<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
FOR THE FISCAL YEAR ENDED JUNE 30, 2000
(Commission File No.) 0-22498
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ACRES GAMING INCORPORATED
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
NEVADA 88-0206560
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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7115 AMIGO, SUITE 150, LAS VEGAS, NEVADA 89119
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(702) 263-7588
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.01 par value
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant computed by reference to the price at which the
common equity was sold, or the average bid and asked prices of such common
equity, as of September 30, 2000 was $11,497,842. For purposes of this
computation, all executive officers and directors of the Registrant have been
deemed affiliates. This shall not be deemed an admission that such persons are
affiliates.
The number of shares outstanding of the Registrant's Common Stock, par value
$.01 per share, as of September 30, 2000 was 8,917,181 shares.
<PAGE> 2
EXPLANATORY NOTES
The information required by Part III, Items 10 through 13, was to be
incorporated by reference to the Company's Proxy Statement to be filed in
connection with the Company's 2000 Annual Meeting of Stockholders to be held
December 15, 2000. The Company's Definitive Proxy Statement will not be filed
with the Commission within the 120-day period after the end of the Company's
fiscal year. Part III, Items 10 through 13 are therefore filed herewith.
<PAGE> 3
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information about the Common Stock Nominees and Other Management Personnel:
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITIONS WITH THE COMPANY AGE SINCE
---- -------------------------- --- -----
<S> <S> <C> <C>
Floyd W. Glisson Chairman of the Board of Directors and 53 1997
Chief Executive Officer
Richard A. Carone Director 52 1997
Robert W. Brown Director 45 2000
Reed M. Alewel Senior Vice President, Chief Financial 36
Officer, Secretary and Treasurer
Richard J. Schneider President and Chief Operating Officer 43
</TABLE>
Floyd W. Glisson became Chairman of the Board of Directors in April 2000
and has served as the Chief Executive Officer since July 1998. Mr. Glisson also
served as President from July 1998 to April 2000. Mr. Glisson was senior vice
president, finance and administration and chief financial officer for ConAgra
Grocery Products Company, a unit of ConAgra, Inc., from April 1995 to July 1998.
Richard A. Carone has been general manager of Accufab Systems, a
robotics company based in Corvallis, Oregon, since 1985.
Robert W. Brown has been a self employed consultant as president of
Brown Financial Consulting, LLC in Corvallis, Oregon since July 1999. Mr. Brown
served as the Company's executive vice president, chief financial officer and
treasurer from July 1993 to July 1999.
Richard J. Schneider became President in April 2000 and has served as
the Chief Operating Officer since July 1999. Mr. Schneider joined the Company in
December 1997 as the Vice President of Game Development and became a Vice
President and Chief Operating Officer in July 1999. From September 1995 to
December 1997, Mr. Schneider was the vice president of game engineering for
Casino Data Systems. Mr. Schneider is also on the board of directors of GAMMA, a
non-profit industry group.
Reed M. Alewel became Senior Vice President in July 2000, became
Secretary in November 1999 and has served as Chief Financial Officer and
Treasurer since July 1999. Mr. Alewel joined the Company in October 1996 as
Controller and Assistant Secretary. Mr. Alewel was the manager of financial
planning and analysis for the American Italian Pasta Company, a food
manufacturing company, from May 1992 to October 1996.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the Company's officers, directors and persons who
own more than 10 percent of the Common Stock of the Company file with the
Securities and Exchange Commission (the "SEC") initial reports of beneficial
ownership on Form 3 and reports of changes in beneficial ownership of Common
Stock and other equity securities of the Company on Form 4 and Form 5. Officers,
directors and holders of more than 10 percent of the Company's Common Stock are
required by SEC regulations to furnish to the Company copies of all Section
16(a) reports that they file. To the Company's knowledge, based solely on a
review of copies of such reports furnished to the Company and written
representation that no other reports are required, during the 2000 fiscal year
all Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with by such persons.
