<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION JUNE 24, 1997
REGISTRATION NO. 333-25481
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 3 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
INNOVATIVE GAMING CORPORATION OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MINNESOTA 41-1713864
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
4750 TURBO CIRCLE
RENO, NEVADA 89502
(702) 823-3000
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
-----------------------
EDWARD G. STEVENSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INNOVATIVE GAMING CORPORATION OF AMERICA
4750 TURBO CIRCLE
RENO, NEVADA 89502
(702) 823-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
WITH COPIES TO:
DOUGLAS T. HOLOD, ESQ.
MASLON EDELMAN BORMAN & BRAND,
A PROFESSIONAL LIMITED LIABILITY PARTNERSHIP
3300 NORWEST CENTER
MINNEAPOLIS, MINNESOTA 55402-4140
(612) 672-8200
APPROXIMATE DATE OF THE COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
INFORMATION CONTAINED HEREIN IN SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALES WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 24, 1997
PROSPECTUS
Innovative Gaming Corporation of America
975,609 SHARES OF COMMON STOCK
----------------------
All of the 975,609 shares of Common Stock of Innovative Gaming
Corporation of America (the "Company") offered hereby and issuable upon
conversion of Series A Convertible Preferred Stock (the "Preferred Stock") are
being sold by certain shareholders of the Company (the "Selling Shareholders").
The 975,609 shares of Common Stock offered hereby assumes the conversion of the
Preferred Stock into Common Stock at the closing bid price on June 20, 1997 of
$5.00 per share. Each share of Preferred Stock is convertible into shares
of Common Stock, at a conversion price equal to 82% of the average closing bid
price of the Company's Common Stock as reported on the Nasdaq National Market
over a ten-day period ending on the day prior to conversion. The Preferred
Stock is convertible in 25% increments, at the option of the holder thereof,
beginning July 9, 1997, at the earliest, and following the end of each 30 day
period thereafter for three months. Preferred Stock not converted eleven
months from the effectiveness of the Registration Statement is automatically
converted into Common Stock. The Company will not receive any of the proceeds
for the sale of shares by the Selling Shareholders.
The Common Stock is listed on the Nasdaq National Market under the
symbol "IGCA." On June 20, 1997, the last sale price for the Common Stock as
reported on the Nasdaq National Market was $5.00 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DESCRIPTION OF CERTAIN
FACTORS WHICH SHOULD BE CONSIDERED BY INVESTORS BEFORE PURCHASING THE
SECURITIES OFFERED HEREBY.
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 COLORADO GAMING COMMISSION, THE MISSISSIPPI GAMING
COMMISSION, THE NEVADA GAMING CONTROL BOARD NOR THE NEVADA
GAMING COMMISSION NOR ANY OTHER GAMING AUTHORITY HAS
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR THE INVESTMENT MERITS OF
THE SECURITIES OFFERED HEREBY. ANY
REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
---------------------
The date of this Prospectus is , 1997.
<PAGE> 3
ADDITIONAL INFORMATION
This Prospectus is part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") which the Company has filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is made to
the Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to herein are
not necessarily complete although the material elements or descriptions of such
documents are described herein or in documents incorporated herein by
reference. With respect to each such contract, agreement or other document
filed as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference.
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 and information statements and other
information with the Commission. Such reports, proxy and information statements
and other information as well as the Registration Statement and Exhibits of
which this Prospectus is a part filed by the Company may be inspected and
copied at the public reference facilities of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, as well as at
the following Regional Offices: 7 World Trade Center, 13th Floor, New York, New
York 10048 and 500 West Madison Street--Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Commission by mail at
prescribed rates. Requests should be directed to the Commission's Public
Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549. Material filed by the Company can also be inspected at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street N.W., Washington, D.C. 20006. The Commission also maintains a World
Wide Web site that contains reports, proxy and information statements, and
other information regarding registrants, such as the Company, that file
electronically with the Commission. Such site and this Registration Statement
may be accessed at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference and made a part hereof:
(i) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 and the amendment thereto on Form 10-K/A filed
June 4, 1997.
(ii) the description of the Company's Common Stock included in its
Registration Statement on Form SB-2 (Registration No. 33-61492C) under
the caption "Description of Securities."
(iii) the Company's Current Report on Form 8-K filed April 17, 1997.
(iv) the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997.
