<PAGE> 1
As filed with the Securities and Exchange Commission September 2, 1998
Registration No. 333-53893
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
AMENDMENT NO. 1 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, LLP
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 is 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 sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED SEPTEMBER 2, 1998
PROSPECTUS
INNOVATIVE GAMING CORPORATION OF AMERICA
1,510,000 SHARES OF COMMON STOCK
---------------
Up to 1,505,000 shares of Common Stock of Innovative Gaming Corporation of
America (the "Company") offered hereby and issuable upon conversion of Series B
Convertible Preferred Stock (the "Preferred Stock") and 5,000 shares of Common
Stock of the Company offered hereby and issuable upon conversion of a
warrant (the "Warrant") are being sold by certain shareholders of the Company
(the "Selling Shareholders"). The maximum aggregate amount of shares of Common
Stock that may be issued upon conversion of the Preferred Stock is 1,505,000
shares. Each share of Preferred Stock is convertible into shares of Common
Stock, at a conversion price equal to 91% of the average of the lowest three
consecutive day closing bid prices of the Company's Common Stock as reported on
the Nasdaq National Market over a twenty-day period ending on the day prior to
conversion, provided that the maximum conversion price shall not exceed $5.16
per share. The Preferred Stock is convertible in 25% increments, at the option
of the holder thereof, beginning on August 11, 1998 and following the
end of each 30 day period thereafter for three months. Preferred Stock not
converted by November 13, 1999 will be automatically converted into Common
Stock. The Company will not receive any of the proceeds for the sale of shares
by the Selling Shareholders of shares issued upon conversion of the Preferred
Stock but will receive proceeds of $15,937 for the sale of all 5,000 shares
issued upon exercise of the Warrant.
The Common Stock is listed on the Nasdaq National Market under the
symbol "IGCA." On August 31, 1998, the last sale price for the Common Stock as
reported on the Nasdaq National Market was $2.25 per share.
See "Risk Factors" beginning on page 5 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 , 1998.
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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. 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.
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, 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 Proxy Statement relating to its 1998 Annual Meeting
of Shareholders.
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(iv) the Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1998 and June 30, 1998.
All documents subsequently 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 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.
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, customer acceptance of the Company's products, need for additional
financing, decline in demand for gaming products or reduction in the growth rate
of new markets, failure or delay in obtaining gaming regulatory approvals,
delays in developing or manufacturing new products, changing economic
conditions, approval of pending patent applications or infringement upon
existing patents, the effects of regulatory and governmental actions, and
increased competition.
On May 22, 1998, Ronald M. Zideck, who is a director of a company with
casino operations in Colorado, resigned as a director of the Company because
the Colorado Division of Gaming has concluded that an individual cannot
simultaneously serve in the capacity as a board member of a licensed gaming
manufacturing company and a licensed gaming operating company.
On August 4, 1998, the Company announced that it purchased the patent
and technology to develop, produce and market a new mechanical revolving rings
roulette game.
On August 13, 1998, the Company filed its Form 10-Q for the quarter
ended June 30, 1998 and announced its results for such quarter. The Company
reported net revenues of $4.0 million compared with $1.1 million in second
quarter 1997. The Company reported a net loss of $375,000, or $.05 per share,
compared to a second quarter 1997 net loss of $1.8 million or $.28 per share.
The second quarter 1998 loss included charges of $157,000 relating to the
Company's issuance of preferred stock in May 1998. The Company expects similar
charges for the third quarter of 1998. Without such charges, the net loss for
second quarter 1998 was $218,000 or $.03 per share.
The Company also reported that for the first six months of 1998, net
revenues increased to $6.2 million versus $1.6 million for the first six months
of 1997. The Company reported a net loss of $936,000, or $.12 per share, for
the 1998 period compared with a net loss of $3.1 million, or $.48 per share,
for the 1997 period.
On August 20, 1998, the Company received approval of this offering
from the Nevada Gaming Commission.
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RISK FACTORS
Each prospective investor should carefully consider the following
factors, prior to purchasing any of the securities offered hereby.
NEED FOR ADDITIONAL FINANCING AND NEGATIVE CASH FLOW
The Company experienced negative cash flow from operations of $7.5
million for the fiscal year ended December 31, 1997 primarily as a result of
$5.6 million increase in inventory and $2.1 million in accounts and notes
receivable, as compared to negative cash flow of $2.7 million for the year
ended December 31, 1996. For the six months ended June 30, 1998, the Company
experienced negative cash flow from operations of $942,000. Primarily as a
result of the recurring negative cash flow from operations, the Company's
Independent Public Accountants issued a going concern opinion as part of its
audit of the Company's Consolidated Financial Statements for Fiscal 1997. The
Company's ability to execute its long-term business strategy depends to a
significant degree on its ability to finance the development, marketing and
production of its products which may require additional third party financing.
