It’s been a rough couple of months for online lottery courier service Lottery.com and in short order, the situation could go from bad to worse. The company has started to address one issue that could significantly impact its future, though.
Lottery.com has identified two new potential members of its board of directors, moving toward heading off sanctions from NASDAQ in the process. While the appointments could help take care of that issue, others still hang over the company ominously.
Online lottery service names two pending board members
On Sept. 21, Lottery.com issued a filing with the United States Securities and Exchange Commission that announced it is out of compliance with a crucial NASDAQ rule. NASDAQ rules require each company on its listing to have:
- an Audit Committee of the board of directors that consists of at least three members, each of whom is not employed by the company or holds any material interest
- a Competiton Committee of the board that consists of at least two members, both of whom must also be independent
On Sept. 8, Lottery.com made a move to partially fulfill this requirement. An 8-K filing bearing that date announced the company has identified two potential board members pending background checks. The filing does not state which roles those people would fill if confirmed to the potential spots.
The Sept. 21 filing states NASDAQ has given Lottery.com until Wednesday, Oct. 5 to submit a plan to bring its board into compliance. If NASDAQ accepts the plan before then, it could grant Lottery.com up to 180 days to actually fill those spots.
The bigger problem is that Lottery.com has recently been in hot water not just with NASDAQ but with shareholders as well.
Troubled times at Lottery.com
The Sept. 8 filing reveals more of the backstory behind this situation. Among the details are the appointment of a new CEO and the resignation of former members of its board of directors.
The Sept. 8 filing essentially covers all the movement in Lottery.com’s leadership over the course of the month. It says on Sept. 6, board members Lisa Borders, Steven Cohen, and William C. Thompson, Jr. resigned their positions on the company’s board. It also states that two days later, Lawrence Anthony DiMatteo resigned as well.
That left Richard Kivel, the board’s chairman, as the board’s sole member. Finally, the company appointed Sohail S. Quraeshi as its interim CEO on Sept. 12. DiMatteo had filled that role prior to his resignation. The resigning board members laid out their reasoning for their departures in yet another 8-K filed on Sept. 2.
For example, Borders cited “opaque and contrived processes, singular relationships, and a dysfunctional board environment” as factors behind her decision. Cohen listed a meeting that excluded members of the board to discuss a financing proposal for the company, calling it “certain directors’ being unwilling to deliberate and confer in an open and reasoned manner.”
That internal strife has likely been compounded by a pending class-action lawsuit. Shareholders of the company allege the former leadership of the company, including DiMatteo, deceived them and gross mismanagement led to losses on the market.
At the time the lawsuit was filed, the company was also facing possible delisting on NASDAQ’s exchange. It was out of compliance with another rule which mandates companies file their quarterly income reports with the exchange by June 30. The company has since satisfied that requirement but more trouble could be ahead next week.
Could the end be near for Lottery.com?
The Sept. 21 filing features Lottery.com stating it plans to come into compliance with the NASDAQ rule governing board participation.
“While the Company can provide no assurance as to timing, the Company plans to identify new independent Audit Committee and Compensation Committee members as soon as practicably possible to regain compliance with the Nasdaq listing rules.”
That statement doesn’t exude confidence that the company will meet the Oct. 5 deadline. It’s unclear right now how NASDAQ could respond should that be the case. Again, Lottery.com doesn’t need to fill the open spots by Wednesday, merely present an acceptable plan for doing so.
Delisting (removal from the market) is a drastic step but for a company that in July doubted whether it had enough money to pay its bills, drastic measures might be appropriate. NASDAQ does allow delisted companies to appeal and the SEC has an appeal process of its own as well, so that would possibly buy the company more time.
As NASDAQ itself points out, though, delisting isn’t necessarily a death sentence in and of itself. It’s possible for companies to regain a place in the market even after being delisted. Given the tumultuous state of Lottery.com otherwise, though, a delisting right now could dampen any interest in the investment it badly needs. Oct. 5 could be a make-or-break day for the company and its remaining shareholders.