2
<PAGE> 4
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, subsequent to the date of this
Prospectus and prior to the termination of the offering described herein shall
be deemed to be incorporated by reference in this Prospectus from the
respective dates those documents are filed. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which 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 a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus has been delivered, on the written or oral request of such
person, a copy of any or all of the documents referred to above which have
been, or may be, incorporated in this Prospectus by reference, other than
exhibits to such documents. Request for such copies should be directed to
Innovative Gaming Corporation of America, 4750 Turbo Circle, Reno, Nevada
89502, Attention: Scott H. Shackelton, Chief Financial Officer or by telephone
at 702-823-3000.
RECENT DEVELOPMENTS
The following discussion contains forward-looking statements that involve risks
and uncertainties relating to future events. Actual events or the Company's
results may differ materially from those discussed in such forward-looking
statements. Factors that might cause actual results to differ from those
indicated by such forward-looking statements include, but are not limited to,
failure or delay in obtaining gaming regulatory approvals, delays in developing
or manufacturing new products, decline in demand for gaming products or
reduction in the growth rate of new markets, changing economic conditions,
approval of pending patent applications or infringement upon existing patents,
the effects of regulatory and governmental actions, customer acceptance of the
Company's products, need for additional financing and increased competition.
On May 12, 1997, the Company announced it received a conditional order
for 57 multi-player machines for New South Wales, Australia from its
distributor, Aristocrat Leisure Industries. The order is conditioned upon
final game approval by the New South Wales Liquor Administration Board.
Aristocrat estimated that the 57 machines will be installed over June, July
and August of 1997. The Company estimated that the order could generate
almost $3 million in revenue.
On May 12, 1997, the Company also announced initial placements in
Nevada of 22 multi-player machines representing over 110 player stations. At
such time, the Company had a customer order backlog of 23 machines in Nevada.
The Company would receive a monthly "participation" payment on each machine
based on a percentage of the machines earnings beginning in late June 1997. On
such date, the Company also announced the Company will place 11 blackjack
machines in Colorado on a lease basis.
On May 14, 1997, the Company announced that its new Bonus Streak(TM)
specialty game, developed in a joint venture with IGT, has received approval
from the Nevada gaming authorities.
3
<PAGE> 5
RISK FACTORS
Each prospective investor should carefully consider the following
factors, prior to purchasing any of the securities offered hereby.
RISKS OF NEW AND EXPANDING BUSINESSES
The Company is continuing to expand and diversify its business by
developing and introducing new products. The Company faces the risks,
expenses and difficulties frequently encountered by new and rapidly expanding
businesses, including, but not limited to, fluctuating cash flow, initial high
development costs of new products without corresponding revenues, pending
receipt of corporate and product regulatory approvals, market introduction and
acceptance of new products and whether the Company can increase production
volume. There is no assurance that the Company's products will be accepted in
the marketplace and that all necessary regulatory approvals will be obtained.
Furthermore, the Company will need to manage the transition to higher volume
operations, entrance into new markets, integration of operations and product
development, control of overhead expense and training and management of
qualified personnel.
The Company's successful entry into new key gaming markets as a gaming
machine manufacter and supplier is dependent upon numerous factors, including
whether it can design, manufacture, market and service gaming machines that
achieve player and casino acceptance while maintaining product quality and
acceptable margins and to compete against gaming machine suppliers with greater
financial resources, name recognition and established service networks and
customer relationships. The Company believes that it will need to develop
gaming machines that offer technological advantages or unique entertainment
features in order for the Company to be able to compete effectively in the
gaming machine market.
RAPIDLY CHANGING TECHNOLOGY
The Company's business is characterized by rapidly changing technology
and frequent new product introductions and enhancements. The Company's success
will depend in part on whether it can continue to enhance its existing products
and to introduce in a timely manner new products that meet existing and future
regulatory requirements and evolving customer requirements and to achieve
market acceptance. There can be no assurance that the Company will be
successful in identifying, developing and marketing new products or enhancing
its existing products. The Company's business will be adversely affected if
the Company experiences delays in developing new products or enhancements or if
such products or enhancements do not meet and receive all regulatory approvals
and/or gain customer acceptance.
