Lottery.com has announced the departure of five employees, including four members of its Board, in a recent SEC filing.
The firm has been mired in negativity over the past few months, mainly owing to the overstating of its available unrestricted cash balance by $30m, as well as the decline of its shares which had dropped by 17% recently.
Lottery.com CEO Tony DiMatteo resigned as CEO in July and shortly after it was reported that the company was $425,000 behind on the payroll and was beginning to furlough employees.
The following month Lottery.com expressed ‘substantial’ doubts over its future amid failure to file its quarterly report for the period ended June 30, 2022, by the prescribed date of August 15.
Lottery.com also received notice from NASDAQ that its shares could be delisted by the end of August, should the firm again fail to submit its financial report for the second quarter.
Now, the company has admitted it is in further breach of NASDAQ rules after its Board was reduced from five members to one – Richard Kivel.
Lisa Borders, Steven Cohen, William Thompson, and DiMatteo – who stayed on as a Consultant – have all resigned this month.
Borders served as the Chair of the Nominating and Governance Committee, a member of the Compensation Committee, and as a member of the Audit Committee.
Cohen was Co-Chair of the Board and also a member of the Audit Committee, while Thompson served as the Chair of the Audit Committee and as a member of the Compensation Committee.
All three indicated that their decision to quit the company was ‘related to recent Board practices’.
Lottery.com recently entered into a Term Sheet with Woodford Eurasia Assets, which secured the company a $2.5m convertible loan with the promise of a further $50m.
The $2.5m convertible loan is equal to 15% of the issued shares and comes at a 25% discount to the average share price for the past 10 days.
Borders wrote in her resignation letter: “Over the last few months, I have worked diligently on behalf of the shareholders and uncovered potentially inappropriate activity, as referenced in our 8-K filings.
“However, my eﬀorts to perform as a fiduciary in evaluating opportunities for the company’s return to normal operation have been consistently obstructed by opaque and contrived processes, singular relationships, and a dysfunctional board environment.”
She added: “Most recently, a request for additional time to review and understand research on the ‘red flags’ from the Compliance team about a potential investor was met with threats to hold an oﬃcial Board meeting without all board members present. In this instance, a meeting was held that violated the requirements of the corporate By-Laws. I did not attend this meeting.
“The need and desire to perform appropriately rigorous due diligence on behalf of the shareholders was thwarted.”
In a separate letter, Cohen said the Woodford proposal “seemingly provides much-needed financing but also contained a number of provisions that, in my view, required meaningful deliberation and further negotiation”.
Lottery.com’s statement confirmed that it is ‘no longer in compliance with the Nasdaq Listing Rule 5605(b)(1), which requires a majority of the Board to be comprised of Independent Directors as defined in Rule 5605(a)(2), and Nasdaq Listing Rule 5605(c)(2), which requires the Audit Committee of the Board to consist of at least three members, each of whom is an independent director under the Nasdaq Listing Rules and who meets heightened independence standards for Audit Committee members’.
Lottery.com has stated that it is working ‘diligently’ to identify and appoint new independent directors ‘as soon as practicable’.
Additionally, Kathryn Lever resigned as Chief Legal Officer (CLO), Chief Operating Officer (COO) and Secretary.