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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 12, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CASINO DATA SYSTEMS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
NEVADA 88-0261839
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
3300 Birtcher Drive
Las Vegas, Nevada 89118
(702) 269-5000
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
------------------
RUSSELL C. MIX, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CASINO DATA SYSTEMS
3300 BIRTCHER DRIVE
LAS VEGAS, NEVADA 89118
(702) 269-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
WITH COPIES TO:
WILLIAM M. MOWER, ESQ.
MASLON EDELMAN BORMAN & BRAND, PLLP
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>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED SHARE(1)(2) PRICE(1)(2) REGISTRATION FEE
- --------------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock, no par value 302,411 Shares $13.375 $4,044,894 $1,394.79
========================== ==================== ==================== ==================== ====================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Calculated pursuant to Rule 457(c) and Rule 457(o) under the Securities
Act of 1933 based upon the average of the high and low trading prices on
July 5, 1996, as reported on the Nasdaq National Market.
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
CASINO DATA SYSTEMS
CROSS REFERENCE SHEET
PURSUANT TO RULE 404
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-3 REGISTRATION STATEMENT CAPTION OR LOCATION IN PROSPECTUS
------------------------------- ---------------------------------
<S> <C> <C>
Item 1. Forepart of Registration Statement and Front of the Registration
Outside Front Cover Page of Prospectus..... Statement and Outside Front
Cover Page of Prospectus
Item 2. Inside Front and Outside Back Cover pages Inside Front and Outside Back
of Prospectus.............................. Cover Pages of Prospectus
Item 3. Risk Factors............................... Risk Factors
Item 4. Use of Proceeds............................ Use of Proceeds
Item 5. Determination of Offering Price............ Not Applicable
Item 6. Dilution................................... Not Applicable
Item 7. Selling Security-Holders................... Not Applicable
Item 8. Plan of Distribution....................... Outside Front Cover Page; Plan
of Distribution
Item 9. Description of Securities to be Registered. Not Applicable
Item 10. Interests of Named Experts and Counsel..... Legal Matters; Experts
Item 11. Material Changes........................... Not Applicable
Item 12. Incorporation of Certain Information by Incorporation of Certain
Reference.................................. Documents by Reference
Item 13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
</TABLE>
<PAGE> 3
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
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 12, 1996
PROSPECTUS
Casino Data Systems
302,411 SHARES OF COMMON STOCK
-------------------
All of the 302,411 shares of Common Stock, no par value per share (the
"Common Stock") of Casino Data Systems (the "Company") offered hereby are being
sold by certain shareholders (the "Selling Shareholders"). The Company will
not receive any of the proceeds from the sale of shares by the Selling
Shareholders.
The Common Stock is listed on the Nasdaq National Market under the symbol
"CSDS." On July 10, 1996, the last sale price for the Common Stock as reported
on the Nasdaq Stock Market was $15.375.
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 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 July 12, 1996.
<PAGE> 4
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
RISK FACTORS........................................................ 5
USE OF PROCEEDS..................................................... 12
SELLING SHAREHOLDERS................................................ 12
PLAN OF DISTRIBUTION................................................ 13
LEGAL MATTERS....................................................... 13
EXPERTS............................................................. 13
2
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ADDITIONAL INFORMATION
This Prospectus is part of a Registration Statement on Form S-3 (together
with all amendments and exhibits thereto, the "Registration Statement") which
the Company has filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), relating to the securities offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information statements
and other information as well as the Registration Statement and Exhibits of
which this Prospectus is a part filed by the Company may be inspected and
copied at the public reference facilities of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549. 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,
1995, as amended; and (ii) the description of the Company's Common Stock
contained in the Company's Registration Statement on Form 8-A filed pursuant to
Section 12 of the Exchange Act and all amendments thereto and reports filed for
the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, subsequent to the date of this
Prospectus and prior to the termination of the offering described herein shall
be deemed to be incorporated by reference in this Prospectus from the
respective dates those documents are filed. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained
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herein or in any other subsequently filed document which 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
Casino Data Systems, 3300 Birtcher Drive, Las Vegas, Nevada 89118, Attention:
Mark Lipparelli, Director Investor Relations.
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RISK FACTORS
Each prospective investor should carefully consider the following factors,
among others, prior to purchasing any of the securities offered hereby.
