<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 23, 1999
REGISTRATION NO. 333-84413
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 2054
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 its charter)
MINNESOTA 41-1713864
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
4725 Aircenter
Reno, Nevada 89502
(775)823-3000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Edward G. Stevenson
Chief Executive Officer
Innovative Gaming Corporation of America
4725 Aircenter
Reno, Nevada 89502
((775)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 23, 1999
PROSPECTUS
INNOVATIVE GAMING CORPORATION OF AMERICA
1,751,500 SHARES OF
COMMON STOCK
This prospectus relates to a maximum of 1,331,500 shares of common
stock of Innovative Gaming Corporation of America issuable upon the conversion
of Series C Convertible Preferred Stock (the "Series C Preferred Shares") and a
maximum of 420,000 shares of common stock issuable upon the exercise of certain
warrants (the "Warrants") granted to the selling shareholders listed on page 13
of this prospectus. Each of the Series C Preferred Shares 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 by Bloomberg, L.P. over a period of twenty trading days ending on
the day prior to which the holder of Series C Preferred Shares notifies the
Company of such holder's intent to convert a specified portion of such Series C
Preferred Shares, provided that the maximum conversion price shall not exceed
$1.877 which represents 135% of the ten day average of the closing bid price of
our common stock ending on May 28, 1999. The Series C Preferred Shares are
convertible in 25% increments, at the option of the holder thereof, beginning on
August 30, 1999 and following the end of each 30 day period thereafter for three
months. Series C Preferred Shares not converted by June 1, 2001 will be
automatically converted into common stock. We will receive no proceeds from the
sale of the common stock by selling shareholders. The total proceeds to us from
the exercise of the warrants, if the warrants are exercised in full, would be a
maximum of $517,200.
Our common stock is listed on the Nasdaq National Market under the
symbol "IGCA." On September 22, 1999, the last sale price for the common stock
as reported on the Nasdaq National Market was $2.53.
THE SHARES OFFERED BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DESCRIPTION OF FACTORS WHICH SHOULD
BE CONSIDERED BY INVESTORS BEFORE PURCHASING THE SHARES OFFERED BY THIS
PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. A REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NEITHER THE COLORADO GAMING COMMISSION, THE MISSISSIPPI GAMING
COMMISSION, THE NEVADA GAMING CONTROL BOARD, THE NEVADA GAMING COMMISSION,
2
<PAGE> 3
NOR ANY OTHER GAMING AUTHORITY HAS PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED HEREBY. A
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE, AND MAY BE CHANGED.
THIS PROSPECTUS IS INCLUDED IN THE REGISTRATION STATEMENT THAT WAS FILED BY
INNOVATIVE GAMING CORPORATION OF AMERICA WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE SELLING SHAREHOLDERS CANNOT SELL THEIR SHARES UNTIL THAT
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO
SELL THE SHARES OR THE SOLICITATION OF AN OFFER TO BUY THE SHARES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
-----------------------------------------
THE DATE OF THIS PROSPECTUS IS , 1999
3
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY.................................................................5
RISK FACTORS.......................................................................7
USE OF PROCEEDS...................................................................12
SELLING SHAREHOLDERS..............................................................13
PLAN OF DISTRIBUTION..............................................................16
WHERE YOU CAN FIND MORE INFORMATION...............................................17
NOTE REGARDING FORWARD-LOOKING STATEMENTS.........................................18
LEGAL MATTERS.....................................................................19
EXPERTS...........................................................................19
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES....................................19
</TABLE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus. You must not rely on any information or representations not
contained in this prospectus, if given or made, as having been authorized by us.
This prospectus is not an offer or solicitation in respect to these securities
in any jurisdiction in which such offer or solicitation would be unlawful. The
delivery of this prospectus shall not under any circumstances, create any
implication that there has been no change in our affairs or that the information
contained in this prospectus is correct as of any time subsequent to the date of
this prospectus. However, in the event of a material change, this prospectus
will be amended or supplemented accordingly.
4
<PAGE> 5
PROSPECTUS SUMMARY
As used in this prospectus, the terms "Company","we", "us" and "our"
refer to Innovative Gaming Corporation of America and its consolidated
subsidiary.
THE COMPANY
Innovative Gaming Corporation of America ("IGCA") through its wholly
owned operating subsidiary, Innovative Gaming, Inc. ("IGI", collectively, the
"Company"), develops, manufactures, markets and distributes multi-station and
other specialty gaming machines to regulated gaming markets world-wide. We have
four primary product lines: multi-player/multi-station video table games; bonus
"top box" games that are placed on top of slant top spinning reel slot machines;
single player video slot machines incorporating state of the art graphics and
sound, and unique specialty gaming machines such as "Mythical Reels(TM)", a game
which projects the slot machine's spinning reels out in front of the box as if
spinning in space. We also own the world-wide patent rights to a unique machine
that combines elements of roulette play and pinball in a single player machine.
We believe that our gaming machines will appeal to casinos/clubs, lotteries and
slot route operators seeking to enhance the entertainment experience by
providing new and unique forms of gaming.
We distribute our products directly and through distributors, primarily
on a cash sales basis. In Nevada, we directly place our products under lease,
sales (cash or extended payment terms) or participation agreements where we
retain ownership and share in the net win of the games with the casino.
Our primary target markets have been gaming jurisdictions in North
America, including the states where we are presently licensed: Arizona,
Colorado, Iowa, Louisiana, Mississippi, Minnesota, Nevada, New Mexico, North
Carolina and South Carolina, South Dakota and through distributors in Europe and
Australia. We have submitted and have a pending application in Connecticut and
have submitted games for approval in New Jersey. Previously registered with
Alberta, Manitoba, Saskatchewan, Quebec and the Atlantic Lottery Corporation we
have applications pending in British Columbia and Ontario. The Company has an
agent to market its products in Canada.
Our executive offices are located at 4725 Aircenter, Reno, Nevada 89502
and our telephone number is (775) 823-3000.
