Final Prospectus
Pursuant to Rule 424(b)(1)
PROSPECTUS
250,000 Shares
ALLIANCE GAMING CORPORATION
COMMON STOCK
(Par Value $.10 per Share)
_______________
All of the shares of Common Stock, par value $.10 per share
(the "Common Stock"), of Alliance Gaming Corporation (formerly
United Gaming, Inc.), a Nevada corporation (the "Company"),
offered hereby (the "Shares") are being offered by Steve
Greathouse, the Chairman of the Board, President and Chief
Executive Officer of the Company (the "Selling Stockholder"), as
described more fully herein. The Company will not receive any of
the proceeds from the sale of the Shares offered hereby. See
"Use of Proceeds," "Selling Stockholder" and "Plan of
Distribution."
The Common Stock is traded on the Nasdaq National Market
under the symbol "ALLY." On March 23, 1995, the last reported
sale price of the Common Stock on the Nasdaq National Market was
$57/8 per share.
_______________
Prospective investors should carefully consider the factors
set forth under the caption "Risk Factors."
_______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION 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 NOR THE NEVADA STATE
GAMING CONTROL BOARD HAS PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS OR THE INVESTMENT MERITS
OF THE SECURITIES OFFERED HEREBY
_______________
This Prospectus relates to the public offering of up to
250,000 shares of Common Stock, which will be issued as of the
date of effectiveness of the Registration Statement of which this
Prospectus is a part. The Selling Stockholder, directly, through
agents designated from time to time, or through dealers or
underwriters also to be designated, may sell the Shares from time
to time on terms to be determined at the time of sale. To the
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extent required, the specific shares to be sold, public offering
price, the names of any such agent, dealer or underwriter and any
applicable commission or discount with respect to a particular
offer will be set forth in an accompanying Prospectus Supplement.
See "Selling Stockholder" and "Plan of Distribution."
The date of this Prospectus is March 29, 1995
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AVAILABLE INFORMATION
The Company is subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, files
reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference
facilities of the Commission located at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at the New York
Regional Office of the Commission, Seven World Trade Center,
Suite 1300, New York, New York 10048, and at the Chicago Regional
Office of the Commission, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60621. Copies of such material may also be
obtained at prescribed rates from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Such reports and other information may also be inspected at the
offices of the National Association of Securities Dealers, Inc.,
1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration
Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with
respect to the registration of the Common Stock offered hereby.
This Prospectus omits certain of the information contained in the
Registration Statement in accordance with the rules and
regulations of the Commission. Reference is hereby made to the
Registration Statement and related exhibits for further
information with respect to the Company and the Common Stock.
Statements contained herein concerning the provisions of any
contract or document are not necessarily complete and, in each
instance, where a copy of such document has been filed as an
exhibit to the Registration Statement or otherwise has been filed
with the Commission, reference is made to the copy of the
applicable document so filed. Each such statement is qualified
in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the
Company with the Commission, are incorporated herein by
reference: (i) the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1994 and Amendment No. 1 and No. 2
thereto on Form 10-K/A; (ii) the Company's Current Reports on
Form 8-K dated June 25, 1993, September 21, 1993, July 14, 1994
and August 11, 1994 and its Information Statement dated June 24,
1994; (iii) the Company's Quarterly Reports on Form 10-Q for the
fiscal quarters ended September 30, 1994 and December 31, 1994;
(iv) the Company's Proxy Statement dated November 15, 1994
related to the Annual Meeting of Stockholders held on December
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15, 1994; and (v) the Company's Form 10-C dated December 20,
1994. In addition, each document filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to
termination of the offering of the Shares shall be deemed to be
incorporated by reference into this Prospectus and to be a part
hereof from the date such document is filed with the Commission.
Any statement contained herein, or any document, all or a
portion of which is incorporated or deemed to be incorporated by
reference herein, shall be deemed to be modified or superseded
for purposes of the Registration Statement and this Prospectus to
the extent that a statement contained herein, or in any
subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute
part of the Registration Statement or this Prospectus. All
information appearing in this Prospectus is qualified in its
entirety by the information and financial statements (including
notes thereto) appearing in the documents incorporated herein by
reference. This Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. These
documents (other than exhibits thereto) are available without
charge, upon written or oral request by any person to whom this
Prospectus has been delivered, from John W. Alderfer, Chief
Financial Officer, Alliance Gaming Corporation, 4380 Boulder
Highway, Las Vegas, Nevada 89121, telephone number (702)
435-4200.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the
more detailed information and financial statements appearing
elsewhere, or incorporated by reference, in this Prospectus.
The Company
Alliance Gaming Corporation (formerly United Gaming, Inc.),
a Nevada corporation (the "Company"), is a diversified gaming
company which (at February 28, 1995) operated approximately 6,777
gaming devices (primarily video poker devices and slot machines).
The Company is the largest private gaming device route operator
in Nevada and one of the largest in the United States. In its
Nevada gaming device route operations, the Company selects, owns,
installs, manages and services gaming devices (approximately
5,223 as of February 28, 1995) in third-party owned local
establishments such as taverns, restaurants, supermarkets, drug
stores and convenience stores (approximately 540 locations as of
February 28, 1995). Also in Nevada, the Company owns and operates
one full service casino and leases and operates one small casino,
one casino-hotel and three taverns which collectively have
approximately 790 gaming devices and 9 table games. As described
in the Company's Form 10-K for the fiscal year ended June 30,
1994, the Company is presently in the process of closing or
selling certain of these operations and has recently entered into
certain agreements in respect thereof. During the fiscal year
ended June 30, 1992, the Company expanded its gaming device route
operations to Louisiana, where it is the operator of
approximately 764 video poker devices at the only racetrack and
associated off-track betting parlors ("OTBs") in the greater Long
Bow Orleans area. In August 1994, the Company completed its
acquisition of a 45% interest in the Rainbow Casino - Vicksburg
Partnership, L.P. ("RCVP"). RCVP owns a dockside casino in
Vicksburg, Mississippi which contains approximately 573 gaming
devices and 28 table games. Additionally, the Company manages
the casino. The Company also designs and manufactures gaming
devices which are used only in its Nevada operations.
The Company's strategy is to build its gaming business in
existing markets, such as Nevada and Louisiana, as well as in
emerging markets nationally. The Company intends to use its
diversified gaming expertise, strengthened executive management,
business partners and investment community relationships to
pursue new casino operations as well as dockside, riverboat and
Native American operations and the design, supply and management
of gaming devices.
In August 1994, the Company hired Mr. Steve Greathouse as
President and Chief Executive Officer. Mr. Greathouse, who has
held various positions in the gaming industry since 1974, most
recently served as the President of the Harrah's Casino Hotels
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Division of The Promus Companies, Inc. Mr. Greathouse was
appointed to the Company's Board of Directors in October 1994 and
was appointed Chairman of the Board in March 1995.
With regard to certain additional developments concerning
the Company, see "Recent Developments."
The Company was incorporated in Nevada in 1968 and is a
holding company which conducts its gaming operations through
directly and indirectly owned subsidiaries. On December 15, 1994,
stockholders approved the change of the Company's name from
"United Gaming, Inc." to "Alliance Gaming Corporation." All of
the Company's significant subsidiaries are, directly or
indirectly, wholly-owned, except for (i) Kansas Financial
Partners, LLC and Kansas Gaming Partners, LLC, each a Kansas
limited liability company (each 50% owned); (ii) Native American
Investments, Inc., a Delaware corporation (90% owned); (iii)
RCVP, a Mississippi limited partnership (45% limited partnership
interest, as well as certain non-voting special limited
partnership interests); and (iv) Video Services, Inc. (49% owned,
but the Company controls 100% of the voting rights and 71% of the
rights to receive dividends). See "Recent Developments." The
term "Company" as used herein refers to Alliance Gaming
Corporation and its subsidiaries unless the context otherwise
requires. The Company's principal executive offices are located
at 4380 Boulder Highway, Las Vegas, Nevada 89121; telephone (702)
435-4200.
