UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
Amendment No. 1
Mark One
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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)
(650) 842-9000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of each exchange on which registered
- -------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 per share
Indicate by check mark whether the Registrant (1) 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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the registrant's Common Stock held by non-affiliates
as of February 29, 2000: $5,013,226
Number of shares outstanding of the issuer's common Stock, $.001 par value, as
of February 29, 2000: 30,949,273
DOCUMENTS INCORPORATED BY REFERENCE:
None
<PAGE>
Part III of the Registrant's Form 10-K for the fiscal year ended 12/31/99 is
amended to read in its entirety as follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information regarding the current directors, including
information furnished by them as to principal occupations, certain other
directorships held by them, any arrangements pursuant to which they were
selected as directors or nominees and their ages as of March 1, 2000
Director
Name Age Principal Occupation since
---- --- -------------------- -----
Andrew S. Pascal...... 34 President and Chief Executive Officer, 1998
Silicon Gaming, Inc.
Rob Reis.............. 46 Consultant/Proprietor, Breakthroughs! 1999
Stanford Springel..... 53 Consultant; Chief Executive Officer, 1999
Omega Environmental, Inc.
Andrew S. Pascal was elected President and Chief Executive Officer of the
Company in February 1999. Previously Mr. Pascal had served as Executive Vice
President Marketing and Game Development of the Company since October 1994. He
has over 10 years of gaming industry experience with an emphasis in slot
marketing, slot merchandising and slot operations. He joined SGI in October 1994
from Mirage Resorts, Incorporated, where he worked from June 1985 to October
1994. Mr. Pascal held the position of Director of Slot Operations and Marketing
at The Mirage Hotel and Casino ("The Mirage"). Mr. Pascal also served on The
Mirage's eight-member Operating Committee, which set operating policy and
established the strategic direction for The Mirage and its employees, from
September 1992 to October 1994. Prior to the opening of The Mirage, Mr. Pascal
served as the Director of Slot Marketing for the Golden Nugget Casino-Hotel.
Rob Reis was appointed to the board of directors of the Company effective
November 24, 1999. He is currently engaged as an independent consultant with the
Company for strategic business advice. From 1996 to 1998, he served as a
director of the Texas Instruments Innovation Center. In 1989 Mr. Reis founded
Savi Technology, Inc., and from 1989 to 1995 served as its President and Chief
Executive Officer. In 1983, Mr. Reis founded Finial Technology, Inc. and from
1983 to 1987 served as its President and Chief Executive Officer.
2
<PAGE>
Stanford Springel was appointed to the board of directors of the Company
effective November 24,1999. Mr. Springel is a specialist in company
turn-arounds. Since 1991, Mr. Springel has acted as an independent consultant
serving in a variety of executive roles providing domestic and international
turnaround management services to financially distressed companies, including
(i) Omega Environmental, Inc., an environmental services company currently in
Chapter 11 where, since June 1997, Mr. Springel has served as Chief Executive
Officer, (ii) Interlogic Trace, Inc., ("Interlogic"), a nationwide provider of
computer maintenance and repair services where, from February 1995 to December
1995, Mr. Springel served as Interim Chief Operating Officer and Interim
President, (iii) Riedel Environmental Technologies, Inc. ("Riedel"), an
environmental remediation and services company where, from January 1994 to March
1996, Mr. Springel served as Interim Chief Executive Officer and President and,
for a period of time, as a member of the board of directors, and (iv) Ter Meulen
Post, a Dutch retail catalogue company where, during 1993, Mr. Springel served
as Chief Operating Officer. Both Interlogic and Riedel were in Chapter 11 during
Mr. Springel's association with those companies. Since December 1995, Mr.
Springel has served on the board of directors of Pinebrook Capital.
There are no family relationships among executive officers or directors of
the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, officers and ten percent beneficial owners to file reports of
ownership and changes in ownership with the SEC. Directors, officers and greater
than ten percent beneficial owners are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Form 5s were
required for such persons, the Company believes that each of its directors,
officers and greater than ten percent beneficial owners during the fiscal year
ended December 31, 1999 have complied with all filing requirements applicable to
such person.