RECENT DEVELOPMENTS
Scott H. Shachelton resigned as Chief Financial Officer effective
September 1, 1999. Edward G. Stevenson was named Chief Financial Officer. On
September 15, 1999, Wayne W. Mills resigned as a director. On September 23,
1999, the Company received approval of this offering from the Nevada Gaming
Commission.
5
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common stock offered (1) ................................... 1,751,500 shares
Common stock outstanding
before the offering....................................... 7,226,885 shares
Common stock outstanding
after the offering (2)................................... 8,978,385 shares
Nasdaq National Market symbol............................... IGCA
</TABLE>
(1) Represents the maximum number of shares issuable upon the conversion of
all Series C Preferred Shares and upon the exercise of Warrants.
(2) Does not include maximum of 728,148 shares issuable upon the conversion
of our Series B Convertible Preferred Stock.
6
<PAGE> 7
RISK FACTORS
An investment in our common stock is very risky. You may lose the
entire amount of your investment. Prior to making an investment decision, you
should carefully review this entire prospectus and consider the following risk
factors:
WE HAVE INCURRED LOSSES TO DATE AND IF OUR SALES DO NOT IMPROVE, WE
WILL NEED ADDITIONAL FINANCING IN ORDER TO CONTINUE OPERATIONS.
We have incurred net losses of approximately $5.4 million in 1998, $2.9
million in 1997 and $6.2 million in 1996 and had a net loss of approximately
$3.5 million during the quarter ended June 30, 1999. We have not had a
profitable quarter since the fourth quarter of fiscal 1997. As of August 31,
1999, we had cash and cash equivalents of approximately $600,000. We believe,
assuming we can achieve our sales forecasts which exceed current sales rates,
that we will have sufficient cash to fund operations into the fourth quarter of
1999. In the absence of alternative financing, we may be required to
significantly reduce operations, or liquidate all or a portion of our assets. A
significant reduction in operations would seriously impair our ability to meet
our short-term revenue projections and would negatively impact our ability to
obtain additional financing. We also may be unable to obtain such financing on
terms acceptable to us, if such need arises. In connection with the 1999
refinancing, we issued convertible promissory notes secured by certain of our
assets. Security interests held by the holders of such promissory notes could
hurt our ability to raise additional financing. Any new investors may seek and
obtain substantially better terms than were granted to its present investors and
the issuance of such securities would result in dilution to its existing
shareholders.
OUR OPERATIONS MAY PROVE UNSUCCESSFUL WHICH WOULD RESULT IN CONTINUED
UNPROFITABILITY AND MAY CAUSE OUR STOCK PRICE TO FALL.
To date, we have not generated a profit. Due to a variety of factors,
many of which are discussed in this prospectus, we may never generate
significant revenues or operate profitability. Even if we succeed in our
operations as contemplated, we cannot assure a successful transition to higher
volume operations. We may be unable to control our expenses, attract necessary
additional personnel, or procure the capital required to maintain expanded
operations. If our sales growth is ultimately unsuccessful , the results of our
operations will suffer accordingly, and the market price of our stock may fall.
OUR SUCCESS DEPENDS IN LARGE PART UPON OUR ABILITY TO DESIGN,
MANUFACTURE, MARKET AND SERVICE PRODUCTS THAT WILL BE ACCEPTED IN THE GAMING
MACHINE MARKET.
Our success as a gaming machine manufacturer and supplier is dependent
upon numerous factors, including our ability to design, manufacture, market and
service gaming machines that achieve player and casino acceptance while
maintaining product quality and acceptable margins. In addition, we must compete
against gaming machine suppliers with greater financial resources, name
recognition and established service networks, customer relationships and
licensed in more jurisdictions. To date, the sales of our multi-player games
have been significantly lower than we anticipated. In order to diversify and
expand sales, we have begun licensing, marketing and selling single player games
such as Bonus Streak and Mythical Reels. We have also begun the development of
other single player games such as Revolving Rings. We cannot assure you that
these single player games will be accepted by the market. We will need to
develop gaming machines that offer technological advantages or unique
entertainment features in order for us to be able to compete effectively in the
gaming machine market.
7
<PAGE> 8
DUE TO THE RAPIDLY-CHANGING TECHNOLOGIES ASSOCIATED WITH THE GAMING
MACHINE INDUSTRY, AN INABILITY TO IDENTIFY, DEVELOP AND MARKET NEW PRODUCTS, OR
ENHANCE OUR EXISTING PRODUCTS, COULD ADVERSELY AFFECT OUR ABILITY TO ACHIEVE
MARKET ACCEPTANCE.
Our business is characterized by rapidly changing technology and
frequent new product introductions and enhancements. Our success in achieving
and maintaining market acceptance will depend in part on our continuing ability
to enhance our existing products and to introduce in a timely manner new
products that meet existing and future regulatory requirements and evolving
customer requirements. We may be unsuccessful in identifying, developing and
marketing new products or enhancing our existing products. Our business will be
adversely affected if we experience delays in developing new products or
enhancements or if such products or enhancements do not meet and receive all
regulatory approvals and/or gain customer acceptance.
WE MAY BE UNABLE TO COMPETE SUCCESSFULLY IN THE SINGLE PLAYER GAMES
MARKET, FOR WHICH WE ARE CURRENTLY DEVELOPING PRODUCTS, OR WITH COMPETITORS WHO
DEVELOP GAMING MACHINES THAT ARE SIMILAR TO OUR MULTI-STATION PRODUCTS.
Many gaming equipment companies, several of which are large and
well-established, supply the casino and video lottery industries with video
gaming machines and other gaming equipment. Our management believes that
Aristocrat, Alliance Gaming, International Game Technology, Anchor Gaming and
WMS Industries are among the largest and most-established gaming machine
suppliers. Sigma Games distributes a multi-player horserace game, which our
management believes competes for the same casino floor space as our games.