The Offering
Common Stock Offered by the
Selling Stockholder. . . . . . . . . . . . . . . . 250,000 shares
Shares of the Common Stock Outstanding. . . 11,629,650 shares (1)
Nasdaq National Market Common Stock Symbol. . . . . . . . . .ALLY
_________
(1) Includes the 250,000 shares of Common Stock to be issued in
this Offering. Excludes up to (i) 8,500,000 shares of
Common Stock issuable upon conversion of the Company's
Convertible Debentures (as defined herein); (ii) 5,000,000
shares of Common Stock issuable under the Company's 1991
Stock Option Plan and the Company's 1984 Stock Option Plan,
of which options covering 2,852,334 shares were outstanding
and options covering 978,100 shares were exercisable as of
March 22, 1995; (iii) 2,000,000 shares of Common Stock
issuable upon exercise of warrants held by Alfred H. Wilms,
a principal stockholder and a director of the Company; (iv)
2,750,000 shares of Common Stock issuable upon exercise of
the Investment Warrants (as defined herein) held by
Kirkland-Ft. Worth Investments Partners, L.P. ("Kirkland");
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(v) 1,250,000 shares of Common Stock issuable upon exercise
of the Incentive Warrants (as defined below) held by Gaming
Systems Advisors, L.P. ("GSA") and up to 2,500,000 shares of
Common Stock issuable upon exercise of additional Incentive
Warrants held by GSA; (vi) 780,000 shares of Common Stock
issuable upon exercise of the Institutional Warrants (as
defined herein) held by the initial purchasers of the
Company's Convertible Debentures and up to 250,000 shares of
Common Stock potentially issuable upon exercise of
additional Institutional Warrants which may be issued in the
future; (vii) up to 168,889 shares of Common Stock issuable
in connection with the acquisition of Native American
Investments, Inc.; (viii) 250,000 shares of Common Stock
issuable upon exercise of warrants (having economic terms
identical to the Incentive Warrants) of Mr. Greathouse;
and (ix) 250,000 shares of Common Stock issuable upon
exercise of warrants (having economic terms identical to the
Incentive Warrants) held by Dr. Craig Fields, Vice Chairman
of the Board of Directors of the Company. See "Risk Factors
Effect of Outstanding Warrants, Options, and Convertible
Debentures," "Recent Developments" and Executive
Compensation incorporated by reference to this Prospectus.
RISK FACTORS
In addition to the other information contained or
incorporated by reference in this Prospectus, prospective
investors should consider carefully the following factors before
purchasing any of the Shares offered hereby.
Operating History - Recent Losses
The Company incurred net losses of approximately $4,680,000,
$3,650,000 and $13,128,000 during the fiscal years ended June 30,
1992, 1993 and 1994, respectively, and approximately $5,017,000
during the six months ended December 31, 1994. There can be no
assurance that the Company will operate profitably in the future.
See Management's Discussion and Analysis of Financial Condition
and Results of Operations and the Consolidated Financial
Statements and notes thereto, incorporated by reference in this
Prospectus.
Uncertainty of Change in Operating Strategy
The Company is actively seeking to expand its operations
into jurisdictions that have recently legalized or are
anticipated to legalize gaming in the future. Certain recently
implemented changes in management and business strategy are
intended to improve the results of operations from the Company's
existing business. The prospects for substantial improvement in
operating performance and profitability, however, will be
dependent, in large part, on the development of new gaming
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opportunities. There can be no assurance that the Company will
be able successfully to identify or acquire such new gaming
opportunities or operate profitably in the future. The Company's
ability to expand to additional jurisdictions will be dependent
upon a number of factors, including negotiating acceptable
terms; securing required state and local licenses, permits and
approvals, which in some jurisdictions are limited in number for
gaming operations; securing adequate financing on acceptable
terms; identifying and securing suitable locations, which
management expects will be limited; and addressing political
factors. Most of these factors are beyond the control of
the Company. The Company has experienced and expects to continue
to experience significant competition in its search for suitable
new gaming opportunities. In addition, in order to develop new
growth opportunities, the Company will be required to add, train,
and retain additional management and other personnel. As a
result, there can be no assurance that the Company will be able
to expand to additional locations or, if any such expansion
occurs, that it will be successful. In addition, the Company's
existing and future operations are dependent in large part on
certain key members of management, including its Chairman of the
Board, President and Chief Executive Officer, Steve Greathouse,
who joined the Company in August 1994, and other members of
management who have joined the Company during the past 12 months,
including Dr. Fields and Messrs. Kirschbaum and DiCesare. The
ability to retain qualified management personnel could have a
material adverse effect on the Company's results of operations.
Leverage and Debt Service; Need for Additional Financing
As of December 31, 1994, the Company had outstanding
long-term debt of approximately $88.1 million and a long-term
debt to equity ratio of 6.33 to 1. The Company has substantial
annual fixed debt service requirements attributable to the $85
million aggregate principal amount of 7 1/2% Convertible
Subordinated Debentures due 2003 of the Company issued in
September 1993 (the "Convertible Debentures") and other operating
expenses. During the fiscal years ended June 30, 1992, 1993 and
1994 and the six months ended December 31, 1994, earnings before
income taxes, interest on indebtedness, imputed interest on
capital lease obligations and that portion of rent expense
estimated to represent interest were inadequate to cover fixed
charges, which include interest on indebtedness and imputed
interest on capital lease obligations, by $4,680,000, $3,650,000,
$12,887,000 and $4,727,000, respectively. See Management's
Discussion and Analysis of Financial Condition and Results of
Operations and the Consolidated Financial Statements and notes
thereto, incorporated by reference in this Prospectus.
At December 31, 1994, the Company had cash and cash
equivalents and securities available for sale of approximately
$40.8 million, of which approximately $7 million is generally
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required to fund ongoing gaming operations in the ordinary
course. It remains a part of the Company's business strategy to
seek complementary gaming opportunities, including opportunities
in less mature markets to which its route and casino experience
may be applicable. As part of its business activities, the
Company is regularly involved in the identification, investiga-
tion and development of such opportunities. Accordingly, in
order to support such activities, the Company may in the future
elect to issue additional debt or equity securities if and when
appropriate opportunities become available on terms satisfactory
to it. Due to the Company's operating results over the past
three fiscal years and leverage and coverage ratios, there can be
no assurance that additional funds would be available, or
available on terms satisfactory to the Company. Any such
additional financing would result in dilution to existing equity
holders. See Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources, incorporated by reference in this Prospectus.
Competition
The gaming industry is highly competitive and many of the
Company's competitors have more experience, are larger and have
significantly greater financial and other resources than the
Company. The recent and continuing expansion of legalized casino
gaming and gaming devices to new jurisdictions throughout the
United States has created dynamic industry and market conditions
that will affect and likely intensify the competitive conditions
faced by the Company, particularly in jurisdictions in which
gaming licenses are limited. The Company believes that
competition for existing and future gaming, gaming systems and
related opportunities, sites and acquisitions will continue to be
intense. There can be no assurance that the Company will be
successful in maintaining or expanding its existing gaming
activities or in expanding its activities into or making
investments in other projects, areas or jurisdictions.