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
introduced its first multi-site progressive link ("MSP") system, Cool Millions,
in Mississippi in November 1994 and in Nevada in May 1995 and has recently
begun to manufacture gaming machines for a video version of Caribbean Stud
poker, which is the first gaming machine developed and manufactured by the
Company. The Company recently entered into certain agreements (the "Telnaes
Agreements") to acquire rights to use certain technology that will enable the
Company to design and manufacture reel spinning slot machines. In addition, in
1994 the Company acquired a manufacturer of decorative slot machine glass, in
1995 acquired a casino sign manufacturer and a software developer, and in 1996
acquired 100% of Imageworks, Inc. The Company faces the risks, expenses and
difficulties frequently encountered by new and rapidly expanding businesses,
including, but not limited to, fluctuating cash flow, initial high development
costs of new products without corresponding sales pending receipt of regulatory
approvals and market introduction and acceptance of new products. There is no
assurance that the Company's new products will be accepted in the marketplace
and that regulatory approvals will be obtained. Furthermore, in each area of
the Company's business, the Company will need to manage the transition to
higher volume operations, entrance into new markets, integration of operations
and personnel from new lines of business, control of overhead expense and the
addition, training and management of qualified personnel. There is no
assurance that the Company can successfully manage the expansion of its MSP
systems and other businesses.
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.
RAPIDLY CHANGING TECHNOLOGY
Each area of the Company's business is characterized by rapidly changing
technology and frequent new product introductions and enhancements. The
Company's success will depend in substantial part upon its ability to continue
to enhance its existing products and to introduce in a timely manner new
products that meet evolving customer requirements and achieve market
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acceptance. There can be no assurance that the Company will be successful in
identifying, developing and marketing new products or enhancing its existing
products. The Company's business will be adversely affected if the Company
experiences delays in developing new products or enhancements or if such
products or enhancements do not gain customer acceptance.
COMPETITION
The market for MSP systems, casino management information systems, gaming
machines and each of the Company's other products are difficult markets in
which to compete. There are also a number of established, well-financed and
well-known companies that compete with each of the Company's products and
services. International Game Technology ("IGT") in particular, enjoys a
significant domestic and international market position in the Company's primary
markets, including casino management information systems, gaming machines and
MSP systems. In addition to its greater resources and established position in
domestic and international markets, management believes that IGT's ability to
link sales of gaming machines, casino information management systems and
placement of MSP systems provides IGT with a competitive advantage in the
development, marketing and sale of new casino management information systems,
MSP systems and gaming machines. The Company will also compete with other
established gaming machine manufacturers such as Bally Gaming International,
Inc. WMS Gaming, Inc. and Sigma Gaming, Inc. The development of a successful
new product or product design by a competitor could adversely affect sales of
the Company's products and, 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.
DEPENDENCE UPON KEY SUPPLIER
The Company depends upon a single manufacturer to supply it with slot
machines for use in its Cool Millions Dollars and new Cool Millions Quarters
MSP systems. The Company does not have a contract with the supplier. The
Company operates with a substantial inventory of slot machines; however a
significant interruption in delivery of slot machines from its supplier could
have a material adverse effect on the Company's results of operations.
DEPENDENCE UPON KEY EMPLOYEE
The Company's financial success is dependent to a large degree on the
experience and ability of Steven Weiss. The loss of the services of Mr. Weiss
would have a material adverse effect on the Company and its business prospects.
The Company has an employment agreement with Mr. Weiss that expires on December
31, 1997. Mr. Weiss is subject to certain non-competition provisions during
the term of the employment agreement and for two years thereafter, unless the
employment agreement is terminated by the Company or Mr. Weiss under certain
circumstances, including in the event of a change in control of the Company.
In addition,
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the Company has obtained key-man life insurance in the amount of $5 million
on the life of Mr. Weiss.
FACTORS AFFECTING PROFITABILITY AND GROWTH
Substantially 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, expansion and
renovation of casinos, the legalization of MSP systems and other forms of
casino gaming in new jurisdictions, the continued popularity of casino gaming
as a leisure activity and increased demand by gaming customers for progressive
jackpot games and game variations providing increased payout opportunities.
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.
Approximately 61% of the Company's 1995 revenues were derived from sales
of its casino management information systems and related products and services.
As a result, any factor adversely affecting sales of the Company's casino
management information systems would have an adverse effect on the Company.
