<PAGE> 1
As filed with the Securities and Exchange Commission May 29, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Title of Each Class of Proposed Maximum Proposed Maximum
Securities Amount To Be Offering Price Aggregate Offering Amount of
To be Registered Registered per Share(1) Price(1) Registration Fee
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01
per share 1,510,000 $3.32 $5,013,200 $1,699.39
===================================================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(c) under the Securities Act of 1933 (the
"Act") based upon the average of the bid and asked priceas of May 22, 1998. Also
includes an indeterminate number of shares of Common Stock that may become
issuable to prevent dilution resulting from stock splits, stock dividends and
conversion price adjustments, which are included pursuant to Rule 416 under the
Securities Act of 1933, as amended.
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 MAY 29, 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 the earlier of (i) the date the Common Stock
underlying the Preferred Stock is registered or (ii) 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 May 28, 1998, the last sale price for the Common Stock as
reported on the Nasdaq National Market was $3.19 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.
<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. 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 Report on Form 10-Q for the fiscal quarter
ended March 31, 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.
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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. 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 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 NEW AND EXPANDING BUSINESSES
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. 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 costs of new products without corresponding sales
pending receipt of corporate and product regulatory approvals and market
introduction and acceptance of new products. There is no assurance that the
Company's 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. Furthermore, 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 expense and the addition, training
and management of qualified personnel.
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The Company's successful entry 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 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. Prior to this Offering, the Company has 7,535,211 shares of Common
Stock outstanding, 1,025,000 shares of which are held by Grand Casinos. In
addition, as of May 26, 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 1,014,370(1) 1,505,000(2)(3) 0% (4)
Gaming Ventures Corporation 5,000 5,000 0% (4)
</TABLE>
- ---------
(1) Includes 1,014,370 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 $2.9575 per share. 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 (included on pages II-3 and II-4)
-------------------
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 May 26, 1998.
INNOVATIVE GAMING CORPORATION OF AMERICA
Registrant
By: /S/ Edward G. Stevenson
-----------------------------------
Name: Edward G. Stevenson
Title: President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Edward G. Stevenson and Scott H.
Shackelton, each or either of them, his or her true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution for him or her
and in his or her name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement and to file the same with all exhibits thereto, and other documents in
connection therewith with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his or her substitutes,
may lawfully do or cause to be done by virtue thereof.
II-3
<PAGE> 18
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 26th day of May, 1998 by the
following persons in the capacities indicated:
Signature Title
--------- -----
/S/ Edward G. Stevenson President, Chief Executive Officer
- ------------------------------------ and Director
Edward G Stevenson (principal executive officer)
/S/ Lyle Berman Director
- ------------------------------------
Lyle Berman
/S/ Paul A. Bible Director
- ------------------------------------
Paul A. Bible
/S/ Scott H. Shackelton Chief Financial Officer
- ------------------------------------ (principal accounting officer)
Scott H. Shackelton
II-4
<PAGE> 19
EXHIBIT INDEX
Exhibit Description of Document Page
5 Opinion of Maslon Edelman Borman & Brand, LLP
10 Form of Warrant issued to Gaming Venture Corp.
23 Consent of Arthur Andersen LLP
II-5
<PAGE> 1
EXHIBIT 5
May 27, 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 May 27, 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 Series B Convertible Preferred Stock and upon the exercise of certain
Warrants issued by the Company.