Maturity of Nevada Gaming Device Route Business
The competition for obtaining and renewing gaming device
routes in Nevada is high and continues to intensify. Such
competition has, over time, reduced the Company's profit margins
for such operations. In addition, such competition has required
the Company to provide substantial financial incentives and incur
financial obligations to retain or obtain certain gaming device
route locations. Such incentives include long-term lease
commitments, guarantees of leases in favor of owners of local
establishments, substantial advance deposits, payments of lease
rentals in advance and loans for building and tenant-improvement
costs. Historically, substantial losses have been incurred in
connection with such transactions. Notwithstanding the change in
its business strategy to one emphasizing profitability rather
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than market share, to some extent the future success of the
Company's gaming device route business will continue to be
dependent on its ability and willingness to provide such
financial inducements. Although the Company has historically
generated sufficient new gaming device route contracts to offset
the loss of old gaming device route contracts, as a result of
increased competition, the increased sophistication and
bargaining power of customers and other factors, there can be no
assurance that the Company will be able to obtain new gaming
device route contracts or renew or extend its current space
leases or revenue-sharing arrangements upon their expiration or
termination, or that, if renewed or extended, the terms will be
as favorable to the Company. See "-- Uncertainty of Change in
Operating Strategy."
Gaming Taxes
The Company believes that the prospect of significant tax
revenue is one of the primary reasons that many jurisdictions
have legalized various forms of gaming. As a result, gaming
operators are typically subject to significant taxes and fees in
addition to corporate income taxes, and such taxes and fees are
subject to increase at any time. Any material increase in these
taxes or fees, which could occur prospectively or retroactively,
would adversely affect the Company. The Company pays and expects
to continue to pay substantial taxes and fees in Nevada,
Louisiana and Mississippi and expects to pay substantial taxes
and fees in any other jurisdiction in which it conducts gaming
operations.
Control by Principal Stockholders
Alfred H. Wilms, the Company's principal stockholder, holds
approximately 43.3% of the Company's outstanding shares of Common
Stock (47.0% assuming the exercise of warrants held by Mr. Wilms
and the conversion of the Company's outstanding shares of Non-
Voting Junior Convertible Special Stock (the "Convertible Special
Stock")) as of March 22, 1995. Pursuant to the terms of the
Stockholders Agreement, dated as of September 21, 1993, as
amended, among the Company, Mr. Wilms, Kirkland, Kirkland
Investment Corporation ("KIC") and GSA (the "Stockholders
Agreement"), Mr. Wilms is obligated to vote his shares of Common
Stock in favor of the four designees of KIC to the Company's
seven-member Board of Directors. On July 14, 1994, as
contemplated by the Stockholders Agreement, the Company's Board
of Directors was reconfigured to consist of four persons
designated by KIC (initially Messrs. Kirschbaum, DiCesare,
Gottlieb and Robbins) and three persons designated by Mr. Wilms
(initially Messrs. Wilms and Sosin and Dr. Scheinman). On
October 20, 1994, the Stockholders Agreement was amended to
reconfigure the Board of Directors to consist of four persons
designated by KIC (initially,Messrs. Kirschbaum, DiCesare,
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Gottlieb and Robbins), one person designated by Mr. Wilms (Mr.
Wilms) and two new directors designated by a majority of the
Board of Directors. Accordingly, on October 20, 1994, Mr.
Greathouse and Dr. Fields were appointed to the Board to fill
vacancies created upon the resignation of Dr. Scheinman and Mr.
Sosin. As amended, the Stockholders Agreement also provides that
Mr. Wilms may designate two persons (initially Dr. Scheinman and
Mr. Sosin) (the "Advisors") who shall be observers of, and
advisors to, the Board of Directors and who will be entitled to
attend all of the Company's Board of Directors' meetings and
receive all information furnished to members of the Board. Mr.
Wilms and/or at least one Advisor will be entitled to attend all
meetings of the committees of the Company and its subsidiaries.
See "Recent Developments -- Recent Transactions -- Certain
Additional Appointments."
The October 20, 1994 amendment to the Stockholders Agreement
also provides that the voting agreements between Mr. Wilms on the
one hand, and KIC on the other hand, will terminate upon the
earlier of (i) September 21, 1997 and (ii) the date that both (a)
KIC and its permitted transferees and (b) Mr. Wilms and his
permitted transferees each own in the aggregate Company
securities representing less than 5% of the Company's fully
diluted Common Stock (with outstanding Convertible Special Stock
and underlying warrant shares counted as Common Stock); provided,
that, in the event the average closing price of a share of Common
Stock (as traded on the Nasdaq National Market System or other
principal exchange or trading market on which the Common Stock is
then traded or listed) for any thirty consecutive trading day
period during the 15-month period prior to the earlier of the
dates described in clauses (i) and (ii) above shall not have
equaled or exceeded $15 (as appropriately adjusted to give effect
to stock splits, recapitalizations, mergers, reorganizations or
similar transactions) then, in no event as soon as practicable
after September 21, 1997, KIC and its permitted transferees will
use their best efforts to cause the Board of Directors to be in a
ratio of four designees of KIC to three designees of Mr. Wilms
(rather than as described above). The Stockholders Agreement, as
amended, and related transactions are more fully described in the
Company's Forms 8-K dated June 25, 1993, September 21, 1993 and
July 14, 1994 and in its Information Statement dated June 29,
1994.
Importance of Louisiana Contract; Competition in Louisiana
Market
Since the Company currently operates in Louisiana under a
single 10-year operating agreement with Fairgrounds Corporation,
Jefferson Downs Corporation and Finish Line Management Corp.
expiring in May 2002, subject to extension under certain
circumstances, the loss of such agreement for any reason would
have a material adverse effect on the Company. The Company has
no reason to believe that the agreement will be prematurely
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terminated. From time to time, legislators and other politicians
recommend or introduce measures to limit or repeal the Louisiana
Video Draw Poker Devices Control Law and the Rules and
Regulations promulgated thereunder by the Department of Public
Safety and Corrections, Office of State Police, Gaming
Enforcement Section, Video Gaming Division (the "Louisiana Act").
See "-- Regulatory Matters -- Louisiana." Although the Company
has no reason to believe such measures will be successful, the
repeal of such Act would have a material adverse effect on the
Company.
In addition, there can also be no assurance that the
Company's Louisiana operations will not be materially adversely
affected by other competitive gaming activities in and around the
New Orleans area. Among other things, the Company is facing
significantly increased competition from docked riverboats which,
under Louisiana law, are not limited in the number of gaming
devices (including slot machines) offered or the jackpots paid.
In contrast, the Company's OTB parlors are only permitted to
offer video poker devices and are subject to limits on jackpots.
Docked riverboats have had a significant adverse impact on those
Company OTB parlors located near such riverboats, and this trend
is expected to continue. See "-- Regulatory Matters --
Louisiana."
Uncertainty of the Emerging Video Gaming Market
Certain jurisdictions in the United States and Canada have
approved various forms of video gaming operations. The Company
cannot predict if or when additional jurisdictions, if any, will
approve video gaming, which approval is not within the control of
the Company. In addition, there is no assurance that if
additional jurisdictions approve video gaming that such approvals
will result in business opportunities for private operators such
as the Company or that the Company will be successful in
exploiting such opportunities.
Regulatory Matters -- Nevada
The ownership and operation of casino gaming facilities, the
operation of gaming device routes and the manufacture and
distribution of gaming devices in Nevada are subject to the
Nevada Gaming Control Act (the "Nevada Act") and to licensing and
regulatory control by the Nevada State Gaming Control Board (the
"Nevada Board"), the Nevada Gaming Commission (the "Nevada
Commission") and various local, city and county regulatory
agencies (collectively, the "Nevada Gaming Authorities").
The Nevada Gaming Authorities may investigate any individual
who has a material relationship to, or material involvement with,
a publicly traded corporation registered with the Nevada
Commission (a "Registered Corporation"), such as the Company, or
which holds a license in order to determine whether such
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individual is suitable or should be licensed as a business
associate of a Registered Corporation or a gaming licensee.