Sales of casino management information systems are of a nonrecurring nature and
the Company's ability to maintain or increase revenues from sales in this
market is dependent upon the Company's ability to enter into new sales
agreements. Among the factors affecting the sales of casino management
information systems and related products are the rate of growth in the gaming
industry, the rate at which casinos add, replace or upgrade existing systems
and competition from other suppliers of casino management information systems.
The Company is continuing to expand into new businesses such as MSP systems
that generate recurring revenues, and meters, signs, graphics and gaming
machines, which are less dependent upon the construction of new casinos than
sales of the Company's historical core product, the OASIS (On-Line Accounting
and Slot Information System) II ("OASIS II"); however, such new businesses have
generally lower margins than OASIS II system sales. The Company's future
financial performance in a slower gaming growth environment depends in part on
the Company's ability to successfully expand its MSP systems and other
businesses and to develop and market new products such as video interactive
gaming machines that have technological, entertainment or marketing advantages
over existing products.
REGULATION AND LICENSING
The Company and its products are subject to gaming regulations in each
jurisdiction, including Native American land, in which it intends to operate
MSP systems or in which its products are sold or used by persons licensed to
conduct gaming activities. Such gaming regulations vary from jurisdiction to
jurisdiction and the classification and level of the regulatory licensing,
approvals and compliance to which the Company and its products must conform
also vary by jurisdiction. In certain jurisdictions, the Company or its
subsidiaries may be operating
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pursuant to temporary waivers or approvals. There can be no assurance that such
temporary waivers or approvals will be maintained or become permanent. Failure
by the Company or its subsidiaries to obtain, or the loss or suspension of, any
necessary licenses, approvals or suitability findings would prevent or restrict
the Company or its subsidiaries from operating, selling or distributing its
products in most jurisdictions, which would have a material adverse effect on
the Company. In the event gaming authorities determine that an officer,
director, key employee, stockholder or other person of the Company is unsuitable
to act in such a capacity, the Company will be required to terminate its
relationship with such person, which termination could have a material adverse
effect on the Company. Although the Company has the right to redeem shares of
an unsuitable stockholder under certain circumstances, such a finding of
unsuitability could in any event have a material adverse effect on the Company.
There can be no assurance that the Company or its subsidiaries will obtain all
the necessary licenses and approvals or that its officers, directors, key
employees, their affiliates and certain other stockholders will satisfy the
suitability requirements in each jurisdiction in which the Company or its
subsidiaries seeks to operate MSP systems or in which its products are sold or
used by persons licensed to conduct gaming activities. The failure to obtain
such licenses and approvals in one jurisdiction may affect the Company's
licensure and/or approvals in other jurisdictions. In addition, a significant
delay in obtaining such licenses and approvals could have a material adverse
effect on the business prospects of the Company.
INTELLECTUAL PROPERTY RIGHTS
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, 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 has applied for patents covering certain aspects of its MSP systems
and gaming devices. There is no assurance that such patents will be issued,
or, if issued, will offer meaningful protection of such intellectual property.
In addition, whether or not such patents are issued, others may hold or receive
patents which contain claims having a scope that covers products developed by
the Company. Furthermore, there can be no assurance that others have not
developed or will not develop similar products or technology, duplicate any of
the Company's products or technology, or design around any patents licensed to
the Company, or any patents that may be issued in the future to the Company.
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ACQUISITION OF TELNAES TECHNOLOGY
In February 1996, the Company entered into the Telnaes Agreements pursuant
to which the Company acquired from certain third parties non-exclusive rights
to use the Telnaes Technology. The Company's rights to practice the Telnaes
Technology and manufacture reel spinning slot machines may be subject to
challenge, however, by third parties under a variety of patent infringement,
contract and other theories. Specifically, the Company believes that IGT has
held certain rights to the Telnaes Technology for a number of years and may
contest the use of the Telnaes Technology by the Company or its subsidiaries.
Although the Company believes that its rights to use the Telnaes Technology
pursuant to the Telnaes Agreements are valid and enforceable, there can be no
assurance that a third party could not successfully challenge the transfer of
the rights to the Company. If the Telnaes Agreements are held to have not
validly transferred rights to the Telnaes Technology, the Company may incur a
substantial write-off of some or all of the amounts paid in connection with the
Telnaes Agreements (up to approximately $6 million in cash, notes and shares of
Common Stock) and the Company could be limited in its present plan to expand
into the manufacture of certain slot machines that utilize virtual reel
technology. In addition, the Company could be liable for damages for patent
infringement during the period of time that it used the Telnaes Technology
without possessing the valid right to such technology.
