Silicon Gaming, Inc.

Silicon Gaming was engaged in the design, manufacture and sale of innovative electronic-based slot machines. This start-up company spent $100 million in the development and early manufacturing phases, but by late 1998 had exhausted its financing options. These illiquidity problems occurred simultaneously with product problems and significant management turnover.

In order to provide sufficient financing to save the company, its major lender offered to advance additional monies, subject to a conversion of its existing exposure into equity. In addition, management also proposed that it receive almost 40% of the pro forma equity as part of its restructuring incentive package. As a result, the then existing shareholders of this public company were to be diluted down to a de minimis ownership percentage. Gordian Group was retained to render a fairness opinion with respect to the old stockholders.

In connection with this work, Gordian Group determined that Silicon Gaming had significant problems - but, if overcome, there was significant upside in the stock. Based upon it's valuation views, Gordian Group negotiated a new structure that provided for materially more common stock and warrants to be allocated to old equity.