4
<PAGE> 6
RISKS OF COMPETITION
The market for gaming machines is very competitive. There are a
number of established, well-financed and well-known companies that compete with
the Company's products. The Company will also compete with other established
gaming machine manufacturers such as International Game Technology, Bally
Gaming International, Inc., WMS Gaming, Inc. and Sigma Gaming, Inc. The
development of a successful new product or product design by a competitor could
adversely affect sales of the Company's products and no assurance can be made
that a significant new product designed by a competitor would not have a
material adverse effect on the Company's results of operations.
NEED FOR ADDITIONAL FINANCING
Whether the Company can execute its long-term business strategy
depends to a significant degree on its ability to finance the development,
marketing and production of its products. If additional funds are required,
there can be no assurance that any additional funds will be available on terms
acceptable to the Company or its present shareholders. New investors may seek
and obtain substantially better terms than were granted to its present
investors and the issuance of such securities would result in dilution to its
existing shareholders.
RELIANCE ON REVENUES OF SINGLE INDUSTRY
All of the Company's revenues and profits are derived from the gaming
industry. The profitability and growth of the Company's business is
substantially dependent upon factors that are beyond the control of the
Company, including, among others, the pace of development, changes in gaming
regulation, expansion and renovation of casinos and other forms of casino
gaming in new jurisdictions, the continued popularity of casino gaming as a
leisure activity. The expansion of the gaming industry has slowed in recent
years and the continued expansion of gaming markets is dependent upon
political, legal and other factors which are beyond the control of the Company.
As a result of these and other factors, there is no assurance of the Company's
growth or profitability.
DEPENDENCE UPON RELATIONSHIP WITH VENDORS AND SUPPLIERS
The Company has historically utilized one of its suppliers to
facilitate the flow of various parts and components from Japanese vendors. The
Company is not obligated to purchase parts and components from any specific
vendor and is not subject to any minimum purchase requirements. A significant
interruption or delay in the delivery of or the availability of
5
<PAGE> 7
components from suppliers could have a material adverse effect on the Company's
results of operations.
RISKS OF LACK OF PRODUCT PROTECTION
The Company's business is dependent upon whether it can protect its
proprietary software, hardware and other intellectual property. The Company
relies primarily on a combination of non-disclosure agreements for its key
employees, license agreements with its customers and suppliers and trade secret
protection to protect such intellectual property. Despite the Company's
precautions, it may be possible for unauthorized parties to copy or to "reverse
engineer" certain portions of the Company's products or to obtain and use
information that the Company believes is proprietary. Therefore, there is no
assurance that precautionary steps taken by the Company in this regard will be
adequate to deter misappropriation of its intellectual property or independent
third party development of functionally equivalent products or that the Company
can meaningfully protect its rights to such proprietary intellectual property.
The Company relies on a combination of patent, trade secret, copyright
and trademark law, nondisclosure agreements and technical security measures to
protect its rights pertaining to its products. The Company holds patents for
its blackjack, craps and roulette machines. There can be no assurance that
such patents are valid. The Company may file for patents on certain features
of products that the Company may develop in the future. No assurance can be
given that, if applied for, any patents will be issued, or, if issued, that
such patents will be valid or will provide any significant competitive
protection for such products. Only certain features of the Company's
blackjack, craps, roulette and any other products the Company may develop in
the future may be eligible for patent protection. Such protection may not
preclude competitors from developing products with features similar to the
Company's products.
GOVERNMENTAL REGULATION OF GAMING INDUSTRY
The manufacture, distribution, sale and operation of gaming machines
are subject to extensive federal, state, provincial, tribal, and local
regulation, including licensing requirements. These regulations are constantly
changing and evolving, and may permit additional gaming or curtail gaming in
various jurisdictions in the future, which may have a material adverse impact
on the Company. The Company, its key personnel, and the Company's gaming
machines are required to hold various licenses from each jurisdiction in which
the Company does business. Generally, regulatory authorities have broad
discretion when granting, renewing or revoking such licenses. The failure of
the Company, any of its key personnel, or its gaming machines to obtain or
retain a necessary license and or approvals in any jurisdiction could have a
material adverse effect on the Company or on whether the Company, its key
personnel, and its gaming machines to obtain or retain required licenses in
other jurisdictions. If the Company enters into lease participation agreements
under which the Company shares in the revenues generated by gaming machines,
the Company may be subject to additional regulation as a gaming operator.
