators, add
flexibility to our product line, and allow further penetration and expansion of
new and existing markets.
Odyssey and Quest feature high resolution video presented across the full
surface of a large touchscreen display. The games feature high quality
animation, video clips, digital sound and a level of visual appeal and
interactivity that we believe is unattainable by the current generation of slot
machines. The majority of today's slot machines are "hardware dominant,"
consisting of a fixed and unvarying game played out on spinning reels or a small
video screen mounted within a large metal box. By contrast, our machines are
"software dominant," in that the attraction and entertainment value of our
machines is created by software programs that run our games. Odyssey offers a
selection of a suite of up to six different games on a single machine, while
Quest is designed as a single-game machine. We expect that casino operators
will be able to quickly and easily upgrade our machines simply by installing new
software, rather than by replacing an entire slot machine.
We commenced commercial sale of Odyssey in May 1997, prior to which we were
in the development stage. Since introducing Odyssey we have focused our efforts
on entering new markets and jurisdictions, introducing its product and ramping
up our sales in such markets. As of September 30, 1998 we had an installed base
of over 3,000 machines. We shipped 505 machines to customers during the quarter
ended September 30, 1998, increasing our installed base by 12%. Odyssey is
licensed for sale in Nevada, Missouri, Mississippi, Michigan, Indiana,
Connecticut, Alberta-Canada and certain native American tribes in Louisiana,
Mississippi, Minnesota, Iowa and New Mexico. We have received our corporate
license in these jurisdictions as well as New Jersey and is in the process of
gaining licenses in additional jurisdictions. We offer multiple denomination
machines to our customers and in June 1998 began operating our "game factory"
concept which intends to introduce new game titles to customers on a monthly
basis. In June we introduced Arabian Riches,(TM) and in July introduced Riddle
of the Sphinx(TM) and Banana-Rama(TM) into Nevada. We plan to introduce these
games into other jurisdictions pending regulatory approval.
We generate revenue from machine sales direct to customers as well as from
software license and participation revenue. We install units on casino floors
through direct sales, as well as on a trial basis, consistent with industry
practice. Our initial sales of Odyssey include the hardware platform bundles
with a suite of six games, play stoppage entertainment and the Machine
Management System(TM). We recently announced our new product Quest, which has
been designed as a single-game product. We offer two alternative purchase
programs, consisting of the sale of hardware bundled with either (1) a single-
game or a suite of games or (2) a renewable one-year software license, including
access to our entire game library for the term of the license. In addition, in
many gaming jurisdictions we offer a revenue participation plan that allows us
to share with casino operators the aggregate win generated by the machines, with
20% going to us. Under this plan, the casino accumulates credits that may be
applied to the purchase of the machines. We expect to introduce a multi-site
progressive product in December 1998, which is also under a program of revenue
participation.
SGI was incorporated in California on July 27, 1993. SGI's principal
offices are located at 2800 W. Bayshore Road, Palo Alto, California 94303. SGI
also maintains sales and support offices in Las Vegas and Reno, Nevada and in
Gulfport and Tunica, Mississippi. SGI's telephone number is (650) 842-9000.
3
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth SGI's consolidated ratio of earnings to
fixed charges for the periods shown.
<TABLE>
<CAPTION>
Period from Nine-months Year Year Nine Months Ended
inception Year ended ended ended ended -------------------
(July 17, 1993) March 31, December 31, December 31, December 31, Sept. 30, Sept. 30,
to March 31, 1994 1995 1995 1996 1997 1997 1998
----------------- ---------- ------------ ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges... -- -- -- -- -- -- --
</TABLE>
For the purposes of calculating the ratio of earning to fixed charges, (i)
earnings consists of consolidated income (loss) before income taxes plus fixed
charges and (ii) fixed charges consists of interest expense incurred and the
portion of rental expense under operating leases deemed by SGI to be
representative of the interest factor. Earnings were inadequate to cover fixed
charges by $1,844,000, $13,557,000, $21,746,000, $16,861,000 and $22,607,000 for
the year ended March 31, 1995, the year ended December 31, 1996 and 1997 and for
the nine-month periods ended September 30, 1997 and 1998, respectively. SGI had
no fixed charges during the period from inception (July 27, 1993) through March
31, 1994 and the nine months ended December 31, 1995.
4
<PAGE>
SELLING SHAREHOLDER
The notes, the warrants and the shares of common stock issuable upon
exercise of the warrants and offered hereby were issued to the selling
shareholder in a transaction exempt from the registration requirements of the
Securities Act. The selling shareholder (which term includes its transferees,
pledgees, donees or its successors) may from time to time offer and sell any or
all of the common stock pursuant to this prospectus.
The warrants which were issued to the selling shareholder pursuant to an
amended and restated warrant agreement dated July 8, 1998, which has been filed
as an exhibit (by reference) to the registration statement of which this
prospectus forms a part, allow the selling shareholder to purchase the 250,000
shares of common stock being registered hereunder at a price of $8.00 per share.
The number of shares and the exercise price are both adjustable in various
circumstances, including declaration of a stock split or stock dividend. The
warrants expire if they are not exercised by the holder prior to September 30,
2002. The warrants may be exercised immediately prior to the consummation of a
merger in which the SGI shareholders would own less than 70% of the surviving
corporation in the merger (not counting the exercise of the warrants) or if SGI
sells all or substantially all of its assets. The warrants may be exercised
either by payment of cash or without payment of cash if the holder of the
warrant agrees to forego that number of shares of SGI common stock equal in
value to the exercise price for that number of shares the warrantholder is
purchasing. SGI has agreed to file and keep effective the registration
statement of which this prospectus is a part for at least two years after the
registration statement is declared effective, or three months after the selling
shareholder ceases to be an affiliate of SGI, whichever is longer. SGI may,
however, suspend the use of this prospectus during certain periods of time if
appropriate due to certain corporate developments, if SGI must make filings with
the Commission and in various other circumstances. If SGI suspends the use of
this prospectus more than three times during a period of twelve months, or for
more than a total of thirty total days, SGI must pay liquidated damages of $3.25
per 1,000 shares included in this registration statement to the warrantholder
for each week the suspension is in effect. This penalty increases by another
$3.25 per 1,000 shares if more than sixty days have passed since the
warrantholder received a notice from SGI regarding suspension of the
registration statement. Lastly, SGI has agreed to register the shares
purchasable upon exercise of the warrants on either the Nasdaq National Market,
or the exchange or market on which its common stock is traded, if different from
the Nasdaq.