Additionally, Sega Gaming also offers similar games in a multi-player format and
has applied for licensure in certain U.S. markets. Upon licensing, we believe
Sega Gaming will become a direct competitor. However, these competitors, or
another competitor, may develop gaming machines that are similar to our gaming
machines in the future. Furthermore, we cannot assure you that any of the single
player games we are currently developing for the intensely competitive single
player game market will be accepted in such a competitive market.
AS WITH OTHER BUSINESSES IN THE GAMING INDUSTRY, OUR PROFITABILITY AND
OUR POTENTIAL FOR GROWTH ARE HIGHLY DEPENDENT ON MANY FACTORS WHICH ARE OUT OF
OUR CONTROL.
Our revenues are derived from the gaming industry. The growth of our
business is substantially dependent upon factors that are beyond our the
control. Such factors include, 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 our control. As a result of these and
other factors, we cannot assure you that we will be able achieve planned growth
or profitability.
THE LOSS OF ORDERS OR THE INABILITY TO OBTAIN NEW ORDERS COULD CAUSE
SIGNIFICANT FLUCTUATIONS IN OUR REVENUES AND CASH FLOW AND ADVERSELY AFFECT OUR
OPERATING RESULTS AS A WHOLE.
Our operating results have varied substantially from quarter to
quarter. Revenues in any quarter are substantially dependent on regulatory
approval, receipt of orders, availability of parts and components necessary to
manufacture the products, delivery and installation in that quarter. Our
staffing and operating expenses are based on anticipated revenue levels, and a
high percentage of our costs are fixed, in the short-term. As a result, the loss
of any one order, or the failure to obtain new orders as existing orders are
8
<PAGE> 9
completed, could have a material adverse effect on, or cause significant
fluctuations in, our revenues and cash flow from quarter to quarter.
WE CONTINUE TO FACE RISKS, EXPENSES AND DIFFICULTIES ASSOCIATED WITH
NEW AND EXPANDING BUSINESSES.
Although our business was formed in 1991, we continue to face the
risks, expenses and difficulties frequently encountered by new and expanding
businesses. These risks include, but are not limited to, 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. We cannot guarantee that our
products will be accepted in the marketplace or that we will be able to obtain
the regulatory approvals we require to conduct our business.
OUR OPERATIONS ARE DEPENDENT UPON OUR RELATIONSHIPS WITH OUR VENDORS,
SUPPLIERS AND DISTRIBUTORS.
We are highly dependent upon our relationships with our vendors,
suppliers and distributors. A significant interruption or delay in the delivery
of components from our suppliers, or the loss of a significant distributor,
could materially and adversely affect the results of our operations.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION WHICH COULD
NEGATIVELY IMPACT OUR BUSINESS.
The manufacture and distribution of gaming machines are subject to
numerous federal, state, provincial, tribal, international and local
regulations. 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 us. The timing and expense
of obtaining gaming licenses has an affect on our ability to expand our market.
Together with our key personnel, we undergo extensive investigation before each
jurisdictional license is issued. Our gaming machines are subjected to
independent testing and evaluation prior to approval from each jurisdiction in
which we do business. Generally, regulatory authorities have broad discretion
when granting, renewing or revoking such game approvals and licenses. Our
failure, or the failure of any of our key personnel or gaming machines, in
obtaining or retaining a license in any jurisdiction could have a material
adverse effect on our business. Furthermore, the failure to obtain or retain a
required license in one jurisdiction could negatively impact our ability (or the
ability of any of our key personnel or gaming machines) to obtain or retain
required licenses in other jurisdictions. In addition, we may also be subject to
regulation as a gaming operator if we enter into lease participation agreements
under which we share in the revenues generated by gaming machines. Regulatory
authorities may require significant shareholders to submit to background
investigations and respond to questions from regulatory authorities, and may
deny a license or revoke our licenses based upon their findings. For a more
complete description of the gaming regulations impacting us, you should refer to
the Regulation section of our Form 10-K for the fiscal year ended December 31,
1998.
THERE IS A RISK THAT THE VALUE OF OUR PROPRIETARY INTELLECTUAL PROPERTY
RIGHTS COULD BE DIMINISHED BY IMPROPER USE BY OTHERS.
Our products are technology-based and as such, we face several
intellectual property risks. We believe that our proprietary software, hardware
and other intellectual property are important to our success and our competitive
position. We rely on a combination of patent, trade secret, copyright and
trademark law, nondisclosure agreements and technical security measures to
protect our rights pertaining to our products. We currently hold patents for our
blackjack, craps and roulette machines. However, the actions we have taken to
protect our proprietary rights may be inadequate to prevent others from
imitating our products. For instance, we may not be granted patents for products
that we develop in the future. Even if we are granted
9
<PAGE> 10
patents for our products, we may still be unable to prevent third parties from
being able to copy or to "reverse engineer" certain portions of our products or
to obtain and use information that we believe is proprietary.
Although we are not aware of any infringement, we may be subject to
claims from third parties alleging that we have infringed their proprietary
intellectual property rights. Such claims could have a material adverse effect
on our business given the costs associated with intellectual property
litigation, the potential diversion of our management's resources to litigation
and the risk of an injunction or other delay in the offering of our products.
OUR COMMON STOCK COULD BE DELISTED FROM THE NASDAQ NATIONAL MARKET,
WHICH DELISTING COULD HINDER YOUR ABILITY TO OBTAIN ACCURATE QUOTATIONS AS TO
THE PRICE OF OUR COMMON STOCK, OR DISPOSE OF OUR COMMON STOCK IN THE SECONDARY
MARKET.
Although our common stock is currently listed on the Nasdaq National
Market, we cannot guarantee that an active public market for our common stock
will continue to exist. The market price of our Common Stock has been highly
volatile. In order to maintain our listing on the NASDAQ National Market, we
must maintain a closing sales price of at least $1.00 per share for a certain
period of time. Since January 2, 1999, our Common Stock has traded in the range
of $0.81 to $2.44 per share. In the event our securities are delisted from the
Nasdaq National Market, trading, in our common stock could thereafter be
conducted in the over-the-counter markets in the so-called "pink sheets" or the
National Association of Securities Dealer's "Electronic Bulletin Board."