3
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and each of the other four most highly compensated
executive officers whose compensation for the fiscal year ended December 31,
1999 exceeded $100,000 for services rendered in all capacities to the Company
during the last three fiscal years (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
Name and Principal Fiscal --------------------- Shares Underlying All Other
Position Year Salary(1) Bonus(3) Options Granted Compensation(2)
-------- ---- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
David S. Morse(4) ........ 1999 $ 59,125 -- -- --
Former Chairman of the 1998 $ 64,919 -- 155,000(5) --
Board and Acting Chief -- -- -- -- --
Executive Officer
Andrew S. Pascal(6) ...... 1999 $208,265 $100,000 300,000 $ 450
Chief Executive Officer, 1998 $191,338 $ 2,300 130,000(7) $ 380
President, and Acting 1997 $162,500 $ 35,003 30,000 $ 332
Chief Financial Officer
Betsy B. Sutter .......... 1999 $126,000 $ 31,500 150,000 $ 362
Vice President--Human 1998 $121,870 $ 15,000 150,400(8) $ 319
Resources(9) 1997 $ 82,385 -- 25,200 $ 198
Paul Mathews ............. 1999 $126,170 $ 46,875 150,000 $ 360
Vice President--Business 1998 $125,000 $ 6,375 163,336(10) $ 270
Development and 1997 $110,417 -- 40,000 $ 262
Government Affairs
Paul D. Miltenberger ..... 1999 $150,643 $ 32,500 100,000 $ 324
Vice President-- 1998 $109,167 $ 17,721 --
Corporate Development 1997 $ 93,031 -- --
John K. Penver ........... 1999 $124,993 $ 31,250 140,000 $ 360
Vice President- 1998 $116,667 $ 11,307 --
Finance(11) 1997 $ 85,256 -- --
</TABLE>
- ----------
(1) Salary includes any compensation deferred under Company's 401(k) plan.
(2) Represents life insurance premiums paid by the Company for the benefit of
the Named Executive Officer.
(3) In March of 1999, a retention program was adopted by the Board that
compensated the Company's executives for their continued commitment to the
reorganization of the company.
(4) Mr. Morse was elected Chairman of the Board in August 1998 and served as
Acting Chief Executive Officer from August 1998 to February 1999.
(5) Represents 5,000 shares granted to Mr. Morse in his capacity as a director
and 75,000 shares granted to him as Acting Chief Executive Officer, which
shares were repriced in December 1998.
(6) Mr. Pascal currently serves as President and Chief Executive Officer of the
Company, to which he was elected in February 1999. From January 1997
through February 1999, he served as Executive Vice President-Marketing and
Game Development.
(7) Represents options granted in prior years and repriced in September 1998.
(8) Represents 25,200 shares granted in prior years and repriced in January
1998 and in September 1998; 50,000 shares granted in 1998 and repriced in
September 1998.
(9) Ms. Sutter was hired in March, 1997.
(10) Represents 40,000 shares granted in prior years and repriced in January
1998 and in September 1998; 16,666 shares granted in a prior year and
repriced in September 1998; 33,335 shares granted in 1998, repriced in
September 1998 and subsequently cancelled in October 1998.
(11) Mr. Penver was hired in February, 1997.
4
<PAGE>
STOCK OPTION GRANTS
The following table sets forth further information regarding individual
grants of options for the Company's Common Stock during the year ended December
31, 1999 for each Named Executive Officer. Such grants were made pursuant to the
Company's 1994 Stock Option Plan and 1997 Non-Qualified Stock Option Plan. In
accordance with the rules of the Securities and Exchange Commission ("SEC"), the
table sets forth the hypothetical gains or "option spreads" that would exist for
the options at the end of their respective ten- year terms based on assumed
annualized rates of compound stock price appreciation of 5% and 10% from the
dates the options were granted to the end of the respective option terms. Actual
gains, if any, are dependent on the future performance of the Company's Common
Stock and overall market conditions. There can be no assurance that the
potential realizable values shown in this table will be achieved.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Number of % of Total Rates of Stock Price
Shares Options Appreciation for Option
Underlying Granted to Exercise Term(4)
Options Employees Price Expiration ---------------------------
Name Granted(1)(2) in 1998 Per Share(3) Date 5% 10%
---- ------------- ------- ------------ ---- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
David S. Morse ........ 0.0000
Andrew S. Pascal ...... 300,000 8.7266 $ 0.75 03/09/09 $141,501.00 $358,592.00
Betsy B. Sutter ....... 150,000 4.3633 $ 0.75 03/09/09 $ 70,751.00 $179,296.00
Paul Mathews .......... 150,000 4.3633 $ 0.75 03/09/09 $ 70,751.00 $179,296.00
Paul D .Miltenberger .. 100,000 2.9089 $ 0.75 03/09/09 $ 47,167.00 $119,531.00
John K. Penver ........ 40,000 1.1636 $ 0.50 03/12/09 $ 12,578.00 $ 31,875.00
100,000 2.9089 $ 0.75 04/22/09 $ 47,167.00 $119,531.00
</TABLE>
- ----------
(1) Options granted in 1999 were granted under the 1994 Stock Option Plan, the
1996 Outside Directors' Stock Option Plan and the 1997 Non-Qualified Stock
Option Plan. The Board of Directors has discretion, subject to plan limits,
to modify the terms of outstanding options.
(2) With the exception of the options for 5,000 shares that were granted to Mr.
Morse in 1998 under the 1996 Outside Directors' Plan, which provides that
options become exercisable upon vesting, each option is fully exercisable
from the time of grant, subject to the Company's right to repurchase any
unvested shares at the original exercise price in the event of the
optionee's termination. Shares vest at the rate of 1/4 of the shares after
one year and then 1/48 of the total number of shares each month thereafter.
Each option expires ten years from the date of grant. Under the 1997
Outside Directors' Plan, shares vest monthly over 36 months.
(3) The per-share exercise price of options granted represents the fair market
value of the underlying shares of Common Stock on the dates the respective
options were granted as reported on the NASDAQ National Market, or the OTC
Bulletin Board, as applicable.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The assumed
5% and 10% rates of stock price appreciation are provided pursuant to the
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future Common Stock price.
5
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding the exercise
of options by the named Executive Officers during 1999 and unexercised stock
options held by each of the Named Executive Officers as of December 31, 1999:
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1999 December 31, 1999(1)
----------------------------- -----------------------------
Exercisable(2) Unexercisable Exercisable(2) Unexercisable
-------------- ------------- -------------- -------------
Andrew S. Pascal... 430,000 0 0 0
Betsy B. Sutter.... 225,200 0 0 0
Paul Mathews....... 206,666 0 0 0
Paul Miltenberger.. 175,000 0 0 0
John Penver........ 179,700 0 0 0
- ----------
(1) Market value of underlying securities at year end ($0.125) minus the
exercise price.
(2) With certain exceptions, all options are fully exercisable, subject to the
Company's right to repurchase any unvested shares at the original exercise
price in the event of the optionee's termination.
EMPLOYMENT, SEVERANCE AND CHANGE OF CONTROL AGREEMENTS
Not applicable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 1, 2000 by (i) each person
known by the Company to own beneficially more than five percent of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each of the executive officers named in the "Executive Compensation -- Summary
Compensation Table" on page 7 and (iv) all directors and current executive
officers as a group.
Shares of Common
Stock Beneficially
Owned(1)
----------------------
Five Percent Shareholders, Directors Percentage
and Executive Officers Number(2) Ownership
- ------------------------------------ --------- ---------
Andrew S. Pascal...................................... 11,999,562 27.94
Paul D. Mathews....................................... 8,085,140 20.71
Betsy B. Sutter....................................... 1,117,009 3.48
John Penver........................................... 1,504,675 4.64
Paul Miltenberger..................................... 1,423,534 4.40
All directors and current executive
officers as a group (7 persons)(3).................. 24,129,920 43.81
6
<PAGE>
- ----------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options or warrants held by that person
that are currently exercisable or will become exercisable within 60 days
after March 1, 2000 are deemed outstanding, while such shares are not
deemed outstanding for purposes of computing percentage ownership of any
other person. In general, options granted under the 1994 Stock Option Plan
are fully exercisable from the date of grant, subject to the Company's
right to repurchase any unvested shares at the original exercise price upon
termination of employment. Unless otherwise indicated in the footnotes
below, the persons and entities named in the table have sole voting and
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable.
(2) On November 24, 1999, the Company adopted the "1999 Long Term Compensation
Plan" pursuant to a resolution of the Board of Directors. On the 7th of
February, 2000, the officers along with many of the employees, were granted
new options that took effect in fiscal year 2000. The schedule of
beneficial shares reflects the effects of this plan with regards to the
officers listed thereunder. Options granted under the 1999 Long Term
Compensation plan vest 20% on date of issuance, and the remainder vest
1/48th each calendar month after issuance, unless earlier terminated.
(3) Includes 6,989,470 shares issuable upon exercise of stock options that are
currently exercisable or will become exercisable within 60 days after March
1, 2000 from the options that were granted on February 7th, 2000, under the
1999 Long Term Compensation Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 24, 1999, Mr. Andrew Pascal, the President and CEO, and Mr.
Paul Matthews, the Vice President of Business Development and Government
Affairs, each issued non-recourse promissory notes to the Company in the
principal amount of $117,431.17, as payment for 7,828,745 shares of common stock
issued to each of Messrs. Pascal and Matthews under the Silicon Gaming, Inc.
1999 Long Term Compensation Plan. Messrs. Pascal and Matthews each pledged the
shares as collateral against the payment of the promissory notes. As of April
28, 2000, the principal amount outstanding on each promissory note was
$117,431.17. The notes each accrue interest at the rate of 6.39% per annum and
mature on October 30, 2009.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Silicon Gaming, Inc.
By: /s/ Andrew S. Pascal
------------------------------------
Andrew S. Pascal
President, Chief Executive Officer,
Acting Chief Financial Officer and
director
Date: May 1, 2000