Regulatory authorities may require significant shareholders to submit to
extensive background investigations
6
<PAGE> 8
and respond to questions from regulatory authorities, and may revoke the
Company's licenses based upon their findings. If it is determined that gaming
regulations were violated by the Company or its wholly owned operating
subsidiary IGI, the gaming licenses held could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, the Company and IGI and the persons involved
could be subject to substantial fines for each separate violation of gaming
regulations at the discretion of the requisite gaming authorities limitation,
conditioning or suspension of any gaming license could (and revocation of any
gaming license would) materially adversely affect the Company.
Generally, holders of 10% or more of a corporation's common stock are
deemed significant shareholders, but certain jurisdictions have thresholds as
low as 5%. As a licensee in certain jurisdictions, including Mississippi and
Nevada, the Company may be required to obtain such jurisdictions' prior approval
for activities in other jurisdictions or prior approval for certain corporate
transactions, such as the public offering of stock. No assurance can be given
that such licenses, permits or approvals will be given or renewed. Regulations
must be adopted and implemented before the Company can commence operations in
certain states, and most of the regulations concerning gaming on Indian land
continue to be promulgated. The Company cannot predict the nature of the
regulatory scheme in these jurisdictions, or in any jurisdiction that may
authorize gaming operations in the future. Any such regulatory scheme may have
an adverse effect on the Company, its key personnel and its shareholders. The
Company may not make a public offering of its securities without the prior
approval of the Nevada Gaming Commission if the securities or proceeds therefrom
are intended to be used to construct, acquire or finance gaming facilities in
Nevada, or to retire or extend obligations incurred for such purposes. The
Company will apply for approval by the Nevada Commission of the registration of
the securities from this Offering. However, there can be no assurances that
such approval will be granted. Furthermore, any such approval, if granted, does
not constitute a finding, recommendation or approval by the Nevada Gaming
Commission or the Nevada Gaming Control Board as to the accuracy or adequacy of
this Memorandum or the investment merits of the securities offered hereby. Any
representation to the contrary is unlawful. Mississippi requires similar
approvals to those of Nevada. The Company has received shelf approval of a
public offering with the Mississippi Gaming Commission. This approval satisfies
the requirement of the Company to seek prior approval of a public offering from
the Mississippi Gaming Commission and only requires a post-transaction
notification to such Commission. See "Regulation" in the Company's Form 10-K
for the year ended December 31, 1996, for additional discussion regarding
governmental regulation.
Section 81 of the United States Code states that no agreement shall be
made by any person with any tribe of Indians in consideration of services unless
such agreement is approved by the United States Government. The Company
believes it has engaged in the sale of goods, namely gaming machines, and
therefore Section 81 of the United States Code does not apply to its activities.
The Company has not submitted its gaming machine contracts with Indian tribes to
the Secretary of Interior. If it were determined that United States Section 81
applied to some or all of its Indian sales, such finding could have a material
adverse effect on the Company by making such contracts void and unenforceable.
POTENTIAL REVENUE AND STOCK PRICE VOLATILITY
The Company's future operating results may vary substantially from
quarter to quarter. Revenues in any quarter are substantially dependent on
regulatory approval, receipt of orders and delivery and installation in that
quarter. Because the Company's staffing and operating expenses are based on
anticipated revenue levels, and a high percentage of the Company's costs are
fixed, in the short-term, the loss of any one order, or the failure to obtain
new orders as existing orders are completed, could have a material adverse
effect or cause significant fluctuations in the Company's revenues and cash
flow from quarter to quarter. Due to these and other factors, including the
general economy, stock market conditions or announcements by the Company or its
competitors, the market price of the securities offered hereby may be highly
volatile.
7
<PAGE> 9
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent upon the personal efforts and
abilities of certain key personnel. The loss of the services of any member of
management could have a substantial adverse effect on the Company's ability to
achieve its objectives.
ABSENCE OF DIVIDENDS ON COMMON SHARES
The Company has not paid any dividends on its capital stock since its
incorporation and does not intend to pay any cash dividends in the foreseeable
future on its Common Stock.
