In a filing with the Securities and Exchange Commission, American Wagering Inc. (BETM) revealed that the Ninth Circuit Court of Appeals had reversed a lower court decision relative to the subordination of the bankruptcy claim of Michael Racusin, d/b/a/ M. Racusin & Company.
The appeals court decision ruled that the judgment granted Racusin relative to a breach of contract claim against the company was not subject to subordination and remanded the case for further proceedings.
"We are analyzing the effect of the 9th Circuit’s decision, assessing its consequences, and our possible courses of action," the company wrote in the filing, "but it appears that as a result of the decision, and pursuant to a Sept. 3, 2004 Settlement Agreement among us, our subsidiary, Leroy’s Horse & Sports Place, Inc., and Racusin, we will be required to pay to Racusin $2,380,000, plus interest at 8% per annum under a 60-month amortization schedule contained in the Settlement Agreement."
The company added that as a result of the appeals court’s reversal of the Bankruptcy Appellate Panel’s prior ruling there would several impacts on the company’s financial statements. These included:
l. Reducing the common stock by 2,500 shares (cancellation of the 250,000 shares previously granted Racusin.)
2. Reducing additional paid-in capital by $2,377,500, and
3. Reducing by 250,000 the number of our outstanding shares of common stock.
The company wrote that it plans to further analyze the court decision but expects that the principal portion of the debt will require a first payment in December. Subsequent payments will be made through Jan. 31, 2012.