According to the firm's FORM 10-K for the fiscal year ended June 30, 2001, two related lawsuits were filed in the U.S. District Court alleging violation of the federal securities laws by the Company and its executive officers. Those suits were consolidated into one combined action that received class certification for a class consisting of the purchasers of the Company’s Common Stock during the period from March 26, 1997 to December 11, 1997. In September 2000, the Company and the plaintiffs agreed to settle the litigation. Under the terms of the settlement, the Company became obligated to pay $435,000 and could elect to make additional cash payments aggregating $1.6 million by January 31, 2002 or issue warrants to purchase an aggregate of one million shares of the Company’s Common Stock at $2.50 per share, valued at $1.6 million. The Company recorded a one-time charge of $2.0 million in the year ended June 30, 2000, to account for the settlement. In April 2001, the Company selected the cash payment option.
The original complaint alleges that defendants repeatedly disseminated false and misleading statements regarding Acres' strategic alliance with International Game Technology ("IGT"), one of the largest manufacturers of slot machines in the world, as well as the current and future business and financial prospects of the Company, thereby artificially inflating Acres' common stock price. The defendants include Acres and certain of its officers and directors and charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.