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
shareholders and the issuance of such securities would result in dilution to
its existing shareholders.
RISKS OF NEW PRODUCT DEVELOPMENT
The Company is continuing to expand and diversify its business by developing and
introducing new products and entering into new lines of business that complement
and enhance the Company's existing businesses. There is no assurance that the
Company's new products will be accepted in the marketplace and that regulatory
approvals will be obtained. To date, demand for the Company's products has
varied by location and in certain locations has been slower than originally
anticipated by Management.
RISKS OF BUSINESS EXPANSION
The Company faces the risks, expenses and difficulties frequently encountered by
new and expanding businesses, including, but not limited to, fluctuating and
negative cash flow, initial high development and inventory costs of new products
without corresponding sales pending receipt of corporate and product regulatory
approvals and market introduction and acceptance of new products. To the extent
that the Company's products are successful, 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 and inventory expense
and the addition, training and management of qualified personnel.
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The Company's success as a gaming machine manufacturer and
supplier is dependent upon numerous factors, including its ability to 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.
RISKS OF DEPENDENCE ON KEY CUSTOMERS
During fiscal 1997, approximately 67% of the Company's sales were to
two customers. Sales to one distributor, Aristocrat Leisure Industries
("Aristocrat"), accounted for approximately 48% of sales and sales to Harrah's
Smoky Mountain Casino accounted for approximately 19% of all sales. Although the
Company is attempting to diversify its customer base, no assurance can be given
that the Company will be successful in such diversification. The loss of sales
to Aristocrat could have a material adverse impact on the Company. The Company
has also experienced delays in the shipments of products to Aristocrat from
levels previously anticipated by the Company.
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. These companies include other established gaming machine
manufacturers such as International Game Technology, Anchor Gaming, Alliance
Gaming Corporation, 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, although the Company would endeavor to
respond quickly with its own competing products, 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.
FACTORS AFFECTING PROFITABILITY AND GROWTH
All of the Company's revenues and profits are derived from the gaming
industry. The continued 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 and 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 continued growth or
profitability.
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 its ability to 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
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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.
DEPENDENCE UPON RELATIONSHIP WITH VENDORS AND SUPPLIERS
The Company purchases certain key electronic components, which are not
available from other sources, from a Japanese supplier at a negotiated fixed
price for a period extending until mid 1999. Although the Company is developing
an alternative product design to eliminate its dependence on this sole source
vendor, no assurance can be given that the Company will be able to eliminate
this dependence. Furthermore, a significant interruption or delay in the
delivery of components from this or other suppliers could have a material
adverse effect on the Company's results of operations.
RISKS OR LACK OF PRODUCT PROTECTION
The Company's business is dependent upon its ability to protect its
proprietary software, hardware and other intellectual property. The Company
relies primarily on a combination of non-disclosure agreements for its key
employees and contractors, 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 feature 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, 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.
GOVERNMENT 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 requirement. 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
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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 license
in any jurisdiction could have a material adverse effect on the Company or on
the ability of 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 background investigations and respond to questions from regulatory
authorities, and may revoke the Company's licenses based upon their findings.
Generally, holders of 10% or more of a corporation's common stock are deemed
significant shareholders, but certain jurisdictions, including Colorado, have
thresholds as low as 5%. As a licensee in certain jurisdictions, including
Mississippi, Nevada, and Colorado, 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 return 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. See "Regulation" in
the Company's Form 10-K for the year ended December 31, 1997, for additional
discussion regarding governmental regulation.
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
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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 Company's Common Stock may be highly volatile.
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.
ABILITY TO ISSUE PREFERRED SHARES WITHOUT SHAREHOLDER APPROVAL
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. The rights of holders of
preferred stock and other classes of common stock that may be issued may be
superior to the rights granted to the holders of the Company's Common Stock.
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 is a principal shareholder of the Company. Lyle Berman,
Chairman of the Board of the Company is also 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
the Company's video gaming machines in quantity purchases for a price lower than
what the Company charges in related markets. Mr. Berman may have 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
multi-player video gaming machines to competitors of Grand Casinos.
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
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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.
PREFERRED SHARES AND VOTING RIGHTS
Preferred Shares have no voting rights. Voting rights are not obtained
until the holder of Preferred Shares converts such Preferred Shares into Common
Shares.
ABSENCE OF DIVIDENDS ON COMMON SHARES
The Company has not paid any dividends on its Common Stock since its
incorporation and does not intend to pay any cash dividends in the foreseeable
future on its Common Stock.