<PAGE> 4
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth certain information for each of the
fiscal years ended June 30, 2000, 1999 and 1998 regarding compensation accrued
or paid to the Company's Chief Executive Officer and each Executive Officer who
accrued or was paid compensation in excess of $100,000 in the fiscal year ended
June 30, 2000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
--------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Floyd W. Glisson 2000 $300,000 $ 50,000 $ 9,539(1)
Chairman of the Board of Directors and Chief 1999 28,750 -- 40,531(1)
Executive Officer 1998 -- -- --
Richard J. Schneider 2000 171,667 -- --
President and Chief Operating Officer 1999 131,250 -- --
1998 1,500 -- --
Reed M. Alewel 2000 120,000 -- 21,658(2)
Senior Vice President, Chief Financial Officer, 1999 89,947 -- 4,375(3)
Secretary and Treasurer 1998 86,198 -- 15,000(3)
John F. Acres 2000 39,018 -- 279,556(5)
Chairman of the Board of Directors(4) 1999 350,000 -- --
1998 300,000 -- --
</TABLE>
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(1) Mr. Glisson received a reimbursement of certain expenses he incurred in
conjunction with his relocation to Las Vegas, Nevada.
(2) Mr. Alewel received a reimbursement of certain expenses he incurred in
conjunction with his relocation to Las Vegas, Nevada.
(3) Mr. Alewel received a reimbursement of certain expenses he incurred in
conjunction with his relocation to Corvallis, Oregon.
(4) In April 2000, Mr. Acres resigned as Chairman of the Board of Directors.
Mr. Acres was the Chief Executive Officer of the Company until July
1998.
(5) Mr. Acres received $38,333 under certain non-compete provisions of his
employment agreement and received $241,223 for consulting services
provided to the Company.
The following table sets forth certain information regarding options
granted during the fiscal year ended June 30, 2000, to the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OPTION TERM(4)
UNDERLYING EMPLOYEES IN PRICE EXPIRATION -------------------------
NAME OPTIONS FISCAL YEAR ($/SHARE) DATE(3) 5% 10%
---- ---------- ------------ ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Floyd W. Glisson 135,000(1) 24% $ 1.00 12/8/09 $ 219,901 $ 350,155
Richard J. Schneider 50,000(2) 9% 1.00 12/8/09 81,445 129,687
Reed M. Alewel 50,000(2) 9% 1.00 12/8/09 81,445 129,687
</TABLE>
(1) Options vested upon grant.
(2) 12,500 options vested upon grant and 12,500 vested April 1, 2000. The
remaining options vest ratably on April 1, 2001 and 2002.
(3) The options expire ten years from the date of grant.
(4) Future value of current year grants assuming appreciation of 5% and 10%
per year over the ten-year option period. The actual value realized may
be greater than or less than the potential realizable values set forth
in the table.
<PAGE> 5
There were no exercises of stock options by the Named Executive Officers
during the fiscal year ended June 30, 2000. The following table sets forth the
number of securities underlying unexercised options and the value of unexercised
in-the-money options at fiscal year end.
AGGREGATED FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT FISCAL
YEAR END YEAR END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ------------------------- ----------------------------
<S> <C> <C>
Floyd W. Glisson 310,500 / 132,000 $101,250 / $0
Richard J. Schneider 45,000 / 55,000 $18,750 / $18,750
Reed M. Alewel 46,600 / 53,400 $18,750 / $18,750
John F. Acres 0 / 0 $0 / $0
</TABLE>
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(1) The market price of the Company's Common Stock was $1.75 at June 30,
2000.
RETIREMENT SAVINGS PLAN
The Company maintains a profit sharing and savings plan (the "401(k)
Plan") under Section 401(k) of the Internal Revenue Code of 1986, as amended
(the "Code"), which allows employees to contribute up to 15 percent of their
pre-tax income to the 401(k) Plan. The 401(k) Plan includes a discretionary
matching contribution by the Company and provides that the Company may make an
additional discretionary contribution out of profits at the end of any year. The
Company has not made any discretionary matching contributions nor any additional
discretionary contributions under the 401(k) Plan.