The Company believes that the validity of the patent underlying the
Telnaes Technology is the subject of at least two separate lawsuits seeking to
invalidate such patent. If the patent underlying the Telnaes Technology is
held invalid, other competitors likely would use the Telnaes Technology to
enter the reel spinning slot machine market, which may have an adverse effect
on the Company's operations and prospects, and the Company's investment in the
Telnaes Technology would have little or no value, which could also cause the
Company to incur a substantial write-off as described above. Finally, at least
one company, WMS Gaming, Inc., has announced that it has developed an
alternative means to produce a high-odds slot machine that, it contends, does
not utilize the Telnaes Technology. If WMS Gaming, Inc.'s alternative
technology is held not to infringe the Telnaes Technology, the value of the
Company's acquisition of the Telnaes Technology also would be reduced, and
additional competitors may enter the reel spinning slot machine market, which
may have an adverse effect on the Company's operations and prospects.
RIGHTS REGARDING CARIBBEAN STUD VIDEO POKER
On February 5, 1996, the Company entered into an agreement with Casino
Technology, Inc. ("CTI") pursuant to which the Company obtained an exclusive
five-year license to use CTI's intellectual property rights to develop,
manufacture and sell Caribbean Stud video poker machines in certain territory
within the United States. Although the Company believes that such intellectual
property rights are valid and enforceable, there can be no assurance as
to the extent or validity of such rights. Shuffle Master, Inc. has requested
that the patent office reexamine four patents licensed to the Company by CTI.
There can be no assurance of the outcome of such
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reexamination. If such patents or other licensed intellectual property rights
were held to be invalid, unenforceable or limited in scope so as not to fully
protect the Company's exclusive rights to develop, manufacture and sell the
Caribbean Stud video poker machine within its territory, or were it to be
determined that such rights were not validly transferred to the Company, the
Company may incur a substantial write-off of the costs of developing and
manufacturing the Caribbean Stud video poker machine, may incur liability to
third parties and may be limited in its present plan to introduce the Caribbean
Stud video poker machine. In addition, were these rights found to be invalid,
unenforceable or otherwise limited in scope, other competitors could not be
precluded from developing (and likely would develop) competing Caribbean Stud or
similar video poker machines. Any of such occurrences may have an adverse
effect on the Company's operations and prospects.
VARIABILITY OF QUARTERLY OPERATING RESULTS
The Company's operating results may vary substantially from quarter to
quarter. Revenues in any quarter are substantially dependent upon receipt of
contracts for installations of casino management information systems and, to a
lesser extent, MSP operations in that quarter. The Company's ability to obtain
new contracts for casino management information systems and to expand its MSP
operations are subject to numerous factors and contingencies, many of which are
beyond the Company's control, including, among others, the expansion of casino
gaming into new jurisdictions, the successful construction and licensing of new
casinos in existing gaming jurisdictions, the replacement or upgrading of
existing systems, the Company's ability to obtain regulatory approvals and
licensing, competitive factors and numerous other factors. The Company has
experienced a decline in its casino management information system sales in 1995
compared to 1994, which in 1995 constituted approximately 61% of the Company's
revenues. Notable quarterly variations in revenue and income may occur while
casino management information systems sales constitute a primary source of
revenue. In addition, as an MSP system operator, the Company is responsible
for paying jackpots. In the event that the Company experiences progressive
jackpot hits on its MSP system in amounts exceeding the accrued liability
recorded on its financial statements, such excess may have a material adverse
effect on the Company's future reported earnings.