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. As of August 31, 1998, the Company had 7,535,211 shares of Common
Stock outstanding, 1,025,000 shares of which are held by Grand Casinos. In
addition, as of August 31, 1998, the Company had 889,600 shares of Common Stock
subject to outstanding options granted under its employee and director 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.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common
Stock by the Selling Shareholders of up to 1,505,000 shares of Common Stock
issuable upon conversion of the Preferred Stock. Assuming exercise of the 5,000
shares of Common Stock issuable upon exercise of the Warrant, the Company will
receive net proceeds of $15,937 which be used for working capital purposes.
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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 either a) purchased Preferred Stock
in a private placement from the Company or b) received the Warrant in exchange
for consulting services provided to the Company. The Company will not receive
any proceeds from the sale of the Common Stock by the Selling Shareholders of up
to 1,505,000 shares of Common Stock issuable upon conversion of the Preferred
Stock. Assuming exercise of the 5,000 shares of Common Stock issuable upon
exercise of the Warrant, the Company will receive net proceeds of $15,937 which
be used for working capital purposes.
<TABLE>
<CAPTION>
Amount of
Beneficial Shares Offered Beneficial
Ownership Prior by Selling Ownership After
Name to the Offering Shareholders the Offering
- ---- --------------- ------------ ------------
<S> <C> <C> <C>
KA Investments LDC 1,465,201(1) 1,505,000(2)(3) 0% (4)
Gaming Ventures Corporation 5,000 5,000 0% (4)
</TABLE>
- ---------
(1) Includes 1,465,201 shares of Common Stock issuable upon conversion of the
Preferred Stock and as payment of dividends thereon in shares of Common Stock,
at an assumed conversion price of $2.0475 per share based upon the closing bid
price of $2.25 per share on August 28, 1998. Because the number of shares of
Common Stock issuable upon conversion of the Preferred Stock and as payment of
dividends thereon is dependent in part upon the market price of the Common Stock
prior to a conversion, the actual number of shares of Common Stock that will be
issued in respect of such conversions or dividend payments, and consequently the
number of shares of Common Stock that will be beneficially owned by the Selling
Stockholder, will fluctuate daily and cannot be determined at this time.
However, the Selling Stockholder has contractually agreed to restrict its
ability to convert Preferred Stock (and receive shares of Common Stock in
payment of dividends thereon) to the extent that the number of shares of Common
Stock held by it and its affiliates after such conversion exceeds 4.999% of the
then issued and outstanding shares of Common Stock following such conversion.
(2) Represents the maximum number of shares of Common Stock issuable upon
conversion of the Preferred Stock.
(3) The 9% 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 twenty-day period preceding the issuance of the Preferred
Stock was $3.819. As such, the holders of Preferred Stock could convert the
Preferred Stock into approximately 863,237 shares of Common Stock and the value
of the beneficial conversion feature therefore was approximately $296,703. 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
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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 $140,934, $143,406 and $12,363 during the second, third and fourth
quarters of 1998, respectively.
(4) Assumed resale of all shares of Common Stock offered.
PLAN OF DISTRIBUTION
The Selling Stockholders (including pledgees, transferees and other
successors in interest) may, from time to time, sell all or a portion of the
Shares on the Nasdaq National Market, in privately negotiated transactions or
otherwise, at fixed prices that may be changed, at market prices prevailing at
the time of sale, at prices related to such market prices or at negotiated
prices. The Shares may be sold by the Selling Stockholders by one or more of the
following methods, without limitation: (a) block trades in which the broker or
dealer so engaged will attempt to sell the Shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction, (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus, (c) an exchange distribution in
accordance with the rules of such exchange, (d) ordinary brokerage transactions
and transactions in which the broker solicits purchasers, (e) privately
negotiated transactions, (f) short sales and (g) a combination of any such
methods of sale. In effecting sales, brokers and dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the Selling Stockholders (or,
if any such broker-dealer acts as agent for the purchaser of such shares, from
such purchaser) in amounts to be negotiated which are not expected to exceed
those customary in the types of transactions involved. Broker-dealers may agree
with the Selling Stockholders to sell a specified number of such Shares at a
stipulated price per share, and, to the extent such broker-dealer is unable to
do so acting as agent for the Selling Stockholders, to purchase as principal any
unsold Shares at the price required to fulfill the broker-dealer commitment to
the Selling Stockholders. Broker-dealers who acquire Shares as principal may
thereafter resell such Shares from time to time in transactions (which may
involve block transactions and sales to and through other broker-dealers,
including transactions of the nature described above) in the over-the-counter
market or otherwise at prices and on terms then prevailing at the time of sale,
at prices then related to the then-current market price or in negotiated
transactions and, in connection with such resales, may pay to or receive from
the purchasers of such Shares commissions as described above. The Selling
Stockholders may also sell the Shares in accordance with Rule 144 under the
Securities Act, rather than pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in sales of the Shares may be deemed
to be "underwriters" within the meaning of the Securities Act in connection with
such sales. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the Shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
12
<PAGE> 13
From time to time the Selling Stockholders may engage in short sales,
short sales against the box, puts and calls and other transactions in securities
of the Company or derivatives thereof, and may sell and deliver the Shares in
connection therewith or in settlement of securities loans. If the Selling
Stockholders engage in such transactions, the Conversion Price may be affected.
