As filed with the Securities and Exchange Commission on January 18, 2002
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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ACRES GAMING INCORPORATED
(Exact name of Registrant as specified in its charter)
Nevada 88-0206560
(State of Incorporation) (I.R.S. Employer Identification No.)
7115 Amigo, Suite 150
Las Vegas, Nevada 89119
(702) 263-7588
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Patrick W. Cavanaugh
Senior Vice President and Chief Financial Officer
ACRES GAMING INCORPORATED
7115 Amigo, Suite 150
Las Vegas, Nevada 89119
(702) 263-7588
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies to:
Patrick J. Simpson
PERKINS COIE LLP
1211 S.W. Fifth Avenue, Suite 1500
Portland, OR 97204
(503) 727-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective.
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 of 1933 of 1933, please check
the following box and list the Securities Act of 1933 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 of 1933, check the following box and list the
Securities Act of 1933 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
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Proposed Proposed
Maximum Maximum
Title of Each Class Offering Aggregate Amount of
of Securities to be Amount to be Price Per Offering Registration
Registered Registered(1) Share(2) Price(2) Fee
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Common Stock, $.01 par 3,033,639 $4.96 $15,046,849.44 $1,384.31
value per share
(1) All 3,033,639 shares registered pursuant to this registration statement
are to be offered by the selling shareholders. This registration statement
covers a contractually agreed upon number of shares, calculated as follows:
(i) 200% of the number of shares of common stock issuable upon conversion of
convertible subordinated debentures, (ii) 100% of the number of shares of
common stock issuable upon exercise of warrants, and (iii) 100% of the number
of shares of common stock issuable in lieu of cash for interest payments on
convertible subordinated debentures. Though the conversion price of the
debentures is fixed, the number of shares being registered includes 200% of
the number of shares of common stock issuable upon conversion of the
debentures at an adjusted conversion price. If we fail to timely register the
common stock issuable upon conversion of the debentures and exercise of the
warrants, the holders of the debentures will have the right to convert the
outstanding principal amount under the debentures at an adjusted conversion
price, which will be equal to the lesser of $4.6433 or 90% of an average
market price per share (calculated as the average of the five lowest daily
volume-weighted average prices of our common stock on the Nasdaq SmallCap
Market for the 22 consecutive trading days immediately preceding the
conversion date). Additionally, we may elect to repay the outstanding
principal amount under the debentures in shares of our common stock at this
adjusted conversion price rather than in cash. For purposes of this
registration statement, we were obligated to register 200% of the number of
conversion shares issuable at the adjusted conversion rate as of December 21,
2001. Pursuant to Rule 416 under the Securities Act of 1933, this
registration statement also covers an indeterminate number of shares that may
be issued as a result of stock splits, stock dividends and similar
transactions under the convertible subordinated debentures and the warrants.
However, such number does not include additional shares (beyond those
specifically registered pursuant to this registration statement) that may be
issued as a result of adjustments to the conversion price of the convertible
subordinated debentures.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 on the basis of the
average of the high and low sales prices of our common stock on January 16,
2002, as reported on the Nasdaq SmallCap Market.
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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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
The information in this prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not offering
to sell securities and is not soliciting offers to buy these securities in any
state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JANUARY 18, 2002
PROSPECTUS
1,329,871 SHARES
(plus up to 1,703,768 additional shares)
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COMMON STOCK
PAR VALUE $.01 PER SHARE
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ACRES GAMING INCORPORATED
Our common stock is traded on the Nasdaq SmallCap Market (R) under the
symbol "AGAM". On January 16, 2002, the last sale price of the common stock, as
reported on the Nasdaq SmallCap Market, was $4.95 per share.
The selling shareholders listed in the section titled "Selling
Shareholders" below may offer for sale from time to time up to 1,076,820 shares
of our common stock issuable upon conversion of 6% convertible subordinated
debentures, up to 253,051 shares of our common stock issuable upon exercise of
warrants and up to an additional 1,703,768 shares of our common stock that we
may issue, at our option, to pay interest on and principal of the debentures, or
that we might have to issue if we fail to timely register the common stock
issuable upon conversion of the debentures and exercise of the warrants.
We will not receive any proceeds from the sale of the shares issued upon
conversion of the debentures that are subsequently sold by selling shareholders.
If any of the warrants are exercised, we will receive proceeds from the exercise
of each warrant equal to its exercise price. The exercise price for the warrants
is $4.6433 per share.
The selling shareholders may sell the shares of common stock offered by
this prospectus at prevailing market prices or at prices negotiated with
purchasers. The selling shareholders will be responsible for any commissions or
discounts due to brokers or dealers. The amount of those commissions or
discounts cannot be known now because they will be negotiated at the times of
the sales. We will pay all other offering expenses. We cannot tell you whether
the selling shareholders will sell all or any portion of the common stock
offered under this prospectus.
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INVESTING IN THE COMMON STOCK INVOLVES RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense. Neither the Nevada Gaming Commission nor the Nevada State
Gaming Control Board 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.
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THE DATE OF THIS PROSPECTUS IS JANUARY __, 2002
TABLE OF CONTENTS
Page
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ACRES GAMING INCORPORATED ............................................ 1
RECENT DEVELOPMENTS .................................................. 1
RISK FACTORS ......................................................... 3
If the Selling Shareholders Convert the 6% Convertible
Subordinated Debentures and Exercise the Warrants, Our
Existing Shareholders' Interests Will Be Significantly
Diluted; Sales of Substantial Amounts of Our Stock
Could Cause the Price to Go Down .................................. 3
Our Stock Price Has Been Volatile, Which May Make It
More Difficult to Resell Shares When You Want at Prices
You Find Attractive, and Could Result in Litigation ............... 3
If Our Quarterly Operating Results Continue to
Fluctuate, It Could Cause Continued Volatility in Our
Stock Price ....................................................... 4
We Have Substantial Indebtedness and, If We Fail to
Perform Our Obligation to the Selling Shareholders, We
May Be Required to Pay Substantial Penalties to Them .............. 5
Changes in Business and Economic Conditions Generally
and in the Gaming Industry and the Economic Impact of
Recent Terrorist Attacks Could Reduce Our Revenues ................ 6
An Inability to Maintain Sufficient Liquidity Could
Negatively Affect Expected Levels of Operations and New
Product Development ............................................... 6
Our Reliance on a Few Major Customers Increases the
Risk of an Adverse Effect From the Loss of Such Customers ......... 6
The Costs of or an Unfavorable Outcome Arising From
Litigation Could Have a Negative Impact on Us ..................... 6
Our Revenues and Operating Results Could Be Harmed by
Product Concentration, Competition, or Technological Change ....... 7
Government Regulation of Us and Our Products Could
Result in Potential Restrictions on Sales of Our Products ......... 7
Our Intellectual Property Protections May Be
Insufficient to Properly Protect Our Trade Secrets and
Our Products From Being Copied .................................... 7
FORWARD-LOOKING INFORMATION .......................................... 8
HOW TO OBTAIN MORE INFORMATION ....................................... 8
USE OF PROCEEDS ...................................................... 9
SELLING SHAREHOLDERS.................................................. 9
PLAN OF DISTRIBUTION ................................................. 12
LEGAL MATTERS ........................................................ 14
EXPERTS .............................................................. 14
ACRES GAMING INCORPORATED
Acres Gaming Incorporated is a Nevada corporation formed in 1985. Our
principal executive offices are located at 7115 Amigo, Suite 150, Las Vegas,
Nevada and our telephone number is (702) 263-7588.