Consequently, the liquidity of our common stock would likely be impaired, not
only in the number of shares which could be bought and sold, but also through
delays in the timing of the transactions, reduction in the coverage of
Innovative Gaming Corporation of America by security analysts and the news
media, and lower prices for our securities than might otherwise prevail. In
addition, our common stock would become subject to certain rules of the
Securities and Exchange Commission relating to "penny stocks." These rules
require broker-dealers to make special suitability determinations for purchasers
other than established customers and certain institutional investors and to
receive the purchasers' prior written consent for a purchase transaction prior
to sale. Consequently, these "penny stock rules" may adversely affect the
ability of broker-dealers to sell our common stock and may adversely affect your
ability to sell shares of our common stock in the secondary market.
THE CONVERSION OF PREFERRED SHARES INTO SHARES OF OUR COMMON STOCK MAY
SIGNIFICANTLY DILUTE THE INTERESTS OF OUR OTHER INVESTORS.
We issued $1.4 million in Series C Preferred Shares to an institutional
investor in June 1999. As of August 30, 1999, we have issued and outstanding
approximately $1.3 million in Series B Convertible Preferred Stock (the "Series
B Preferred Shares," and collectively with the Series C Preferred Shares, the
"Preferred Shares"). The Preferred Shares are convertible into our common stock
at a conversion price equal to 91% of the average of the lowest three
consecutive day closing bid price over the 20 day period prior to conversion.
The Series C Preferred Share terms prohibit issuing more than 1,331,500 shares
of common stock upon conversion of the Series C Preferred Shares at a discount
and the Series B Preferred Share terms prohibit issuing more than 1,505,000
shares of common stock upon conversion of Series B Preferred Shares at a
discount and also limit the ability of the holder to convert if, following the
conversion, such holder would own in excess of 4.9% of our common stock. A
decline in the stock price of common stock could result in dilution to investors
if the holders of Preferred Shares convert.
10
<PAGE> 11
LIMITATIONS PLACED ON THE CONVERSION OF THE SERIES C PREFERRED SHARES
MAY REQUIRE US TO REDEEM SUCH SERIES C PREFERRED SHARES IN CASH AT A SUBSTANTIAL
PREMIUM TO THEIR STATED VALUE.
The total number of shares of common stock issuable upon conversion of
the Series C Preferred Shares cannot exceed 1,331,500 shares, which amount
represents 20% of our common stock outstanding on June 1, 1999. If a holder of
Series C Preferred Shares is unable to convert those shares into common stock
because these limitations have been reached, we would be required to redeem the
Series C Preferred Shares in cash at 115% of the amount paid those shares plus
any accrued and unpaid dividends. Depending on the number of shares we are
required to redeem, we may lack sufficient cash to accomplish the required
redemption.
PURSUANT TO ITS AUTHORITY TO DESIGNATE AND ISSUE SHARES OF OUR STOCK AS
IT DEEMS APPROPRIATE, OUR BOARD OF DIRECTORS MAY ASSIGN RIGHTS AND PRIVILEGES TO
CURRENTLY UNDESIGNATED SHARES WHICH COULD ADVERSELY AFFECT YOUR RIGHTS AS A
COMMON SHAREHOLDER.
Our authorized capital consists of 100,000,000 shares of capital stock.
Our Board of Directors, without any action by the shareholders, may designate
and issue shares in such classes or series (including classes or series of
preferred stock) as it deems appropriate and establish the rights, preferences
and privileges of such shares, including dividends, liquidation and voting
rights. The rights of holders of preferred shares and other classes of capital
stock that may be issued may be superior to the rights granted to the holders of
our common stock. Our Board's ability to designate and issue such undesignated
shares could impede or deter an unsolicited tender offer or takeover proposal.
Further, the issuance of additional shares having preferential rights could
adversely affect the voting power and other rights of holders of common stock.
WE ARE DEPENDENT ON THE ONGOING SERVICES OF CERTAIN OF OUR EXECUTIVES,
THE LOSS OF WHICH COULD HAVE A DETRIMENTAL EFFECT ON OUR PROFITABILITY AND THE
MARKET PRICE OF OUR STOCK.
Our business and our day-to-day operations rely heavily upon the
experience, personal efforts and abilities of Edward G. Stevenson, our Chairman
of the Board and Chief Executive Officer, and Barrett V. Johnson, our President
and Chief Operating Officer. Each of these executives has significant experience
in managing and guiding the business affairs of companies in the gaming machine
industry. The loss of any member of management could adversely affect the
success of our operations and strategic plans and, consequently, have a
detrimental effect on the market price of our stock.
WE MAY NOT PAY DIVIDENDS ON OUR COMMON STOCK, IN WHICH EVENT YOUR ONLY
RETURN ON INVESTMENT, IF ANY, WILL OCCUR ON THE SALE OF OUR STOCK.
To date, we have not paid any cash dividends on our common stock, and
we do not intend to do so in the foreseeable future. Rather, we intend to use
any future earnings to fund our operations and the growth of our business.
Accordingly, the only return on an investment in our common stock will occur
upon its sale.
MINNESOTA LAW MAY INHIBIT OR DISCOURAGE TAKEOVERS, WHICH COULD REDUCE
THE MARKET VALUE OF OUR STOCK.
Being a corporation organized under Minnesota law, we are subject to
certain Minnesota statutes which regulate business combinations and restrict the
voting rights of certain persons acquiring shares of our stock. By impeding a
merger, consolidation, takeover or other business combination involving
Innovative
11
<PAGE> 12
Gaming Corporation of America or discouraging a potential acquiror from making a
tender offer or otherwise attempting to obtain control of us, these regulations
could adversely affect the market value of our stock.