ABILITY TO ISSUE PREFERRED SHARES WITHOUT SHAREHOLDER APPROVAL
The Company's authorized capital consists of 100,000,000 shares of
capital stock. The Board of Directors, without any action by the Company's
shareholders, is authorized to designate and issue shares in such classes or
series (including classes or series of preferred stock) as it deems appropriate
and to establish the rights, preferences and privileges of such shares,
including dividends, liquidation and voting rights. Other than the presently
outstanding classes of capital stock, no other class of common stock, or
preferred stock, is currently designated and there is no current plan to
designate or issue any such securities. The rights of holders of preferred
stock and other classes of commons stock that may be issued may be superior to
the rights granted to the holders of the shares. Further, the ability of the
Board of Directors to designate and issue such undesignated shares could impede
or deter an unsolicited tender offer or takeover proposal regarding the Company
and the issuance of additional shares having preferential rights could
adversely affect the, voting power and other rights of holders of Common Stock.
CONFLICTS OF INTEREST
Grand Casinos, Inc. ("Grand Casinos") is a principal shareholder of
the Company. Lyle Berman, Chairman of the Company, is the Chief Executive
Officer and Chairman of the Board of Grand Casinos. The Company and Grand
Casinos have entered into an agreement that allows casinos owned or managed by
Grand Casinos or its affiliates to purchase quantity sales of the Company's
video gaming machines at distributor level prices. Mr. Berman has conflicts of
interest with respect to this agreement, any future agreements between the
Company and Grand Casinos, and with respect to the sale of the Company's video
gaming machines to competitors of Grand Casinos.
POTENTIAL ADVERSE MARKET PRICE IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE
The sale, or availability for sale, of substantial amounts of Common
Stock in the public market subsequent to this offering of Common Stock may
adversely affect the prevailing market price of Common Stock and may impair
whether the Company can raise additional capital by the sale of its equity
securities. Prior to this Offering, the Company has 6,476,515 shares of
8
<PAGE> 10
Common Stock outstanding, 1,025,000 shares of which are held by Grand Casinos.
In addition, as of April 15, 1997, the Company had 668,850 shares of Common
Stock subject to outstanding options granted under its stock option plans,
602,500 shares of Common Stock subject to outstanding warrants including 102,500
shares issuable upon exercise of a warrant issued to Grand Casinos.
Additionally, the Company's shareholders have approved, at the Company's 1997
Annual Meeting of Shareholders, an increase in the shares of Common Stock
reserved for issuance pursuant to the employee stock option plan of 250,000
shares and a 1997 Director Stock Option Plan pursuant to which 100,000 shares
are reserved for issuance.
MINNESOTA ANTI-TAKEOVER LAW; RESTRICTIONS IN ARTICLES OF INCORPORATION;
POTENTIAL ANTI- TAKEOVER EFFECT
The Company is subject to Minnesota statutes regulating business
combinations and restricting voting rights of certain persons acquiring shares
of the Company, which may hinder or delay a change in control of the Company.
Beneficial owners of more than certain designated percentages of the Company's
securities are subject to certain reporting and qualification procedures
established by state and federal gaming authorities. The Company is authorized
under the Company's Articles of Incorporation, and may be required, under
certain circumstances, to redeem at fair market value securities held by
persons whose status as a security holder may jeopardize the Company's
eligibility to hold gaming licenses. Such restrictions may discourage
acquisitions of blocks of the Company's securities and may have an anti-
takeover effect.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common
Stock by the Selling Shareholders.
9
<PAGE> 11
SELLING SHAREHOLDERS
The following table sets forth the number of shares of the Common
Stock owned by each Selling Shareholder as of the date hereof and after giving
effect to this offering. All Selling Shareholders are accredited investors as
that term is defined in Regulation D promulgated under the Securities Act of
1933 who purchased Preferred Stock in a private placement from the Company.
The Company will not receive any proceeds from the sale of the Common Stock by
the Selling Shareholders.
<TABLE>
<CAPTION> Amount of
Shares Offered by
Beneficial Ownership Selling Beneficial Ownership
Prior to the Offering Shareholders After the Offering
--------------------- ------------ --------------------
Name Number Percentage
---- ----- ----------
<S> <C> <C> <C> <C>
Stark International 487,805 (1)(2) 487,805 (1)(2) 0 0%
Shepherd Investments International, 487,804 (1)(2) 487,804 (1)(2) 0 0%
Inc.
