Just one member of Lottery.com’s board of directors remains after the business agreed a deal to receive a $2.5m convertible loan in exchange for the resignation of all other board members.
On 6 September, the ailing Lottery.com entered into a term sheet with Woodford Eurasia Assets Ltd, which provided for a $2.5m convertible loan to be funded within five working days, contingent upon the fulfilment of conditions including the resignation of four of the firm’s five directors.
The term sheet also required the appointment of two new board members – to be selected by Woodford – and of a new interim CEO.
The deal also “contemplates” a further $50m in expansion capital via an additional convertible loan or other investment instrument, subject to an agreement between the parties on terms and other customary conditions.
Under the new terms, only Richard Kivel – a venture capitalist and managing director of European venture fund GreyBella Capital – remains on the board, where he now presides as chairman.
Woodford will now appoint two new directors to the board, which will subsequently appoint a new interim CEO and chair of the audit committee.
As a result of the board’s overhaul, Lottery.com is not currently in compliance with Nasdaq listing rules which require a majority of the board to be composed of independent directors, and stipulate that its audit committee must consist of at least three independent directors.
The directors who have resigned from the board are Steven Cohen (former co-chair), Lisa Borders, William Thompson and former CEO Tony DiMatteo.
Former Lottery.com directors Lisa Borders & William Thompson: “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.”
In addition to those resignations, chief legal and operating officer Kathryn Lever tendered her resignation on 5 September.
In letters of resignation submitted to the SEC, outgoing board members explained that after having received the financing proposal from Woodford, questions raised around lender suitability and source of funds were dismissed by the desperate business.
After requesting additional time to review and research the proposed lender, both Borders and Thompson were absent from a board meeting held on the matter, which they insisted was in contravention of the requirements of corporate by-laws.
At the meeting, adjustments to the original proposal put forward by Woodford were agreed and subsequently voted upon with a view to securing a favourable deal for the business.
As a result of Borders’ and Thompson’s absence in the meeting, however, Cohen said in his resignation letter that he abstained from the vote, meaning that only former CEO DiMatteo and current chairman Kivel could have voted in favour of the proposal.
The published resignation letters paint a bleak picture of the situation inside Lottery.com.
Both Thompson and Borders commented separately that: “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.”
Former Lottery.com co-chair Steven Cohen: “This is only the most recent example of a breakdown in the ability of members of this board to function as a group and only the most recent example of certain directors’ being unwilling to deliberate and confer in an open and reasoned manner.”
In his resignation letter, Cohen referred to the previously mentioned meeting as “needlessly rancorous”, and expressed concern about “the acrimony surrounding efforts to hold a meaningful discussion.”
Damningly, he added: “This is only the most recent example of a breakdown in the ability of members of this board to function as a group and only the most recent example of certain directors’ being unwilling to deliberate and confer in an open and reasoned manner.
“Such a breakdown and such an unwillingness to seek consensus in a thoughtful manner does not serve the interests of the shareholders,” Cohen concluded.
Little is known about Woodford Eurasia Assets Ltd.
A company under that name is listed on Companies House in the UK, which describes its nature of business as “support activities for petroleum and natural gas extraction,” as well as involvement in the sale of fuels, ores and metals, activities of construction holding companies and activities of financial services holding companies.
The business is registered at 10 Foster Lane in London, where more than 100 separate businesses – many with net assets in the millions of pounds – have an address.
At present, Woodford lists just one director, Italian national Alex Smotlak, who has a total of 24 appointments listed with Companies House.
A list of former directors of the business includes Paul Mills, managing partner of banking and financial service provider BPA London, and Philip John Clancy, who is also listed as a director of APR Oilfield Services and Geoprep Limited.
Those directors resigned from Woodford in 2016 and 2017, respectively.
The only other former director listed for Woodford is Russian national Sergei Muravev, who resigned from the role on 31 March 2022. No other appointments are listed for Muravev on Companies House.
Nasdaq-listed Lottery.com “will be forced to wind down some or all of its operations” if it is not able to secure additional capital resources or other funding, according to an 8-K filing made to the SEC on Friday (29 July).
On 28 July, Lottery.com’s board of directors determined that the business does not currently have the sufficient financial resources to fund its operations or pay certain existing obligations, including its staff payroll.
According to the filing, Lottery.com owes approximately $425,000 in outstanding payroll obligations, and as a result the business said it intended to furlough certain employees starting from the end of last week.
Failure to fulfil its payroll obligations, the firm recognised, may result in employees terminating their relationship with the business or pursuing legal action.
Since the company is dependent on the efforts and abilities of its employees – particularly its developers and engineers, it said – a material loss of its employee base could leave it unable to operate its technology and meet customer obligations.
This, in turn, could bring about the loss of key customer relationships and revenue, in addition to opening it up to claims brought against the business for breaches of its contractual obligations.
Lottery.com also pointed out in the filing that its current capital resources are not sufficient to fund its operations for the next 12 months, and there is therefore “substantial doubt” about its ability to continue as a going concern.
Lottery.com 8-K filing: “If the company is not able to secure additional capital resources or otherwise fund its operations, the company will be forced to wind down some or all of its operations and pursue options for liquidating the company’s assets, including equipment and intellectual property.”
This led the business to conclude that if it is not able to secure additional capital resources or otherwise fund its operations, it will be forced to wind down some or all of its operations and pursue options for liquidating its assets, including equipment and intellectual property.
Lottery.com has found itself in a downward spiral over the past month, as investors dumped shares in the business on 18 July after it was revealed the firm had overstated its available cash balance by $30m.
This was reported alongside the resignation of chief revenue officer Matthew Clemenson, which followed the 1 July termination of CFO Ryan Dickenson.
The C-suite exodus continued into last week, as founder and CEO Tony DiMatteo also stood down from his role with the business.
While DiMatteo will continue to serve as senior adviser to the Lottery.com board, only two executives are now listed on the ‘management’ section of the firm’s investor relations website.
Harry Dhaliwal, a long-time C-suite exec who has previously held leadership roles at AIG and Barclay’s and served as an adviser to Lottery.com, is listed as CFO, while gaming industry and legal veteran Katie Lever serves as chief legal and operating officer.
This latest instalment in the Lottery.com saga saw droves of investors dump shares in the business on Friday, reducing its opening value of $0.81 per share by a further two thirds. Since a November 2021 high of $15.70, Lottery.com’s share price has now collapsed by more than 98%.