POTENTIAL ADVERSE MARKET PRICE IMPACT OF SHARES ELIGIBLE FOR FUTURE
SALE.
The sale, or availability for sale, of substantial amounts of our
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 we can raise additional capital by the sale of stock. As of September
17, 1999, we had 7,226,885 shares of common stock outstanding. In addition, as
of September 17, 1999, we had 926,950 shares of common stock subject to
outstanding options granted under its employee and director stock option plans,
667,500 shares of common stock subject to outstanding warrants (other than the
Warrants) and 2,133,332 shares of common stock issuable upon conversion of
convertible promissory notes and 746,356 shares of common stock issuable upon
conversion of Series B Preferred Stock.
USE OF PROCEEDS
The gross proceeds to us from the exercise of the warrants, if the
warrants are exercised in full, would be a maximum of $517,200. The proceeds
from the exercise of the warrants are intended to be used for working capital
purposes. We will not receive any proceeds from the sale by the selling
shareholders of the common stock issuable upon the conversion of the Series C
Preferred Shares.
12
<PAGE> 13
SELLING SHAREHOLDERS
The following table sets forth the number of shares of the common stock
owned by the selling shareholders as of the date hereof and after giving effect
to this offering. We will not receive any proceeds from the sale of the common
stock by the selling shareholders. The shares of common stock received upon
exercise of the Warrants or the conversion of Series C Preferred Shares may be
offered from time to time by the selling shareholders.
<TABLE>
<CAPTION>
Shares Number of Percentage
Beneficially Shares Offered Beneficial
owned before Hereby by Selling Ownership After
Offering Shareholder Offering
- -------------------------- ------------- ------------------ ----------------
<S> <C> <C> <C>
The Shaar Group, Ltd. 2,288,548(1) 1,331,500 (2)(3) 2.6%(4)
Wayne Mills 550,000(5) 125,000 7.5%
Lakes Gaming, Inc. 412,500(6) 87,500 3.6%
Edward G. Stevenson 308,000(7) 50,000 2.9%
Richard C. Lockwood 145,000(8) 45,000 1.1%
Gulfstream Financial, LLC 75,000(9) 75,000 *
Craig C. Avery 240,000(10) 37,500 2.3%
</TABLE>
- ------------
*Less than 1%.
(1) Includes (i) 233,900 shares of common stock beneficially owned by such
shareholder; (ii) 1,331,500 shares of common stock issuable upon conversion of
the Series C Preferred Shares, and (iii) 723,148 shares of common stock issuable
upon conversion of Series B Preferred Shares. The common stock issuable upon
conversion of the Series B Preferred Shares is at an assumed conversion price of
$1.763 per share based upon the closing bid price $1.9375 per share on July 30,
1999. Because the number of shares of common stock issuable upon conversion of
the Series C Preferred Shares and the Series B Preferred Shares 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 shareholder, will fluctuate daily and cannot be determined
at this time. However, the selling shareholder has contractually agreed to
restrict its ability to convert Series C Preferred Shares (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 4.9% 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 Series C Preferred Shares.
(3) The 9% beneficial conversion feature is accounted for as an additional
Series C Preferred Shares dividend, the amount of which is determined on the
date the Series C Preferred Shares were issued. The average closing bid price of
our common stock over the ten day period preceding the issuance of the Series C
Preferred Shares was $1.3906. As such, the holders of Series C Preferred Shares
could convert the Series C Preferred Shares into approximately 1,106,329 shares
of common stock and the value of the beneficial conversion feature therefore was
approximately $138,462. This beneficial conversion feature or dividend reduces
income available for holders of our common stock and therefore reduces earnings
per share on a pro
13
<PAGE> 14
rata basis over the period from issuance of the Series C Preferred Shares to the
earliest conversion date. Income available to holders of common stock will be
reduced by approximately $32,885, $87,115 and $18,462 during the second, third
and fourth quarters of 1999, respectively.
(4) Assumes a maximum of 723,148 shares of common stock issuable upon
conversion of the Series B Preferred Shares offered pursuant to our prospectus
dated September 3, 1998, as supplemented by prospectus supplement dated June 16,
1999, are sold pursuant to such prospectus.
(5) Includes (i) 425,000 shares of common stock beneficially owned by such
shareholder; (ii) 50,000 shares issuable upon exercise of a warrant issued March
5, 1999 in connection with our redemption of 400,000 shares of common stock
owned by such selling shareholder; and (iii) 75,000 shares issuable upon
exercise of a warrant issued in connection with the issuance of secured
convertible notes on June 1, 1999. Does not include (i) 400,000 shares of common
stock issuable upon conversion of a promissory note issued to such shareholder
in connection with such redemption; and (ii) 20,000 shares of common stock
issuable upon exercise of director stock options granted July 22, 1999.
(6) Includes (i) 325,000 shares of common stock beneficially owned by such
shareholder, and (ii) 87,500 shares issuable upon exercise of a warrant issued
April 22, 1999 in connection with our redemption of 700,000 shares of common
stock owned by such selling shareholder. Does not include (i) 700,000 shares of
common stock issuable upon conversion of a promissory note issued to such
shareholder in connection with such redemption and (ii) 102,500 shares of common
stock issuable upon exercise of another Warrant issued to such shareholder.
(7) Includes (i) 50,000 shares issuable upon exercise of a warrant issued June
1, 1999 in connection with Mr. Stevenson's guarantee of a portion of the
principal amount of secured convertible promissory notes issued on such date and
(ii) 258,000 shares issuable upon exercise of employee stock options.
Mr. Stevenson is our Chairman and Chief Executive Officer.
(8) Includes 45,000 shares issuable upon exercise of Warrants issued June 1,
1999 in connection with the issuance of secured convertible notes on such date
to such selling shareholder. Does not include 200,000 shares of common stock
issuable upon conversion of the secured convertible notes issued June 1, 1999.
(9) Shares issuable upon exercise of Warrants issued June 1, 1999 in
connection with the issuance of secured convertible notes on such date to such
selling shareholder. Does not include 333,333 shares of common stock issuable
upon conversion of the secured convertible notes issued June 1, 1999.