</TABLE>
- -------------------------------
(1) Assumes the conversion of the Preferred Stock into Common Stock at the
closing bid price on June 20, 1997 of $ 5.00 per Share. Shares of Common Stock
are issuable upon conversion of Preferred Stock at a conversion price of 82% of
the average closing bid price of the Company's Common Stock over a ten-day
period ending on the day prior to conversion. The Company and such Selling
Shareholders have agreed, and the Certificate of Designation relating to the
Preferred Stock provides, that no Selling Shareholder may convert Preferred
Stock into Common Stock if, following conversion, such Selling Shareholder
beneficially owns in excess of 4.9% of the Company's Common Stock. Accordingly,
given the assumed closing bid price on June 20, 1997 of $5.00 per share, both
Selling Shareholders would not be able to convert all such shares of Preferred
Stock at one time. The Company would not convert any Preferred Stock that,
following such conversion, would result in the holder requesting conversion
in owning in excess of 4.9% of the Company's Common Stock.
(2) The 18% beneficial conversion feature is accounted for as an additional
Preferred Stock dividend, the amount of which is determined on the date the
Preferred Stock was issued. The average closing bid price of the Company's
Common Stock over the ten-day period preceding the issuance of the Preferred
Stock was $5.125. As such, the holders of Preferred Stock could convert the
Preferred Stock into approximately 952,000 shares of Common Stock and the value
of the beneficial conversion feature therefore was approximately $878,000. This
beneficial conversion feature or dividend reduces income available for holders
of the Company's Common Stock and therefore reduces earnings per share on a pro
rata basis over the period from issuance of the Preferred Stock to the earliest
conversion date. Income available to holders of Common Stock will be reduced by
approximately $626,000 and $252,000 during the second and third quarters of
1997, respectively.
10
<PAGE> 12
PLAN OF DISTRIBUTION
4,000 shares of Series A Convertible Preferred Stock were originally
issued to and purchased by the Selling Shareholders at a price of $1,000 per
share in connection with a private placement made by the Company. Each share
of Preferred Stock is convertible into shares of Common Stock at a conversion
price of 82% of the average closing bid price of the Company's Common Stock
over the ten-day trading period ending on the day prior to conversion (the
"Conversion Price"). The Conversion Price may not exceed $8.1725 per share.
Twenty-five percent (25%) of the Preferred Stock is convertible into Common
Stock, at the election of the holder thereof, at the later of July 9, 1997 or
the date of effectiveness of the Registration Statement with the Securities and
Exchange Commission (the "Effective Date"). Twenty-five percent (25%) of the
Preferred Stock is convertible 30 days after the Effective Date; 25% of the
Preferred Stock is convertible 60 days after the Effective Date; and the
remaining 25% of the Preferred Stock is convertible 90 days after the Effective
Date. All outstanding shares of Preferred Stock will automatically be
converted into Common Stock eleven months following the Effective Date. A
holder of Preferred Stock may not convert such stock into Common Stock if,
following such conversion, the holder beneficially owns in excess of 4.9% of
the Company's Common Stock. This Registration Statement is being filed by, and
at the expense of, the Company pursuant to obligations contained in a
Registration Rights Agreement dated April 11, 1997 (the "Registration Rights
Agreement").
The Selling Shareholders and/or their pledgees, donees, transferees or
other successors in interest will sell the securities of the Company covered by
this Prospectus to the public on the over-the-counter market, or in negotiated
transactions, or otherwise, at prices and at terms then obtainable.
Brokers-dealers either may act as agents for the Selling Shareholders and/or
their pledgees, donees, transferees or other successors in interest for such
commissions as may be agreed upon at the time, or may purchase any of the
securities covered thereby as principals and thereafter may sell such
securities from time to time in the over-the-counter market or in negotiated
transactions, or otherwise, at prices and on terms then obtainable.
LEGAL MATTERS
Certain legal matters in connection with the validity of the
securities offered hereby will be passed upon for the Company by Maslon Edelman
Borman & Brand, a Professional Limited Liability Partnership, Minneapolis,
Minnesota.
EXPERTS
The financial statements of Innovative Gaming Corporation of America
as of December 31, 1996 incorporated by reference in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto incorporated by reference herein in reliance upon the authority of said
firm as experts in giving said report.
11
<PAGE> 13
NO DEALER, SALESREPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SHARES
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE OF COMMON STOCK HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS PAGE
ADDITIONAL INFORMATION . . . . . . . .. . . . . 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . 2
RECENT DEVELOPMENTS . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . 4
USE OF PROCEEDS . . . . . . . . . . . . . . . . . 9
SELLING SHAREHOLDERS . . . . . . . . . . . . . . 10
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . 11
LEGAL MATTERS . . . . . . . . . . . . . . . . . . 11
EXPERTS . . . . . . . . . . . . . . . . . . . . . 11
INNOVATIVE GAMING
CORPORATION OF AMERICA
975,609 SHARES
OF
COMMON STOCK
PROSPECTUS
, 1997
<PAGE> 14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and
distribution of the securities registered hereby, are set forth in the
following table:
Securities and Exchange Commission Registration
Fee . . . . . . . . . . . . . . . . . . . . . . . $ 1,212
Accounting Fees . . . . . . . . . . . . . . . . . $ 5,000
NASDAQ Listing Fee . . . . . . . . . . . . . . . $17,500
Legal Fees and Expenses . . . . . . . . . . . . . $50,000
Miscellaneous . . . . . . . . . . . . . . . . . . $ 1,288
-------
Total . . . . . . . . . . . . . . . . . . . . . . $75,000
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is governed by Minnesota Statutes Chapter 302A. Minnesota Statutes
Section 302A.521 provides that a corporation shall indemnify any person made or
threatened to be made a party to any proceeding by reason of the former or
present official capacity of such person against judgments, penalties, fines,
including, without limitation, excise taxes assessed against such person with
respect to an employee benefit plan, settlements, and reasonable expenses,
including attorney's fees and disbursements, incurred by such person in
connection with the proceeding, if, with respect to the acts or omissions of
such person complained of in the proceeding, such person has not been
indemnified by another organization or employee benefit plan for the same
expenses with respect to the same acts or omissions; acted in good faith;
received no improper personal benefit and Section 302A.255, if applicable, has
been satisfied; in the case of a criminal proceeding, had no reasonable cause
to believe the conduct was unlawful; and in the case of acts or omissions by
persons in their official capacity for the corporation, reasonably believed
that the conduct was in the best interests of the corporation, or in the case
of acts or omissions by persons in their capacity for other organizations,
reasonably believed that the conduct was not opposed to the best interests of
the corporation. Subdivision 4 of Section 302A.521 of the Minnesota Statutes
provides that a company's articles of incorporation or bylaws may prohibit such
indemnification or place limits upon the same. The Company's articles and
bylaws do not include any such prohibition or limitation. As a result, the
Company is bound by the indemnification provisions set forth in Section
302A.521 of the Minnesota Statutes.
As permitted by Section 302A.251 of the Minnesota Statutes, the Articles of
Incorporation of the Company provide that a director shall have no personal
liability to the Company and its shareholders for breach of his fiduciary duty
as a director, to the fullest extent permitted by law. The Underwriting
Agreement contains provisions under which the Company, on the one hand, and the
Underwriters, on the other hand, have agreed to indemnify each other (including
officers and directors of the Company and the Underwriters, and any person who
may be deemed to control the Company or the Underwriters) against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
II-1
<PAGE> 15
ITEM 16. EXHIBITS.
EXHIBITS DESCRIPTION OF DOCUMENT
- -------- -----------------------
3.1 Articles of Amendment of Certificate of Designation of Series
A Convertible Preferred Stock.
5 Opinion of Maslon Edelman Borman & Brand, a *
Professional Limited Liability Partnership.
23(1) Consent of Arthur Andersen LLP.
23(2) Consent of Maslon Edelman Borman & Brand, a
Professional Limited Liability Partnership
(included in Exhibit 5). *
24 Power of Attorney. *
- ------------------------
* Previously Filed
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the Prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration Statement; and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
II-2
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 3 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Reno, State of Nevada, on June 23, 1997.
INNOVATIVE GAMING CORPORATION OF AMERICA
Registrant
By: /S/ Edward G. Stevenson
-----------------------------
Name: Edward G. Stevenson
Title: President and Chief Executive
Officer
II-3
<PAGE> 17
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 3 to this Registration Statement has been signed below on the
23rd day of June, 1997 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
President, Chief Executive Officer
/S/ Edward G. Stevenson and Director
------------------------ (principal executive officer)
Edward G Stevenson
* Director
-----------------------
Lyle Berman
* Director
----------------------
Paul A. Bible
/S/ Scott H. Schackelton Chief Financial Officer
------------------------ (principal accounting officer)
Scott H. Schackelton
</TABLE>
* By /s/ Scott H. Schackelton
------------------------
Scott H. Schackelton
Attorney-In-fact
II-4
<PAGE> 18
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF DOCUMENT PAGE
3(1) Certificate of Designation
23(1) Consent of Arthur Andersen LLP.
II-5
<PAGE> 1
EXHIBIT 3.1
INNOVATIVE GAMING CORPORATION OF AMERICA
ARTICLES OF AMENDMENT OF
CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERRED STOCK
The undersigned, President of Innovative Gaming Corporation of America
(the "Company"), a corporation organized and existing under the Business
Corporation Act of the State of Minnesota, Does Hereby Certify:
That the following Articles of Amendment of Certificate of Designation
were adopted pursuant to Chapter 302A of the Business Corporation Act of the
State of Minnesota, by written action of the shareholders of the Company's
Series A Convertible Preferred Stock on May 23, 1997 and by the Company's Board
of Directors on May 23, 1997, to amend the Certificate of Designation filed
with the Secretary of State of Minnesota on April 10, 1997 as follows.
RESOLVED, that Article 5 of the Certificate of Designation be amended by
adding the following provisions:
(g) Maximum Common Stock Issuance. The Company may not issue more than
1,295,300 shares of Common Stock (the " Maximum Common Stock Issuance " ) at
the Conversion Price upon conversion of the Preferred Shares unless the Company
receives shareholder approval from the holders of the Company's Common Stock.
(h) Inability to Fully Convert. If, upon the Company's receipt of a
Conversion Notice, the Company cannot issue shares of Common Stock in
satisfaction of such Conversion Notice because: (i) the Company has issued
the Maximum Common Stock Issuance and has not received the approval of the
holders of the Company's Common Stock pursuant to Section 5(g) hereof or (ii)
is otherwise prohibited by applicable law or by the rules or regulations of any
stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its securities, including
without limitation the NASDAQ National Market from issuing all of the Common
Stock at the Conversion Price which is to be issued to a holder of Preferred
Shares pursuant to a Conversion Notice, then the Company shall issue as many
shares of Common Stock as it is able to issue in accordance with such holder's
Conversion Notice and pursuant to Section 5(g) above and, with respect to the
unconverted Preferred Shares, the Company will, at the Company's option:
1) Redemption. Redeem the unconverted Preferred Shares for cash at a
price equal to the equivalent of an 18 percent discount to the $1,000
denomination per unconverted Preferred Share plus any accrued but unpaid
dividends;
<PAGE> 2
2) (i) Stock Issuance at Fair Market Value. Convert such
unconverted Preferred Shares without a discount into Common Stock at a
conversion price equal to the greater of (a) $5.375 or (b) the average
closing bid price of the Company's Common Stock as reported by
Bloomberg, L.P. over the last ten days of trading ending on the day
prior to the Conversion Date (the "Conversion Date Price"); and
(ii) Cash Payment. Pay cash to the holder of such unconverted
Preferred Shares equal to (a) the difference of (i) the number of
shares of Common Stock that would have been issued at the lesser of
the Conversion Price or the average closing bid price of the
Company's Common Stock as reported by Bloomberg, L.P. over the last four
days of trading ending on the day prior to the Conversion Date and (ii)
the number of shares of Common Stock issued pursuant to Section
5(h)(2)(i) above multiplied by (b) the Conversion Date Price; or.
(3) any combination of Section 5(h)(1) and Section 5(h)(2) above.
-2-
<PAGE> 3
IN WITNESS WHEREOF, Innovative Gaming Corporation of America has caused
this Amendment to be duly executed in its corporate name on this 23rd day of
June, 1997.
INNOVATIVE GAMING CORPORATION OF AMERICA
By: /s/ Edward G. Stevenson
----------------------------------------------
Edward G. Stevenson
Its: President and Chief Executive Officer
-3-
<PAGE> 1
EX-23.1
AUDITORS CONSENT
EXHIBIT 23(1)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Amendment No. 3 to this registration
statement of our report dated February 14, 1997 included in the Innovative
Gaming Corporation of America Annual Report on Form 10-K/A for the year ended
December 31, 1996 and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
June 23, 1997
