8-K

                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549


                                   FORM 8-K

                                CURRENT REPORT

    Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


       Date of Report (Date of earliest event reported)   July 22, 1999
                                                     -------------

                             SILICON GAMING, INC.
                             --------------------


              (Exact name of registrant as specified in charter)


        California                       0-28294             77-0357939
- ------------------------------           -------             ----------
(State or other jurisdiction           (Commission          (IRS Employer
     of incorporation)                 File Number)       Identification No.)


  2800 W. Bayshore Road, Palo Alto, California                     94303
  --------------------------------------------                     -----
    (Address of principal executive offices)                     (Zip Code)


     Registrant's telephone number, including area code     (650) 842-9000
                                                            --------------

                                Not applicable
                                --------------
         (Former name or former address, if changed since last report)


Item 5.  Other Events.

On July 22, 1999, Silicon Gaming, Inc. (the "Company") announced that it has
entered into a non-binding letter of intent with the holders of its $47.25
million of outstanding Senior Discount Notes (the ``Notes'') to convert a
portion of the Notes into equity and make various modifications to the terms of
the remaining Notes.

Under the letter of intent, $39.75 million of Notes would be exchanged for
preferred stock that would be convertible into a 57% common equity interest in
the Company. The terms of the remaining $7.5 million of outstanding Notes would
be modified to reduce the interest rate from 12.5% to 10% per annum (effective
July 15, 1999) and to provide for interest to be payable in kind, at the
Company's option and subject to certain coverage ratio tests, for up to the
first five (5) years following the effective date of the restructuring, at which
time the Notes would mature.

The Company previously announced on July 1, 1999 that it would not make the
current interest payment on the Notes. Pursuant to the letter of intent, accrued
and unpaid interest on the Notes remaining outstanding following the
restructuring would be forgiven through July 15, 1999.

The letter of intent also contemplates an additional investment by the holders
of the Notes of up to $5.0 million in the form of convertible senior secured
notes (the ``New Notes''). The New Notes would bear interest at the rate of 10%
per annum, payable in cash, with a maturity of five (5) years. The $5.0 million
of New Notes would be convertible into a 40% equity interest in the Company
(subject to the issuance of additional employee equity incentives as described
below). The New Notes would be issuable in tranches, with the first $2.0 million
issued on the closing date of the restructuring. To the extent required by the
Company, the remaining $3.0 million of New Notes would be issued upon the
achievement of certain financial and operating hurdles.

As part of the restructuring, the Company would allocate 38% of its equity as of
the effective date to be issued as incentive compensation to employees. The
Company's current equity holders, including all holders of options, warrants and
convertible preferred stock, would own approximately 5% of the outstanding
fully-diluted equity upon the effective date of the restructuring (prior to the
issuance of any New Notes). Certain of the Company's currently outstanding
warrants and convertible preferred stock have anti-dilution rights that may
substantially reduce the portion of such equity interest that would be allocated
to holders of common stock. As discussed above, $39.75 million of existing Notes
would be convertible into the remaining 57% of the Company's outstanding equity
as of the effective date of the restructuring (prior to the issuance of any New
Notes). Upon issuance of any New Notes, the number of shares of common stock
allocated to the employee incentive compensation pool would be increased so that
the incentive pool would remain at 38% of the Company's equity after giving
effect to the dilution of the conversion of the New Notes. In addition, upon
closing of the restructuring, the Board of Directors would be reduced to three
members, consisting of Andrew Pascal, the President and Chief Executive Officer
of the Company, and two independent directors.


The proposed restructuring is subject to a number of conditions, including
receipt by the Company's board of directors of a ``fairness opinion'' from an
investment banking firm, the receipt of all necessary gaming and regulatory
approvals and the negotiation and execution of definitive documentation. There
can be no assurance that the restructuring will be successfully implemented or
that there will not be modifications to the restructuring terms.

Item 7.  Financial Statements and Exhibits

         (c)  Exhibits.

              See Exhibit 99.1 (Press Release of Silicon Gaming, Inc.
              dated July 22, 1999) attached hereto.



                                  SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                    SILICON GAMING, INC.


Date:  July 27, 1999                By: /s/ Andrew Pascal
                                       ----------------------------------
                                       Andrew Pascal
                                       President and Chief Executive Officer


                                 EXHIBIT INDEX

  Exhibit No.          Description
  -----------          ------------

     99.1              Press Release of Silicon Gaming, Inc. dated July 22,
                       1999.

EX-99.1

                                                                    EXHIBIT 99.1

Silicon Gaming Announces Signing of Letter of Intent for Financial Restructuring

PALO ALTO, Calif., July 22 /PRNewswire/ -- Silicon Gaming, Inc. (OTC Bulltin
Board: SGIC) announced today that it has entered into a non-binding letter of
intent with the holders of its $47.25 million of outstanding Senior Discount
Notes (the ``Notes'') to convert a portion of the Notes into equity and make
various modifications to the terms of the remaining Notes.