(10) Includes 37,500 shares issuable upon exercise of Warrants issued June 1,
1999 in connection with the issuance of secured convertible notes on such date
to such selling shareholder. Does not include 166,666 shares of common stock
issuable upon conversion of the secured convertible notes issued June 1, 1999.
On June 1, 1999, we issued 1,400 Series C Preferred Shares with a stated
value of $1,000 per share in a private placement for total proceeds of
$1,400,000, and net proceeds after expenses of approximately $1,345,000. Of such
net proceeds, $1,100,000 was used to redeem 1,100 shares of our Series B
Preferred Shares.
14
<PAGE> 15
The annual dividend of 4% on the Series C Preferred Shares is
cumulative and is payable quarterly in arrears either in cash or in registered
shares of our common stock. Each Series C Preferred Share is convertible into
shares of our common stock, at a conversion price equal to 91% of the average of
the lowest three consecutive day closing bid prices of our common stock as
reported on by Bloomberg, L.P. over a period of twenty trading days ending on
the day prior to which the holder of Series C Preferred Shares notifies us of
such holder's intent to convert a specified portion of such Series C Preferred
Shares, provided that the maximum conversion price shall not exceed $1.877. The
total number of shares of common stock issuable upon conversion of the Series C
Preferred Shares cannot exceed 1,331,500 shares (which represents 20% of the
number of outstanding shares of common stock on June 1, 1999), unless the
Company obtains shareholder approval as required by the Nasdaq National Market.
In the event a holder of Series C Preferred Shares is unable to convert shares
of Series C Preferred Shares into common stock because 1,331,500 shares have
already been issued as described in the preceding sentence, we must redeem any
unconverted Series C Preferred Shares presented for conversion for cash at a
price equal to 115% of their stated value. We have the right to redeem the
Series C Preferred Shares in cash at 115% of their stated value plus accrued and
unpaid dividends at any time after July 31, 1999. All Series C Preferred Shares
which are still outstanding on June 1, 2001 are mandatorily converted at the
conversion price.
We are not required to convert Series C Preferred Shares, whether upon
request for conversion by the holder or upon the June 1, 2001 mandatory
conversion date, if and to the extent that such holder or any affiliate of such
shareholder would then own in excess of 4.9% of our common stock. If,
notwithstanding the foregoing, such holder is deemed by a court to be the
beneficial owner of more than 4.9% of our common stock, we are required to
redeem for cash such number of shares of Series C Preferred Shares as will
reduce such holder's ownership to not more than 4.9% at a redemption price equal
to 115% of the stated value plus accrued and unpaid dividends. In the case of
mandatory conversion, we may elect to pay a redemption price in cash equal to
115% of the stated value plus accrued and unpaid dividends.
15
<PAGE> 16
PLAN OF DISTRIBUTION
We are registering the shares offered by this prospectus in part on
behalf of the selling shareholders. We agreed to file a registration statement
under the Securities Act of 1933, as amended (the "Securities Act") covering
resale by the selling shareholders of the shares and to use our best efforts to
cause such registration statement to be declared effective as soon as possible
thereafter. As used in this section, the term "selling shareholders" includes
donees, pledgees, transferees and other successors in interest selling shares
received from a selling shareholder after the date of this prospectus. We will
pay all costs and expenses in connection with the preparation of this prospectus
and the registration of the shares offered by it. Any brokerage commissions and
similar selling expenses attributable to the sale of shares will be borne by the
selling shareholders. Sales of shares may be effected by the selling
shareholders at various times in one or more types of transactions (which may
include block transactions) on the Nasdaq National Market, in negotiated
transactions, through put or call options transactions relating to the shares,
through short sales of shares, or a combination of such methods of sale at
market prices prevailing at the time of sale or at negotiated prices. Such
transactions may or may not involve brokers or dealers. The selling shareholders
have advised us that they have not entered into any agreements, understandings
or arrangements with any underwriters or broker-dealers regarding the sale of
the shares, nor is there an underwriter or coordinating broker acting in
connection with the proposed sale of shares by the selling shareholders.
We have agreed to indemnify the selling shareholders and their
officers, directors, employees and agents, and each person who controls any
selling shareholder, in certain circumstances against certain liabilities,
including liabilities arising under the Securities Act. Each selling shareholder
has agreed to indemnify us and our directors and officers in certain
circumstances against certain liabilities, including liabilities arising under
the Securities Act.
The selling shareholders and any broker-dealers that act in connection
with the sale of securities might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commissions received by
such broker-dealers and any profit on the resale of the securities sold by them
while acting as principals might be deemed to be underwriting discounts or
commissions under the Securities Act.
Because selling shareholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the selling shareholders
will be subject to the prospectus delivery requirements of the Securities Act.
We have informed the selling shareholders that the anti-manipulative provisions
of Regulation M promulgated under the Securities Exchange Act of 1934, as
amended, may apply to their sales in the market.
Selling shareholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of that Rule.
MINNESOTA ANTI-TAKEOVER LAW
We are governed by the provisions of Sections 302A.671 and 302A.673 of
the Minnesota Business Corporation Act. In general, Section 302A.671 provides
that the shares of a corporation acquired in a "control share acquisition" have
no voting rights unless voting rights are approved in a prescribed manner. A
"control share acquisition" is an acquisition, directly or indirectly, of
beneficial ownership of shares that would, when added to all other shares
beneficially owned by the acquiring person, entitle the acquiring person to have
voting power of 20% or more in the election of directors. In general, Section
302A.673 prohibits a publicly-held Minnesota corporation from engaging in a
"business combination" with an
16
<PAGE> 17
"interested shareholder" for a period of four years after the date of
transaction in which the person became an interested shareholder, unless the
business combination is approved in a prescribed manner. "Business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested shareholder. An "interested shareholder" is a person
who is the beneficial owner, directly or indirectly, of 10% or more of the
corporation's voting stock or who is an affiliate or associate of the
corporation and at any time within four years prior to the date in question was
the beneficial owner, directly or indirectly, of 10% or more of the
corporation's voting stock.