We develop, manufacture and market electronic equipment and software for
the casino gaming industry. Many of our products are based on our proprietary
Acres Bonusing Technology(TM) and are designed to enhance casino profitability
by providing entertainment and incentives to players of gaming machines. Our
bonusing technology improves the efficiency of bonus and incentive programs
currently offered by many casinos, and makes possible some bonus and incentive
programs that have not previously been offered.
Acres Bonusing Technology enables the design and delivery of bonuses and
other promotions directly to players at the point of play and at the time of
play. We currently offer bonusing products directly to casinos in the form of
standard and customized bonusing promotions that can be applied casino-wide or
to a limited number of gaming machines. In addition to bonusing products, we
also offer slot accounting, player tracking, table game management and visual
analysis modules that may be purchased and installed individually or as
components of an integrated system marketed as Acres Advantage(TM).
Casinos with more than 500 gaming machines represent the principal
market for Acres Advantage. Casinos of this size are generally large enough to
support a professional staff capable of using the analytical and promotional
tools provided by Acres Advantage. This market includes many casinos in Las
Vegas, Reno and Laughlin, Nevada, and Atlantic City, New Jersey, as well as a
number of Native American and riverboat casinos in various other states and a
number of casinos in Australia, Canada, and South Africa.
We sell our products primarily in the United States, Australia and South
Africa. We currently market our products and provide service to customers from
our headquarters in Las Vegas, Nevada and our office in Corvallis, Oregon.
RECENT DEVELOPMENTS
On December 21, 2001, we sold to three institutional investors
$5,000,000 principal amount of 6% convertible subordinated debentures that are
convertible into shares of our common stock at $4.6433 per share. The investors
also acquired warrants to purchase 177,674 shares of our common stock at an
exercise price of $4.6433 per share. Interest on the debentures at the rate of
6% is due semi-annually starting in April 2002. Principal payments of $300,000
are due monthly from June 2002 to August 2003 and principal payments of $500,000
are due monthly from September 2003 until the principal is repaid. Although we
expect to pay the principal of and interest on the debentures in cash we, may
elect to pay the principal of and interest on the debentures in shares of our
common stock rather than cash at a discounted market price, in the case of
principal payments, or market price, in the case of interest payments, as more
fully described below. We also issued a warrant to purchase 75,317 shares of our
common stock at an exercise price of $4.6433 per share to the placement agent in
connection with the sale of the debentures.
If we fail to timely register the common stock issuable upon conversion
of the debentures and exercise of the warrants, the holders of the debentures
will have the right to convert the outstanding principal amount of the
debentures into our common stock at a conversion price equal to the lesser of
$4.6433 or 90% of an average market price per share (the average of the five
lowest daily volume-weighted average prices of our common stock on the Nasdaq
SmallCap Market for the 22 consecutive trading days immediately preceding the
conversion date). We may elect to repay the outstanding principal amount of the
debentures in shares of our common stock at this adjusted conversion price
rather than in cash.
Pursuant to our agreement with the debenture holders, we are including
in the number of shares offered by this prospectus 1,076,820 shares of common
stock issuable on conversion of the debentures at the fixed price of $4.6433 per
share and an additional 1,628,391 shares of common stock that we can issue to
the investors in payment of
1
principal of the debentures, in lieu of cash payments, and to cover shares we
could be required to issue if we fail to timely register the conversion and
warrant shares. If we make principal payments in cash and timely register the
conversion and warrant shares, these additional shares would not be issued by us
nor offered for sale by the debenture holders under this prospectus.
We may also elect to make interest payments on the debentures in shares
of our common stock, rather than in cash, at an interest conversion price, which
will be calculated as the average of the daily volume-weighted average prices of
our common stock on the Nasdaq SmallCap Market for the five consecutive trading
days immediately preceding the interest payment date. We have included 75,377
shares of our common stock in the number of shares offered by this prospectus to
permit us to pay the interest due in shares of our common stock, rather than in
cash. If we elect to pay interest in cash, these additional shares will not be
issued by us nor offered for sale by the debenture holders under this
prospectus.
Upon certain events of default, the holders of the debentures can cause
us to retire the outstanding debentures by paying the holders an amount equal to
the greater of
- 150% of the aggregate principal amount of the debentures
outstanding; or
- the market value of the shares that would be issuable upon
conversion;
plus all accrued and unpaid interest and all other amounts, costs, expenses, and
liquidated damages due.
Upon a merger, acquisition or consolidation of Acres with or into
another entity that would result in a change of control, we may elect to retire,
or the holders of the debentures may force us to retire, the outstanding
principal of the debentures by paying an amount equal to 110% of the aggregate
principal amount of the debentures outstanding, plus all accrued but unpaid
interest.
On December 21, 2001, we settled ongoing litigation with Mikohn Gaming
Corporation. Pursuant to the settlement agreement, Mikohn agreed to license our
bonusing patents and paid us a royalty of $1.5 million for use of the patents
prior to September 1, 2001. Mikohn also agreed to pay additional royalties for
future use of those patents.
On December 26, 2001, IGT, the holder of all outstanding shares of our
outstanding Series A Preferred Stock, exercised its right to cause us to redeem
all of the 519,481 shares of our Series A Preferred Stock at a price of $9.625
per share, for an aggregate redemption amount of $5,000,004. We intend to redeem
all of IGT's Series A Preferred Stock on or about January 28, 2002.
On December 28, 2001, we filed our answer and counterclaims in a lawsuit
filed by Wild Game NG, LLC, a Nevada limited liability company, dba Siena Hotel
Spa Casino, in the Second Judicial District Court of the State of Nevada in the
County of Washoe. Siena owns and operates a casino located in Reno, Nevada.
Siena alleges that we failed to perform our obligation under a $1.8 million
Equipment Sale Agreement to install and maintain a networked, slot accounting,
cage and credit and player tracking system in Siena's casino. In its complaint
Siena seeks unspecified damages in excess of $10,000. We believe that Siena's
claims are unfounded and have filed counterclaims seeking, among other things,
payments Siena owes us for installation of our hardware in its casino. We do not
expect the outcome of the litigation to have a material adverse effect on our
financial condition or results of operations.
2
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. You should also refer to the other information in this
prospectus, including our financial statements and the related notes
incorporated by reference into this prospectus. The risks and uncertainties
described below are not the only risks and uncertainties we face. Additional
risks and uncertainties not currently known to us or that we currently deem
immaterial also may impair our business operations. If any of the following
risks actually occur, our business, results of operations and financial
condition would suffer. In that event, the trading price of our common stock
could decline, and you may lose all or part of your investment in our common
stock.
RISKS RELATED TO OUR STOCK
IF THE SELLING SHAREHOLDERS CONVERT THE 6% CONVERTIBLE SUBORDINATED DEBENTURES
AND EXERCISE THE WARRANTS, OUR EXISTING SHAREHOLDERS' INTERESTS WILL BE
SIGNIFICANTLY DILUTED; SALES OF SUBSTANTIAL AMOUNTS OF OUR STOCK COULD CAUSE THE
PRICE TO GO DOWN
On December 21, 2001, we sold 6% convertible subordinated debentures
that are convertible into our common stock at a price of $4.6433 per share to
three institutional investors for $5,000,000. In connection with the sale of the
debentures, we issued to these investors warrants to purchase 177,674 shares of
our common stock at a price of $4.6433 per share, subject to adjustment. We also
issued an additional warrant to purchase 75,377 shares of our common stock at a
price of $4.6433 per share to Roth Capital Partners, LLC, the placement agent,
in connection with the sale of the debentures. If we fail to timely register the
common stock issuable upon conversion of the debentures and exercise of the
warrants, the holders of the debentures will have the right to convert the
outstanding principal of the debentures at an adjusted conversion price, which
will be equal to the lesser of $4.6433 or 90% of an average market price for our
common stock.
To the extent that the debentures are converted and the warrants are
exercised, a significantly greater number of shares of our common stock will be
outstanding and the interests of our existing shareholders will be substantially
diluted. If we fail to register timely the shares issuable upon conversion of
the debentures, the number of shares issuable on conversion of the debentures
and the dilution of our existing shareholders' interests could be increased. If
these additional shares are sold into the market, it could decrease the market
price of our common stock and encourage short sales. Short sales could place
further downward pressure on the price of our common stock. Additionally, we may
elect to make payments of principal of and interest on the debentures in shares
of our common stock, which could result in increased downward pressure on our
stock price and further dilution to our existing shareholders.
Substantial sales of our stock also may make it more difficult for us to
sell equity or equity-related securities in the future at a time and price that
we deem appropriate, which could make it more difficult for us to obtain
financing when needed and affect our ability to carry out our operating plans.
OUR STOCK PRICE HAS BEEN VOLATILE HISTORICALLY, WHICH MAY MAKE IT MORE DIFFICULT
TO RESELL SHARES WHEN YOU WANT AT PRICES YOU FIND ATTRACTIVE, AND COULD RESULT
IN LITIGATION
Our common stock is thinly traded, and the price has been volatile. In
calendar year 2001, our average monthly trading volume was 1,724,150 shares,
sold at prices ranging from $7.15 to $1.75 per share. If the selling
shareholders or our other shareholders sell substantial amounts of our common
stock, including shares issued on conversion of the debentures, exercise of
outstanding warrants or payment of principal of or interest on the debentures,
the market price of our common stock could decline as a result of those sales.
The stock market in general, and the stock prices of technology and
gaming-related companies in particular, have experienced significant volatility,
which has sometimes been unrelated to the operating performance of any
particular company or companies.
3
Our stock price has fluctuated substantially in the past and could be
subject to wide fluctuations in the future in response to factors such as the
following:
- actual or anticipated variations in quarterly results of operations;
- sales of substantial amounts of our common stock by the selling
shareholders or other shareholders;
- short sales of our stock by the selling shareholders or other
shareholders;
- announcements of technological innovations, new products or new
services by us or our competitors;
- changes in financial estimates or recommendations by securities
analysts;
- conditions or trends in our industry;
- changes in the market valuations of our competitors, or our
announcement of significant acquisitions, strategic relationships,
joint ventures or capital commitments;
- additions or departures of key personnel;
- general market conditions; and
- other events or factors, many of which are beyond our control.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in their stock prices. We were
a defendant in a securities class action suit that has been settled and could be
subject to future securities class action litigation if our stock price were to
experience significant volatility. Securities litigation could result in
substantial costs and divert our management's time and resources, which could
cause our business to suffer.
IF OUR QUARTERLY OPERATING RESULTS CONTINUE TO FLUCTUATE, IT COULD CAUSE
CONTINUED VOLATILITY IN OUR STOCK PRICE
Actual or anticipated fluctuations in our operating results may result
in volatility in the price of our common stock. Our quarterly operating results
have fluctuated in the past, and may fluctuate significantly in the future, due
to a number of factors, including, among others:
- the size and timing of customer orders and deliveries of orders;
- the timing and market acceptance of new products introduced by us;
- changes in the level of operating expenses;
- technological advances and new product introductions by our
competitors;
- competitive conditions in the industry;
- uncertainties regarding required regulatory approval; and
- general economic conditions.
4
In addition, our product development and marketing costs are often
incurred in periods before any revenues are recognized from the sales of
products, and our gross margins are lower and operating expenses are higher
during periods in which such product development expenses are incurred and
marketing efforts are commenced. We sell to a relatively small number of
customers. Therefore, our quarterly and annual revenues and results of
operations may be materially affected by the receipt or loss of any one order
and by the timing of the delivery, installation and regulatory approval of any
one order. We may not be able to achieve or maintain profitable operations on a
consistent basis. We believe that period-to-period comparisons of our financial
results may not be meaningful and should not be relied upon as indications of
future performance.
WE HAVE SUBSTANTIAL INDEBTEDNESS AND, IF WE FAIL TO PERFORM OUR OBLIGATION TO
THE SELLING SHAREHOLDERS, WE MAY BE REQUIRED TO PAY SUBSTANTIAL PENALTIES TO
THEM
As of January 18, 2002, we had outstanding $5,000,000 principal amount
of debentures. Interest at the rate of 6% is due semi-annually on the debentures
starting in April 2002. Principal payments of $300,000 are due monthly from June
2002 through August 2003 and payments of $500,000 are due monthly from September
2003 until the principal is repaid. Our ability to make these payments will
depend upon our continuing to maintain our operating cash flow, which will be
affected by our success in implementing our business strategy, prevailing
economic conditions and financial, business and other factors, some of which are
beyond our control.
If we default on the debentures, we may be required to pay substantial
penalties to the holders of our debentures. Defaults include:
- a failure to pay principal of, or interest on, the debentures when
due;
- a failure to perform or observe any material covenant, condition or
agreement under our agreement with the debenture holders;
- a failure to deliver timely shares of our common stock on conversion
of the debentures and exercise of the warrants;
- a failure to maintain the listing of our common stock on the Nasdaq
SmallCap Market;
- a failure to comply with a request for conversion of the debentures
or exercise of the warrants;
- a failure to secure effectiveness of the registration statement
covering the shares of common stock issuable on conversion of the
debentures and on exercise of the warrants by May 20, 2002 or
failure to cause it to remain effective;
- a default on indebtedness in excess of $250,000; or
- institution of a bankruptcy, insolvency or similar proceeding
against us.
We would generally have to pay such penalties in the form of an
increased interest rate during the time of the default and liquidated damages
based on the debenture holders' lost stock sales opportunities during the time
of a default and other indeterminate costs and expenses. Additionally, the
debenture holders could cause us to retire the debentures by paying them an
amount equal to at least 150% of the principal amount of the debentures
outstanding, plus all accrued and unpaid interest. If we merge, acquire or
consolidate with or into another entity in a transaction that results in a
change of control, the holders of the debentures can cause us to retire the
debentures by paying an amount equal to 110% of the principal amount
outstanding, plus all accrued but unpaid interest. The payment of those
penalties or early repayment of the principal amount of the debentures could
negatively affect our liquidity, which in turn could negatively affect our stock
price.
5
RISKS RELATED TO OUR BUSINESS
CHANGES IN BUSINESS AND ECONOMIC CONDITIONS GENERALLY AND IN THE GAMING INDUSTRY
AND THE ECONOMIC IMPACT OF RECENT TERRORIST ATTACKS COULD REDUCE OUR REVENUES
AND INCOME
The strength and profitability of our business depends on the overall
demand for our products and growth in the gaming industry. Gaming industry
revenues are sensitive to general economic conditions and generally rise or fall
more rapidly in relation to the condition of the overall economy. Many of our
customers rely on tourism involving air travel for a significant portion of
their business. Although we cannot accurately estimate the economic impact of
the recent terrorist attacks at this time, many of these customers have been
negatively affected by the reduction in air travel and tourism, and we expect
that any significant decline in the business of our casino customers will reduce
demand for our products. In a period of reduced demand, we may not be able to
lower our costs rapidly enough to counter a decrease in revenues.
AN INABILITY TO MAINTAIN SUFFICIENT LIQUIDITY COULD NEGATIVELY AFFECT EXPECTED
LEVELS OF OPERATIONS AND NEW PRODUCT DEVELOPMENT
Historically, our operations have used cash. Revenues generated during
fiscal 2002 and beyond may not be sufficient to meet operating, product
development and other cash flow requirements, because such revenues depend on
the completion of existing orders and the receipt of future orders. In addition,
the repayment of the debentures, which starts in June 2002, could have a
material adverse effect on our liquidity.
Sufficient funds to service our debt and maintain new product
development efforts and expected levels of operations may not be available and
additional capital, if and when needed by us, may not be available on terms
acceptable to us. If we cannot obtain sufficient capital on acceptable terms
when needed, we may not be able to carry out our planned product development
efforts and level of operations, which could have a material adverse effect on
our financial condition and results of operations.
OUR RELIANCE ON A FEW MAJOR CUSTOMERS INCREASES THE RISK OF AN ADVERSE EFFECT
FROM THE LOSS OF SUCH CUSTOMERS
Sales of our products to a limited number of casino operators accounts
for a substantial portion of our revenues in any given fiscal year.
Historically, three or fewer customers have accounted for more than 65% of our
annual revenues. A significant reduction, delay or cancellation of orders from
one or more significant customers or a decision by one or more significant
customers to select products manufactured by a competitor could have a material
adverse effect on our revenues. We expect our operating results to continue to
depend on sales of our products to a relatively small number of customers.
OTHER RISKS
THE COSTS OF OR AN UNFAVORABLE OUTCOME ARISING FROM LITIGATION COULD HAVE A
NEGATIVE IMPACT ON US
We are involved in a variety of litigation to protect our intellectual
property rights and expect to pursue additional litigation where appropriate.
From time to time we are also engaged in other litigation, including a recent
lawsuit filed by Siena Hotel Spa Casino, alleging breach of contract, breach of
implied covenant of good faith and fraud/intentional misrepresentation and
seeking unspecified damages in excess of $10,000. Litigation can divert
management focus, is expensive and could reduce our ability to fund product
initiatives. An unfavorable outcome in one or more of these suits could affect
our competitive position for bonusing and have a material adverse effect on our
sales and revenues.
6
OUR REVENUES AND OPERATING RESULTS COULD BE HARMED BY PRODUCT CONCENTRATION,
COMPETITION, OR TECHNOLOGICAL CHANGE
We expect to derive most of our revenues from the sale of Acres
Advantage products and our future success will depend in part upon our ability
to continue to generate sales of these products. A decline in demand or prices
for our products, whether as a result of new product introduction or price
competition from competitors, technological change, or failure of our products
to address customer requirements or otherwise, could have a material adverse
effect on our revenues and operating results. The markets in which we compete
are highly competitive and subject to frequent technological change, and one or
more of our competitors may develop alternative technologies for our products.
Our future results of operations will depend in part upon our ability to improve
and market our existing products and to successfully develop, manufacture and
market new products. While we expend a significant portion of our revenues on
research and development and on product enhancement, we may not be able to
continue to improve and market our existing products or develop and market new
products, or technological developments may cause our products to become
obsolete or noncompetitive. Many of our competitors have substantially greater
financial, marketing and technological resources than we do and we may not be
able to compete successfully with them.
GOVERNMENT REGULATION OF US AND OUR PRODUCTS COULD RESULT IN POTENTIAL
RESTRICTIONS ON SALES OF OUR PRODUCTS
We are subject to gaming regulations in each jurisdiction in which our
products are sold or are used by persons licensed to conduct gaming activities.
Our products generally are regulated as "associated equipment," and gaming
regulators have discretion to subject us, our officers, directors, key
employees, other affiliates and certain shareholders to licensing, approval and
suitability requirements. In the event that gaming authorities determine that
any person is unsuitable to act in such capacity, we would be required to
terminate our relationship with such person. Products offered and expected to be
offered by us include features that are not available on products currently in
use. These new features may, in some cases, result in additional regulatory
review and licensing requirements for the products or us. Compliance with such
regulatory requirements is often time consuming and expensive, and may delay or
prevent a sale in one or more jurisdictions. In addition, associated equipment
generally must be approved by the regulatory authorities for use by each
licensed location within the jurisdiction, regardless of whether we are subject
to licensing, approval or suitability requirements. Failure by us to obtain, or
the loss or suspension of, any necessary licenses, approvals or suitability
findings, may prevent us from selling or distributing our product in that
jurisdiction, which could have a material adverse effect on us. We often enter
into contracts that are contingent upon our and/or our customer obtaining the
necessary regulatory approvals to sell or use our products or to operate a
casino. Failure to timely obtain such approvals may result in the termination of
the contract and the return of amounts paid pursuant to such contract.
OUR INTELLECTUAL PROPERTY PROTECTIONS MAY BE INSUFFICIENT TO PROPERLY PROTECT
OUR TRADE SECRETS AND OUR PRODUCTS FROM BEING COPIED
We rely on a combination of patent, trade secret, copyright and
trademark law, nondisclosure agreements and technical security measures to
protect our products. We have received U.S. and foreign patents on certain
features of our bonusing product line, have applied for additional U.S. and
foreign patents and may in the future apply for other U.S. patents and
corresponding foreign patents. We may also file for patents on certain features
of products that we may develop in the future. Notwithstanding these safeguards,
our competitors may be able to obtain our trade secrets and to imitate our
products. Furthermore, others may independently develop products similar or
superior to those developed or planned by us. While we may obtain patents with
respect to certain of our products, we may not have sufficient resources to
defend our patents, such patents may not afford all necessary protection and
competitors may develop equivalent or superior products which may not infringe
such patents.
7
FORWARD-LOOKING INFORMATION
This prospectus and the documents incorporated by reference in this
prospectus include forward-looking statements. These statements relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "anticipate," "believe,"
"continue," "could," "estimate," "expect," "intend," "may," "might," "plan,"
"potential," "predict," "should" or "will" or the negative of such terms or
other comparable terminology. These statements are only predictions and involve
known and unknown risks, uncertainties and other factors, including the risks
outlined under the section of this prospectus titled "Risk Factors," that may
cause our or our industry's actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Although we believe
that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, performance or achievements. You
should not place undue reliance on these forward-looking statements. These
forward-looking statements are made as of the date of this prospectus. We assume
no obligation to update or revise these forward-looking statements or provide
reasons why actual results may differ from those results discussed in or implied
by the forward-looking statements.
HOW TO OBTAIN MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, DC 20549. Please call the SEC toll-free at
1-800-SEC-0330 for further information on the public reference room. The SEC
maintains an Internet Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding issuers,
including us, that file documents with the SEC electronically. You can also
inspect our SEC filings at the offices of the Nasdaq Stock Market, 1735 K
Street, N.W., Washington, DC 20006.
This prospectus is a part of a registration statement on Form S-3 that
we filed with the SEC with respect to the common stock offered by this
prospectus. This prospectus does not contain all the information that is in the
registration statement. We omitted certain parts of the registration statement
as permitted by the rules and regulations of the SEC. You can obtain a copy of
the registration statement and its exhibits from the SEC at the address listed
above or from the SEC Web site.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with it, which means that we can disclose important
information to you by referring to those documents. The information we
incorporate by reference is considered part of this prospectus, and the
information that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings made with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended, until this offering
is completed:
- Our Annual Report on Form 10-K for the fiscal year ended June 30,
2001.
- Our Quarterly Report on Form 10-Q for the quarter ended September
30, 2001.
- The description of our common stock contained in our Registration
Statement on Form 8-A filed with the SEC under Section 12(g) of the
Exchange Act of 1934 on September 27, 1993, including any amendment
or report filed for the purpose of updating such description.
- All other documents filed by us pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act of 1934 after the date of this
prospectus and before the termination of this offering.
8
You may request a copy of these filings, at no cost, by writing to or
telephoning us at the address below. We will not provide copies of the exhibits
to these filings unless we specifically incorporated the exhibits by reference
in this prospectus.
Attn: Investor Relations Department
Acres Gaming Incorporated
7115 Amigo, Suite 150
Las Vegas, Nevada 89119
(702) 263-7588
We have not authorized any person to give you any information or to make
any representations other than those contained in this prospectus. You should
not rely on any information or representations other than this prospectus. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
securities other than the common stock. It is not an offer to sell or a
solicitation of an offer to buy securities if the offer or solicitation would be
unlawful. The affairs of Acres Gaming Incorporated may have changed since the
date of this prospectus. You should not assume that the information in this
prospectus is correct at any time subsequent to its date.
USE OF PROCEEDS
All of the shares of common stock offered by this prospectus are being
offered by the selling shareholders. We will not receive any of the proceeds
from the sale of the common stock offered by this prospectus. We will receive
proceeds from any cash exercise of warrants held by the selling shareholders. We
have not been advised when or whether the holders of the warrants intend to
exercise their warrants. The amount of proceeds we receive, if any, will depend
on whether any warrants are exercised and whether the exercise price is paid in
cash. After the deduction of offering expenses being paid by us, any remaining
proceeds from the exercise of the warrants will be used for general corporate
purposes.
SELLING SHAREHOLDERS
The following table provides the information regarding the selling
shareholders and the number of shares of our common stock each may offer by this
prospectus as of January 18, 2002. The information with respect to each selling
shareholder was provided by such selling shareholder pursuant to a
questionnaire.
"Beneficial Owner" is defined in Rule 13d-3 of the Exchange Act of 1934
and generally means any person who directly, or indirectly, has or shares voting
or investment power with respect to a security. A person is 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 any right to
acquire such security through the exercise of any option or warrant or through
the conversion of a security. The percentage of shares beneficially owned is
calculated based on 9,282,606 shares of our common stock outstanding on December
31, 2001.
"Number of Shares Registered for Sale" includes shares that may be sold
by means of this prospectus. However, in some cases these shares may be sold
pursuant to Rule 144 under the Securities Act of 1933, as amended, and in some
cases may not be sold at all during the time this prospectus may be used for
sales. See the section of this prospectus titled "Plan of Distribution."
The number and percentage of shares of common stock listed in the
following table for any person is calculated without regard to shares of common
stock issuable to others upon conversion of outstanding convertible securities,
or exercise of stock options or warrants. Any shares a person is deemed to own
by having the right to acquire such shares upon conversion of convertible
securities or exercise of an option or a warrant are considered to be
outstanding solely for the purpose of calculating that person's ownership
percentage.
9
The information under the column titled "Shares Beneficially Owned After
the Offering" assumes that all shares of common stock offered by this prospectus
have been sold and that the shareholder does not sell shares other than those
listed in the columns or purchase additional shares except upon conversion of
outstanding convertible securities, or exercise of options or warrants.
The information under the column titled "Number of Shares Beneficially
Owned Prior to Offering" as to each debenture holder is affected by a provision
in our agreement with the debenture holders that prohibits the conversion of
a debenture or exercise of a warrant to the extent that such conversion or
exercise, as the case may be, would result in the holder of such debenture or
warrant beneficially owning in excess of 4.999% of our outstanding shares of
common stock following such conversion or exercise. A debenture or warrant
holder may waive this provision as to itself upon not less than 61 days notice
to us.
Number of Shares Number of Shares Shares Beneficially
Beneficially Owned Registered Owned After
Name Prior to Offering for Sale the Offering
- ---- ----------------- ---------------- -----------------------
Number Percent
------- -------
Deephaven Private Placement 376,348(2) 887,478(3) 0 0
Trading Ltd.(1)
Omicron Partners, LP(4) 250,899(2) 591,653(5) 0 0
Riverview Group, LLC(6) 488,501(7) 1,479,131(8) 0 0
Roth Capital Partners, LLC(9) 75,377(10) 75,377(10) 0 0
- ----------------
* Less than 1%
(1) Mr. Colin Smith has voting and investment control over the shares
beneficially owned by Deephaven Private Placement Trading Ltd.
(2) Consists of the shares of our common stock issuable to the selling
shareholders upon conversion of debentures at a price of $4.6433 per
share and upon exercise of warrants at a price of $4.6433 per share. The
number of shares issuable to the respective selling shareholder is
subject to the 4.999% limitation upon conversion of its debenture and
exercise of its warrant.
(3) Includes 405,782 shares issuable on conversion of a debenture, an
additional 428,394 shares that may be issued to pay principal of and
interest on the debenture and 53,302 shares issuable upon exercise of a
warrant.
(4) Omicron Capital, L.P., a Delaware limited partnership, serves as
subadvisor to Omicron Partners, L.P., a Bahamas limited partnership, and
Grove Management Limited is the general partner of Omicron Partners. By
reason of such relationships, Omicron Capital may be deemed to share
dispositive power over the shares of common stock owned by Omicron
Partners, and Grove may be deemed to share voting and dispositive power
over the shares of common stock owned by Omicron Partners. Omicron Capital
and Grove disclaim beneficial ownership of such shares of common stock.
Omicron Partners and Grove are not affiliates of one another, as that term
is used for purposes of the Exchange Act of 1934 or of any other person
named in this prospectus as a selling shareholder. No person or "group"
(as that term is used in Section 13(d) of the Exchange Act of 1934 or
Regulation 13D-G promulgated under that section) controls Omicron Partners
and Grove.
10
(5) Includes 270,521 shares issuable on conversion of a debenture, an
additional 285,597 shares that may be issued to pay principal of and
interest on the debenture and 35,535 shares issuable upon exercise of a
warrant.
(6) Riverview Group, LLC is engaged in the business of investing in publicly
traded equity securities for its own account. Riverview's principal
offices are located at 666 5th Avenue, 8th Floor, New York, New York
10103. The Chief Financial Officer of Riverview has voting and dispositive
power over the shares of our common stock beneficially owned by Riverview.
(7) Consists of the shares of our common stock issuable to the selling
shareholder upon conversion of the debentures at a price of $4.6433 per
share and upon exercise of the warrants at a price of $4.6433 per share,
subject to the 4.999% limitation on conversion of the selling
shareholder's debenture and exercise of its warrant.
(8) Includes 676,303 shares issuable on conversion of a debenture, an
additional 713,991 shares that may be issued to pay principal of and
interest on the debenture and 88,837 shares issuable upon exercise of a
warrant.
(9) Voting and dispositive power over the shares of common stock beneficially
owned by Roth Capital Partners, LLC is exercised by its Chairman and Chief
Executive Officer Byron Roth, its Chief Financial Officer Gordon Roth and
its Executive Vice President Arnold Kraus.
(10) Consists of shares of our common stock issuable upon exercise of its
warrants.
On December 21, 2001, we sold to Riverview Group, LLC, Omicron Partners,
L.P. and Deephaven Private Placement Trading, Ltd., $5,000,000 principal amount
of 6% convertible subordinated debentures that are convertible into shares of
our common stock at $4.6433 per share. The investors also acquired warrants to
purchase 177,674 shares of our common stock at an exercise price of $4.6433 per
share. Interest on the debentures at the rate of 6% is due semi-annually
starting in April 2002. Principal payments of $300,000 are due monthly from June
2002 to August 2003 and payments of $500,000 are due monthly from September 2003
until the principal is repaid. We also issued a warrant to purchase 75,317
shares of our common stock at an exercise price of $4.6433 per share to Roth
Capital Partners, LLC, the placement agent in connection with the sale of the
debentures.
The sale of the debentures and the warrants and the issuance of our
common stock upon conversion of the debentures and exercise of the warrants were
not and will not be registered under the Securities Act of 1933. The purchasers
of the debentures and warrants represented that they acquired the debentures and
the warrants for investment and with no present intention of distributing them
or the underlying shares of our common stock. In addition, each such investor
individually represented that it is an "accredited investor" as such term is
defined in Rule 501 under the Securities Act of 1933.
We agreed to file this registration statement to register shares for
resale in recognition of the fact that the selling shareholders may wish to be
legally permitted to sell their shares when they deem appropriate.
We are registering for resale 3,033,639 shares of our common stock,
which number of shares represents the sum of 200% of the number of shares that
could be issued upon conversion of the debentures, calculated using an adjusted
conversion price of $3.6966 per share (which is 90% of the average of the five
lowest daily volume-weighted average prices of our common stock on the Nasdaq
SmallCap Market for the 22 consecutive trading days immediately preceding
December 21, 2001), 100% of the number of shares that could be issued upon
exercise of the warrants issued in connection with the sale of the debentures,
and 100% of the number of shares that could be issued in payment of interest on
the debentures, calculated assuming an interest conversion price of $4.6433 per
share . This number represents 24.6% of the outstanding shares of our common
stock as of December 31, 2001.
11
We have agreed to prepare and file any amendments and supplements to the
registration statement as may be necessary to keep the registration statement
effective for up to three years or until the date on which all the shares
offered in this prospectus have been sold or may be resold by the selling
shareholders without registration or without regard to volume limitations by
reason of Rule 144(k) under the Securities Act of 1933, as amended, or any other
rule of similar effect.
PLAN OF DISTRIBUTION
We are registering all the shares of common stock offered by this
prospectus on behalf of the selling shareholders and their pledgees, donees,
transferees or other successors-in-interest, who may sell the shares from time
to time, or who may also decide not to sell all the shares that may be sold
under this prospectus. We will not receive any proceeds from the sale of shares
by the selling shareholders.
The selling shareholders or their successors may sell all of the shares
of our common stock offered by this prospectus from time to time in transactions
in the over-the-counter market through Nasdaq, on one or more other securities
markets and exchanges, or in privately negotiated transactions. They may sell
the shares offered by this prospectus at fixed prices, at market prices
prevailing at the time of sale, or at negotiated prices. The selling
shareholders may use any one or more of the following methods when selling the
shares offered by this prospectus:
- block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by such
broker-dealer for its account;
- an exchange distribution in accordance with the rules of such
exchange;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
- privately negotiated transactions;
- short sales;
- transactions in which broker-dealers may agree with the selling
shareholders to sell a specified number of the shares at a
stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
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 their shares. They have also advised us
that no underwriter or coordinating broker is now acting in connection with the
proposed sale of shares.
The selling shareholders may enter into hedging transactions with
broker-dealers in connection with distributions of shares or otherwise, subject
to the terms of the Convertible Subordinated Debentures and Warrants Purchase
Agreement. In such transactions, broker-dealers may engage in short sales of
shares in the course of hedging the positions they assume with the selling
shareholders. The selling shareholders also may sell shares short, subject to
the terms of the Convertible Subordinated Debentures and Warrants Purchase
Agreement, and redeliver shares to close out such short positions. The selling
shareholders may enter into
12
option or other transactions with broker-dealers that require the delivery of
shares to the broker-dealer. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The selling shareholders may
from time to time pledge or grant a security interest in some or all of the
shares owned by them and, if they default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell the shares of
common stock from time to time under this prospectus, or under an amendment to
this prospectus under the Rule 424(b)(3) or other applicable provision of the
Securities Act of 1933 that amends the list of selling shareholders to include
the pledgee, transferee or other successors in interest as selling shareholders
under this prospectus.
The selling shareholders also may lend or pledge shares to a
broker-dealer. The broker-dealer may sell the shares so loaned or, upon a
default, the broker-dealer may sell the shares so pledged, pursuant to this
prospectus. Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling shareholders.
Broker-dealers or agents may also receive compensation from the purchasers of
shares for whom they act as agents or to whom they sell as principals, or both.
Compensation to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with
transactions involving shares. Broker-dealers or agents and any other
participating broker-dealers or the selling shareholders may be deemed to be an
"underwriter" within the meaning of Section 2(11) of the Securities Act of 1933
in connection with sales of shares. Accordingly, any such commission, discount
or concession received by them and any profit on the resale of shares purchased
by them may be deemed to be underwriting discounts or commissions under the
Securities Act of 1933. Because the selling shareholders may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act of
1933, the selling shareholders will be subject to the prospectus delivery
requirements of the Securities Act of 1933.
The shares may be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act of 1934,
any person engaged in the distribution of shares may not simultaneously engage
in market making activities with respect to our common stock for a period of two
business days before the commencement of such distribution. In addition, the
selling shareholders will be subject to applicable provisions of the Exchange
Act of 1934 and the associated rules and regulations under the Exchange Act of
1934, including Regulation M, which provisions may limit the timing of purchases
and sales of shares of our common stock by the selling shareholders. We will
make copies of this prospectus available to the selling shareholders and have
informed them of the need for delivery of copies of this prospectus to
purchasers at or prior to the time of any sale of the shares.
To the extent required, we may amend or supplement this prospectus from
time to time to describe a specific plan of distribution. In effecting sales,
broker-dealers engaged by the selling shareholders may arrange for other
broker-dealers to participate in the resales.
We will file a supplement to this prospectus, if required, pursuant to
Rule 424 under the Securities Act of 1933 upon being notified by the selling
shareholders that any material arrangement has been entered into with a
broker-dealer for the sale of shares through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by a broker or
dealer. Such supplement will disclose:
- the name of each selling shareholder and of the participating
broker-dealer(s);
- the number of shares involved;
- the price at which such shares were sold;
- the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in this
prospectus; and
13
- other facts material to the transaction.
In addition, if a selling shareholder notifies us that a donee or
pledgee intends to sell more than 500 shares, we will file a supplement to this
prospectus to disclose information about that donee or pledgee.
We will bear all costs, expenses and fees in connection with the
registration and sale of the shares other than selling commissions and fees and
stock transfer taxes. The selling shareholders will bear all commissions and
discounts, if any, attributable to the sales of the shares. We have also agreed
to indemnify the selling shareholders against liabilities based on any untrue or
alleged untrue statements of material fact in this prospectus or the related
registration statement or on any omission or alleged omission of a material fact
required to be included in this prospectus or the registration statement or
necessary to make the statements herein and therein not misleading. We will not
be required to provide indemnification to the extent any untrue or alleged
untrue statement was included, or an omission or alleged omission was made, as a
result of information furnished by the selling shareholders. The selling
shareholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act of 1933.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us
by Perkins Coie LLP, Portland, Oregon.
EXPERTS
The financial statements and schedule incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
14
We have not authorized any person to give you any information or to make
any representations other than those contained in this prospectus. You should
not rely on any information or representations other than this prospectus. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
securities other than our common stock. It is not an offer to sell or a
solicitation of an offer to buy securities if the offer or solicitation would be
unlawful. The affairs of Acres Gaming Incorporated may have changed since the
date of this prospectus. You should not assume that the information in this
prospectus is correct at any time subsequent to its date.
1,329,871 SHARES
(plus up to 1,703,768 additional shares)*
ACRES GAMING INCORPORATED
COMMON STOCK
PAR VALUE $.01 PER SHARE
---------------------
PROSPECTUS
---------------------
JANUARY __, 2002
The selling shareholders may offer for sale from time to time up to
1,076,820 shares of our common stock issuable upon conversion of 6% convertible
subordinated debentures up to 253,051 shares of our common stock issuable upon
exercise of warrants and up to an additional 1,703,768 shares of our common
stock that we may issue, at our option, to pay interest on and principal of the
debentures, or that we might have to issue if we fail to timely register the
common stock issuable upon conversion of the debentures and exercise of the
warrants.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses by the registrant
in connection with the sale of common stock being registered. All amounts are
estimates, except the SEC registration fee. The selling shareholders will bear
no portion of these expenses. The selling shareholders will pay any selling
commissions and fees and stock transfer taxes.
SEC registration fee $ 3,596.20
Nasdaq SmallCap Market listing fee* 2,000.00
Legal fees and expenses* 22,000.00
Accounting fees and expenses* 9,000.00
Miscellaneous fees and expenses* 403.80
------------
Total* $ 37,000
============
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.751 of the Nevada General Corporation Law provides that a
corporation may indemnify its current and former officers, directors, employees
and agents against expenses (including attorneys' fees), judgments, penalties,
fines and amounts paid in settlement and that were incurred in connection with
actions, suits, or proceedings, except an action by or in the right of the
corporation, in which such persons are parties by reason of the fact that they
are or were an officer, director, employee or agent of the corporation, if they
(i) have not been adjudged to be liable to the corporation, (ii) acted in good
faith, (iii) in the case of a criminal proceeding, had no reasonable cause to
believe the conduct was unlawful and (iv) reasonably believed that the conduct
was in the best interests of the corporation. Section 78.752 also permits a
corporation to purchase and maintain insurance on behalf of its officers,
directors, employees and agents against any liability which may be asserted
against, or incurred by, such persons in their capacities as officers,
directors, employees and agents of the corporation, whether or not the
corporation would have had the power to indemnify the person against the
liability under the provisions of such section.
Article IX of our Bylaws provides that our directors, officers and
representatives shall have the rights to indemnification in accordance with, and
to the fullest extent provided by, Section 78.751 of the Nevada General
Corporation Law.
Our Articles of Incorporation include a provision that limits personal
liability for breach of the fiduciary duty of our directors to the extent
provided by Section 78.037 of the Nevada General Corporation Law. Such provision
eliminates the personal liability of directors for damages occasioned by breach
of fiduciary duty, except for liability based on the director's duty of loyalty
to us, liability for acts or omissions involving intentional misconduct, fraud
or a knowing violation of law, liability based on payments of improper
dividends, and liability for acts occurring prior to the date such provision was
added.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.1(1) Description of the Registrant's Capital Stock contained in the
Articles of Incorporation of Acres Gaming Incorporated, as amended.
4.2(2) Description of the Rights of Security Holders contained in the
Bylaws of Acres Gaming Incorporated.
4.3 Convertible Subordinated Debentures and Warrants Purchase Agreement
dated December 21, 2001, by and between Acres Gaming Incorporated,
Deephaven Private Placement Trading Ltd., Omicron Partners, LP and
Riverview Group, LLC.
4.4 Form of Convertible Subordinated Debenture dated December 21, 2001,
entered into by Acres Gaming Incorporated and each of Deephaven
Private Placement Trading Ltd., Omicron Partners, LP and Riverview
Group, LLC in the amounts of $1,500,000, $1,000,000 and $2,500,000,
respectively.
4.5 Form of Stock Purchase Warrant dated December 21, 2001, issued by
Acres Gaming Incorporated to each of Deephaven Private Placement
Trading Ltd., Omicron Partners, LP and Riverview Group, LLC for
53,302, 35,535 and 88,837 shares of common stock, respectively.
4.6 Registration Rights Agreement dated December 21, 2001, by and
between Acres Gaming Incorporated and Deephaven Private Placement
Trading Ltd., Omicron Partners, LP and Riverview Group, LLC.
4.7 Stock Purchase Warrant dated December 21, 2001, issued by Acres
Gaming Incorporated to Roth Capital Partners, LLC.
5.1 Opinion of Perkins Coie LLP regarding legality of the Common Stock
being registered.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Perkins Coie LLP (included in the opinion filed as
Exhibit 5.1).
24.1 Power of Attorney (included in signature page).
- ----------
(1) Incorporated by reference from our Quarterly Report on Form 10-Q for the
quarterly period ended December 31, 1996.
(2) Incorporated by reference from our Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1996.
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 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) 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.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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 Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 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 of 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and 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 January 16, 2002.
ACRES GAMING INCORPORATED
By: /s/ Floyd W. Glisson
--------------------------------------------------
Floyd W. Glisson
Chairman of the Board and Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
Floyd W. Glisson and Patrick W. Cavanaugh, or either of them, as
attorneys-in-fact and agents with full power of substitution, to execute in the
name and on the behalf of each person, individually and in each capacity stated
below, and to file, any and all amendments or supplements to this registration
statement, including any and all post-effective amendments, and any related Rule
462(b) registration statement and any amendment thereto, hereby grants to them
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, and hereby ratifies and confirms all that
said attorneys-in-fact and agents or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated below on the 16th day of January, 2002.
/s/ Floyd W. Glisson Chairman of the Board and Chief Executive Officer
- -------------------------------------------- (Principal Executive Officer)
Floyd W. Glisson
/s/ Patrick W. Cavanaugh Senior Vice President and Chief Financial Officer
- -------------------------------------------- (Principal Financial and Accounting Officer)
Patrick W. Cavanaugh
/s/ Ronald G. Bennett Director
- --------------------------------------------
Ronald G. Bennett
/s/ Robert W. Brown Director
- --------------------------------------------
Robert W. Brown
/s/ Roger B. Hammock Director
- --------------------------------------------
Roger B. Hammock
/s/ David R. Willensky Director
- --------------------------------------------
David R. Willensky
/s/ Richard D. Furash Director
- --------------------------------------------
Richard D. Furash
INDEX TO EXHIBITS
TO FORM S-3
FOR ACRES GAMING INCORPORATED
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.1(1) Description of the Registrant's Capital Stock contained in the
Articles of Incorporation of Acres Gaming Incorporated, as amended.
4.2(2) Description of the Rights of Security Holders contained in the
Bylaws of Acres Gaming Incorporated.
4.3 Convertible Subordinated Debentures and Warrants Purchase Agreement
dated December 21, 2001, by and between Acres Gaming Incorporated,
Deephaven Private Placement Trading Ltd., Omicron Partners, LP and
Riverview Group, LLC.
4.4 Form of Convertible Subordinated Debenture dated December 21, 2001,
entered into by Acres Gaming Incorporated and each of Deephaven
Private Placement Trading Ltd., Omicron Partners, LP and Riverview
Group, LLC in the amounts of $1,500,000, $1,000,000 and $2,500,000,
respectively.
4.5 Form of Stock Purchase Warrant dated December 21, 2001, issued by
Acres Gaming Incorporated to each of Deephaven Private Placement
Trading Ltd., Omicron Partners, LP and Riverview Group, LLC for
53,302, 35,535 and 88,837 shares of common stock, respectively.
4.6 Registration Rights Agreement dated December 21, 2001, by and
between Acres Gaming Incorporated and Deephaven Private Placement
Trading Ltd., Omicron Partners, LP and Riverview Group, LLC.
4.7 Stock Purchase Warrant dated December 21, 2001, issued by Acres
Gaming Incorporated to Roth Capital Partners, LLC.
5.1 Opinion of Perkins Coie LLP regarding legality of the Common Stock
being registered.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Perkins Coie LLP (included in the opinion filed as
Exhibit 5.1).
24.1 Power of Attorney (included in signature page).
- ----------
(1) Incorporated by reference from our Quarterly Report on Form 10-Q for the
quarterly period ended December 31, 1996.
(2) Incorporated by reference from our Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1996.