Under the letter of intent, $39.75 million of Notes would be exchanged for
preferred stock that would be convertible into a 57% common equity interest in
the Company. The terms of the remaining $7.5 million of outstanding Notes would
be modified to reduce the interest rate from 12.5% to 10% per annum (effective
July 15, 1999) and to provide for interest to be payable in kind, at the
Company's option and subject to certain coverage ratio tests, for up to the
first five (5) years following the effective date of the restructuring, at which
time the Notes would mature.

The Company previously announced on July 1, 1999 that it would not make the
current interest payment on the Notes. Pursuant to the letter of intent, accrued
and unpaid interest on the Notes remaining outstanding following the
restructuring would be forgiven through July 15, 1999.

The letter of intent also contemplates an additional investment by the holders
of the Notes of up to $5.0 million in the form of convertible senior secured
notes (the ``New Notes''). The New Notes would bear interest at the rate of 10%
per annum, payable in cash, with a maturity of five (5) years. The $5.0 million
of New Notes would be convertible into a 40% equity interest in the Company
(subject to the issuance of additional employee equity incentives as described
below). The New Notes would be issuable in tranches, with the first $2.0 million
issued on the closing date of the restructuring. To the extent required by the
Company, the remaining $3.0 million of New Notes would be issued upon the
achievement of certain financial and operating hurdles.

As part of the restructuring, the Company would allocate 38% of its equity as of
the effective date to be issued as incentive compensation to employees. The
Company's current equity holders, including all holders of options, warrants and
convertible preferred stock, would own approximately 5% of the outstanding
fully-diluted equity upon the effective date of the restructuring (prior to the
issuance of any New Notes). Certain of the Company's currently outstanding
warrants and convertible preferred stock have anti-dilution rights that may
substantially reduce the portion of such equity interest that would be allocated
to holders of common stock. As discussed above, $39.75 million of existing Notes
would be convertible into the remaining 57% of the Company's outstanding equity
as of the effective date of the restructuring (prior to the issuance of any New
Notes). Upon issuance of any New Notes, the number of shares of common stock
allocated to the employee incentive compensation pool would be increased so that
the incentive pool would remain at 38% of the Company's equity after giving
effect to the dilution of the conversion of the New Notes. In addition, upon
closing of the restructuring, the Board of Directors would be reduced to three
members, consisting of Andrew Pascal, the President and Chief Executive Officer
of the Company, and two independent directors.

"We are pleased to announce this letter of intent and the terms of the proposed
restructuring to our customers, suppliers, employees and shareholders,''
commented Andrew Pascal, the President and Chief Executive Officer of the
Company. ``We believe this restructuring will provide the Company with a solid
balance sheet and sound capital structure, allowing us to focus greater
attention on our operational and marketing strategies. In addition, it provides
us with the flexibility to offer incentives to help attract and retain key
technical and management personnel in this highly competitive marketplace."


The proposed restructuring is subject to a number of conditions, including
receipt by the Company's board of directors of a ``fairness opinion'' from an
investment banking firm, the receipt of all necessary gaming and regulatory
approvals and the negotiation and execution of definitive documentation. There
can be no assurance that the restructuring will be successfully implemented or
that there will not be modifications to the restructuring terms.

Silicon Gaming, Inc. is an industry leader in the design and manufacture of slot
machines such as the Odyssey(R) and Quest(TM), which feature such innovative
games as Vacation, Multi-Draw, TopHat 21, Phantom Belle Poker, Banana-Rama and
The Big Win. Headquartered in Palo Alto, California, the Company is traded on
the OTC Electronic Bulletin Board as SGIC.

Forward-Looking Statements

This press release may contain certain forward-looking statements that involve
risks and uncertainties, including statements regarding the proposed
restructuring and its terms. The Company's actual results may differ materially
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, the Company's ability
to successfully obtain any necessary regulatory approvals for the restructuring
and to negotiate definitive documentation for the restructuring, the receipt of
a ``fairness opinion'' regarding the restructuring, the Company's capital
requirements, expectation of losses, dependence on a single product, risk of
technical errors in the Company's products, uncertain market acceptance of the
Company's products, regulatory approval of the Company's products, the Company's
management of its growth, intense competition, rapidly changing technology,
dependence on key personnel and those other risks identified in the Company's
Form 10-K and 10-K/A for the year ended December 31, 1998 and Form 10-Q for the
quarter ended March 31, 1999.

For more information on Silicon Gaming, visit the company's website at
http://www.silicongaming.com

SOURCE: Silicon Gaming, Inc.