POTENTIAL ANTI-TAKEOVER EFFECT
Executive officers and directors of the Company beneficially own
approximately 14% of its issued and outstanding shares of Common Stock and
therefore may exercise substantial influence over the Company's affairs,
including, without limitation, the sale of additional equity or debt securities
of the Company, which may have an anti-takeover effect. The Company's stock
option plan and certain of the executive officers' employment agreements provide
for the acceleration of the vesting and exercisability of stock options and
grants of stock thereunder under certain circumstances, including in the event
of a change in control of the Company. The Company is subject to Nevada
statutes regulating business combinations and restricting voting rights of
certain persons acquiring shares of the Company, which may hinder or delay a
change
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of control in the Company and may have an anti-takeover effect. Beneficial
owners of more than certain designated percentages of the Company's stock are
subject to certain reporting and qualification procedures established by various
state and federal gaming authorities, which may discourage acquisition of blocks
of Common Stock and may have an anti-takeover effect. In addition, the
Company's Articles of Incorporation authorize the Board of Directors to cause
the Company to issue preferred stock and common stock with superior rights and
preferences, the issuance of which may have the effect of discouraging an
acquisition of the Company and may also have an anti-takeover effect. Each
of the provisions or laws described above may have the effect of delaying or
making a change of the control of the Company more difficult to effect.
ABSENCE OF DIVIDENDS
The Company has never paid cash dividends on its Common Stock and does not
intend to pay any cash dividends on its Common Stock in the foreseeable future.
Future dividends will be declared at the discretion of the Board of Directors.
POSSIBLE STOCK PRICE VOLATILITY
The trading prices of the Common Stock could be subject to wide
fluctuations in response to quarterly variations in operating results and other
events or factors, including announcements of new products being manufactured
or distributed by the Company or its competitors, the cyclicity of the gaming
industry, regulatory developments and general economic and political factors.
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 may adversely affect the
prevailing market price of Common Stock and may impair the Company's ability to
raise additional capital by the sale of its equity securities. The Company
will have 17,732,198 shares of Common Stock outstanding immediately following
this offering, of which 2,509,856 shares will be held by executive officers and
directors of the Company. In addition, as of May 28, 1996, the Company had
1,627,723 shares of Common Stock subject to outstanding options granted under
its stock option plans and through direct grants.
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<PAGE> 14
USE OF PROCEEDS
All of the Shares included in this offering are for the account of the
Selling Shareholders. The Company will not receive any proceeds from the sale
of the Shares.
SELLING SHAREHOLDERS
The following table sets forth, as of May 31, 1996, the name of each
Selling Shareholder, certain beneficial ownership information with respect to
the Selling Shareholders, and the number of Shares that may be sold from time
to time by each pursuant to this Prospectus.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OUTSTANDING
BENEFICIALLY SHARES
SHARES OWNED UPON BENEFICIALLY OWNED
BENEFICIALLY SHARES COMPLETION OF UPON COMPLETION
OWNED OFFERED THE OF THE
SELLING SHAREHOLDER PRIOR TO OFFERING HEREBY OFFERING OFFERING
- ------------------- ----------------- ------ ------------- -----------------
<S> <C> <C> <C> <C>
Gregg R. Guiffria(1) 87,693 87,693 -0- -0-
Robert Huckabee, III(1) 4,615 4,615 -0- -0-
Raymond R. Alcini(1) 34,153 34,153 -0- -0-
Kim R. Kokkonen(2) 112,500 112,500 -0- -0-
Summit Systems, Inc.(1) 40,500 40,500 -0- -0-
Michael A. Hicks(3) 20,790 20,790 -0- -0-
Mark A. Potes(3) 2,160 2,160 -0- -0-
</TABLE>
(1) Messrs. Giuffria, Huckabee and Alcini and Summit Systems, Inc. received the
shares listed above as partial consideration for the Telnaes Technology
purchased by the Company in February 1996. The Company has agreed to use its
good faith efforts to file with the Securities and Exchange Commission a
registration statement with respect to these shares on or before August 1,
1996.
(2) The Company issued 112,500 shares of its Common Stock to Mr. Kokkonen in
connection with its acquisition of the assets of TurboPower Software in January
1995.
(3) Messrs. Hicks and Potes received their shares of the Company's Common Stock
in connection with the sale of their shares of Imageworks, Inc. capital stock
to the Company in March 1996, pursuant to a stock purchase agreement which
obligates the Company to use its good faith efforts to file a registration
statement with respect to such shares on or before August 1, 1996.
12
<PAGE> 15
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Shareholders, or
by pledgees, donees, transferees or other successors in interest. Such sales
may be made in the over-the-counter market, or otherwise, at prices and at
terms then prevailing or at prices related to the then current market price, or
in negotiated transactions. The Shares may be sold by one or more of the
following: (a) a block trade 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
of 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; and (d) ordinary brokerage transactions and
transactions in which the broker solicits purchases. In effecting sales,
brokers or dealers engaged by the Selling Shareholders may arrange for other
brokers or dealers to participate. Brokers or dealers will receive commissions
or discounts from Selling Shareholders in amounts to be negotiated immediately
prior to the sale. Such brokers or dealers and any other participating brokers
or dealers may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act") in connection with such sales.
In addition, any securities converted by this prospectus which qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
prospectus.
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon
for the Company by Maslon Edelman Borman & Brand, a Professional Limited
Liability Partnership ("Maslon"), Minneapolis, Minnesota. William M. Mower, a
director of the Company, is the sole stockholder of a professional association
that is a partner in Maslon. Mr. Mower owns options to purchase an aggregate
of 34,875 shares of Common Stock.
EXPERTS
The financial statements of Casino Data Systems as of December 31, 1995
and 1994 and for each of the years in the three year period ended December 31,
1995, incorporated by reference in this Prospectus and elsewhere in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
13
<PAGE> 16
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:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $ 1,395
Accounting Fees 5,000
Legal Fees and Expenses 10,000
Miscellaneous 1,000
-------
Total $17,395
=======
</TABLE>
ITEM 15.INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 78.751 and 78.752 of the General Corporation Law of Nevada
read as follows:
78.751 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
ADVANCEMENT OF EXPENSES.
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, has no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
II-1
<PAGE> 17
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorneys' fees actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which such
a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense of
any claim, issue or matter therein, he must be indemnified by the corporation
against expenses, including attorneys' fees, actually and reasonably incurred
by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a
court or advanced pursuant to subsection 5, must be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act, suit or
proceeding;
(c) If a majority vote of a quorum consisting of directors who were
not parties to the act, suit or proceeding so orders, by independent
legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
act, suit or proceeding cannot be obtained, by independent legal counsel
in a written opinion.
5. The certificate or articles of incorporation, the bylaws or an
agreement made by the corporation may provide that the expenses of officers and
directors incurred in defending a civil or criminal action, suit or proceeding
must be paid by the corporation as they are incurred and in advance of the
final disposition of the action, suit or proceeding, upon receipt of an
undertaking
II-2
<PAGE> 18
by or on behalf of the director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. The provisions of this
subsection do not affect any rights to advancement of expenses to which
corporate personnel other than directors or officers may be entitled under any
contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
certificate or articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an
action in his official capacity or an action in another capacity while
holding his office, except that indemnification, unless ordered by a
court pursuant to subsection 2 or for the advancement of expenses made
pursuant to subsection 5, may not be made to or on behalf of any director
or officer if a final adjudication establishes that his acts or omissions
involved intentional misconduct, fraud or a knowing violation of the law
and was material to the cause of action.
(b) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
78.752 INSURANCE AND OTHER FINANCIAL ARRANGEMENTS AGAINST LIABILITY OF
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.-1. A corporation may purchase and
maintain insurance or make other financial arrangements on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise for any liability asserted against him and liability and
expenses incurred by him in his capacity as a director, officer, employee or
agent or arising out of his status as such, whether or not the corporation has
the authority to indemnify him against such liability and expenses.
2. The other financial arrangements made by the corporation pursuant to
subsection 1 may include the following:
(a) The creation of a trust fund.
(b) The establishment of a program of self-insurance.
(c) The securing of its obligation of indemnification by granting a
security interest or other lien on any assets of the corporation.
(d) The establishment of a letter of credit, guaranty or surety.
II-3
<PAGE> 19
No financial arrangement made pursuant to this subsection may provide
protection for a person adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for intentional misconduct,
fraud or a knowing violation of law, except with respect to the advancement of
expenses or indemnification ordered by a court.
3. Any insurance or other financial arrangement made on behalf of a
person pursuant to this section may be provided by the corporation or any other
person approved by the board of directors, even if all or part of the other
person's stock or other securities is owned by the corporation.
4. In the absence of fraud:
(a) The decision of the board of directors as to the propriety of
the terms and conditions of any insurance or other financial arrangement
made pursuant to this section and the choice of the person to provide the
insurance or other financial arrangement is conclusive; and
(b) The insurance or other financial arrangement:,
(1) Is not void or voidable; and
(2) Does not subject any director approving it to personal
liability for his action, even if a director approving the
insurance or other financial arrangement is a beneficiary of the
insurance or other financial arrangement.