No person may become a controlling stockholder of the
Company without the prior approval of the Nevada Commission,
although any beneficial owner of the Company's voting
securities, regardless of the number of shares owned,
may be required to file applications, be investigated,
and have his suitability determined if the Nevada
Commission has reason to believe that such ownership may be
inconsistent with the declared policies of the State of
Nevada.
The Nevada Act provides that persons who acquire beneficial
ownership of more than 5% of the voting securities of a
Registered Corporation must report the acquisition to the Nevada
Commission. The Nevada Act also requires that beneficial owners
of more than 10% of the voting securities of a Registered
Corporation must apply to the Nevada Commission for a finding of
suitability within 30 days after the Nevada Board Chairman mails
the written notice requiring such filing. An "institutional
investor" (as such term is defined in the Nevada Commission's
regulations) which acquires beneficial ownership of more than
10%, but not more than 15%, of the Company's voting securities
may apply to the Nevada Commission for a waiver of such finding
of suitability if such institutional investor holds the voting
securities for investment purposes only (as determined in
accordance with the provisions of the Nevada Commission's
regulations). The Nevada Commission may, in its discretion,
apply the rules and regulations of the Commission in determining
whether, and to what extent, the beneficial owner of equity
securities, such as the Common Stock or Convertible Debentures,
is the beneficial owner of voting securities for purposes of
determining whether a holder must apply for a finding of
suitability. Further, the Nevada Commission may, in its
discretion, require the holder of any security of a Registered
Corporation, such as the Company, including the Common Stock or
Convertible Debentures, to file applications, be investigated and
be found suitable to own a security of the Registered
Corporation. The applicant for licensing or a finding of
suitability must pay all the costs of the investigation.
Historically, the costs incurred by the Company in connection
with investigations have varied widely depending upon, among
other things, the complexity of the financial history of the
person being investigated, the position of the proposed licensee
and the nature and scope of the investigatory activity which the
regulatory authority elects to undertake. The Company incurred
investigative costs aggregating approximately $255,000 in the
fiscal year ended June 30, 1994 (of which approximately $135,000
related to the licensing of KIC in respect of the investment by
Kirkland in the Company and the change in composition of the
Company's Board of Directors contemplated by the Stockholders
Agreement). Amounts incurred by other proposed investors in
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gaming companies, such as the Company, could be materially
greater or less than such amount. Additionally, the Company
maintains with the Nevada Board a revolving fund of $15,000
to cover minor investigations incurred in the ordinary course of
conducting its Nevada gaming operations. Theoretically, there is
no limit to the amount of investigative fees which can be charged
to the Company or a proposed investor by gaming authorities.
The Company will continue to incur licensing and investigative
costs in the future.
The Nevada Act prohibits the Company from making a public
offering of its securities without the approval of the Nevada
Commission if the securities or any part of the proceeds of the
offering is to be used to finance the construction, acquisition
or operation of gaming facilities in Nevada, or to retire or
extend obligations incurred for one or more such purposes.
On February 23, 1995, the Nevada Commission granted the Company
prior approval to make public equity offerings for a period of
one year, limited to the registration and sale of common stock,
from time to time, upon the exercise of certain designated
securities and warrants subject to certain conditions ("Shelf
Approval"). However, the Shelf Approval may be rescinded for good
cause without prior notice upon the issuance of an interlocutory
stop order by the Chairman of the Nevada Board and must be
reviewed annually. The Shelf Approval, or any approval of a
public offering, if granted, does not constitute a finding,
recommendation or approval by the Nevada Commission or by the
Nevada Board as to the accuracy or adequacy of the prospectus
or the investment merits of the securities offered. Any
representation to the contrary is unlawful. The Nevada
Commission has also imposed a requirement on the Company
that it must receive the prior administrative approval of the
Nevada Board Chairman for any offer for the sale of an equity
security in a private transaction.
The loss or restriction of the Company's gaming licenses in
Nevada would have a material adverse effect on its business and
could require the Company to cease gaming operations in Nevada.
Mandatory Disposition Pursuant to Gaming Laws
If a holder or a beneficial holder of Convertible Debentures
or Common Stock is required by the Nevada Commission to be found
suitable, the holder shall apply for a finding of suitability
within 30 days after being ordered to do so by the Nevada Board
Chairman or the Nevada Commission's request. The applicant for a
finding of suitability must pay all costs of the
investigation for such finding of suitability. If a holder or a
beneficial owner is required to be found suitable and is not
found suitable by the Nevada Commission, (i) the holder shall,
upon request of the Company, dispose of his Convertible
Debentures and Common Stock within 30 days or within that time
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prescribed by the Nevada Commission, whichever is earlier, or
(ii) the Company may, at its option, redeem the holder's
Convertible Debentures in cash at the lesser of (w) the principal
amount thereof or (x) the price at which the Convertible
Debentures were acquired by the holder, together with, in either
case, accrued interest to the date of the finding of
unsuitability by the Nevada Commission and repurchase
the holder's Common Stock at the lesser of (y) the market price
thereof on the date of the finding of unsuitability or (z) the
price at which such Common Stock was acquired by the holder.
Such mandatory disposition could be required at a time when
market conditions are not favorable to the affected holders or at
a time or at costs which are otherwise unfavorable to such
holders.
Regulatory Matters -- Louisiana
The manufacture, distribution, servicing and operation of
video draw poker gaming devices ("Devices") in Louisiana is
subject to the Louisiana Act. Licensing and regulatory control
is provided by the Video Gaming Division of the Gaming
Enforcement Section of the Office of State Police within the
Department of Public Safety and Corrections (the "Division").
The laws and regulations of the Division are based upon a primary
consideration of maintaining the health, welfare and safety of
the general public and upon a policy which is concerned with
protecting the video gaming industry from elements of organized
crime, illegal gambling activities and other harmful elements,
and protection of the public from illegal and unscrupulous gaming
to ensure the fair play of video gaming Devices.
Two of the Company's indirect operating subsidiaries
involved with its gaming operations in Louisiana have each been
granted a license as a Device owner by the Division. Another
indirect subsidiary of the Company has been granted a license as
a distributor of Devices by the Division. These gaming
subsidiaries are licensees under the terms of the Louisiana Act
(collectively, the "Louisiana Licensees" and individually, a
"Louisiana Licensee"). The licenses held by the Louisiana
Licensees expire at midnight on June 30 of each year and must be
renewed annually through payment of certain fees. All license
fees must be paid on or before May 15 in each year licenses are
renewable.
The Division may deny, impose a condition or fine, suspend
or revoke any license, renewal or application for a license for
violation of any rules and regulations of the Division or any
violations of the Louisiana Act. Fines for violations of gaming
laws or regulations may be levied against the licensees and the
persons involved. In addition, the licensees could be subject to
separate fines for each violation of the gaming laws. The
Louisiana Act states that a license issued by the Division is a
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pure and absolute privilege. The issuance, condition, denial,
suspension or revocation of a license is at the discretion of the
Division in accordance with the provisions of the Louisiana Act.
A license is not property or a protected interest under the
constitution of either the United States or the State of
Louisiana. Suspension or revocation of any of the licenses of the
Louisiana Licensees could have a material adverse effect on the
business of the Company.
The Division has the authority to conduct overt and covert
investigations of any person, entity, applicant or participant
involved directly or indirectly in the video gaming industry in
Louisiana. This investigation may extend beyond the information
provided in the formal application, including information with
regard to the licensee's immediate family and relatives and their
affiliations with certain groups, organizations, corporations,
firms or other business entities. The investigation may also
extend to every person who has or controls more than a 5%
ownership, income or profit interest in an entity which applies
for a license in accordance with the Louisiana Act, or who is a
key employee or who has the ability to exercise significant
influence over the licensee. All persons or entities
investigated must meet all suitability requirements and
qualifications for a licensee. The Division may deny an
application for licensing for any cause which it may deem
reasonable. The applicant for licensing must pay
a filing fee which also covers the cost of investigation.