From time to time, the Selling Stockholders may pledge their Shares pursuant to
the margin provisions of its customer agreements with its brokers. Upon a
default by the Selling Stockholders, the broker may offer and sell the pledged
Shares from time to time.
The Company is required to pay certain fees and expenses incident to
the registration of the Shares. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
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, LLP, Minneapolis, Minnesota.
EXPERTS
The financial statements of Innovative Gaming Corporation of America as of
December 31, 1997 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 and is
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report. Reference is made to
said report in which the opinion contains an explanatory fourth paragraph with
respect to the Company's ability to continue as a going concern.
13
<PAGE> 14
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL 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 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 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..............................................3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.....................3
RECENT DEVELOPMENTS.................................................4
RISK FACTORS........................................................5
USE OF PROCEEDS....................................................10
SELLING SHAREHOLDERS...............................................11
PLAN OF DISTRIBUTION...............................................12
LEGAL MATTERS......................................................13
EXPERTS ..........................................................13
INNOVATIVE GAMING
CORPORATION OF AMERICA
1,510,000 SHARES
OF
COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 1998
<PAGE> 15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with the issuance and distribution
of the securities registered hereby, other than underwriting discounts and fees,
are set forth in the following table:
Securities and Exchange Commission
Registration Fee...................................... $1,694
Accounting Fees....................................... $10,000
NASDAQ Listing Fee.................................... $17,500
Legal Fees and Expenses............................... $30,000
Miscellaneous......................................... $5,806
-------
Total................................................. $65,000
=======
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.
II-1
<PAGE> 16
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.
Item 16. Exhibits.
Exh Description of Document
5 Opinion of Maslon Edelman Borman & Brand, LLP
10 Form of Warrant issued to Gaming Venture Corp.*
23 Consent of Arthur Andersen LLP
23 Consent of Maslon Edelman Borman & Brand, LLP
(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> 17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Reno, State
of Nevada, on August 31, 1998.
INNOVATIVE GAMING CORPORATION OF AMERICA
Registrant
By: /S/ Scott H. Shackelton
-----------------------------------
Name: Scott H. Shackelton
Title: Chief Financial Officer
II-3
<PAGE> 18
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 31st day of August, 1998
by the following persons in the capacities indicated:
Signature Title
--------- -----
* President, Chief Executive Officer
- ------------------------------------ and Director
Edward G Stevenson (principal executive officer)
* Director
- ------------------------------------
Lyle Berman
* Director
- ------------------------------------
Paul A. Bible
/S/ Scott H. Shackelton Chief Financial Officer
- ------------------------------------ (principal accounting officer)
Scott H. Shackelton
*By: /s/ Scott H. Shackelton
--------------------------------
Scott H. Shackelton
Attorney-in-fact
II-4
<PAGE> 19
EXHIBIT INDEX
Exhibit Description of Document Page
5 Opinion of Maslon Edelman Borman & Brand, LLP
23 Consent of Arthur Andersen LLP
II-5
<PAGE> 1
EXHIBIT 5
August 31, 1998
Innovative Gaming Corporation of America
4750 Turbo Circle
Reno, Nevada 89502
Ladies and Gentlemen:
We have acted on behalf of Innovative Gaming Corporation of America, a
Minnesota corporation (the "Company") in connection with the preparation of a
Registration Statement on Form S-3 (the "Registration Statement") to be filed
by the Company with the Securities and Exchange Commission on September 1,
1998 relating to the registration under the Securities Act of
1933, as amended, of shares (the "Shares") of the Company's Common Stock, $.01
par value issued upon conversion of the Company's Series B Convertible
Preferred Stock.
Upon examination of such corporate documents and records as we have
deemed necessary or advisable for the purposes hereof and including and in
reliance upon certain certificates by the Company, it is our opinion that:
1. The Company is a validly existing corporation in good standing under
the laws of the State of Minnesota.
2. The Shares have been duly authorized, and when issued as described
in the Registration Statement, will be validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the references to our firm under the heading "Legal
Matters" in the Registration Statement.
Very truly yours,
/S/ Maslon, Edelman, Borman & Brand, LLP
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated March 12, 1998
(except with respect to the matter discussed in Note 1, as to which the date is
March 25, 1998) included in the Innovative Gaming Corporation of America Annual
Report on Form 10-K for the year ended December 31, 1997 and to all references
to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
September 2, 1998