STOCK OPTIONS
The Acres Gaming Incorporated 1993 Stock Option and Incentive Plan (the
"1993 Plan") was adopted by the Board of Directors of the Company and approved
by the stockholders in 1993. The 1993 Plan permits the granting of awards to
employees and consultants of the Company in the form of stock options and grants
of restricted stock. Stock options granted under the 1993 Plan may be "incentive
stock options" meeting the requirement of Section 422 of the Code or
non-qualified options which do not meet the requirements of Section 422. A total
of 1,750,000 shares of the Company's Common Stock has been reserved for issuance
pursuant to awards granted under the 1993 Plan. As of September 30, 2000, an
aggregate of 1,108,867 shares were subject to outstanding stock options, and
290,783 shares were available for grant. The exercise prices for currently
outstanding stock options range from $.94 to $15.00 per share. Options for
350,350 shares have been exercised under the 1993 Plan. No grants of restricted
stock have been made under the 1993 Plan.
The 1993 Plan is administered by the Compensation Committee of the Board
of Directors. The 1993 Plan gives broad powers to the Committee to administer
and interpret the 1993 Plan, including the authority to select the individuals
to be granted options and to prescribe the particular form and conditions of
each option granted. Options may be granted pursuant to the 1993 Plan through
July 2003. The 1993 Plan may be terminated earlier by the Board of Directors in
its sole discretion.
In fiscal year 2000, the Company issued 185,000 non-qualified options
stock options to certain management employees outside of the 1993 Plan. The
options have an exercise price of $1.00 which was the market price of the
Company's Common Stock on the grant date. The terms and conditions of these
options were consistent with the terms and conditions of non-qualified options
issued under the 1993 Plan except 135,000 of these non-qualified options granted
to Mr. Glisson vested on grant date and will remain exercisable for the 10-year
option term even if Mr. Glisson's employment with the Company is terminated
during such term.
<PAGE> 6
COMPENSATION OF DIRECTORS
Non-employee directors receive an annual fee of $25,000 and $1,000 per
board meeting or committee meeting (other than meetings held in connection with
a board meeting) plus expenses. Non-employee directors also receive options to
purchase 7,500 shares of the Company's Common Stock at a price equal to fair
market value on the date they are first elected to the board; 25 percent of
those options vest immediately; the balance over three years. In addition,
non-employee directors are granted options to purchase an additional 2,500
shares of Common Stock at each annual meeting of stockholders after such
director has served a full year. Those options vest over three years on the same
basis as the initial option grants. Mr. Carone and Mr. Brown will each receive
options to purchase 2,500 shares of the Company's Common Stock in connection
with the Company's 2000 annual meeting of stockholders.
EMPLOYMENT CONTRACTS
The Company entered into an employment agreement with Mr. John F. Acres
effective July 1, 1996, and amended on July 20, 1998 and again effective July 1,
1999 (the "Acres Employment Agreement"). The initial term of the Acres
Employment Agreement runs through June 30, 2001, subject to prior termination.
The Company or Mr. Acres may terminate the Acres Employment Agreement at any
time. Upon the appointment of Mr. Glisson as President and Chief Executive
Officer in fiscal 1999, Mr. Acres remained as Chairman of the Board and agreed
to reduce his Base Salary for the fiscal year ending June 30, 2000 to $50,000
with no opportunity for a bonus. In April 2000, Mr. Acres resigned as Chairman
of the Board, but continues to receive consulting fees commensurate with the
level of services Mr. Acres provides to the Company. Consulting fees payable to
Mr. Acres for fiscal year ending June 30, 2001 are estimated to be less than
$100,000.
The Acres Employment Agreement provides that upon termination, provided
the Company makes certain termination payments to Mr. Acres, Mr. Acres will not,
directly or indirectly, be connected in any manner with any business that
competes with the Company or solicit or entice or divert any customer or
supplier from the Company. The Company has elected to make such termination
payments and, if it continues to do so, such payments will amount to $225,000 in
fiscal year ending June 30, 2001.
The Company has entered into an employment arrangement with Floyd W.
Glisson pursuant to which Mr. Glisson received a base salary of $30,000 for the
fiscal year ended June 30, 1999, was awarded options to purchase 300,000 shares
of the Company's common stock that vest over a five-year period, and will
receive severance payments equal to six months' base salary upon an involuntary
termination of his employment with the Company. For the fiscal year ended June
30, 2000, Mr. Glisson's base salary was $300,000, plus a $50,000 bonus paid
ratably over the fiscal year.