In order for a corporation to be licensed by the Division,
it must be demonstrated that a majority of the stock of the
corporation is owned by persons who have been domiciled in
Louisiana for a period of at least two years prior to the date of
the application.
Devices must meet strict specifications established by the
Division. The number of Devices is limited depending on the type
of location at which the Devices are located. Fees payable to
the Division include an application fee, which is non-refundable,
an annual fee, based upon a percentage of the net revenues from
the operation of each Device, a Device owner's fee, a Device
operations fee, a license establishment fee and a Device owner's
franchise fee. All fees are payable in either quarterly or
annual installments depending on the fee being paid.
The loss or restriction of the Company's gaming licenses in
Louisiana would have a material adverse effect on its business
and could require the Company to cease gaming operations in
Louisiana. Any expansion of the Company's Louisiana gaming
operations (other than the addition of video poker devices in
existing locations) could subject the Company to additional
regulation in Louisiana.
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Regulatory Matters -- Mississippi
The ownership and operation of gaming devices in Mississippi
is subject to extensive state and local laws and regulations,
including the Mississippi Gaming Control Act (the "Mississippi
Act") and the regulations (the "Mississippi Regulations")
promulgated thereunder. The Mississippi Gaming Commission (the
"Mississippi Commission") oversees licensing and regulatory
compliance. Gaming in Mississippi can be legally conducted only
on vessels of a certain minimum size in navigable waters of the
Mississippi River or in waters of the State of Mississippi which
Lie adjacent and to the south (principally in the Gulf of Mexico)
of the counties of Hancock, Harrison and Jackson, and only in
counties in Mississippi in which the registered voters have not
voted to prohibit such activities. The underlying policy of the
Mississippi Act is to ensure that gaming operations in
Mississippi are conducted (i) honestly and competitively, (ii)
free of criminal and corruptive influences and (iii) in a manner
which protects the rights of the creditors of gaming operations.
The Mississippi Act requires that a person (including any
corporation or other entity) must be licensed to conduct gaming
activities in Mississippi. A license will be issued only for a
specified location which has been approved as a gaming site by
the Mississippi Commission. The Company, through its interest in
RCVP, obtained a license on June 30, 1994 that is valid for two
years. The Company must apply for renewal of such license, which
renewal cannot be assured. The Mississippi Act also requires
that certain officers or directors of a gaming licensee, any
person that owns more than 10% of a licensee, or any other
person who exercises a significant influence over the licensee,
either directly or indirectly, must be found suitable by the
Mississippi Commission. In addition, any employee of the licensee
which is directly involved in gaming, must obtain a work permit
from the Mississippi Commission. The Mississippi Commission will
not issue a license or make a finding of suitability unless it is
satisfied, only after an extensive investigation paid for by the
applicant, that the persons associated with the gaming licensee
or applicant for a license are of good character, honesty and
integrity, with no relevant or material criminal record. In
addition, the Mississippi Commission will not issue a license
unless it is satisfied that the licensee is adequately financed
or has a reasonable plan to finance its proposed operations from
acceptable sources, and that persons associated with the
applicant have sufficient business probity, competence and
experience to engage in the proposed gaming enterprise. The
Mississippi Commission has the power to deny, limit, condition,
revoke and suspend any license, finding of suitability or
registration, or fine any person, as it deems reasonable and in
the public interest, subject to any opportunity for a hearing.
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Under the Mississippi Regulations, a gaming licensee cannot
be publicly held, although an affiliated corporation, such as the
Company, may be publicly held so long as the Company registers
with and obtains the approval of the Mississippi Commission. In
addition, approval of any subsequent public offerings of the
securities of the Company must be obtained from the Mississippi
Commission if any part of the proceeds from that offering are
intended to be used to pay for or reduce debt used to pay for the
construction, acquisition or operation of any gaming facility in
Mississippi.
Under the Mississippi Regulations, a person is prohibited
from acquiring control of a licensee without the prior approval
of the Mississippi Commission. Any person who, directly or
indirectly, or in association with others, acquires beneficial
ownership of more than 5% of any licensee must notify the
Mississippi Commission of this acquisition. The Mississippi
Commission may require that a person be found suitable if that
person holds less than a 10% ownership position and must require
that a person be found suitable if that person owns more than 10%
of a licensee. Furthermore, regardless of the amount of
ownership, any person who acquires beneficial ownership may be
required to be found suitable if the Mississippi Commission has
reason to believe that the acquisition of such ownership would be
inconsistent with the declared policy of Mississippi. Any person
who is required to be found suitable must apply for a finding of
suitability from the Mississippi Commission within 30 days after
being requested to do so, and must deposit with the State Tax
Commission a sum of money which is adequate to pay the
anticipated investigatory costs associated with such finding.
Any person who is found not to be suitable by the Mississippi
Commission shall not be permitted to have any direct or indirect
ownership in the licensee. Any person who is required to apply
for a finding of suitability and fails to do so, or who fails
to dispose of his or her interest in the licensee if found
unsuitable, is guilty of a misdemeanor. If a finding of
suitability with respect to any person is not applied for where
required, or if it is denied or revoked by the Mississippi
Commission, the licensee is not permitted to pay such person for
services rendered, or to employ or enter into any contract with
such person.
The laws and regulations permitting and governing
Mississippi casino gaming were adopted during 1990 and 1991, and
the first casinos opened in August 1992. Consequently, the
interpretation and application of Mississippi law and regulations
may evolve over time, and any such changes may have an adverse
effect on Mississippi licensees. The loss or restriction of the
Company's gaming license in Mississippi could have a material
adverse effect on its business and could require the Company to
cease gaming operations in Mississippi.
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Regulatory Matters -- Additional Jurisdictions
The Company, in the ordinary course of its business,
routinely considers business opportunities to expand its gaming
operations into additional jurisdictions. Any such expansion
would subject the Company and, possibly, some or all of its
officers, directors, employees and securityholders, to regulatory
requirements in addition to those with which such parties are
presently obligated to comply. As the Company seeks to establish
gaming operations in additional jurisdictions, the Company
expects to continue to incur significant development costs,
including costs related to efforts to obtain gaming licenses and
other regulatory approvals in such jurisdictions.
Shares Eligible for Future Sale
The sale of a substantial number of shares of Common Stock
in the public market could materially adversely affect the market
price of Common Stock. Persons holding a substantial number of
shares of Common Stock and options and warrants to purchase
additional shares of Common Stock have rights, subject to certain
conditions, to require the Company to file registration
statements covering the shares they own or may acquire through
option or warrant exercises. These persons and others also have
rights, subject to certain limitations, to "piggyback"
registrations if the Company files a registration statement. The
Company filed a registration statement in December 1994 which
covered 600,000 shares of Common Stock of certain selling
stockholders in connection with the acquisition of the Company's
interest in the RCVP. See "-- Effect of Outstanding Warrants,
Options and Convertible Debentures."
