Lottery.com has notified NASDAQ that the company is in breach of one of its listing rules, following the resignation of four Board members.
Last week, a Lottery.com SEC filing reported the departures of four Board members; Lisa Borders, Steven Cohen, William Thompson, and Tony DiMatteo.
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’.
This appears to be in relation to the entering of a Term Sheet with Woodford Eurasia Assets, which secured Lottery.com 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”.
DiMatteo, meanwhile, was previously CEO at Lottery.com before stepping down from the post in July in the ‘best interest of the company’.
Lottery.com’s shares had recently dropped by 17% and the company had admitted overstating its available unrestricted cash balance by $30m.
DiMatteo agreed to stay on as a Consultant but he has also now left the Lottery.com Board, which has now been reduced from five members to one – Richard Kivel.
This means Lottery.com 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 has resigned as Chief Legal Officer (CLO), Chief Operating Officer (COO) and Secretary.