COMMITTEES OF THE BOARD OF DIRECTORS AND COMPENSATION COMMITTEE INSIDER
PARTICIPATION
The Company has a standing Audit Committee and a Compensation Committee
but no Nominating Committee. In fiscal 2000, the Audit Committee consisted of
Mr. Brown, Chairman, and Mr. Carone and the Compensation Committee consisted of
Mr. Carone, Chairman, and Mr. Brown. Mr. Brown was Executive Vice President,
Chief Financial Officer and Treasurer of the Company from July 1993 to July 1999
and continues to provide limited consulting services to the Company.
The Audit Committee reviews and makes recommendations to the Board
regarding services provided by the independent accountants, reviews with the
independent accountants the scope and results of their annual examination of the
Company's consolidated financial statements and any recommendations they may
have, and makes recommendations to the Board with respect to the engagement or
discharge of the independent accountants. The Audit Committee also reviews the
Company's procedures with respect to maintaining books and records, the adequacy
and implementation of internal auditing, accounting and financial controls, and
the Company's policies concerning financial reporting and business practices.
<PAGE> 7
The Compensation Committee makes recommendations to the Board regarding
officers' compensation, management incentive compensation arrangements and
administers the Company's Stock Option and Incentive Plan.
REPORT ON EXECUTIVE COMPENSATION
The underlying objectives of the Company's compensation strategy are to
attract and retain the best possible executive talent, to motivate those
executives to achieve optimum operating performance for the Company, to link
executive and stockholder interests through equity-based plans and to provide a
compensation package that recognizes individual contributions as well as overall
business results. There are three components to the Company's executive
compensation: base salary, long-term incentives in the form of stock options,
and incentive (bonus) payments.
Base Salary. Base salary for each executive officer, other than Mr.
Glisson's, was subjectively determined by an assessment of his or her sustained
performance, advancement potential, experience, responsibility, scope and
complexity of the position, and current salary in relation to salary levels for
comparable positions in the industry, based on the Company's general awareness
of such salary levels. Mr. Glisson's compensation for the fiscal year ending
June 30, 2001 is based on his employment arrangement effective July 1, 1999.
Long-Term Incentives. Stock options have been granted to the Chairman
and other executive officers to encourage management of the Company from the
perspective of an owner with an equity interest in the Company. Vesting is used
to encourage key employees to continue in the employ of the Company.
Annual Incentives. Certain members of management may participate in an
annual incentive plan, the goals of which are determined annually by the
Company's Board of Directors. No payments under the annual incentive plan were
made in the fiscal year ended June 30, 2000.
Compensation Committee Chairman
Richard A. Carone
Robert W. Brown
<PAGE> 8
PERFORMANCE GRAPH
The following graph compares total cumulative return to holders of the
Company's Common Stock with the cumulative total return of the Nasdaq US Stock
Market and a peer group index created by the Company for the five year period
ended June 30, 2000. The Company uses a peer group (the "Peer Group") which
consists of the following companies: Shuffle Master, Alliance Gaming
Corporation, Casino Data Systems, International Game Technology, Mikohn Gaming
Corporation, WMS Industries, Anchor Gaming and Innovative Gaming Corp. of
America.
PERFORMANCE GRAPH
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
TOTAL RETURN ANALYSIS
6/30/95 6/28/96 6/30/97 6/30/98 6/30/99 6/30/00
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
ACRES GAMING $100.00 $120.97 $112.91 $ 64.52 $ 25.81 $ 22.58
PEER GROUP 100.00 192.30 $228.83 319.46 218.36 286.72
NASDAQ COMPOSITE 100.00 127.57 $155.73 205.46 292.32 432.51
</TABLE>
Assumes $100 invested in the Company's Common Stock, the Nasdaq Stock
Market and the Peer Group, with all dividends reinvested. Stock price shown
above for the Common Stock is historical and not necessarily indicative of
future price performance.
<PAGE> 9
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of shares of the Company's Common Stock by each director of the
Company, by each Named Executive Officer, by all directors and executive
officers of the Company as a group, and by each stockholder who is known by the
Company to own more than 5 percent of the Company's Common Stock as of September
30, 2000.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OUTSTANDING(2)
---------------- ---------------------- ---------------
<S> <C> <C>
Floyd W. Glisson 424,500 (3) 4.6%
Richard A. Carone 25,000 (4) *
Robert W. Brown 151,875 (5) 1.7%
Richard J. Schneider 45,000 (6) *
Reed M. Alewel 51,109 (7) *
All directors and executive officers as a group 7.3%
(5 persons) 697,484 (8)
John F. and Jo Ann Acres 2,012,529 (9) 22.5%
International Game Technology ("IGT") 2,229,295(10) 20.0%
</TABLE>
---------------------
*Less than 1%.