5. A corporation or its subsidiary which provides self-insurance for
itself or for another affiliated corporation pursuant to this section is not
subject to the provisions of Title 57 of NRS.
Article Fifth of the registrant's Articles of Incorporation reads as
follows:
FIFTH: No Director or Officer of this Corporation shall be liable to
the Corporation or its stockholders for any breach of fiduciary duty as
Officer or Director of the Corporation. This provision shall not affect
liability for acts or omissions which involve intentional misconduct,
fraud, a knowing violation of law, or the payment of dividends in
violation of NRS 78.300.
All expenses incurred by Officers or Directors in defending a civil
or criminal action, suit, or proceeding, must be paid by the Corporation
as they are incurred in advance of a final disposition of the action,
suit or proceeding, upon receipt of an undertaking by or on behalf of a
Director or Officer to repay the amount if it is ultimately determined by
a court of competent jurisdiction, that he or she did not act in good
faith, and in the manner he or she reasonably believed to be or not
opposed to the best interests of the Corporation.
II-4
<PAGE> 20
A policy of directors' and officers' insurance is maintained by the
registrant under which the directors and officers of the registrant will be
insured, within the limits and subject to the limitations of the policy,
against certain expenses in connection with the defense of actions, suits or
proceedings to which they are parties by reason of being or having been such
directors or officers.
ITEM 16. EXHIBITS.
EXHIBIT DESCRIPTION OF DOCUMENT
- ------- -----------------------
5 Opinion of Maslon Edelman Borman & Brand, a Professional Limited
Liability Partnership.
23(1) Consent of KPMG Peat Marwick LLP.
23(2) Consent of Maslon Edelman Borman & Brand, a Professional Limited
Liability Partnership (included in Exhibit 5).
24 Power of Attorney (included on pages II-6 and II-7).
- -------------
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-5
<PAGE> 21
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 Las Vegas, State of
Nevada, on July 11, 1996.
CASINO DATA SYSTEMS
Registrant
By:
---------------------------------------------
Name: Russell C. Mix
Title: Senior Vice President, General Counsel
and Secretary
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below
hereby constitutes and appoints Russell C. Mix and William M. Mower, 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.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 11th day of July, 1996 by
the following persons in the capacities indicated:
SIGNATURE TITLE
--------- -----
/s/ Steven A. Weiss Chairman of the Board and Chief Executive
- ---------------------------- Officer (principal executive officer)
Steven A. Weiss
/s/ G. Jack Kiland Director
- ----------------------------
G. Jack Kiland
II-6
<PAGE> 22
/s/ Phil E. Bryan Director
- -----------------------------------
Phil E. Bryan
/s/ Diana L. Bennett President, Chief Operating Officer and
- ----------------------------------- Director (principal financial and
Diana L. Bennett accounting officer)
/s/ Russell C. Mix Senior Vice President, General Counsel,
- ----------------------------------- Secretary and Director
Russell C. Mix
/s/ William M. Mower Director
- -----------------------------------
William M. Mower
/s/ Karl K. Hoagland, III Director
- -----------------------------------
Karl K. Hoagland, III
/s/ Daniel N. Copp Director
- -----------------------------------
Daniel N. Copp
By: /s/ Russell C. Mix
--------------------------------
Russell C. Mix
Senior Vice President,
General Counsel and Secretary
II-7
<PAGE> 23
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ----
5 Opinion of Maslon Edelman Borman & Brand, a Professional Limited
Liability Partnership.
23(1) Consent of KPMG Peat Marwick LLP.
23(2) Consent of Maslon Edelman Borman & Brand, a Professional Limited
Liability Partnership (included in Exhibit 5).
II-8
<PAGE> 1
EXHIBIT 5
July 12, 1996
Casino Data Systems
3300 Birtcher Drive
Las Vegas, Nevada 89118
Ladies and Gentlemen:
We have acted on behalf of Casino Data Systems, a Nevada 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 July 12, 1996 relating to the
registration under the Securities Act of 1933, as amended, of 302,411 shares
(the "Shares") of the Company's Common Stock, no par value.
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 Nevada.
2. The Shares have been duly authorized, validly issued, fully paid and
are 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.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by or furnished to any other person without our prior written
consent.
Very truly yours,
/s/ Maslon Edelman Borman & Brand,
a Professional Limited Liability Partnership
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Casino Data Systems:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Las Vegas, Nevada
July 8, 1996