Effect of Outstanding Warrants, Options and Convertible
Debentures
Giving effect to the warrants issued to Kirkland, GSA and
certain other investors in connection with the September 1993
investment by Kirkland (the "Kirkland Investment"), the warrants
issued to Mr. Wilms in connection with the completion of the
funding of a $6,500,000 loan to Video Services, Inc., a Louisiana
corporation ("VSI") (the outstanding principal balance of which
as of March 22, 1995 was approximately $4,365,000), and a
majority controlled subsidiary of the Company (the "Wilms
Warrants"), the warrants issued to the initial purchasers in
connection with the Convertible Debenture offering and the
warrants issued to Mr. Greathouse and Dr. Fields in connection
with their employment contracts, the Company has outstanding
warrants covering 7,280,000 shares of Common Stock. Of such
warrants, warrants which cover 2,750,000 shares of Common Stock
were issued to Kirkland and certain other investors on September
21, 1993 in connection with the Kirkland Investment (the
"Investment Warrants"), warrants which cover 1,250,000 shares of
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Common Stock were issued to GSA in connection with advisory
services (the "Incentive Warrants"), warrants which cover 780,000
shares of Common Stock were issued to the initial purchasers in
connection with the Convertible Debenture offering on September
21, 1993 (the "Initial Institutional Warrants") and warrants
which cover 250,000 shares of Common Stock were issued to each of
Mr. Greathouse and Dr. Fields in connection with their employment
contracts (all of which are vested in the case of Mr. Greathouse
and of which, as discussed below in the case of Dr. Fields,
62,500 are vested immediately and the remainder of which will
vest ratably in annual increments during the term of his three
year engagement agreement). Certain additional warrants (the
exact number of which has not been finally determined) are
issuable to GSA in respect of certain consummated transactions
and may be issuable in the future in the event that certain other
transactions are consummated. As of March 22, 1995, options
covering 2,852,334 shares of Common Stock had been granted and
were outstanding pursuant to the Company's 1984 Stock Option Plan
and the Company's 1991 Stock Option Plan, of which options
covering approximately 978,100 of such shares of Common Stock
were currently exercisable at prices ranging from $1.375 to $8.75
per share. See Note 5 of Notes to the Company's June 30, 1994
Consolidated Financial Statements, incorporated by reference in
this Prospectus. The Wilms Warrants, which cover 2,000,000
shares of Common Stock, are exercisable at a price of $2.50 per
share. The Investment Warrants and the Incentive Warrants will
be exercisable, at a price of $1.50 per share, only in the event
that the price of the Common Stock has traded for 15 consecutive
trading days at an average price equal to, or in excess of,
$11.00, $13.00 and $15.00 as to one-third of such Investment
Warrants and Investment Warrants, respectively. The Stockholders
Agreement provides that the Wilms Warrants and the Common Stock
owned by Mr. Wilms (together, the "Wilms Securities"), on the one
hand, and the Investment Warrants and Incentive Warrants, on the
other hand, entitle the holders thereof to four demand
registrations and unlimited "piggyback" registrations for
offerings by the Company for its own account, subject to
customary exceptions, at the Company's expense. Of such demand
registrations, holders of the Wilms Securities (i) may elect to
participate in two registrations demanded by holders of the
Investment Warrants and the Incentive Warrants and (ii) have
certain priority rights relative to such other holders with
respect to "piggyback" registration rights. In connection with
the employment of Mr. Greathouse by the Company, Mr. Greathouse
received 250,000 shares of restricted Common Stock, 250,000
warrants on economic terms identical to the Incentive Warrants
and 250,000 options exercisable at $5.75 per share under the 1991
Stock Option Plan. All of the warrants are presently vested and
become exercisable on the first anniversary of August 15, 1994
(the initial date of Mr. Greathouse's employment) and one-third of
the options vest and become exercisable on each of the first,
second and third anniversaries of August 15, 1994. In connection
with his engagement agreement to acts Vice Chairman of the Board
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of Directors, Dr. Fields received 250,000 warrants on economic
terms identical to the Incentive Warrants and 250,000
options exercisable at $5.75 per share under the 1991 Stock
Option Plan. One-fourth of such warrants and options vested and
became exercisable on September 1, 1994 and one-fourth will vest
and become exercisable on each of August 31, 1995, 1996 and 1997.
See Executive Compensation incorporated by reference in this
Prospectus.
On September 21, 1993, after receipt of the administrative
approval of the Chairman of the Nevada Board, the Company issued
the Initial Institutional Warrants to the initial purchasers in
connection with the Convertible Debenture offering and may issue
warrants which cover up to an additional 250,000 shares of Common
Stock (the "Additional Institutional Warrants," and together with
the Initial Institutional Warrants, the "Institutional Warrants")
to one of such initial purchasers in connection with future
advisory services to be provided to the Company by such initial
purchaser. The Initial Institutional Warrants vested upon the
issuance thereof and became exercisable on September 21, 1994.
The Additional Institutional Warrants, if issued, will vest and
become exercisable only after the Common Stock has traded at an
average price equal to, or in excess of, $13.00 for 15
consecutive trading days after the issuance thereof, subject to
adjustment under certain circumstances. All of the
Institutional Warrants will remain exercisable, to the extent
vested, for five years after first becoming exercisable, but in
no event longer than six years from the date of issuance. The
exercise price of the Institutional Warrants is $8.25 per share.
The holders of the Institutional Warrants are entitled to
one demand registration and unlimited "piggyback" registrations,
whether or not the proposed registration is for the Company's
account, subject to customary exceptions, at the Company's
expense.
The Company has outstanding $85 million principal amount of
the Convertible Debentures which are convertible at any time, or
from time to time, into Common Stock at a conversion price of $10
per share (i.e., for an aggregate of up to 8,500,000 shares of
Common Stock), subject to adjustment under certain circumstances.
Holders of the options, warrants and Convertible Debentures
described above are likely to exercise or convert them at times
when the Company could raise additional capital by issuing Common
Stock for greater consideration than could be obtained by the
exercise of the options and warrants or conversion of the
Convertible Debentures, thereby affecting the terms on which the
Company could obtain additional capital or its ability to do so.
See Management's Discussion and Analysis of Financial Condition
and Results of Operations, incorporated by reference in this
Prospectus.
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RECENT DEVELOPMENTS
Recent Transactions
Kirkland Transaction. On June 25, 1993, the Company and Mr.
Alfred H. Wilms, the principal stockholder and a director of the
Company (and then Chairman of the Board and Chief Executive
Officer), entered into agreements with Kirkland, KIC (the general
partner of Kirkland) and GSA, an affiliate of Kirkland. Pursuant
to these agreements, (i) KIC and certain of its affiliates
agreed, among other things, not to make investments in certain
gaming opportunities without first having offered them to the
Company on the same terms and conditions; and (ii) GSA agreed to
assist the Company in identifying potential investors, in
negotiating and obtaining financing, and in identifying
opportunities for acquisitions, dispositions, joint ventures and
other similar transactions. These agreements contained
provisions involving stock purchase rights involving the issuance
of shares of the Company's Convertible Special Stock and certain
warrants. In addition, these agreements provided that if at
least $20 million in capital infusion to the Company was
achieved, KIC, in its individual capacity, would acquire the
right, subject to the receipt of required regulatory and other
approvals, to nominate a majority of the seven members of the
Company's Board of Directors with the other members nominated by
Mr. Wilms. On September 21, 1993, the Company completed the
private placement of $85 million aggregate principal amount of
the Convertible Debentures. Concurrent with the closing of this
issuance, Kirkland invested $5,000,000 in the Company in exchange
for 1,333,333 shares of the Company's Convertible Special Stock
and Investment Warrants to acquire 2,750,000 shares of Common
Stock, and KIC delivered notice to the Company of its intent to
exercise it right to control the Company's Board of Directors.
On June 23, 1994, KIC received the required regulatory approvals
from the Nevada Commission and in July 1994 exercised its right
to take control of the Board of Directors. For a further
discussion concerning the changes in the Board of Directors as a
result of these transactions and certain subsequent changes to
the Board of Directors, see "Risk Factors -- Control by Principal
Stockholders."
Certain Additional Appointments. In August 1994, the
Company hired Mr. Steve Greathouse as President and Chief
Executive Officer. Mr. Greathouse, who has held various
positions in the gaming industry since 1974, most recently served
as the President of the Harrah's Casino Hotels Division of The
Promus Companies, Inc. Mr. Greathouse was appointed to the
Company's Board of Directors in October 1994. Consistent with the
continuing development and implementation of the business
strategy of the Company, Mr. Greathouse succeeded Mr. Kirschbaum
as Chairman of the Board in March 1995. Mr. Kirschbaum will
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continue to serve as a Director and remains actively involved in
the business of the Company, particularly in its development
efforts. In conjunction with such actions, Dr. Fields has
replaced Mr. Greathouse as Chairman of the Executive Committee of
the Board.