(1) "Beneficial Ownership" is defined pursuant to Rule 13d-3 of the Exchange
Act, and generally means any person who directly or indirectly has or
shares voting or investment power with respect to a security. A person
shall be deemed to be the beneficial owner of a security if that person
has the right to acquire beneficial ownership of such security within 60
days, including, but not limited to, any right to acquire such security
through the exercise of any option or warrant or through the conversion
of a security. Each person has sole voting and sole dispositive power
with respect to all outstanding shares, except as noted.
(2) Based on 8,917,181 shares outstanding at September 30, 2000. Any
securities not outstanding that are subject to options or warrants held
by a person shall be deemed to be outstanding for the purpose of
computing the percentage of outstanding securities of the class owned by
such person, but shall not be deemed to be outstanding for the purpose
of computing the percentage of the class owned by any other person.
(3) Includes 81,000 shares owned jointly with Mr. Glisson's wife as trustees
of the Glisson Family Trust, with respect to which Mr. Glisson has
shared voting and shared dispositive powers and 343,500 shares subject
to options exercisable within 60 days of September 30, 2000.
(4) Includes 10,000 shares subject to options exercisable within 60 days of
September 30, 2000.
(5) Includes 2,000 shares Mr. Brown holds as trustee for the benefit of his
minor children, with respect to which he has sole voting and dispositive
powers. Includes 149,875 shares subject to options exercisable within 60
days of September 30, 2000.
(6) Includes 45,000 shares subject to options exercisable within 60 days of
September 30, 2000.
(7) Includes 2,000 shares owned jointly with Mr. Alewel's wife and 339
shares held as trustee for the benefit of his minor children, with
respect to which Mr. Alewel has shared voting and shared dispositive
powers. Also includes 620 shares held by Mr. Alewel's wife with respect
to which he has no voting or dispositive powers. Includes 46,600 shares
subject to options exercisable within 60 days of September 30, 2000.
(8) Includes 594,975 shares subject to options exercisable within 60 days of
September 30, 2000.
(9) Includes 1,798,866 shares held by the John and Jo Ann Acres 1989 Living
Trust, a revocable trust established by Mr. Acres and Mrs. Acres, with
respect to which Mr. Acres and Mrs. Acres have shared voting and shared
dispositive powers. Also includes 204,288 shares beneficially owned by
their children who reside in their household, with respect to which Mr.
Acres and Mrs. Acres have no voting or dispositive powers. Includes
9,375 shares subject to options exercisable by Mrs. Acres within 60 days
of September 30, 2000, which options expire on October 20, 2000.
(10) Shares issuable on conversion of Series A Convertible Preferred Stock
owned by IGT based on the conversion price in effect on September 30,
2000 subject to ownership limitations contained in the Stock Purchase
Agreement between IGT and the Company pursuant to which IGT purchased
519,481 shares of Series A Stock. The Stock Purchase Agreement restricts
IGT's ownership of the
<PAGE> 10
Company's Common Stock. Without the consent of the Company, IGT may not
own more than 20% of the outstanding Common Stock, including, for
purposes of the calculation, the shares of Common Stock into which the
Series A Stock owned by IGT is convertible. The Company believes that
this provision operates to limit IGT's right to convert shares of Series
A Stock as well as limiting IGT's rights to purchase additional shares
of Common Stock. IGT has asserted that the agreement does not limit the
number of shares into which the Series A Stock may be converted. If
there were no limit on IGT's right to convert shares of Series A Stock
into Common Stock, as of September 30, 2000, the Series A Stock could
have been converted into 3,006,615 shares of Common Stock, or 25.2% of
the then outstanding Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no relationships or transactions that have been conducted
during the fiscal year, or that are planned, that would require disclosure under
this item.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this amendment
to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: October 26, 2000
ACRES GAMING INCORPORATED
(Registrant)
By: /s/ Reed M. Alewel
------------------------
Reed M. Alewel
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer