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires Innovative Gaming Corporation of
America to file information with the Securities and Exchange Commission
concerning its business and operations. Accordingly, we file annual, quarterly,
and special reports, proxy statements and other information with the Commission.
You can inspect and copy this information at the Public Reference Facility
maintained by the Commission at Judiciary Plaza, 450 5th Street, N.W., Room
1024, Washington, D.C. 20549. You can also do so at the following regional
offices of the Commission:
(1) New York Regional Office, 7 World Trade Center, Suite 1300, New York,
New York 10048
(2) Chicago Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661.
You can receive additional information about the operation of the
Commission's Public Reference Facilities by calling the Commission at
1-800-SEC-0330. The Commission also maintains a website at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding companies that, like Innovative Gaming Corporation of America, file
information electronically with the Commission.
The Commission allows us to "incorporate by reference" information that
has been filed with it, which means that we can disclose important information
to you by referring you to the other information we have filed with the
Commission. The information that we incorporate by reference is considered to be
part of this prospectus, and related information that we file with the
Commission will automatically update and supersede information we have included
in this prospectus. We also incorporate by reference any future filings we make
with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, until the selling shareholders sell all of
their shares or until the registration rights
17
<PAGE> 18
of the selling shareholders expire. This prospectus is part of a registration
statement that we filed with the Commission (Registration No. 333-84413). The
following are specifically incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
2. Amended Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1998 as filed August 3, 1999;
3. Quarterly Reports on Form 10-Q filed on May 17, 1999 and on
August 16, 1999 for the respective quarterly periods ended
March 31, 1999 and June 30, 1999;
4. Current Report on Form 8-K filed on June 7, 1999;
5. The description of common stock included under the caption
"Securities to be Registered" in the Company's registration
statement on Form SB-2 (Registration No. 33-61492C), including
any amendments or reports filed for the purpose of updating
such description.
You can request a free copy of the above filings or any filings
subsequently incorporated by reference into this prospectus by writing or
calling us at the following address:
Innovative Gaming Corporation of America
Attention: Chief Financial Officer
4725 Aircenter Circle
Reno, Nevada 89502
(775) 823-3000
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement or amendment to this prospectus.
We have not authorized anyone else to provide you with different information or
additional information. Selling shareholders will not make an offer of our
common stock in any state where the offer is not permitted. You should not
assume that the information in this prospectus, or any supplement or amendment
to this prospectus, is accurate at any date other than the date indicated on the
cover page of such documents.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus and in the documents
incorporated by reference in this prospectus are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward-looking statements can be
identified by the use of predictive, future-tense or forward-looking
terminology, such as "believes," "anticipates," "expects," "estimates," "may,"
"will" or similar terms. Forward-looking statements also include projections of
financial performance, statements regarding management's plans and objectives
and statements concerning any assumption relating to the foregoing. Important
factors regarding Innovative Gaming Corporation of America's business,
operations and competitive environment which may cause actual results to vary
materially from these forward-looking statements are discussed under the caption
"Risk Factors."
18
<PAGE> 19
LEGAL MATTERS
Legal matters in connection with the validity of the shares offered by
this Prospectus will be passed upon for the Company by Maslon Edelman Borman &
Brand, LLP, Minneapolis, Minnesota.
EXPERTS
The consolidated financial statements of Innovative Gaming Corporation
of America as of December 31, 1998 and December 31, 1997 and for the years ended
on December 31, 1998, December 31, 1997 and December 31, 1996, incorporated by
reference in the registration statement of which this prospectus is a part have
been audited by Kafoury, Armstrong & Co., independent public accountants, as
indicated in their report with respect thereto, and are incorporated herein in
reliance upon the authority of that firm as experts in giving said reports.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
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 corporation's articles of
incorporation or bylaws may prohibit such indemnification or place limits upon
the same. Our articles and bylaws do not include any such prohibition or
limitation. As a result, we are bound by the indemnification provisions set
forth in Section 302A.521 of the Minnesota Statutes. As permitted by Section
302A.251 of the Minnesota Statutes, our Articles of Incorporation provide that a
director shall, to the fullest extent permitted by law, have no personal
liability to us and our shareholders for breach of fiduciary duty as a director.
To the extent that indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling us
pursuant to the foregoing provisions, we have been informed that in the opinion
of the Commission such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
19
<PAGE> 20
1,751,500 SHARES
INNOVATIVE GAMING CORPORATION OF AMERICA
COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 1999
20
<PAGE> 21
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 are set forth in the following table:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 945
Nasdaq National Market additional listing fee............... 17,500
Legal fees and expenses..................................... 55,000
Accounting fees and expenses................................ 50,000
Printing and miscellaneous expenses 6,555
--------
Total....................................................... $ 95,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is governed by Minnesota Statutes Chapter 302A. Minnesota
Statutes Section 302A.521 provides that a corporation shall indemnify any person
made or threatened to be made a party to any proceeding by reason of the former
or present official capacity of such person against judgments, penalties, fines,
including, without limitation, excise taxes assessed against such person with
respect to an employee benefit plan, settlements, and reasonable expenses,
including attorney's fees and disbursements, incurred by such person in
connection with the proceeding, if, with respect to the acts or omissions of
such person complained of in the proceeding, such person has not been
indemnified by another organization or employee benefit plan for the same
expenses with respect to the same acts or omissions; acted in good faith;
received no improper personal benefit and Section 302A.255, if applicable, has
been satisfied; in the case of a criminal proceeding, had no reasonable cause to
believe the conduct was unlawful; and in the case of acts or omissions by
persons in their official capacity for the corporation, reasonably believed that
the conduct was in the best interests of the corporation, or in the case of acts
or omissions by persons in their capacity for other organizations, reasonably
believed that the conduct was not opposed to the best interests of the
corporation. Subdivision 4 of Section 302A.521 of the Minnesota Statutes
provides that a company's articles of incorporation or bylaws may prohibit such
indemnification or place limits upon the same. The Company's articles and bylaws
do not include any such prohibition or limitation. As a result, the Company is
bound by the indemnification provisions set forth in Section 302A.521 of the
Minnesota Statutes.