In March 1995, David Johnson joined the Company as
Secretary, Senior Vice President and General Counsel. He also
serves as Secretary of each of the subsidiaries of the Company.
Mr. Johnson has approximately 17 years of experience in legal and
regulatory matters. He was formerly a senior partner in the
Nevada law firm, Schreck, Jones, Bernhard, Woloson & Godfrey,
Chartered. In addition, Alfred H. Wilms was elected a director
of each of the subsidiaries of the Company.
Native American Investments, Inc. On March 7, 1994, the
Company acquired 90% of the common stock and all of the shares of
a newly established class of preferred stock of USA Gaming of
Native America, Inc., which subsequently changed its name to
Native American Investments, Inc. ("NAI"). As consideration for
the common stock and as its initial contribution to NAI, the
Company agreed, through a subsidiary and subject to certain
conditions, to issue 224,444 shares of Common Stock of the
Company and pay $960,000 in cash. As of March 22, 1995, 168,333
of such shares had been issued and delivered. The Company also
agreed, upon adoption of a non-qualified stock bonus plan by NAI,
to fund such plan with up to 168,889 shares of the Company's
common stock at the discretion of the Company. NAI has contracts
to develop Class II and Class III gaming opportunities with
several Indian tribes in California and Oklahoma.
All of the contracts presently held by NAI are in the
development and non-operational stages and are subject to
negotiations resulting in satisfactory compacts with the states
in which the projects are located and approval of the contracts
by the National Indian Gaming Commission (the "NIGC").
Therefore, the Company has realized no revenues through its
ownership of NAI. Subsequent to initial approval, gaming
contracts entered into with Indian tribes are subject to periodic
review by the NIGC as well as the gaming commission of the tribe
party to the contract. Such reviews typically occur annually,
but may be undertaken at any time. Each of NAI's gaming
contracts, if initially approved, will be subject to such
periodic review and, therefore, will be subject to revocation by
gaming authorities from time to time prior to the date such
contract expires by its terms. Such contracts may additionally
be restricted by, or obligations may be imposed under, the
tribal-state compact under which such contract is operated.
Moreover, any contract with an Indian tribe relating to land is
subject to approval by the Bureau of Indian Affairs of the United
States Department of Interior.
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All Indian tribes, including the Indian tribes with which
NAI has contracted, possess sovereign immunity from contract
suit unless a tribe unequivocally expresses a clear waiver from
such immunity. The gaming contracts NAI has entered into with
Indian tribes provide for such waivers.
The Governor of California has to date refused to negotiate
a compact (other than compacts for pari-mutuel wagering on horse
racing) covering Indian gaming in California and is currently
engaged in related litigation with certain Indian tribes. In
Rumsey Indian Rancheria vs. Wilson the Ninth Circuit Court of
Appeals ruled in November 1994 that, with the possible exception
of "slot machines" in the form of video lottery terminals, the
State of California has no obligation to negotiate with the
plaintiff tribes on the gaming activities at issue in that
litigation. That court remanded the case back to the trial court
to make certain determinations in respect of "slot machines"
under California law. Given the requirement that the trial court
make additional determinations and the likely prospect of further
appeals in this case, the Company cannot predict if or when the
State of California will enter into any compact covering Class
III gaming in California.
There can be no assurance as to the successful completion or
operation of any part of the NAI's contracts.
Greater Dubuque Riverboat Entertainment Company. On June 2,
1994, the Company, as plaintiff (along with its subsidiary,
United Gaming of Iowa, Inc.) filed a lawsuit in the United States
District Court, Northern District of Iowa, alleging, among other
things, a breach of fiduciary duty by defendants Greater Dubuque
Riverboat Entertainment Company, L.C., an Iowa limited liability
company organized to operate a riverboat casino in Dubuque, Iowa
("GDREC"), and Joseph P. Zwack. The defendants in that lawsuit
filed a counterclaim alleging, among other things, that the
Company tortiously interfered with the business of GDREC and
sought unspecified compensatory and exemplary damages and costs
of the action. In December 1994, the parities to such litigation
entered into a Settlement Agreement pursuant to which such
litigation will be dismissed with prejudice without any payment
by any party thereto. Also in connection with such settlement,
GDREC permitted the Company to conduct a due diligence
investigation of its business. At the conclusion of such
investigation, the Company had the option, in its sole and
unfettered discretion, either to elect to proceed with an offer
to acquire GDREC as set forth in the settlement or,
alternatively, not to proceed and cease all efforts
to acquire, in any manner, any interest in GDREC, certain related
parties or the Dubuque, Iowa riverboat license. On December 16,
1994, the Company advised GDREC that it elected not to proceed
with such offer.
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Camptown Greyhound Racing, Inc. In September 1994, Kansas
Gaming Partners, LLC and Kansas Financial Partners, LLC (the
"Kansas Partners"), each Kansas limited liability companies,
whose members include wholly owned subsidiaries of the Company
and Casino Magic Corporation, announced that the Kansas Racing
Commission approved a financing proposal submitted by Camptown
Greyhound Racing, Inc. ("Camptown") that would facilitate the
completion of construction of a greyhound racing facility located
near Frontenac, Kansas. In November 1994, Camptown closed a
$3,205,000 loan commitment which is guaranteed by the Kansas
Partners. Additionally, Camptown has entered into an option
agreement with the Kansas Partners whereby the Kansas Partners
have been granted the exclusive right to operate casino-type
gaming at Camptown's facility if and when such gaming is enacted
in Kansas. In the event casino gaming is enacted in Kansas, it
is presently contemplated that the Kansas Partners will construct
a casino, hotel, recreational vehicle park, theme park and
restaurants on the 320-acre site. A referendum to amend the
Kansas constitution to permit casino gaming exclusively at three
existing pari-mutuel facilities (including Camptown) could be put
to the voters of Kansas following action by the Kansas State
Legislature which could come as early as Spring 1995. There can
be no assurance as to the successful completion or operation of
any part of this project.
Pine Hills Joint Venture. In July 1994, the Company
executed a joint venture agreement with Lone Star Casino
Corporation (the "Joint Venture") to develop the Pine Hills
Casino resort site ("Pine Hills") in Bay St. Louis, Mississippi.
Pine Hills is anticipated to consist of 60,000 square feet of
gaming, restaurant and back office facilities, and an 18-hole
golf course and clubhouse. The Company has agreed, upon certain
conditions described below, to make initial advances of up to
$1,900,000 to defray certain preliminary expenses to be incurred
in connection with the project in accordance with an approved
budget. The Company's obligation to make the initial advance
payments was contingent upon, among other things, obtaining the
landlord's consent to Lone Star's assignment of the ground lease
for the project site to the Joint Venture and related financing,
the completion of definitive joint venture documents and the
satisfactory completion of the Company's due diligence. In
addition, the Company agreed, upon certain conditions, to make an
equity investment of up to $15,000,000 (including the initial
$1,900,000 contribution) for a 50% equity interest in the Joint
Venture, plus the separate right to receive management fees and
royalties aggregating 10% of the Joint Venture's gross revenues,
as defined. The Company's obligation to make its $15,000,000
equity investment was contingent upon, among other things,
obtaining the landlord's consent to Lone Star's assignment of the
ground lease for the project site to the Joint Venture and
related financing, obtaining satisfactory debt financing for the
project, the receipt of all necessary governmental approvals, the
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satisfactory resolution of certain litigation relating to the
project site currently pending in the Mississippi Supreme Court,
as well as the satisfactory completion of the Company's due
diligence. Certain of the conditions to the funding of the
$1,900,000 and $15,000,000 amounts referenced above have not been
met and the Company has advised Lone Star that, accordingly, the
Company has no further obligations in respect thereof. The
Company is continuing discussions with the parties to determine
whether an agreement can be reached regarding an acceptable
transaction. There can be no assurance as to whether such an
agreement can be reached or, if so, as to the future successful
completion or operation of this project.