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 10
Warrant No. 1
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE TRANSFERRED UNLESS REGISTERED
UNDER THE ACT, EXCEPT IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE HOLDER HEREOF QUALIFIES AS AN EXEMPT TRANSACTION
UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF
COMMON STOCK OF
INNOVATIVE GAMING CORPORATION OF AMERICA
THIS CERTIFIES THAT, for good and valuable consideration, Gaming
Venture Corporation, is entitled to subscribe for and purchase from Innovative
Gaming Corporation of America, a Minnesota corporation (the "Corporation"), at
any time during the period ending April 21, 2000 (the "Exercise Period"), up to
5,000 of fully paid and nonassessable shares of Common Stock of the Corporation
at a price of Three and Three/Sixteenth Dollars ($3.1875) per share (the
"Warrant Exercise Price"), subject to the antidilution provisions set forth in
Section 5 of this Warrant. The shares which may be acquired upon exercise of
this Warrant are referred to herein as the "Warrant Shares." As used herein, the
term "Holder" means the initial holder, or any record holder or holders of the
Warrant Shares issued upon exercise, whether in whole or in part, of the
Warrant; the term "Common Stock" means and includes the Corporation's presently
authorized Common Stock, $.01 par value per share; and the term "Convertible
Securities" means any stock or other securities convertible into, or
exchangeable for, Common Stock.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise. The rights represented by this Warrant may be exercised by
the Holder hereof, in whole or in part (but not as to a fractional share of
Common Stock), after August 1, 1998 and prior to the expiration of this Warrant
by written notice of exercise (in the form attached hereto) delivered to the
Corporation at the principal office of the Corporation and accompanied or
preceded by the surrender of this Warrant along with cash, a certified check or
bank draft in payment of the Warrant Exercise Price for such shares.
<PAGE> 2
2. Exchange and Replacement. Upon receipt by the Corporation of
evidence reasonably satisfactory to it of the loss, theft, destruction, or
mutilation of this Warrant, and upon surrender and cancellation of this Warrant,
if mutilated, the Corporation will make and deliver a new Warrant of like tenor,
in lieu of this Warrant. This Warrant shall be promptly canceled by the
Corporation upon the surrender hereof in connection with any exchange or
replacement. The Corporation shall pay all expenses, taxes (other than stock
transfer or income taxes), and other charges payable in connection with the
preparation, execution, and delivery of Warrants pursuant to this Section 2.
3. Issuance of the Warrant Shares.
(a) The Corporation agrees that the shares of Common Stock
purchased hereby shall be and are deemed to be issued to the Holder as of the
close of business on the date on which this Warrant shall have been surrendered,
the payment made for such Warrant Shares as aforesaid is returned to the
Corporation. Subject to the provisions of the next section, certificates for the
Warrant Shares so purchased shall be delivered to the Holder within a reasonable
time, not exceeding fifteen (15) days after the rights represented by this
Warrant shall have been so exercised, and, unless this Warrant has expired, a
new Warrant representing the right to purchase the number of Warrant Shares, if
any, with respect to which this Warrant shall not then have been exercised shall
also be delivered to the Holder within such time.
(b) Notwithstanding the foregoing, however, the Corporation
shall not be required to deliver any certificate for Warrant Shares upon
exercise of this Warrant except in accordance with exemptions from the
applicable securities registration requirements or registrations under
applicable securities laws. Nothing herein, however, shall obligate the
Corporation to effect registrations under federal or state securities laws,
except as provided in Section 8. If registrations are not in effect and if
exemptions are not available when the Holder seeks to exercise the Warrant, the
Warrant exercise period will be extended, if need be, to prevent the Warrant
from expiring, until such time as either registrations become effective or
exemptions are available, and the Warrant shall then remain exercisable for a
period of at least 30 calendar days from the date the Corporation delivers to
the Holder written notice of the availability of such registrations or
exemptions. The Holder agrees to execute such documents and make such
representations, warranties, and agreements as may be required solely to comply
with the exemptions relied upon by the Corporation, or the registrations made,
for the issuance of the Warrant Shares.
4. Covenants of the Corporation. The Corporation covenants and agrees
that all Warrant Shares will, upon issuance, be duly authorized and issued,
fully paid, nonassessable, and free from all taxes (except stock transfer and
income taxes), liens, and charges with respect to the issue thereof. The
Corporation further covenants and agrees that during the period within which the
rights represented by this Warrant may be exercised, the Corporation will at all
times have authorized and reserved for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this Warrant a sufficient
number of shares of Common Stock to provide for the exercise of the rights
represented by this Warrant.