As permitted by Section 302A.251 of the Minnesota Statutes, the
Articles of Incorporation of the Company provide that a director shall have no
personal liability to the Company and its shareholders for breach of his
fiduciary duty as a director, to the fullest extent permitted by law. The Agency
Agreement contains provisions under which the Company, on the one hand, and the
Placement Agent, on the other hand, have agreed to indemnify each other
(including officers and directors of the Company and the Placement Agent, and
any person who may be deemed to control the Company or the Placement Agent)
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
21
<PAGE> 22
ITEM 16. EXHIBITS.
EXHIBIT DESCRIPTION OF DOCUMENT
------- -----------------------
3.1(a) Articles of Incorporation, as amended (Incorporated herein by
reference to Exhibit 3.1 to the Company's Registration Statement
on Form SB-2 (File No. 33-61492C)
3.1(b) Certificate of Designation relating to Series B Convertible
Preferred Stock (Incorporated herein by reference to Exhibit 4 to
the Company's report on Form 10-Q for the quarter ended March 31,
1998)
3.1(c) Articles of Amendment of Certificate of Designation of Series B
Convertible Preferred Stock as filed June 15, 1999 (Incorporated
herein by reference to Exhibit 3.1(c) to the Company's report on
Form 8-K dated June 1, 1999)
3.1(d) Certificate of Designation relating to Series C Convertible
Preferred Stock as filed June 1, 1999 (Incorporated herein by
reference to Exhibit 3.1(d) to the Company's report on Form 8-K
dated June 1, 1999)
5 Opinion of Maslon Edelman Borman & Brand, LLP*
10.1 Stock Redemption Agreement by and between the Company and Wayne
M. Mills, dated March 5, 1999*
10.2 Warrant issued to Wayne M. Mills, dated March 5, 1999*
10.3 Convertible Promissory Note issued to Wayne M. Mills, dated
March 5, 1999*
10.4 Stock Redemption Agreement by and between the Company and Lakes
Gaming, Inc., dated April 22, 1999*
10.5 Warrant issued to Lakes Gaming, Inc., dated April 22, 1999*
10.6 Convertible Promissory Note issued to Lakes Gaming, Inc., dated
April 22, 1999*
10.7 Series B Convertible Preferred Stock Amendment Agreement dated
June 1, 1999 by and between the Company and KA Investments, LDC
(Incorporated herein by reference to Exhibit 10.1 to the
Company's report on Form 8-K dated June 1, 1999)
10.8 Subscription Agreement with respect to Series C Convertible
Preferred Stock dated June 1, 1999 by and between the Company and
The Shaar Fund, Ltd (Incorporated herein by reference to Exhibit
10.2 to the Company's report on Form 8-K dated June 1, 1999)
10.9 Registration Rights Agreement with respect to Series C
Convertible Preferred Stock dated June 1, 1999 by and between the
Company and The Shaar Fund, Ltd (Incorporated herein by reference
to Exhibit 10.3 to the Company's report on Form 8-K dated June 1,
1999)
10.10 Form of Note Subscription Agreement (Incorporated herein by
reference to Exhibit 10.4 to the Company's report on Form 8-K
dated June 1, 1999)
10.11 Form of 12% Secured Convertible Promissory Note (Incorporated
herein by reference to Exhibit 10.5 to the Company's report on
Form 8-K dated June 1, 1999)
10.12 Form of Warrant (Incorporated herein by reference to Exhibit 10.6
to the Company's report on Form 8-K dated June 1, 1999)
10.13 Security Agreement, dated June 1, 1999, by Innovative Gaming,
Inc. in favor of certain Noteholders (Incorporated herein by
reference to Exhibit 10.7 to the Company's report on Form 8-K
dated June 1, 1999)
23.1 Consent of Kafoury, Armstrong & Co.
23.2 Consent of Maslon Edelman Borman & Brand, LLP (included in
Exhibit 5).*
24 Power of Attorney*
- -------------------------
*Previously filed.
22
<PAGE> 23
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) 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; (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, 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;
(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; and
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration statement
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.
23
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Reno, State of Nevada, on
September 23, 1999.
Innovative Gaming Corporation of America, Registrant
By /s/ Edward G. Stevenson
------------------------------------------------------
Edward G. Stevenson, Chief Executive Officer
/s/ Edward G. Stevenson Chief Executive Officer September 23, 1999
- ----------------------- Chief Financial Officer
& Director September 23, 1999
* Director
- -----------------------
Barrett V. Johnson
24
<PAGE> 25
*
- ------------------------------------ Director September 23, 1999
Ronald A. Johnson
*
- ------------------------------------ Director September 23, 1999
Leo V. Seevers
*
- ------------------------------------ Director September 23, 1999
Ronald R. Zideck
*By Edward G. Stevenson as Attorney-In-Fact
25
<PAGE> 26
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT PAGE NO.
- ------- ----------------------- --------
<S> <C> <C>
23.1 Consent of Kafoury, Armstrong & Co.
</TABLE>
26
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in the Registration Statement (Form S-3,
No. 333-84413 ) of our report dated February 26, 1999 (except with respect to
the matter discussed in Note 11, as to which the date is July 16, 1999) included
in Innovative Gaming Corporation of America's Form 10-K/A (as amended by Form
10-K/A) for the year ended December 31, 1998 and of our report dated July 16,
1999 for the years ended December 31, 1997 and December 31, 1996 and to all
references to our firm included in this Registration Statement.
KAFOURY, ARMSTRONG & CO.
Reno, Nevada
September 23, 1999