The table below lists the selling shareholder (which has sole voting and
investment power with respect to all SGI common stock owned by them), the number
of shares of SGI common stock which it beneficially owned as of December 1,
1998, the number of shares subject to sale pursuant to this registration
statement, and the number of the shares of SGI common stock which it would own
assuming that such number of shares were offered and assuming the sale of all
such shares.
B III Capital Partners, L.P. is a Delaware limited partnership of which DDJ
Capital III, LLC is the general partner. The manager of DDJ Capital III, LLC is
DDJ Capital Management, LLC. The address of B III Capital Partners, L.P. is c/o
DDJ Capital Management, LLC, 141 Linden Street, Wellesley, MA 02181.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Shares Beneficially After Offering Assuming
Owned as of Shares To All Shares Are
Selling Shareholder December 1, 1998 Be Offered Hereby Sold by Selling Shareholder
------------------- ------------------- ----------------- ---------------------------
<S> <C> <C> <C>
B III Capital Partners, L.P. 625,000 250,000 0
</TABLE>
5
<PAGE>
PLAN OF DISTRIBUTION
The sale or distribution of the shares registered by this prospectus may be
effected directly to purchasers by the selling shareholder as principal or
through one or more underwriters, brokers, dealers or agents from time to time.
Such sale or distribution may occur by one or more of the following transactions
(which may involve crosses or block transactions):
- or on any exchange or in the over-the-counter market,
- in transactions other than in the over-the-counter market, or
- through the writing of options (whether such options are listed on an
options exchange or otherwise) on, or settlement of short sales of, the Shares.
Any of the transactions listed above may be made at market prices
prevailing at the time of sale or otherwise or at negotiated or fixed prices, in
each case as determined by the selling shareholder or by agreement between the
selling shareholder and underwriters, brokers, dealers, or agents, or
purchasers. If the selling shareholder effects such transactions by selling
shares to or through underwriters, brokers, dealers or agents, such
underwriters, brokers, dealers, or agents may receive compensation in the form
of customary or other discounts, concessions or commissions from the selling
shareholder or commissions from purchasers of the shares for whom they may act
as agent The selling shareholder and any brokers, dealers or agents that
participate in the distribution of the shares may be deemed to be underwriters,
and any profit on the sale of shares by them and any discounts, concessions or
commissions received by any such underwriters, brokers, dealers or agents may be
deemed to be underwriting discounts and commissions under the Securities Act.
Under the securities laws of certain states, the shares may be sold in such
states only through registered or licensed brokers or dealers.
SGI will pay all of the expenses incident to the registration, offering and
sale of the shares to the public hereunder other than commissions, fees and
discounts of underwriters, brokers, dealers and agents. SGI has agreed to
indemnify the selling shareholder and any underwriters against certain
liabilities, including liabilities under the Securities Act. SGI will not
receive any of the proceeds from the sale of any of the shares by the selling
shareholder.
SGI has agreed to use its best efforts to keep the registration statement,
of which this prospectus constitutes a part, effective until the longer of
twenty-four months following the date such registration statement is declared
effective by the SEC or if the holder of the shares is an Affiliate of SGI, the
date which is three months after the date on which such holder ceases to be an
Affiliate of SGI, provided that SGI first provides such holder with an opinion
of counsel to such effect.
6
<PAGE>
USE OF PROCEEDS
SGI will not receive any proceeds from the sale of the shares by the
selling shareholder.
LEGAL MATTERS
The legality of the Shares is being passed upon by Gray Cary Ware &
Freidenrich LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from the Company's Annual Report on Form 10-K as of December 31, 1997
and 1996 and for the years ended December 31, 1997 and 1996 for the nine months
ended December 31, 1996 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and has been incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
7
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- --------------------------------------------
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE A
STATEMENT THAT DIFFERS FROM WHAT IS IN THIS PROSPECTUS
PROSPECTUS. IF ANY PERSON DOES MAKE A
STATEMENT THAT DIFFERS FROM WHAT IS IN THIS
PROSPECTUS, YOU SHOULD NOT RELY ON IT. THIS
PROSPECTUS IS NOT AN OFFER TO SELL, NOR IS ------------------------
IT SEEKING AN OFFER TO BUY, THESE SECURITIES
IN ANY STATE IN WHICH THE OFFER OR SALE IS
NOT PERMITTED. THE INFORMATION IN THIS
PROSPECTUS IS COMPLETE AND ACCURATE AS OF
ITS DATE, BUT THE INFORMATION MAY CHANGE
AFTER THAT DATE.
TABLE OF CONTENTS
Page
----
Where You Can Find More Information..... 2
The Company............................. 3
Ratio Of Earnings To Fixed Charges...... 4 250,000 Shares of
Selling Shareholder..................... 5 COMMON STOCK
Plan Of Distribution.................... 6
Use Of Proceeds......................... 7
Legal Matters........................... 7
Experts................................. 7 SILICON GAMING, INC.
February 1, 1999
------------------------
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- --------------------------------------------
</TABLE>