2
<PAGE> 3
5. Antidilution Adjustment. The provisions of this Warrant are subject
to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be subject to adjustment
from time to time such that in case the Corporation shall hereafter:
(i) subdivide its then outstanding shares of Common Stock into
a greater number of shares; or
(ii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (a) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Warrant
Exercise Price, by (b) the total number of shares of Common Stock outstanding
immediately after such event (including the maximum number of shares of Common
Stock issuable in respect of any securities convertible into Common Stock), and
the resulting quotient shall be the adjusted Warrant Exercise Price per share.
An adjustment made pursuant to this Subsection shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this Subsection, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive shares of two or more
classes of capital stock or shares of Common Stock and other capital stock of
the Corporation, the Board of Directors (whose determination shall be
conclusive) shall determine the allocation of the adjusted Warrant Exercise
Price between or among shares of such classes of capital stock or shares of
Common Stock and other capital stock. All calculations under this Subsection
shall be made to the nearest cent or to the nearest 1/100 of a share, as the
case may be. In the event that at any time as a result of an adjustment made
pursuant to this Subsection, the Holder of any Warrant thereafter surrendered
for exercise shall become entitled to receive any shares of the Corporation
other than shares of Common Stock, thereafter the Warrant Exercise Price of such
other shares so receivable upon exercise of any Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in this
Section.
(b) Upon each adjustment of the Warrant Exercise Price
pursuant to Section 5(a) above, the Holder of each Warrant shall thereafter
(until another such adjustment) be entitled to purchase at the adjusted Warrant
Exercise Price the number of shares, calculated to the nearest full share,
obtained by multiplying the number of shares specified in such Warrant (as
adjusted as a result of all adjustments in the Warrant Exercise Price in effect
prior to such adjustment) by the Warrant Exercise Price in effect prior to such
adjustment and dividing the product so obtained by the adjusted Warrant Exercise
Price.
3
<PAGE> 4
(c) In case of any consolidation or merger to which the
Corporation is a party other than a merger or consolidation in which the
Corporation is the continuing corporation, or in case of any sale or conveyance
to another corporation of the property of the Corporation as an entirety or
substantially as an entirety, or in the case of any statutory exchange of
securities with another corporation (including any exchange effected in
connection with a merger of a third corporation into the Corporation), there
shall be no adjustment under Subsection (a) of this Section above but the Holder
of each Warrant then outstanding shall have the right thereafter to convert such
Warrant into the kind and amount of shares of stock and other securities and
property which the Holder would have owned or have been entitled to receive
immediately after such consolidation, merger, statutory exchange, sale, or
conveyance had such Warrant been converted immediately prior to the effective
date of such consolidation, merger, statutory exchange, sale, or conveyance and
in any such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section with respect to the
rights and interests thereafter of any Holders of the Warrant, to the end that
the provisions set forth in this Section shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock and other securities and property thereafter deliverable on the exercise
of the Warrant. The provisions of this Subsection shall similarly apply to
successive consolidations, mergers, statutory exchanges, sales or conveyances.
(d) Upon any adjustment of the Warrant Exercise Price, then,
and in each such case, the Corporation shall give written notice thereof, by
first class mail, postage prepaid, addressed to the Holder as shown on the books
of the Corporation, which notice shall state the Warrant Exercise Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares of Common Stock purchasable at such price upon the exercise of
this Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
6. No Voting Rights. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Corporation.
7. Fractional Shares. Fractional shares shall not be issued upon the
exercise of this Warrant, but in any case where the Holder would, except for the
provisions of this Section, be entitled under the terms hereof to receive a
fractional share, the Corporation shall, upon the exercise of this Warrant for
the largest number of whole shares then called for, pay a sum in cash equal to
the sum of (a) the excess, if any, of the Fair Value of such fractional share
over the proportional part of the Warrant Exercise Price represented by such
fractional share, plus (b) the proportional part of the Warrant Exercise Price
represented by such fractional share. For purposes of this Section, the term
"Fair Value" with respect to shares of Common Stock of any class or series means
the last reported sale price or, if none, the average of the last reported
closing bid and asked prices on any national securities exchange or listed in
the National Association of Securities Dealers, Inc.'s Automated Quotations
System (Nasdaq).