Annual Meeting of Stockholders. At the Company's 1994
Annual Meeting of Stockholders, (i) all present directors were
re-elected as nominated and (ii) stockholders approved a proposal
to change the Company's name from "United Gaming, Inc." to
"Alliance Gaming Corporation."
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USE OF PROCEEDS
All of the shares of Common Stock offered hereby are being
offered by the Selling Stockholder. The Company will not receive
any of the proceeds from the sale of the shares.
SELLING STOCKHOLDER
As of the effective date of the Registration Statement of
which this Prospectus is a part, the Selling Stockholder will own
250,000 shares of Common Stock (2.1% of the Common Stock
outstanding). Assuming that the Selling Stockholder sells all
250,000 Shares offered hereby, he will no longer own beneficially
any shares of Common Stock.
The Selling Stockholder was engaged by the Company to act as
President and Chief Executive Officer in August 1994. He was
appointed to the Company's Board of Directors in October 1994 and
was appointed Chairman of the Board in March 1995.
In connection with the issuance of the 250,000 shares of
Common Stock to the Selling Stockholder, the Company agreed to
file and cause to be declared effective the Registration
Statement of which this Prospectus is a part. The Company has
also agreed to maintain the Registration Statement effective
until the latter to occur of (i) the first anniversary of the
date the Selling Stockholder ceases to be an employee of the
Company and (ii) the date on which the Selling Stockholder may
sell, freely and without restriction, his shares unregistered in
compliance with federal securities laws.
DESCRIPTION OF CAPITAL STOCK
The Company's Articles of Incorporation, as amended,
authorize the issuance of 185,000,000 shares of capital stock, of
which 175,000,000 shares are designated as Common Stock, par
value $0.10 per share, and 10,000,000 shares are designated as
Special Stock, par value $0.10 per share. As of March 22, 1995,
11,629,650 shares of Common Stock were issued and outstanding and
1,333,333 shares of Convertible Special Stock were issued and
outstanding.
Common Stock
Holders of Common Stock are entitled to cast one vote per
share on all matters on which the Company's stockholders are
entitled to vote. The number of votes required to take any
action by the Company's stockholders are as provided in the
Nevada General Corporation law. Holders of Common Stock are not
entitled to cumulate their votes. Holders of Common Stock are
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entitled to receive dividends when and as declared by the
Company's Board of Directors out of funds legally available for
the payment thereof. The Company's Articles of Incorporation
provide that once the subscription price or par value of any
share of Common Stock has been paid in, such share shall be
non-assessable and shall not be subject to assessment to pay the
debts of the Company. Subject to any preferential rights which
may be granted to holders of certain series of Special Stock,
holders of Common Stock are entitled to share ratably in all
assets of the Company that are legally available for distribution
to its stockholders in the event of its liquidation or
dissolution. Holders of Common Stock have no preemptive rights
nor are there any subscription, redemption or conversion
privileges associated with the Common Stock.
Special Stock
The Articles of Incorporation provide that the Special Stock
may be issued from time to time upon such terms and conditions
and for such consideration as may be provided by the Company's
Board of Directors. The Special Stock may be issued in one or
more series, each series having such designations, rights,
preferences and privileges as may be determined by the Board of
Directors of the Company at the time of issuance. The Board has
designated an initial series of Special Stock as "Non-Voting
Junior Convertible Special Stock," which series consists of
1,333,333 shares of Convertible Special Stock. All of the shares
of Convertible Stock were issued to Kirkland on September 21,
1993. The Company's Articles of Incorporation provide that the
shares of Convertible Special Stock are intended to have the same
rights as the Common Stock and, subject to regulatory compliance,
are convertible on a share-for-share basis into shares of Common
Stock, except that the shares of Convertible Special Stock have
no voting rights and have a $.01 per share liquidation
preference.
Provisions Applicable to Certain Holders
The Nevada General Corporation Law contains a control share
provision with respect to the acquisition of more than 20% of the
voting shares of a Nevada corporation. The Company, however, has
opted out of this provision in accordance with Nevada law by
adopting an amendment to its By-laws to such effect.
PLAN OF DISTRIBUTION
Any or all of the shares of Common Stock may be offered and
sold to purchasers directly by or on behalf of the Selling
Stockholder from time to time in the over-the-counter market, in
privately negotiated transactions, in the Nasdaq National Market
or otherwise at prices prevailing in such market or exchange or
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as may be negotiated at the time of sale. The shares of Common
Stock may also be publicly offered through agents, underwriters
or dealers. In such event, the Selling Stockholder may enter into
agreements with respect to any such offering. Such underwriters,
dealers or agents may receive compensation in the form of
underwriting discounts, concessions or commissions from the
Selling Stockholder and/or the purchasers of shares of Common
Stock. The Selling Stockholder and any such underwriters,
dealers or agents that participate in the distribution of shares
of Common Stock may be deemed to be underwriters, and any profit
on the sale of the shares of Common Stock by them and any
discounts, commissions or concessions received by them may be
deemed to be underwriting discounts and commissions, under the
Securities Act. Any such underwriters, dealers and agents may
engage in transactions with, and perform services for, the
Company and affiliates of the Company. At the time a particular
offer of Shares is made, to the extent required, a Prospectus
Supplement will be distributed which will set forth the aggregate
number of Shares being offered and the terms of the offering,
including the name or names of any underwriters, dealers or
agents, any discounts, concessions or commissions and other items
constituting compensation from the Selling Stockholder and any
discounts, commissions, or concessions allowed or reallowed or
paid to dealers.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby
has been passed upon for the Company by Schreck, Jones,
Bernhard, Woloson & Godfrey, Chartered, Las Vegas, Nevada.
EXPERTS
The consolidated financial statements and schedules of
Alliance Gaming Corporation (formerly United Gaming, Inc.), and
its subsidiaries as of June 30, 1994 and 1993, and for each of
the years in the three-year period ended June 30, 1994, have been
incorporated by reference herein and in the Registration
Statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by
reference herein upon the authority of said firm as experts in
accounting and auditing.
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No dealer, salesperson or other person
has been authorized to give any information
or to make any representations other than
those contained in this Prospectus and, 250,000 SHARES
if given or made, such information or
representations in connection with
this offering must be relied upon as
having been authorized by the Company
or by the Selling Stockholder. This
Prospectus does not constitute an
offer to sell or a solicitation of an
offer to buy any of the securities
offered hereby by anyone in any
jurisdiction in which such offer or
solicitation is not authorized or in
which the person making such offer or
solicitation is not qualified to do so ALLIANCE GAMING
or to any person to whom it is unlawful CORPORATION
to make such offer or solicitation.
Neither the delivery of this Prospectus
nor any sale made hereunder shall,
under any circumstances, create an
implication that the information COMMON STOCK
contained herein is correct as of any (Par Value $.10
share time subsequent to the date per Share)
of this Prospectus.
TABLE OF CONTENTS
Page
Available Information . . . . . . 2
Incorporation of Certain
Documents by Reference. . . . . . 2
Prospectus Summary. . . . . . . . 3 PROSPECTUS
Risk Factors. . . . . . . . . . . 5
Recent Developments . . . . . . .14
Use of Proceeds . . . . . . . . .17
Selling Stockholder . . . . . . .17
Description of Capital Stock. . .17
Plan of Distribution. . . . . . .18
Legal Matters . . . . . . . . . .18
Experts . . . . . . . . . . . . .18 March 29, 1995
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