4
<PAGE> 5
8. Registration Rights.
(a) If, at any time prior to the second anniversary hereof,
the Corporation shall propose to file any Registration Statement (other than (i)
any registration on Form S-4, S-8 or any other similarly inappropriate form, or
any successor forms thereto under the Securities Act of 1933, as amended (the
"Act"), covering a public offering of the Corporation's Common Stock, it will
notify the Holder hereof at least thirty (30) days prior to each such filing and
will use its best efforts to include in the Registration Statement (to the
extent permitted by applicable regulation), the Common Stock purchased by the
Holder or purchasable by the Holder upon the exercise of the Warrant to the
extent requested by the Holder hereof within fifteen (15) days after receipt of
notice of such filing (which request shall specify the interest in this Warrant
or the Warrant Shares intended to be sold or disposed of by such Holder and
describe the nature of any proposed sale or other disposition thereof);
provided, however, that if a greater number of Warrants and Warrant Shares is
offered for participation in the proposed offering than in the reasonable
opinion of the managing underwriter of the proposed offering can be accommodated
without adversely affecting the proposed offering, then the amount of Warrant
and Warrant Shares proposed to be offered by such Holders for registration, as
well as the number of securities of any other selling shareholders participating
in the registration, shall be proportionately reduced to a number deemed
satisfactory by the managing underwriter.
(b) All expenses of any such registration referred to in this
Section 8, except the fees of counsel to such holders, underwriting commissions
or discounts and filing fees shall be borne by the Corporation.
(c) The Corporation hereby indemnifies each of the Holders of
this Warrant and of any Warrant Shares, and the officers and directors, if any,
who control such Holders, within the meaning of Section 15 of the 1933 Act,
against all losses, claims, damages, and liabilities caused by (1) any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus (and as amended or supplemented if the
Corporation shall have furnished any amendments thereof or supplements thereto),
any Preliminary Prospectus or any state securities law filings; (2) any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading except
insofar as such losses, claims, damages, or liabilities are caused by any untrue
statement or omission contained in information furnished in writing to the
Corporation by such Holder expressly for use therein; and each such Holder by
its acceptance hereof severally agrees that it will indemnify and hold harmless
the Corporation, each of its officers who signs such Registration Statement, and
each person, if any, who controls the Corporation, within the meaning of Section
15 of the 1933 Act, with respect to losses, claims, damages, or liabilities
which are caused by any untrue statement or omission contained in information
furnished in writing to the Corporation by such Holder expressly for use
therein.
5
<PAGE> 6
The Holder of the Warrant agrees to cooperate with the Corporation in
the preparation and filing of any Registration Statement, and in the furnishing
of information concerning the holder for inclusion therein, or in any efforts by
the Corporation to establish that the proposed sale is exempt under the Act as
to any proposed distribution.
IN WITNESS WHEREOF, Innovative Gaming Corporation of America has caused
this Warrant to be signed by its duly authorized officers this 21st day of
April, 1998.
INNOVATIVE GAMING CORPORATION
OF AMERICA
By: __________________________________
Scott Shackelton, Chief Financial
Officer
6
<PAGE> 7
NOTICE OF WARRANT EXERCISE
(To be signed only upon exercise of Warrant)
TO: Innovative Gaming Corporation of America
The undersigned hereby irrevocably elects to exercise the attached
Warrant to purchase for cash, _____________ of the shares issuable upon the
exercise of such Warrant, and requests that certificates for such shares
(together with a new Warrant to purchase the number of shares, if any, with
respect to which this Warrant is not exercised) shall be issued in the name of
__________________________________
(Print Name)
Please insert social security or other
identifying number of registered holder of
certificate (_____________)
__________________________________
(Address)
Date: _____________________, 199_ __________________________________
Signature*
*The signature of the Notice of Exercise of Warrant must correspond to the name
as written upon the face of the Warrant in every particular without alteration
or enlargement or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
7
<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
May 26, 1998
