UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed
by the Registrant |
☒ |
|
|
Filed
by a Party other than the Registrant |
☐ |
Check
the appropriate box:
☐ |
Preliminary
Proxy Statement |
|
|
☐ |
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
|
|
☒ |
Definitive
Proxy Statement |
|
|
☐ |
Definitive
Additional Materials |
|
|
☐ |
Soliciting
Material under §240.14a-12 |
LOTTERY.COM
INC.
(Name
of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment
of Filing Fee (Check all boxes that apply):
☒ |
No
fee required. |
|
|
☐ |
Fee
paid previously with preliminary materials. |
|
|
☐ |
Fee
computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
LOTTERY.COM
INC.
20808 State Hwy 71 W, Unit B
Spicewood, TX 78669
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 7, 2023 AT 10 A.M
CENTRAL TIME
Dear
Stockholders of Lottery.com Inc.:
You
are cordially invited to attend the 2023 Annual Meeting of Stockholders (the “Annual Meeting”) of Lottery.com Inc., a Delaware
corporation (the “Company”). The meeting will be held on August 7, 2023 at 10 a.m. Central Time. The Annual
Meeting will be a virtual meeting of stockholders, which will be conducted only via a live audio webcast. You will be able to attend
the Annual Meeting, submit your questions and vote online during the meeting by visiting https://www.cstproxy.com/lottery/2023.
To participate in the Annual Meeting, you will need to register to attend the meeting by 5:30 p.m., Eastern time, on August
2, 2023 using the control number located on your proxy card or voting instruction form. For purposes of attendance at the Annual
Meeting, all references in the accompanying Proxy Statement to “present in person” or “in person” shall mean
virtually present at the Annual Meeting.
We
are holding the Annual Meeting for the following purposes, as more fully described in the accompanying proxy statement:
|
1.
|
To
elect one nominee for Class II director named in the accompanying proxy statement to serve until the 2026 annual meeting of stockholders
and until their successor is duly elected and qualified; |
|
|
|
|
2.
|
To
approve an amendment to the Company’s second amended and restated certificate of incorporation to effect a reverse stock split
of our common stock, par value $0.001 per share (the “Common Stock”) at a ratio in the range of one-for-two to
one-for-thirty of our Common Stock, with the exact ratio to be determined in the discretion of our board of directors and
with such reverse stock split to be effected at such time and date, if at all, as determined by our board of directors in its sole
discretion (the “Reverse Stock Split Proposal”); |
|
|
|
|
3.
|
To
ratify the appointment by the audit committee of our board of directors of Yusufali & Associates, LLC as our independent registered
public accounting firm for the year ending December 31, 2023; |
|
|
|
|
4.
|
To
approve, on an advisory basis, a proposal to adjourn the Annual Meeting, if necessary or appropriate, to solicit additional proxies
if there are not sufficient votes at the time of the Annual Meeting to approve the Reverse Stock Split Proposal; and |
|
|
|
|
5.
|
To
transact any other business that may properly come before the Annual Meeting and any adjournments or postponements thereof. |
These
items of business are more fully described in the Proxy Statement accompanying this Notice of Annual Meeting of Stockholders. The record
date for the Annual Meeting is June 28, 2023. Only stockholders of record at the close of business on that date may vote at the
meeting or any adjournment thereof. Additional details regarding access to the Annual Meeting and the business to be conducted at the
Annual Meeting are described in the accompanying proxy statement.
Your
attention is directed to the proxy statement accompanying this notice for a more complete description of each of the proposals. We urge
you to read the accompanying proxy statement carefully. If you have any questions or need assistance voting your shares of the Company’s
common stock, please contact Morrow Sodali LLC, our proxy solicitor, by calling (800) 662-5200, or banks and brokers can call collect
at (203) 658-9400, or by emailing LTRY.info@investor.morrowsodali.com.
Important
Notice Regarding the Availability of Proxy Materials for the Stockholders’ Meeting
to Be Held on August 7, 2023 at 10 a.m. Central Time online at https://www.cstproxy.com/lottery/2023.
The
proxy statement and 2022 annual report to stockholders
are available at www.proxyvote.com |
|
By
Order of the Board of Directors, |
|
|
|
/s/
Matthew McGahan |
|
Matthew
McGahan
Chairman of the Board
June 26, 2023 |
All
stockholders are cordially invited to attend the Annual Meeting, which will be held virtually via the Internet. Whether or not you
expect to attend the Annual Meeting, please vote over the telephone or the internet as instructed in these materials, or, if you
receive a paper proxy card by mail, by completing and returning the proxy card mailed to you, as promptly as possible in order to
ensure your representation at the meeting. Even if you have voted by proxy, you may still attend the meeting. Please note, however,
that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you may need to obtain
a proxy issued in your name from that record holder. Please contact your broker, bank or other nominee for information about specific
requirements if you would like to vote your shares at the meeting. |
TABLE
OF CONTENTS
LOTTERY.COM
INC.
PROXY STATEMENT
FOR THE 2023 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 10 a.m. Central TIME ON AUGUST 7, 2023
QUESTIONS
AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
We
are providing you with these proxy materials because the Board of Directors of Lottery.com Inc. (the “Board”) is soliciting
your proxy to vote at Lottery.com’s 2023 Annual Meeting of Stockholders (the “Annual Meeting”), including at any adjournments
or postponements thereof, to be held via a live audio webcast on August 7, 2023 at 10 a.m. Central Time. The Annual Meeting
can be accessed virtually by visiting https://www.cstproxy.com/lottery/2023 where you will be able to listen to the meeting
live, submit questions and vote online.
You
are invited to attend the Annual Meeting to vote on the proposals described in this Proxy Statement. However, you do not need to attend
the Annual Meeting to vote your shares. Instead, you may simply follow the instructions below to submit your proxy. The proxy materials,
including this Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”),
are being distributed and made available on or about July 7, 2023. As used in this Proxy Statement, references to “we,”
“us,” “our,” “Lottery.com” and the “Company” refer to Lottery.com Inc. and its subsidiaries.
When
and where is the Annual Meeting?
The Annual Meeting will be held
virtually on Monday, August 7, 2023, at 10 a.m. Central Time, via live audio webcast on the Internet. You may attend, vote
and ask questions at the Annual Meeting by following the instructions provided on the Notice to log into https://www.cstproxy.com/lottery/2023.
The Annual Meeting will be a virtual meeting, which will be conducted entirely online via audio webcast to allow greater participation.
You will not be able to attend the Annual Meeting physically in person. You are entitled to attend the Annual Meeting if you were
a stockholder of record as of June 28, 2023 (the “Record Date”).
The
audio webcast of the Annual Meeting will begin promptly at 10 a.m. Central Time. We encourage you to access the meeting prior
to the start time. You should allow a reasonable time for the check-in procedures on the meeting date. Information
on how to vote online during the Annual Meeting is discussed below.
How
can I attend and vote at the Annual Meeting?
To
be admitted into the virtual Annual Meeting, you must register by going to https://www.cstproxy.com/lottery/2023. You may
gain access in the following ways, depending on how your shares are held. For more information, see “What is the difference
between a record holder and holding shares of Common Stock in street name?” below.
|
● |
Stockholders
of record. A stockholder deemed to be a “record holder” as of the Record Date must enter the control number found
on their proxy card, voting instruction form or Notice that they previously received. Once registered, such stockholders will receive
a confirmation email that they have successfully requested to join the Annual Meeting. |
|
|
|
|
● |
Stockholders
holding their shares in “street name.” A stockholder holding their shares in “street name,” or through
a broker, bank or other nominee, must obtain a legal proxy reflecting the number of shares of Common Stock that they held as of the
Record Date, along with their name, email address, and a request for registration to: Continental Stock Transfer & Trust Company:
by email to proxy@continentalstock.com, or by mail to Continental Stock Transfer & Trust Company, 1 State Street, 30th
Floor, New York, New York, 10004. Requests for registration must be labeled as “Legal Proxy” and be received by Continental
Stock Transfer & Trust Company no later than 5:30 p.m. New York City Time on August 2, 2023. |
Why
is the Company holding the Annual Meeting virtually?
We
are holding the Annual Meeting online and providing internet voting to facilitate stockholder attendance and participation by enabling
all stockholders to participate fully, equally and without cost, using an Internet-connected device from any location around the world,
with procedures designed to ensure the authenticity and correctness of your voting instructions. In addition, the virtual-only meeting
format increases our ability to engage with all stockholders, regardless of size, resources or physical location. Lottery.com stockholders
will be afforded the same opportunities to participate at the virtual Annual Meeting as they would at an in-person Annual Meeting.
Where
can I get technical assistance?
If
you have difficulty accessing the meeting, please call the phone number listed at https://www.cstproxy.com/lottery/2023.
How
do I ask a question at the Annual Meeting?
As
part of the Annual Meeting, we will hold a question and answer session during which we intend to answer questions submitted prior to
the meeting in accordance with the rules of conduct posted on the meeting website, as time permits. Only stockholders of record as of
the Record Date who have registered in advance to attend the Annual Meeting may submit questions prior to the meeting that may be addressed
during the Annual Meeting. If you would like to submit a question, you may do so when you register to attend the Annual Meeting at https://www.cstproxy.com/lottery/2023
using the control number provided in the Notice and typing your question in the appropriate box in the registration form.
In
accordance with the rules of conduct, we ask that you limit your questions to one brief question that is relevant to the Annual Meeting
and that such questions are respectful of your fellow stockholders and meeting participants. Questions and answers may be grouped by
topic, and substantially similar questions may be grouped and answered once. In addition, questions may be ruled as out of order if they
are, among other things, irrelevant to the business to be conducted at the Annual Meeting, related to pending or threatened litigation,
disorderly, repetitious of statements already made, or in furtherance of the stockholder’s own personal, political or business
interests.
Who
can vote at the Annual Meeting?
Only
stockholders of record at the close of business on the Record Date will be entitled to vote at the Annual Meeting. On the date of
this proxy statement, there were 50,925,271 shares of common stock outstanding and entitled to vote.
What
matters am I being asked to vote on?
There
are four matters scheduled for a vote:
|
● |
The
election of the one nominee for Class II director named herein to serve until our 2026 annual meeting of stockholders and until their
successor is duly elected and qualified, subject to their earlier death, resignation or removal (“Proposal 1” or the
“Director Election Proposal”); |
|
|
|
|
●
|
The
approval of an amendment to the Company’s second amended and restated certificate of incorporation (the “Certificate
of Incorporation”) to effect a reverse stock split of our common stock, par value $0.001 per share (the “Common Stock”)
at a ratio in the range of one-for-two to one-for-thirty of our Common Stock, with the exact ratio to be determined
in the discretion of the Board and with such reverse stock split to be effected at such time and date, if at all, as determined by
the Board in its sole discretion (“Proposal 2” or the “Reverse Stock Split Proposal”); |
|
|
|
|
● |
The
ratification of the appointment by the Audit Committee of the Board (the “Audit Committee”) of Yusufali & Associates,
LLC (“Yusufali”) as our independent registered public accounting firm for the year ending December 31, 2023 (“Proposal
3” or the “Ratification Proposal”); and |
|
|
|
|
● |
The
approval, on an advisory basis, of a proposal to adjourn the Annual Meeting, if necessary or appropriate, to solicit additional proxies
if there are not sufficient votes at the time of the Annual Meeting to approve the Reverse Stock Split Proposal (“Proposal
4” or the “Adjournment Proposal”). |
How
does the Board recommend that I vote?
The
Board recommends that you vote your shares of our Common Stock:
|
● |
“FOR”
the Class II director nominee named in this Proxy Statement; |
|
|
|
|
● |
“FOR”
the approval of the Reverse Stock Split Proposal; |
|
|
|
|
● |
“FOR”
the ratification of the appointment of Yusufali as our independent registered public accounting firm for the year ending December
31, 2023; and |
|
|
|
|
● |
“FOR”
the approval, on an advisory basis, of the Adjournment Proposal. |
How
do I vote my shares without attending the Annual Meeting?
Stockholders
of record. You may vote by granting a proxy in the following ways:
|
● |
By
Internet: go to https://www.cstproxy.com/lottery/2023 and follow the on-screen instructions. You will need the
Notice or proxy card in order to vote by Internet. |
|
|
|
|
● |
By
Mail: request a proxy card from us and indicate your vote by completing, signing and dating the card where indicated and by mailing
or otherwise returning the card in the envelope that will be provided to you. You should sign your name exactly as it appears on
the proxy card. If you are signing in a representative capacity, indicate your name and title or capacity. |
Stockholders
with shares held in street name. You may vote by submitting voting instructions to their bank, broker or other nominee. In most
instances, such stockholders will be able to do this on the Internet or by mail as indicated above. Please refer to information from
your bank, broker or other nominee on how to submit voting instructions.
Internet voting facilities will close
at 11:59 p.m., Eastern Time, on August 6, 2023 for the voting of shares held by stockholders of record or held in street
name.
Mailed proxy cards with respect to shares
held of record or in street name must be received no later than 5:30 p.m., Eastern Time, on August 4, 2023.
What
is the difference between being a record holder and holding shares of Common Stock in street name?
A
record holder holds shares in its name through Lottery.com’s transfer agent, Continental Stock Transfer & Trust Company (“Continental”).
A “beneficial owner,” or a person or entity that holds their or its shares in “street name,” holds shares in
the name of a bank, broker or other nominee on that person or entity’s behalf.
How
many votes do I have?
On
each matter to be voted upon, you have one vote for each share of Common Stock you own as of June 28, 2023.
What
am I voting on, how many votes are required to approve each item, how are votes counted and how does the Board recommend I vote?
The
table below summarizes the proposals that will be voted on, the vote required to approve each item, how votes are counted and how the
Board recommends you vote:
Proposal |
|
Vote
Required |
|
Voting
Options |
|
Board
Recommendation(1) |
|
Impact
of Broker
Non-Votes |
|
Impact
of Abstain Vote |
Proposal
1 —
Director Nominee
Proposal |
|
Plurality
of the votes cast |
|
“FOR”
“WITHHOLD” |
|
“FOR” |
|
No
impact |
|
No
impact |
Proposal
2 — Reverse Stock Split Proposal |
|
Majority
of shares entitled to vote |
|
“FOR”
“AGAINST” “ABSTAIN” |
|
“FOR” |
|
Against |
|
Against |
Proposal
3 —
Auditor Ratification
Proposal |
|
Majority
of votes cast |
|
“FOR”
“AGAINST” “ABSTAIN” |
|
“FOR” |
|
No
broker non-votes (uninstructed shares may be voted in broker’s discretion) |
|
No
impact |
Proposal
4 — Adjournment Proposal |
|
Majority
of votes cast |
|
“FOR”
“AGAINST” “ABSTAIN” |
|
“FOR” |
|
No
impact |
|
No
impact |
(1)
|
If
you sign and submit your proxy card without indicating your voting instructions, your shares will be voted in accordance with the
Board’s recommendation. |
If
you are a beneficial owner of shares held in street name, in order to ensure your shares are voted in the way you would prefer, you must
provide voting instructions to your broker, bank or other agent by the deadline provided in the materials you receive from your broker,
bank or other agent.
Can
I revoke my proxy or change my vote after I submit my proxy?
Yes,
you may revoke or change your vote after submitting your proxy card.
Stockholders
of record. Whether you have voted by Internet or mail, you may revoke your proxy or change your vote at any time before it is
actually voted. A record holder may revoke their or its proxy by:
|
● |
signing
and delivering another proxy with a later date that is received no later than 5:30 p.m., Eastern Time, on August 4, 2023; |
|
|
|
|
● |
voting
again by Internet at a later time before the closing of those voting facilities at 11:59 p.m., Eastern Time, on August
6, 2023; |
|
|
|
|
● |
sending
a written statement to that effect to the Company’s Chief Compliance Officer at compliance@lottery.com, provided that such
statement is received no later than 5:30 p.m., Eastern Time, on August 4, 2023; or |
|
|
|
|
● |
voting
at the Annual Meeting. |
Stockholders
with shares held in street name. If you wish to revoke your proxy or vote at the Annual Meeting, you must follow the instructions
provided to you by your bank, broker or other record holder and/or obtain from the record holder a proxy issued in your name. Your virtual
attendance at the Annual Meeting will not, by itself, revoke your proxy.
Stockholders who have questions or need assistance in completing or
submitting their proxy cards should contact our proxy solicitor, Morrow, at (800) 662-5200 or by sending a letter to 333 Ludlow
Street, 5th Floor, South Tower Stamford, Connecticut.
Who
will count the votes?
The
Company’s transfer agent, Continental, will tabulate and certify the votes. A representative of the transfer agent may serve as
an inspector of election.
Who
is paying for this proxy solicitation?
We will pay for the entire cost of soliciting
proxies. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by email, by telephone,
or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We have
also retained Morrow Sodali LLC as our “proxy solicitor” to assist in the solicitation of proxies. For these proxy
solicitation services, Morrow Sodali LLC will receive an estimated fee of approximately $12,500 plus reasonable out-of-pocket
expenses and fees for any additional services. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding
proxy materials to beneficial owners.
Who
can help answer my questions?
If
you have questions about the proposals or if you need additional copies of the proxy statement or the enclosed proxy card you should
contact:
Lottery.com
Inc.
20808 State Hwy 71 W, Unit B
Spicewood,
TX 78669
Attn: Chief Compliance Officer
Telephone: (737) 309-4500
You
may also contact the Company’s proxy solicitor at:
Morrow
Sodali LLC
333 Ludlow Street, 5th Floor, South Tower
Stamford,
Connecticut 06902
Telephone:
(800) 662-5200 (banks and brokers call collect at (203) 658-9400)
Email:
LTRY.info@investor.morrowsodali.com
What
does it mean if I receive more than one Notice?
If
you receive more than one Notice, your shares may be registered in more than one name or in different accounts. Please follow the voting
instructions on the Notices to ensure that all of your shares are voted.
What
is the quorum requirement?
A quorum of stockholders is
necessary to hold a valid meeting. A quorum will be present if stockholders holding a majority of the voting power of the outstanding
shares entitled to vote are present in person, by remote communication, or represented by proxy at the meeting. On the date of this
proxy statement, there were 50,925,271 shares outstanding and entitled to vote. Thus, the holders of 25,462,636 shares
must be present by remote communication at the meeting or represented by proxy at the meeting to have a quorum.
Your
shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or
other nominee) or if you vote by telephone, online or at the meeting. Abstentions and broker non-votes will be counted towards the quorum
requirement. If there is no quorum, the holders of a majority of the voting power of the shares present by remote communication at the
meeting or represented by proxy and entitled to vote may adjourn the meeting to another date.
Will
a list of record stockholders as of the Record Date be available?
A
list of our record stockholders as of the close of business on the Record Date will be made available to stockholders for the ten days
ending the day prior to the Annual Meeting. The list will be available for examination by any stockholder of record for any purpose germane
to the Annual Meeting at our corporate headquarters during normal business hours.
What
if another matter is properly brought before the meeting?
The
Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in accordance with their
best judgment.
How
can I find out the results of the voting at the Annual Meeting?
Preliminary
voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a current report on Form
8-K that we expect to file within four business days after the Annual Meeting. If final voting results are not available to us in time
to file a Form 8-K within four business days after the meeting, we intend to file a Form 8-K to publish preliminary results and, within
four business days after the final results are known to us, file an additional Form 8-K to publish the final results.
PROPOSAL
NO. 1
ELECTION OF CLASS II DIRECTOR
Under
our Second Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) and Amended and Restated
Bylaws (the “Bylaws”), the Board is divided into three classes. Only one class of directors is elected in each year and each
class serves a three-year term. The term length of each Class is, for the Class II director, a term that expires at this Annual Meeting;
for the Class III director, a term that expires at the Company’s 2024 annual meeting of stockholders; and, for Class I director,
a term that expires at the Company’s 2025 annual meeting of stockholders.
There
are currently three directors serving on the Board. The Board has considered and nominated the following Class II director nominee, for
a three-year term expiring at the Company’s 2026 annual meeting of stockholders: Nick Kounoupias. Action will be taken at the Annual
Meeting for the election of this director nominee.
It
is intended that the proxies delivered pursuant to this solicitation will be voted by the proxy holders in favor of the election of Mr.
Kounoupias except where proxies bear contrary instructions. In the event that the director nominee should become unavailable for election
due to any presently unforeseen reason, the proxy holders will have the right to use their discretion to vote for a substitute or substitutes.
NOMINEE
FOR ELECTION TO THE BOARD OF DIRECTORS IN 2023
The
following information describes the offices held and other business directorships of the director nominee. Information regarding each
nominee’s beneficial ownership of equity securities is shown under “Security Ownership of Certain Beneficial Owners and Management”
below.
Nick
Kounoupias, 60, has been a member of the Board since April 2023. Mr. Kounoupias is a respected attorney with almost 40-years
of experience with digital, media and technology companies with a strong practice focus on corporate governance, legal issues, regulations,
and Intellectual Property (IP), with varying skills across multiple sectors. He has worked both within private practice and in-house,
including a 16 year period in a senior position in the consumer entertainment industry. He also has extensive experience in branding,
media, news and related industries; and he has held non-executive directorships and senior positions within the computer software, design,
branded goods and newspaper and magazine publishing industries. He is the founder and CEO of Kounoupias IP, a boutique Intellectual Property
consultancy operating out of offices in England and Cyprus providing strategic guidance on digital technology and IP matters internationally.
He is recognized as a leading specialist in anti-piracy and anti-counterfeiting and possesses extensive experience in managing and conducting
investigations in IP and other sectors. He regularly contributes to journals and books, as well as providing professional training on
legal matters at seminars and webinars.
We
believe that Mr. Kounoupias is well-qualified to serve as a director of our Board because of his extensive experience with technology
companies and extensive legal knowledge, including Intellectual Property rights.
Directors
are elected by a plurality of the votes cast for the election of each director at the Annual Meeting.
OUR
BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF THE DIRECTOR NOMINEE NAMED ABOVE.
Continuing
Members of the Board of Directors
In
addition to the director nominated for election at the Annual Meeting, the following directors currently serve on our Board:
Class
III, with a term expiring at the 2024 Annual Meeting of Stockholders:
Barney
Battles, 56, has been a member of the Board since October 2022. In 2014, Mr. Battles founded The League of Angels, a network
of UHNW international members investing in fast growth British ventures with a global impact and strong corporate values. Mr. Battle
is the former co-owner of Jackpot Games, a Maltese online gaming venture that was then sold to a large German Media Group. Additionally,
Mr. Battles is the former senior advisor to the Rank Group PLC (LSE: RNK), where he focused on the Grosvenor Casinos and Bingo (a UK-based
chain of 53 casinos located in major towns and cities across the UK and 76 bingo clubs located in Belgium, Spain, and the UK). During
his time at Grosvenor Casinos and Bingo, Mr. Battles focused on delivering interactive digital gaming formats across their retail footprint.
He also has extensive FTSE experience, working as Executive Chairman/CFO in turnaround or high growth sectors and is a former CFO of
London’s largest digital agency. Mr. Battles earned a Master in Computing Science from the University of Aberdeen, and was a Scottish
Chartered Accountant with Ernst & Young.
We
believe that Mr. Battles is well-qualified to serve as a director of our Board because of his experience as a former chief financial
officer and company executive with experience gaming and early stage companies.
Class
I, with a term expiring at the 2025 Annual Meeting of Stockholders:
Matthew
McGahan, 53, has been a member of and Chairman of the Board since October 2022. Mr. McGahan is the founder of the U.K. charity,
“Mask Our Heroes” (“MOH”), created in memory of his father Alan, who was a victim of the COVID-19 pandemic. MOH
was one of the first charities to recognize the urgent need for vital personal protection equipment and in the first months of the pandemic,
MOH secured and shipped several plane loads of surgical masks to the U.K. Prior to founding MOH, Mr. McGahan had founded Magic Automotive
Group, a Europe-based Harley-Davidson dealer. In 2010, Mr. McGahan sold Magic Automotive Group to pursue other endeavors. In 1997, prior
to founding Magic Automotive Group, Mr. McGahan had joined his family’s business, Pinewood Motor Group, which his father founded
in 1969. In the early 1990s Mr. McGahan left a public UK multi-brand automotive group to set up an international company specializing
in the importing and exporting of luxury automotive brands, race cars and classics. Mr. McGahan is a graduate of the Purley Boys and
Guildford Engineering Technology College.
We
believe that Mr. McGahan is well-qualified to serve as a director of our Board because of his experience as an entrepreneur and business
executive.
THE
BOARD OF DIRECTORS AND CERTAIN GOVERNANCE MATTERS
Overview
The
Board directs and oversees the management of the business and affairs of the Company and carries out its oversight responsibilities through
meetings and actions of the Board and its two standing committees: the Audit Committee of the Board (the “Audit Committee”)
and the Compensation Committee of the Board (the “Compensation Committee”).
Director
Independence and Independence Determinations
The
Board has established guidelines (the “Corporate Governance Guidelines”) to assist it in making independence determinations
for each director of our Board. The Corporate Governance Guidelines define an “independent director” to align with the definition
provided under the corporate governance requirements of the Nasdaq Stock Market LLC (collectively, the “Nasdaq Rules”). Under
Nasdaq Rule 5605(a)(2), a director is not independent unless the Board affirmatively determines that they do not have a direct or indirect
relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director of the Company. Directors who serve on the Audit Committee and Compensation Committee are subject to the additional independence
requirements under applicable SEC rules and Nasdaq Rules.
It
is the policy of the Board to make affirmative independence determinations for all directors at least annually in connection with the
preparation of the Company’s proxy statement. In making independence determinations, the Board will broadly consider all relevant
facts and circumstances in addition to the requirements of Nasdaq Rule 5605(a)(2).
The
Board undertook its annual review of director independence. As a result of this review, the Board affirmatively determined that Messrs.
McGahan, Battles and Kounoupias are independent within the meaning of the Nasdaq Rules, including with respect to their respective committee
service. The Board has determined that each member of the Audit Committee is “independent” for purposes of service on the
Audit Committee in accordance with Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and that each member of the Compensation Committee is “independent” for purposes of service on the Compensation Committee
in accordance with Section 10C(a)(3) of the Exchange Act.
Board
Structure
The
Board retains the flexibility to determine whether the roles of Chairperson and CEO should be combined or separated, based on what the
Board believes is in the best interests of the Company at a given point in time. The Board believes that this flexibility is in the best
interests of the Company and that a one-size-fits-all approach to corporate governance, with a mandated independent Chairperson, would
not result in better governance or oversight.
Currently,
Mark Gustavson serves as our CEO and Matthew McGahan serves as Chairperson. The Board determined that separation of the positions of
chairperson of the Board and CEO reinforces the independence of the Board in its oversight of the business and affairs of the Company.
In addition, the Board believes that having an independent chairperson of the Board creates an environment that is more conducive to
objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability
of the Board to monitor whether management’s actions are in the best interests of the Company and its stockholders. As a result,
the Company believes that having an independent Board chairperson can enhance the effectiveness of the Board as a whole.
Executive
Sessions
We
currently do not have any employee directors serving on the Board, however we hold executive sessions.
Board
Committees and Meetings
The
following table summarizes the current membership of each of the standing committees of the Board.
|
|
Audit
Committee |
|
Compensation
Committee |
Matthew McGahan*^ |
|
X |
|
X |
Barney Battles*# |
|
X (Chair) |
|
X |
Nick Kounoupias*+ |
|
X |
|
X (Chair) |
*
|
Independent
director |
^ |
Appointed
in October 2022 |
# |
Appointed
in November 2022 |
+
|
Appointed
in April 2023 |
In
July 2022, we effectively ceased operations (the “Operational Cessation”) when we furloughed the majority of our employees
and generally suspended our lottery game sales. Since the Operational Cessation, the Company has had minimal day-to-day operations and
has primarily focused its operations on restarting certain of its core businesses. Prior to the Operational Cessation, we had six members
on our Board. As of the date of this Proxy Statement, the size of the Board has decreased to three members. Further, all of the members
of the Board and all of our principal executive officers who served in such capacities at our prior year’s annual meeting of stockholders
have resigned from such positions.
During
the fiscal year ended December 31, 2022, our Board, Audit Committee and Compensation Committee held approximately 8, 6 and 5 meetings,
respectively.
Our
Corporate Governance Guidelines provide that all directors are expected to make best efforts to attend all meetings of the Board, meetings
of the committees of which they are members and the annual meeting of stockholders. This Annual Meeting is the first held after each
member of our current Board was appointed.
Audit
Committee. All members of the Audit Committee are “independent” in accordance with the Nasdaq Rules and rules of the
U.S. Securities and Exchange Commission (the “SEC”) applicable to boards of directors in general and audit committee members
in particular. The Board has determined that each member of the Audit Committee is “financially literate” within the meaning
of the Nasdaq Rules because each member is able to read and understand fundamental financial statements, including the Company’s
balance sheet, income statement and cash flow statement. In addition, the Board has determined that Mr. Battles qualifies as an “audit
committee financial expert” as defined by Item 407(d) of Regulation S-K, and therefore, also satisfies the “financial sophistication”
requirement in accordance with Nasdaq Rule 5605(c)(2)(A). The Board reached its conclusion as to Mr. Battles’ qualifications based
on, among other things, his background in financial services and accounting, and experience on the audit committees of public, private
and investment companies.
The
duties and responsibilities of the Audit Committee include:
|
● |
those
duties and responsibilities delegated to it by the Board, including overseeing our financial reporting policies, our internal controls,
and our compliance with legal and regulatory requirements applicable to financial statements and accounting and financial reporting
processes; |
|
|
|
|
● |
being
directly responsible for the appointment, retention, replacement and oversight of our independent registered public accounting firm
and reviewing and evaluating its qualifications, performance and independence; |
|
|
|
|
● |
pre-approving
the audit and non-audit services and the payment of compensation to the independent registered public accounting firm; |
|
|
|
|
● |
reviewing
reports from, and material written communications between, management and the independent registered public accounting firm, including
with respect to issues as to the adequacy of the Company’s internal controls; |
|
|
|
|
● |
reviewing
and approving any related person transaction that is required to be disclosed pursuant to Item 404(a) of Regulation S-K promulgated
by the SEC and prior to our entering into such transaction; |
|
|
|
|
● |
reviewing
and discussing with management and the independent registered public accounting firm our guidelines and policies with respect to
risk assessment and risk management; and |
|
|
|
|
● |
reviewing
the Audit Committee Charter and the Audit Committee’s performance at least annually. |
With
respect to our reporting and disclosure matters, the Audit Committee is also responsible for reviewing and discussing with the independent
registered public accounting firm and management our annual audited financial statements and our quarterly financial statements prior
to their inclusion in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q or other publicly disseminated materials in accordance
with the applicable SEC rules and regulations.
The
Audit Committee operates pursuant to a charter adopted by the Board.
Compensation
Committee. All members of the Compensation Committee are “independent” in accordance with the Nasdaq Rules and SEC rules
applicable to boards of directors in general and compensation committees in particular. In addition, at least two members of the Compensation
Committee qualify as “non-employee directors” for purposes of Rule 16b-3 under the Exchange Act.
The
Compensation Committee is responsible for reviewing and overseeing our compensation policies and practices, and meets regularly throughout
the year to review and discuss, among other items, our compensation philosophy, changes in compensation governance, and compliance rules
and best practices. With respect to executive compensation, the Compensation Committee:
|
● |
annually
reviews and approves corporate goals and objectives relevant to the compensation of our CEO and other executive officers; |
|
|
|
|
● |
evaluates,
as a committee or together with the other independent directors (as directed by the Board), the performance of our CEO and other
executive officers in light of such corporate goals and objectives, as well as their individual achievements; |
|
|
|
|
● |
approves
and recommends to our Board for approval of the compensation of our CEO and other executive officers based on this evaluation; and |
|
|
|
|
●
|
periodically
reviews and approves of all elements of our CEO’s and other executive officers’ compensation, including cash-based and
equity-based awards and opportunities, as well as any employment agreements and severance agreements, change in control agreements
and special or supplemental compensation and benefits. |
Additional
duties and responsibilities of the Compensation Committee include:
|
● |
establishing
and reviewing the objectives of the our basic compensation policies; |
|
|
|
|
● |
making
recommendations to our Board with respect to the adoption, amendment, termination or replacement of equity-based compensation or
non-equity-based incentive compensation plans maintained by the Company; |
|
|
|
|
● |
establishing
and periodically reviewing policies regarding senior management perquisites and expense accounts; |
|
|
|
|
● |
reviewing
our regulatory compliance with respect to compensation matters, including SEC rules and regulations regarding stockholder approval
of certain executive compensation; and |
|
|
|
|
● |
assessing
at least annually the independence of any compensation consultant, legal counsel or other adviser to the Compensation Committee. |
The
Board will evaluate director candidates recommended by stockholders in the same manner in which the Board evaluates any other director
candidate. Any such recommendation should be submitted to the Chief Compliance Officer in writing and should include any supporting
material the stockholder considers appropriate in support of that recommendation, but must include information that would be required
under the rules of the SEC to be included in a proxy statement soliciting proxies for the election of such candidate and a written consent
of the candidate to serve as one of our directors if elected. Stockholders wishing to propose a candidate for consideration may do so
by submitting the above information to the attention of the Chief Compliance Officer, 20808 State Hwy 71 W, Unit B, Spicewood, TX 78669,
or by email at compliance@lottery.com. All recommendations for nomination received by the Chief Compliance Officer that satisfy the requirements
under the Bylaws relating to such director nominations will be presented to the Board for its consideration. Stockholders must also satisfy
the notification, timeliness, consent and information requirements set forth in the Bylaws. These requirements are also described under
the section entitled “Stockholder Proposals for the 2024 Annual Meeting of Stockholders.”
Board
Diversity Matrix
The
following Board Diversity Matrix provides the self-identified personal characteristics for our Board:
Board
Diversity Matrix (as of June 15, 2023) |
Total
Number of Directors | |
3 | |
| |
Female | | |
Male | | |
Non-Binary | | |
Did
Not Disclose Gender | |
Part
I: Gender Identity | |
| | | |
| | | |
| | | |
| | |
Directors | |
| — | | |
| 3 | | |
| — | | |
| — | |
Part
II: Demographic Background | |
| | | |
| | | |
| — | | |
| — | |
African
American or Black | |
| — | | |
| — | | |
| — | | |
| — | |
Alaskan
Native or Native American | |
| — | | |
| — | | |
| — | | |
| — | |
Asian | |
| — | | |
| — | | |
| — | | |
| — | |
Hispanic
or Latinx | |
| — | | |
| — | | |
| — | | |
| — | |
Native
Hawaiian or Pacific Islander | |
| — | | |
| — | | |
| — | | |
| — | |
White | |
| — | | |
| 3 | | |
| — | | |
| — | |
Two
or More Races or Ethnicities | |
| — | | |
| — | | |
| — | | |
| — | |
Did
Not Disclose Demographic Background | |
| — | | |
| — | | |
| — | | |
| | |
Code
of Business Conduct and Ethics and Corporate Governance Guidelines
Corporate
Governance Guidelines. To further our commitment to sound governance, our Board has adopted the Corporate Governance Guidelines to
ensure that the necessary policies and procedures are in place to facilitate the Board’s review and make decisions with respect
to the Company’s business operations that are independent from management. The Corporate Governance Guidelines set forth the practices
regarding Board and committee composition, selection and performance evaluations; Board meetings; director qualifications and expectations,
including with respect to continuing education obligations; and management succession planning, including for the CEO.
Code
of Business Conduct and Ethics. We maintain a Code of Business Conduct and Ethics (the “Code of Conduct”) that is applicable
to all of our directors, officers and employees, including our Chairperson and CEO, CFO and other members of management. The Code of
Conduct sets forth standards of ethical business conduct, including conflicts of interest, compliance with applicable laws, rules and
regulations, timely and truthful disclosure, protection and proper use of our assets and reporting mechanisms for illegal or unethical
behavior. The Code of Conduct also satisfies the requirements for a code of ethics as defined by Item 406 of Regulation S-K promulgated
by the SEC. If the Company ever were to amend or waive any provision of the Code of Conduct and that applies to the Company’s principal
executive officer, principal financial officer, principal accounting officer or any person performing similar functions, the Company
intends to satisfy its disclosure obligations, if any, with respect to any such waiver or amendment by posting such information on its
website set forth above rather than by filing a Current Report on Form 8-K. Amendments to the Code of Conduct must be approved by our
Board and will be promptly disclosed (other than technical, administrative or non-substantive changes) on our website.
Stockholder
Communications with the Board
Stockholders
may communicate with our Board, or to specific individual directors of the Board, including the Chairperson of the Board, chairperson
of the Audit or Compensation Committees, or to the independent directors as a group, by addressing such communications to the Chief Compliance
Officer, and delivering electronically at compliance@lottery.com. The Chief Compliance Officer will forward such communications upon
receipt as appropriate.
Hedging
and Pledging Policy
Pursuant
to the Company’s Compliance with United States Federal Securities Laws Regarding Insider Trading: Security Trading Policy (the
“Insider Trading Policy”), all directors, officers and employees of the Company, together with its subsidiaries and affiliates
reported on a consolidated basis, are prohibited from entering into hedging, monetization transactions or similar arrangements with respect
to Company securities, holding Company securities in a margin account or pledging Company securities as collateral for a loan.
Board’s
Role in Risk Oversight
As
part of our Board’s meetings, our Board assesses on an ongoing basis the risks faced by the Company in executing its business plans.
These risks include financial, technological, cybersecurity exposures and the steps management has taken or plans to take with respect
to these exposures, competitive and operational risks and exposures, both from a global perspective and on a jurisdiction-by-jurisdiction
basis. The Board receives updates from management on the primary cyber security risks facing the Company and the measures the Company
is taking to mitigate such risks.
Our
Board dedicates time to review and consider the relevant risks that need to be addressed at the time of the Board meeting. In addition
to the full Board, the Audit Committee plays an important role in the oversight of the Company’s policies with respect to financial
risk assessment and risk management, as well as assessing the Company’s major financial risk exposures. In particular, the Audit
Committee reviews and discusses with management any significant risks or exposures with respect to risk assessment and risk management
and assesses any steps taken to monitor and control such risks. The Compensation Committee is charged with ensuring that our compensation
policies and procedures do not encourage risk taking in a manner that would have a material adverse impact on the Company. The Board
is responsible for overseeing risk related to our governance processes. Each of the Board’s Committees reports its findings to
the full Board for consideration. Each Committee reports its findings to the full Board for consideration.
Our
Board’s role in risk oversight at the Company is consistent with the Company’s leadership structure, with the CEO and other
members of senior management having responsibility for assessing and managing the Company’s risk exposures, and our Board and its
committees providing oversight in connection with those efforts and attempts to mitigate identified risks.
Delinquent
Section 16(a) Reports
Section
16(a) of the Exchange Act requires executive officers, directors and persons who beneficially own more than 10% of a company’s
common stock to file initial reports of ownership (Forms 3) and reports of changes in ownership (Forms 4 and 5) with the SEC. Based solely
on our review of copies of such reports and on written representations from our executive officers and directors, we believe that each
of our executive officers and directors failed to comply with all Section 16(a) filing requirements during our fiscal year ended December
31, 2022 following the Operational Cessation.
PROPOSAL
NO. 2
THE REVERSE STOCK SPLIT PROPOSAL
Our
Board has approved, and is recommending that our stockholders approve, proposed amendments to our Certificate of Incorporation to effect
a reverse stock split (the “Reverse Stock Split”) of all of the issued and outstanding shares of our Common Stock at a ratio
of between one-for-two (1:2) and one-for-thirty (1:30)(inclusive), with such ratio to be determined at the sole
discretion of our Board and with such Reverse Stock Split to be effected at such time and date, if at all, as determined by our Board
in its sole discretion. The text of the proposed form of Certificate of Amendment to our Certificate of Incorporation (the “Certificate
of Amendment”) to effect the Reverse Stock Split is attached as Appendix A to this Proxy Statement. However, the text of
the proposed amendments is subject to revision to include such changes as may be required by the Secretary of State of the State of Delaware
and as our Board deems necessary or advisable to effect the proposed amendment of our Certificate of Incorporation.
By
approving this proposal, stockholders will approve a series of amendments to our Certificate of Incorporation pursuant to which any whole
number of outstanding shares between and including two and thirty would be combined into one share of our Common Stock,
and authorize our Board to file only one such amendment, as determined by our Board in the manner described herein, and to abandon each
amendment not selected by the Board. Our Board believes that stockholder approval of amendments granting our Board this discretion, rather
than approval of a specified stock split ratio, provides our Board with maximum flexibility to react to then-current market conditions
and, therefore, is in the best interests of the Company and its stockholders. Our Board may effect only one Reverse Stock Split as a
result of this authorization. Our Board may also elect not to do any Reverse Stock Split. The Reverse Stock Split will take effect, if
at all, only after it is (i) approved by the affirmative vote of a majority of the shares of outstanding Common Stock entitled to vote
on the matter, (ii) is deemed by the Board to be in the best interests of the Company and its stockholders, and (iii) after filing the
amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware. If the Certificate of Amendment is
filed with the Secretary of State of the State of Delaware, the Certificate of Amendment will effect the Reverse Stock Split by reducing
the outstanding number of shares of the Common Stock by the ratio to be determined by the Board, but will not increase the par value
of the Common Stock, and will not change the number of authorized shares of the Common Stock. If the Board does not implement an approved
Reverse Stock Split prior to the one-year anniversary of this meeting, the Board will seek stockholder approval before implementing any
Reverse Stock Split after that time.
You
should keep in mind that the implementation of a reverse stock split does not have an effect on the intrinsic value of our business or
your proportional ownership in it. You should also consider that in many cases, the market price of a company’s common stock may
decline following a reverse stock split.
Background
Our
Common Stock is currently listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “LTRY.” In order
for our Common Stock to continue to be listed on Nasdaq, we must satisfy various listing maintenance standards established by Nasdaq.
If we are unable to meet Nasdaq requirements, our Common Stock will be subject to delisting.
Under
Nasdaq Listing Rule 5550(a)(2), if the bid price of our Common Stock is under $1.00 per share over a period of 30 consecutive trading
days, Nasdaq may delist our Common Stock from trading.
On
August 24, 2022, the Listing Qualifications department of Nasdaq (the “Staff”) notified the Company that the bid price of
its Common Stock did not comply with Listing Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with Listing Rule 5810(c)(3)(A),
the Company was provided 180 calendar days, or until February 20, 2023, to regain compliance with the Bid Price Rule.
On
February 23, 2023, the Company received a determination letter from the Staff advising the Company that the Staff had determined that
the Company had not regained compliance with the Bid Price Rule and that the Company was not eligible for a second 180 day period as
the Company had not filed its periodic reports with the Securities and Exchange Commission (the “SEC”) and Nasdaq, for the
quarters ended June 30, 2022 and September 30, 2022, and it no longer complied with Nasdaq’s Listing Rules for continued listing.
Nasdaq also confirmed to the Company in its February 23, 2023 letter that the failure to timely file those periodic reports each serve
as separate and an individual basis for delisting. On March 23, 2023, the Company requested a hearing before the Nasdaq hearings panel
(the “Panel”) to appeal a determination by the Listing Qualifications department of Nasdaq (the “Staff”) dated
February 23, 2023, to delist the Company’s securities from Nasdaq. At the hearing before the Panel on April 24, 2023, the Company
presented its plan to complete the restatement of its financial statements for the fiscal year ended December 31, 2021, and the subsequent
quarter ended March 31, 2022, and to file the amended periodic reports and all subsequent required filings with the SEC. The Company
requested the continued listing of its securities on Nasdaq pending the completion of its compliance plan.
By
letter dated May 8, 2023, the Panel granted the Company’s request for continued listing, on an interim basis, subject to the Company
submitting financial projections for fiscal 2023 and filing the restated financial statements for the fiscal year ended December 31,
2021, and quarter ended March 31, 2022, with the SEC by May 15, 2023. The Company provided this information and the Panel indicated that
it would review the filings, along with the updated projections, and thereafter determine whether to afford the Company additional time
to complete the compliance plan presented at the hearing.
By
letter dated May 24, 2023, the Panel notified the Company that it had determined to suspend trading and otherwise move to delist the
Company’s securities from Nasdaq effective with the open of the market on May 26, 2023, which suspension of trading occurred as
contemplated. The Company thereafter requested that the Panel reconsider its determination to delist the Company’s securities from
Nasdaq based upon what the Company believed to be mistakes of material fact upon which the Panel had based its decision.
On
June 8, 2023 (the “June 8th Decision”), the Panel notified the Company that it had determined to reverse its prior
decision and grant the Company’s request for continued listing subject to the Company’s timely compliance with a number of
conditions, including implementing the Reverse Stock Split, to the extent necessary to regain compliance with the Bid Price Rule by August
17, 2023. Accordingly, our Board adopted resolutions, subject to approval by our stockholders, to amend our Certificate of Incorporation
to effect a Reverse Stock Split of our Common Stock at a ratio in the range of one-for-two to one-for-thirty, such ratio
to be determined in the discretion of our Board. These resolutions were approved as a means of increasing the share price of our Common
Stock above $1.00, which is required for continued listing on Nasdaq.
Reasons
for the Proposed Reverse Stock Split
The
Board’s primary objective in proposing the Reverse Stock Split is to raise the per share trading price of our Common Stock to regain
compliance with the Bid Price Rule. The Board believes that the Reverse Stock Split will result in a higher per share trading price,
which is intended to enable us to maintain the listing of our Common Stock on Nasdaq and generate greater investor interest in the Company.
The
Board believes that maintaining the listing of our Common Stock on Nasdaq is in the best interests of the Company and our stockholders.
If our Common Stock were delisted from Nasdaq, the Board believes that such delisting would adversely affect the market liquidity of
our Common Stock, decrease the market price of our Common Stock, adversely affect our ability to obtain financing for the continuation
of our operations and result in the loss of confidence in our company.
If
the Reverse Stock Split is approved by our stockholders and implemented by the Board, we expect to satisfy the $1.00 Bid Price Rule for
continued listing. However, despite the approval of the Reverse Stock Split by our stockholders and implementation by the Board, there
can be no assurance that the Reverse Stock Split will result in our meeting and maintaining the $1.00 minimum closing price requirement.
The effect of the Reverse Stock Split upon the market price for our Common Stock cannot be predicted, and the history of similar reverse
stock splits for companies in like circumstances is varied. The market price per share of our Common Stock after the Reverse Stock Split
may not rise in proportion to the reduction in the number of shares of our Common Stock outstanding resulting from the Reverse Stock
Split due to, among other reasons, our performance and other factors that may be unrelated to the number of shares outstanding. Our Common
Stock could also be delisted from Nasdaq due to our failure to comply with one or more other Nasdaq listing standards. We cannot be certain
that we will ultimately be able to regain compliance with the Bid Price Rule or the other listing standards.
Our
Board also believes that the expected increased market price per share of our Common Stock as a result of implementing a Reverse Stock
Split could improve the marketability and liquidity of our Common Stock and encourage interest and trading in our Common Stock. We understand
that many brokerage houses, institutional investors and funds have internal policies and practices that either prohibit them from investing
in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers or by restricting
or limiting the ability to purchase such stocks on margin. Some of those policies and practices may make the processing of trades in
low-priced stocks economically unattractive to brokers. Additionally, a Reverse Stock Split could help increase analyst and broker interest
in our Common Stock as their internal policies might discourage them from following or recommending companies with low stock prices.
Investors may also be dissuaded from purchasing stocks below certain prices because brokers’ commissions, as a percentage of the
total transaction value, can be higher for low-priced stocks.
Criteria
to be Used for Determining Whether to Implement Reverse Stock Split
In
determining whether to implement the Reverse Stock Split and which Reverse Stock Split ratio to implement, if any, following receipt
of stockholder approval of this Proposal 2, our Board may consider, among other things, various factors, such as:
|
●
|
the
historical trading price and trading volume of our Common Stock; |
|
|
|
|
● |
the
then-prevailing trading price and trading volume of our Common Stock and the expected impact of the Reverse Stock Split on the trading
market for our Common Stock in the short- and long-term; |
|
|
|
|
● |
the
continued listing requirements for our Common Stock on Nasdaq; |
|
|
|
|
● |
which
Reverse Stock Split ratio would result in the least administrative cost to us; and |
|
|
|
|
● |
prevailing
general market and economic conditions. |
The
failure of our stockholders to approve this Proposal 2 could have serious, adverse effects on us and our stockholders. If we do not meet
the conditions set forth in the June 8th Letter, including implementing the Reverse Stock Price, to the extent required, but
August 17, 2023, we may be delisted from Nasdaq. If Nasdaq delists the Common Stock, our shares may then trade on the OTC Bulletin Board
or other small trading markets, such as the pink sheets. In that event, the Common Stock could trade thinly as a microcap or penny stock,
adversely decrease to nominal levels of trading and be avoided by retail and institutional investors, resulting in the impaired liquidity
of our shares.
Our
Board reserves the right to abandon the Reverse Stock Split without further action by our stockholders at any time before the effectiveness
of our Certificate of Amendment, even if the Reverse Stock Split has been authorized by our stockholders. By voting in favor of the Reverse
Stock Split, you are expressly authorizing our Board to determine not to proceed with, and abandon, the Reverse Stock Split if it should
so decide.
Effect
on Outstanding Common Stock and Authorized Common Stock
After
the effective date of any Reverse Stock Split that our Board elects to implement, each stockholder will own a reduced number of shares
of Common Stock. The Reverse Stock Split will be effected simultaneously for all issued and outstanding shares of Common Stock and the
Reverse Stock Split ratio will be the same for all issued and outstanding shares of Common Stock. Any Reverse Stock Split will affect
all of our stockholders uniformly and will not affect any stockholder’s percentage ownership interests in the Company, except to
the extent that the Reverse Stock Split results in any of our stockholders owning a fractional share as described below. Voting rights
and other rights and preferences of the holders of the Common Stock will not be affected by a Reverse Stock Split (other than as a result
of the payment of cash in lieu of fractional shares). For example, a holder of 2% of the voting power of the outstanding shares of Common
Stock immediately prior to a Reverse Stock Split would continue to hold 2% of the voting power of the outstanding shares of Common Stock
immediately after such Reverse Stock Split. The number of stockholders of record will not be affected by a Reverse Stock Split (except
to the extent that any stockholder holds only a fractional share interest and receives cash for such interest after such Reverse Stock
Split).
The
following table illustrates the effects of a one-for-two, one-for-five, one-for-ten, one-for-fifteen, one-for-twenty, one-for-twenty
five and one-for-thirty Reverse Stock Split on our outstanding Common Stock as of June 26, 2023 (without giving effect
to any adjustments for fractional shares):
Reverse
Split Ratio | |
Approximate
Number of Shares Issued and Outstanding | | |
Number
of Shares Authorized | | |
Percentage
of Authorized Common Stock | |
Current
Shares | |
| 50,925,271 | | |
| 500,000,000 | | |
| 10.2 | % |
1-for-2 | |
| 25,462,635 | | |
| 500,000,000 | | |
| 5.1 | % |
1-for-5 | |
| 10,185,054 | | |
| 500,000,000 | | |
| 2.0 | % |
1-for-10 | |
| 5,092,527 | | |
| 500,000,000 | | |
| 1.0 | % |
1-for-15 | |
| 3,395,018 | | |
| 500,000,000 | | |
| .68 | % |
1-for-20 | |
| 2,546,264 | | |
| 500,000,000 | | |
| .51 | % |
1-for-25 | |
| 2,037,011 | | |
| 500,000,000 | | |
| .41 | % |
1-for-30 | |
| 1,697,509 | | |
| 500,000,000 | | |
| .34 | % |
The
amendment will not change the terms of our Common Stock. The shares of new Common Stock will have the same voting rights and rights to
dividends and distributions and will be identical in all other respects to the Common Stock now authorized. The Common Stock issued pursuant
to the Reverse Stock Split will remain fully paid and non-assessable. The Reverse Stock Split is not intended as, and will not have the
effect of, a “going private transaction” covered by Rule 13e-3 under the Exchange Act. We will continue to be subject to
the periodic reporting requirements of the Exchange Act.
We
are currently authorized to issue up to 500,000,000 shares of Common Stock under our Certificate of Incorporation. The Reverse Stock
Split will have no effect on the total number of shares of Common Stock we are authorized to issue under our Certificate of Incorporation.
Therefore, upon effectiveness of the Reverse Stock Split, the number of shares of Common Stock that are authorized and unissued will
increase relative to the number of issued and outstanding shares. We may use the additional authorized and unissued shares of Common
Stock resulting from the Reverse Stock Split to issue additional shares of Common Stock from time to time in equity financings, under
our equity compensation plans or in connection with other matters. The Board currently has no plans, arrangements or understandings regarding
the issuance of such additional authorized and unissued shares of Common Stock.
The
Company does not have any issued or outstanding shares of preferred stock. The Reverse Stock Split will not impact the number of authorized
shares of our preferred stock.
Effect
on Outstanding Equity Awards
If
the Reverse Stock Split is effected, the terms of equity awards granted under our Lottery.com 2021 Incentive Plan (the “Incentive
Plan”), including the per share exercise price of options, the number of shares issuable under such options and the number of shares
delivered upon the vesting and settlement of a restricted stock unit or a performance share unit, will be proportionally adjusted to
maintain their economic value, subject to adjustments for any fractional shares as described herein. In addition, the total number of
shares of Common Stock that may be the subject of future grants under the Incentive Plan, as well as any plan limits on the size of such
grants, will be adjusted and proportionately decreased as a result of the Reverse Stock Split.
Effect
on Warrants
If
the Reverse Stock Split is implemented, the number of shares of Common Stock issuable upon the exercise of our outstanding warrants,
will be reduced by the same ratio as the reduction in the outstanding shares. Correspondingly, the exercise price for individual warrants,
on a per share basis, will be proportionally increased (i.e., the aggregate exercise price for all outstanding warrants will be unaffected,
but following a Reverse Stock Split such exercise price will apply to a reduced number of shares).
Cash
Payment in Lieu of Fractional Shares
No
fractional shares of Common Stock will be issued in connection with the Reverse Stock Split. If as a result of the Reverse Stock Split,
a stockholder of record would otherwise hold a fractional share, the stockholder will receive a cash payment in lieu of the issuance
of any such fractional share in an amount per share equal to the closing price per share on Nasdaq on the trading day immediately preceding
the effective date of the Reverse Stock Split (as adjusted to give effect to the Reverse Stock Split), without interest. The ownership
of a fractional interest will not give the holder thereof any voting, dividend or other right except to receive the cash payment therefore.
By
approving the amendment to our Certificate of Incorporation effecting the Reverse Stock Split, stockholders will be approving the combination
of any whole number of issued shares of our Common Stock between and including 2 and 30 shares into one share of Common
Stock.
Stockholders
should be aware that, under the escheat laws of the various jurisdictions where stockholders reside, where we are domiciled and where
the funds will be deposited, sums due for fractional interests that are not timely claimed after the effective time may be required to
be paid to the designated agent for each such jurisdiction. Thereafter, stockholders otherwise entitled to receive such funds may have
to seek to obtain them directly from the state to which they were paid.
Accounting
Matters
The
par value of the shares of our Common Stock is not changing as a result of the implementation of the Reverse Stock Split. Our stated
capital, which consists of the par value per share of our Common Stock multiplied by the aggregate number of shares of our Common Stock
issued and outstanding, will be reduced proportionately on the effective date of the Reverse Stock Split. Correspondingly, our additional
paid-in capital, which consists of the difference between our stated capital and the aggregate amount paid to us upon the issuance of
all currently outstanding shares of our Common Stock, will be increased by a number equal to the decrease in stated capital. Further,
net loss per share, book value per share and other per share amounts will be increased as a result of the Reverse Stock Split because
there will be fewer shares of Common Stock outstanding.
Possible
Disadvantages of Reverse Stock Split
Even
though the Board believes that the potential advantages of the Reverse Stock Split outweigh any disadvantages that might result, the
following are some of the possible disadvantages of the Reverse Stock Split:
|
● |
The reduced number of outstanding shares of our Common
Stock resulting from the Reverse Stock Split could adversely affect the liquidity of our Common Stock. |
|
|
|
|
● |
Based on the experience of certain other companies
that have effected reverse stock splits, the Reverse Stock Split could result in a devaluation of our market capitalization and the
trading price of our Common Stock, on an actual or an as-adjusted basis. |
|
|
|
|
● |
The Reverse Stock Split may leave certain stockholders
with one or more “odd lots,” which are stock holdings in amounts of less than 100 shares of our Common Stock. These odd
lots may be more difficult to sell than shares of Common Stock in even multiples of 100. Additionally, any reduction in brokerage
commissions resulting from the Reverse Stock Split, as discussed above, may be offset, in whole or in part, by increased brokerage
commissions required to be paid by stockholders selling odd lots created by the Reverse Stock Split. |
|
|
|
|
● |
There
can be no assurance that the market price per new share of our Common Stock after the Reverse Stock Split will increase in proportion
to the reduction in the number of old shares of our Common Stock outstanding before the Reverse Stock Split. The effect of the Reverse
Stock Split upon the market price of the Common Stock cannot be predicted with any certainty, and the history of similar reverse
stock splits for companies in like circumstances is varied, particularly since some investors may view a reverse stock split negatively.
For example, based on the closing market price of our Common Stock on June 23, 2023 of $0.2160 per share of Common
Stock, if the stockholders approve this proposal and the Board selects and implements a Reverse Stock Split ratio of 1-for-5,
there can be no assurance that the post-split market price of our Common Stock would be $1.08 per share or greater. Accordingly,
the total market capitalization of our Common Stock after the proposed Reverse Stock Split may be lower than the total market capitalization
before the proposed Reverse Stock Split and, in the future, the market price of our Common Stock following the Reverse Stock Split
may not exceed or remain higher than the market price prior to the proposed Reverse Stock Split. |
|
● |
While the Board believes that a higher stock price
may help generate investor interest, there can be no assurance that the Reverse Stock Split will result in a per share price that
will attract institutional investors or investment funds or that such share price will satisfy the investing guidelines of institutional
investors or investment funds. As a result, the trading liquidity of our Common Stock may not necessarily improve. |
|
|
|
|
● |
If the Reverse Stock Split is effected and the market
price of our Common Stock declines, the percentage decline may be greater than would occur in the absence of a Reverse Stock Split.
The market price of our Common Stock will, however, also be based on our performance and other factors, which are unrelated to the
number of shares outstanding. |
|
|
|
|
● |
The implementation of the Reverse Stock Split will
effectively result in an increase in the authorized number of shares of Common Stock relative to the number of shares outstanding,
which could, under certain circumstances, have anti-takeover implications by permitting issuances that would dilute the ownership
of a person seeking to effect a hostile takeover or increase its percentage ownership. This Proposal 2 has been prompted by business
and financial considerations and not by the threat of any hostile takeover attempt. |
Procedure
for Effecting Reverse Stock Split and Exchange of Stock Certificates
If
our stockholders approve the Reverse Stock Split, the Reverse Stock Split would become effective at such time as it is deemed by our
Board to be in the best interests of the Company and its stockholders and we file the amendment to our Certificate of Incorporation with
the Secretary of State of the State of Delaware. Even if the Reverse Stock Split is approved by our stockholders, our Board has discretion
not to carry out or to delay in carrying out the Reverse Stock Split. Upon the filing of the amendment, all the old Common Stock will
be converted into new Common Stock as set forth in the amendment.
As
soon as practicable after the effective time of the Reverse Stock Split, stockholders will be notified that the Reverse Stock Split has
been effected. If you hold shares of Common Stock in a book-entry form, your shares will be exchanged automatically into post-split shares
without further action by you as soon as practicable after the effective time of the Reverse Stock Split.
Some
stockholders hold their shares of Common Stock in certificate form or a combination of certificate and book-entry form. We expect that
our transfer agent will act as exchange agent for purposes of implementing the exchange of stock certificates, if applicable. If you
are a stockholder holding pre-split shares in certificate form, you will receive a transmittal letter from our transfer agent as soon
as practicable after the effective time of the Reverse Stock Split. The transmittal letter will be accompanied by instructions specifying
how you can exchange your certificate representing the pre-split shares of our Common Stock for a statement of holding. When you submit
your certificate representing the pre-split shares of our Common Stock, your post-split shares of our Common Stock will be held electronically
in book-entry form in the Direct Registration System. This means that, instead of receiving a new stock certificate, you will receive
a statement of holding that indicates the number of post-split shares you own in book-entry form. We will no longer issue physical stock
certificates unless you make a specific request for a share certificate representing your post-Reverse Stock Split ownership interest.
STOCKHOLDERS
SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Beginning
on the effective time of the Reverse Stock Split, each certificate representing pre-Reverse Stock Split shares will be deemed for all
corporate purposes to evidence ownership of post-Reverse Stock Split shares. If a stockholder is entitled to a payment in lieu of any
fractional share interest, such payment will be made as described above under “No Fractional Shares.”
Criteria
to be Used for Decision to Apply the Reverse Stock Split
In
the event that approval for the Reverse Stock Split is obtained, our Board will be authorized to proceed with the Reverse Stock Split.
If an average closing share price of at least $1.00 over the 30 trading-day period ending prior to the Annual Meeting, our Board may
delay its decision to execute the Reverse Stock Split indefinitely. In that case, if at any time during the 12-month period following
the Annual Meeting the average closing share price falls below $1.00 over any 30 trading-day period and therefore fails to comply with
the Bid Price Rule, then the Reverse Stock Split may be executed as a cure for this condition.
No
Appraisal Rights
Under
the General Corporation Law of the State of Delaware, our stockholders are not entitled to dissenter’s or appraisal rights with
respect to our proposed amendment to our Certificate of Incorporation to effect the Reverse Stock Split and we will not independently
provide our stockholders with any such right.
Certain
Material U.S. Federal Income Tax Consequences of the Reverse Stock Split to Holders
The
following is a summary of certain material U.S. federal income tax consequences to U.S. Holders and Non-U.S. Holders (each
as defined below, and collectively, “Holders”) of the Reverse Stock Split. This discussion is limited to Holders that hold
Common Stock, both before and after the Reverse Stock Split, as capital assets within the meaning of Section 1221 of Internal Revenue
Code of 1986, as amended (the “Code”) (generally property held for investment). This summary is based on provisions of the
Code, applicable final, temporary and proposed Treasury Regulations promulgated thereunder, judicial authority and current administrative
rulings and practices as in effect on the date of this proxy statement. Changes to these laws could alter the tax consequences described
below, possibly with retroactive effect, which may result in the U.S. federal income tax consequences of the Reverse Stock Split
differing from the consequences summarized below. We have not sought and do not expect to seek an opinion of counsel or a ruling from
the Internal Revenue Service regarding the U.S. federal income tax consequences of the Reverse Stock Split, and there can be no
assurance that the Internal Revenue Service or the courts will accept the positions expressed below. Moreover, there can be no assurance
that future legislation, regulations, administrative rulings or court decisions will not adversely affect the accuracy of the statements
in this discussion.
This
discussion is for general information only and does not purport to consider all aspects of U.S. federal income taxation that
might be relevant to a Holder. This discussion does not address all of the tax consequences which may apply to stockholders subject
to special rules under U.S. federal income tax law, such as: financial institutions; governments or agencies or instrumentalities
thereof; insurance companies; tax-exempt organizations; traders or dealers in securities; real estate investment trusts;
regulated investment companies; stockholders who hold their Common Stock through individual retirement or other tax-deferred
accounts; U.S. Holders who have a functional currency other than the U.S. dollar; partnerships, S corporations or other
entities or arrangements classified as partnerships or disregarded entities for U.S. federal income tax purposes (or persons
holding our Common Stock through such entities); stockholders who hold their Common Stock as part of a straddle, hedge, wash
sale, conversion transaction or other integrated or risk reduction transaction; stockholders who hold their Common Stock as
qualified small business stock within the meaning of Section 1202 of the Code or Section 1244 stock for purposes of
Section 1244 of the Code; stockholders who acquired their Common Stock in a transaction subject to the gain rollover provisions
of Section 1045 of the Code; stockholders who acquired their Common Stock pursuant to the exercise of employee stock
options or otherwise as compensation; expatriates or former long-term residents of the United States; persons that actually or
constructively own five percent or more (by vote or value) of our stock; controlled foreign corporations; or passive foreign
investment companies.
If
a partnership (including an entity or arrangement treated as a partnership or other pass-thru entity for U.S. federal income tax purposes)
holds our Common Stock, the tax treatment of a partner, member or other beneficial owner in such partnership will generally depend upon
the status of the partner, member or other beneficial owner, the activities of the partnership and certain determinations made at the
partner, member or other beneficial owner level. If you are a partner, member or other beneficial owner of a partnership holding our
Common Stock, you are urged to consult your tax advisor regarding the tax consequences of the Reverse Stock Split.
In
addition, this summary does not address: (a) the tax consequences of transactions effectuated before, after or at the same time
as the Reverse Stock Split, whether or not they are in connection with the Reverse Stock Split; (b) any U.S. federal non-income tax
consequences of the Reverse Stock Split, including estate, gift or other tax consequences; (c) any state, local or non-U.S. tax
consequences of the Reverse Stock Split; (d) the application of the alternative minimum tax, the Medicare contribution tax on net
investment income, or the special tax accounting rules under Section 451(b) of the Code, or (e) tax consequences to holders
of options, warrants or similar rights to acquire our Common Stock. Stockholders are urged to consult their own tax advisors with respect
to the application of U.S. federal income tax laws to determine the particular consequences to them, as well as any tax consequences
arising under the laws of any U.S. state or local or foreign jurisdiction.
U.S.
Holders
For
purposes of this discussion, a “U.S. Holder” means a beneficial owner of shares of our Common Stock that is, for U.S.
federal income tax purposes, any of the following:
|
● |
an individual who is a citizen or resident of the United States or someone treated as a U.S. citizen
or resident for U.S. federal income tax purposes; |
|
|
|
|
● |
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes)
created or organized in or under the laws of the United States, any state thereof, or the District of Columbia; |
|
|
|
|
● |
an estate, the income of which is subject to U.S. federal income taxation regardless of its
source; or |
|
|
|
|
● |
a trust if (i) a U.S. court can exercise primary supervision over the trust’s
administration and one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code)
are authorized or have the authority to control all substantial decisions of the trust or (ii) it has a valid election in effect
under applicable U.S. Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes. |
Tax
Consequences of the Reverse Stock Split
The
Reverse Stock Split should constitute a “recapitalization” for U.S. federal income tax purposes. In general, the U.S. federal
income tax consequences of a Reverse Stock Split will vary depending upon whether a U.S. Holder receives cash for fractional shares
or solely a reduced number of shares of Common Stock in exchange for its pre-Reverse Stock Split shares of Common Stock. A U.S. Holder
that receives solely a reduced number of shares of Common Stock generally should not recognize gain or loss in the Reverse Stock Split.
Such U.S. Holder’s aggregate tax basis in the reduced number of shares of Common Stock should equal such U.S. Holder’s
aggregate tax basis in its pre-Reverse Stock Split shares of Common Stock and such U.S. Holder’s holding period in the reduced
number of shares of Common Stock should include the holding period in its pre-Reverse Stock Split shares of Common Stock exchanged therefor.
Treasury Regulations provide detailed rules for allocating the tax basis and holding period of the shares of Common Stock surrendered
to the shares of Common Stock received in a recapitalization such as the Reverse Stock Split. U.S. Holders should consult their
tax advisors as to application of the foregoing rules, including where shares of Common Stock were acquired at different times or at
different prices.
Cash
in Lieu of Fractional Shares
A
U.S. Holder that receives cash in lieu of a fractional share as a result of the Reverse Stock Split should be treated as having
received the fractional shares pursuant to the Reverse Stock Split and then as having exchanged the fractional shares for cash in a redemption
by us, and generally should recognize gain or loss equal to the difference, if any, between the amount of cash received in lieu of fractional
shares and such U.S. Holder’s adjusted basis allocable to the fractional share interests. Such gain or loss will be a long-term
capital gain or loss if the pre-Reverse Stock Split shares were held for more than one year. Long-term capital gains of individuals
are generally eligible to be taxed at reduced rates. The deductibility of capital losses is subject to limitations. Such U.S. Holder’s
aggregate tax basis in the reduced number of shares of Common Stock should equal such U.S. Holder’s aggregate tax basis in
its pre-Reverse Stock Split shares of Common Stock decreased by the basis allocated to the fractional share for which such U.S. Holder
is entitled to receive cash, and such U.S. Holder’s holding period in its reduced number of shares of Common Stock received should
include such U.S. Holder’s holding period in its pre-Reverse Stock Split shares of Common Stock exchanged.
Non-U.S.
Holders
For
purposes of this discussion, a “Non-U.S. Holder” means a beneficial owner of shares of our Common Stock that is, for U.S.
federal income tax purposes, any of the following:
| ● | a
non-resident alien individual (other than certain former citizens and residents of the United
States subject to U.S. tax as expatriates); |
| | |
| ● | a
foreign corporation; or |
| | |
| ● | an
estate or trust that is not a U.S. Holder. |
Generally, Non-U.S. Holders should
not be subject to U.S. federal income or withholding tax on the completion of the Reverse Stock Split, and in particular any gain
or loss realized with respect to cash received in lieu of a fractional share generally should not be subject to U.S. federal income or
withholding tax unless (a) such gain or loss is effectively connected with the Non-U.S. Holder’s conduct of a trade or business
in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment maintained
by the Non-U.S. Holder), (b) the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more
during the taxable year the Reverse Stock Split is completed and certain other conditions are met, or (c) our Common Stock constitute
a U.S. real property interest by reason of our status as a U.S. real property holding corporation for U.S. federal income tax purposes.
The
gain described in clause (a) above generally will be subject to U.S. federal income tax on a net income basis in the same manner as if
the Non-U.S. Holder were a U.S. Holder. A Non-U.S. Holder that is treated as a foreign corporation for U.S. federal income tax purposes
also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such
effectively connected gain, as adjusted for certain items. A Non-U.S. Holder described in clause (b) above will be subject to U.S. federal
income tax at a rate of 30% (or, if applicable, a lower treaty rate) on the gain realized with respect to cash received in lieu of a
fractional share, which may be offset by certain U.S. source capital losses, even though the Non-U.S. Holder is not considered a resident
of the United States, provided that the individual has timely filed U.S. federal income tax returns with respect to such losses. With
respect to clause (c) above, we believe that we are not, and do not anticipate becoming, a United States real property holding corporation.
However, such determination is factual in nature and subject to change and no assurance can be provided as to whether we were or would
be treated as a U.S. real property holding corporation in any year. If we are or have been a U.S. real property holding corporation,
any gain realized with respect to cash received in lieu of a fractional share may be treated as effectively connected with the conduct
of a trade or business in the United States subject to U.S. federal income tax, and the cash proceeds received by a Non-U.S. Holder may
also be subject to a 15% withholding tax.
Information
Reporting and Backup Withholding
A
Holder of shares of Common Stock may be subject to information reporting and backup withholding on cash paid in lieu of fractional shares
in connection with the Reverse Stock Split. To avoid backup withholding, each Holder of shares of Common Stock that does not otherwise
establish an exemption should provide its taxpayer identification number and comply with the applicable certification procedures. Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a credit against
a Holder’s U.S. federal income tax liability, and may entitle such Holder to a refund, provided the required information is
timely and properly furnished to the Internal Revenue Service. Holders of shares of Common Stock should consult their tax advisors regarding
their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption, as well as the procedures
for obtaining a credit or refund if backup withholding is imposed.
The
preceding discussion is intended only as a summary of certain material U.S. federal income tax consequences of the Reverse Stock
Split. It is not a complete analysis or discussion of all potential tax effects that may be important to a particular holder. All holders
of our Common Stock should consult their own tax advisors as to the specific tax consequences of the Reverse Stock Split them, including
record retention and tax-reporting requirements, and the applicability and effect of any U.S. federal, state and local and non-U.S. tax
laws.
Vote
Required
The
affirmative vote of the holders of a majority of the outstanding shares entitled to vote on the matter will be required to approve the
amendment of our Certificate of Incorporation to effect a Reverse Stock Split of our Common Stock at a ratio in the range of one-for-two
to one-for-thirty, such ratio to be determined in the discretion of our Board.
OUR
BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF THIS REVERSE STOCK SPLIT PROPOSAL.
PROPOSAL
NO. 3
RATIFICATION OF appointment OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our
Audit Committee has selected, and our Board ratified the appointment of Yusufali as our independent registered public accounting firm
for the fiscal year ending December 31, 2023 and has further directed that management submit the selection of its independent registered
public accounting firm for ratification by the stockholders at the Annual Meeting. Representatives of Yusufali are expected to be present
at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate
questions.
Neither
our Bylaws nor other governing documents or law require stockholder ratification of the selection of Yusufali as our independent registered
public accounting firm. However, our Audit Committee of the Board is submitting the selection of Yusufali to the stockholders for ratification
as a matter of good corporate practice. If the stockholders fail to ratify the selection, our Audit Committee of the Board will reconsider
whether or not to retain that firm. Even if the selection is ratified, our Audit Committee of the Board in its discretion may direct
the appointment of different independent auditors at any time during the year if they determine that such a change would be in the best
interests for us and our stockholders.
Change
in Independent Registered Accounting Firm
Resignation
of Armanino LLP
As
previously disclosed in the Current Report on Form 8-K filed with the SEC on October 12, 2022 (the “October 12, 2022 Form 8-K”),
the Audit Committee approved on October 7, 2022 the engagement of Yusufali as the Company’s independent registered public accounting
firm for the fiscal year ended December 31, 2022, effective on the same day. As previously disclosed in the Current Report on Form 8-K
filed with the SEC on October 6, 2022 (the “October 6, 2022 Form 8-K”), Armanino resigned as the Company’s independent
registered public accounting firm on September 27, 2022, effectively immediately.
As
previously disclosed in the October 6, 2022 Form 8-K, Armanino’s report on the Company’s financial statements for the fiscal
years ended December 31, 2021 and December 31, 2020 did not contain an adverse opinion or disclaimer of opinion, nor was it qualified
or modified as to uncertainty, audit scope or accounting principles. In addition, there were no disagreements between the Company and
Armanino on accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved
to the satisfaction of Armanino, would have caused them to make reference to the disagreement in their report for such period, or any
subsequent interim period preceding Armanino’s resignation. However, on July 20, 2022, the Company was advised by Armanino, its
registered independent public accountant for the fiscal year ended December 31, 2021, that the audited financial statements for the year
ended December 31, 2021, and the unaudited financial statements for the quarter ended March 31, 2022, should no longer be relied upon.
Armanino advised and determined subsequent to the audit and review of such financial statements, respectively, that a Company subsidiary
entered into a line of credit in January 2022 that was not disclosed in the footnotes to the December 31, 2021 financial statements and
was not recorded in the March 31, 2022 financial statements.
As
previously disclosed in the October 6, 2022 Form 8-K, during the Company’s two audited fiscal years ended December 31, 2021 and
December 31, 2020, and the subsequent interim period through September 27, 2022, Armanino identified the following reportable events
of the type described in Item 304(a)(1)(v) of Regulation S-K: based on Armanino’s evaluation of the facts and circumstances pertaining
to matters disclosed in the Company’s recent Form 8-K filings regarding the resignations of certain officers and directors, Armanino
is unable to rely on the representations of management.
The
Company provided Armanino with a copy of the foregoing disclosures and has requested that Armanino furnish the Company with a letter
addressed to the SEC stating whether it agrees with the statements made by the Company set forth above. A copy of Armanino’s letter,
dated October 7, 2022, was filed as Exhibit 16.1 to the amendment to the October 12, 2022 Form 8-K.
Dismissal
of Marcum LLP in connection with the Business Combination
As
previously disclosed in the Current Report on Form 8-K filed with the SEC on November 15, 2021 (the “November 15, 2021 Form 8-K”),
following the Business Combination Closing, the Audit Committee engaged Armanino LLP as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2021 and approved the dismissal of Marcum LLP as the Company’s independent
registered public accounting firm on November 10, 2021, effective on the same day. Prior to the Business Combination, Marcum LLP served
as TDAC’s independent registered public accounting firm and Armanino LLP served as AutoLotto’s independent registered public
accounting firm.
The
reports of Marcum LLP on the Company’s financial statements as of and for the two most recent audited fiscal years ended December
31, 2020 and December 31, 2019 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to
uncertainties, audit scope or accounting principles.
During
the Company’s two audited fiscal years ended December 31, 2020 and December 31, 2019, and the subsequent interim period through
November 10, 2021, there were no disagreements between the Company and Marcum LLP on any matter of accounting principles or practices,
financial disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Marcum LLP, would have
caused it to make reference to the subject matter of the disagreements in its reports on the Company’s financial statements for
such years.
During
the Company’s two audited fiscal years ended December 31, 2020 and December 31, 2019, and the subsequent interim period through
November 10, 2021, there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange
Act).
The
Company provided Marcum LLP with a copy of the foregoing disclosures and has requested that Marcum furnish the Company with a letter
addressed to the SEC stating whether it agrees with the statements made by the Company set forth above. A copy of Marcum’s letter,
dated November 12, 2021, was filed as Exhibit 16.1 to the November 15, 2021 Form 8-K.
Principal
Accountant Fees and Services
As
described above, on September 27, 2022, Armanino resigned as the independent registered public accounting firm of the Company, effective
immediately. On October 7, 2022, the Audit Committee approved the engagement of Yusufali as the Company’s new independent registered
public accounting firm, effective immediately, for the fiscal year ended December 31, 2022. The following table sets forth the aggregate
fees billed to us for the fiscal year ended December 31, 2022 by Yusufali:
| |
2022 | |
Audit Fees(1) | |
$ | 325,000 | |
Audit-Related Fees(2) | |
| — | |
Tax Fees(3) | |
| — | |
All
Other Fees(4) | |
| — | |
Total: | |
$ | 325,000 | |
(1) |
Audit
Fees represent the aggregate fees billed for professional services rendered for the audits of the annual financial statements and
the Company’s internal control over financial reporting; for review of the consolidated financial statements included in the
Company’s Quarterly Reports on Form 10-Q filings; for the audits and reviews of certain of our subsidiaries; and for services
that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings. |
(2) |
Audit-Related
Fees represent the aggregate fees billed for assurance and other services related to the performance of the audit or review of our
consolidated financial statements and that are not reported under paragraph (1) above. These services include due diligence related
to mergers and acquisitions and consultation concerning financial accounting and reporting standards. |
|
|
(3) |
Tax
Fees represent the aggregate fees billed for international tax compliance, tax advice, and tax planning services. |
|
|
(4) |
All
Other Fees represent fees billed for all other services. |
Audit
Committee Pre-Approval Procedures for Independent Registered Public Accounting Firm
The
Audit Committee has sole authority to engage and determine the compensation of our independent registered public accounting firm. The
Audit Committee also is directly responsible for evaluating the independent registered public accounting firm, reviewing and evaluating
the lead partner of the independent registered public accounting firm and overseeing the work of the independent registered public accounting
firm. In addition, and pursuant to its charter and the Company’s Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee
annually reviews and pre-approves the audit services to be provided by Armanino LLP, and also reviews and pre-approves the engagement
of Armanino LLP for the provision of other services during the year, including audit-related, tax and other permissible non-audit. For
each proposed service, the Company’s management and the independent registered public accounting firm are required to jointly submit
to the Audit Committee detailed supporting documentation at the time of approval to permit the Audit Committee to make a determination
as to whether the provision of such services would impair the independent registered public accounting firm’s independence, and
whether the fees for the services are appropriate.
Vote
Required
The
affirmative vote of the holders of a majority of the voting power of the shares present in person, by remote communication, or represented
by proxy and entitled to vote on the matter will be required to ratify the appointment of Yusufali as our independent registered public
accounting firm for the year ending December 31, 2023.
OUR
BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF YUSUFALI & ASSOCIATES, LLC AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2023.
Report
of the Audit Committee of the Board of Directors(1)
The
Audit Committee assists the Board in its oversight of the Company’s financial statements and reporting process, audit process and
internal controls. The Audit Committee operates under a written charter adopted by the Board, which describes this and the other responsibilities
of the Audit Committee. Management has the primary responsibility for the financial statements and the reporting process, including the
systems of internal controls. Our independent registered public accounting firm is responsible for performing an independent audit of
our consolidated financial statements and internal controls over financial reporting in accordance with the auditing standards of the
Public Company Accounting Oversight Board (“PCAOB”) and to issue a report thereon.
Our
Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2022 with management
of the Company. Our Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed
by the applicable requirements of the PCAOB and the SEC. Our Audit Committee has also received the written disclosures and the letter
from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountants’
communications with the audit committee concerning independence, and has discussed with the independent registered public accounting
firm the accounting firm’s independence.
Based
on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial
statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Respectfully
submitted by the members of the Audit Committee of the Board.
Barney
Battles (Chair)
Matthew
McGahan
Nick
Kounoupias
(1) |
The
material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be
incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether
made before or after the date hereof and irrespective of any general incorporation language in any such filing. |
PROPOSAL
NO. 4
APPROVAL, ON AN ADVISORY BASIS, TO ADJOURN ANNUAL MEETING
TO SOLICIT ADDITIONAL PROXIES FOR PROPOSAL NO. 2
If,
at the Annual Meeting, the number of shares of Common Stock present in person, by remote communication, or represented by proxy and voting
in favor of Proposal 2 to approve the Reverse Stock Split is insufficient to approve such proposal, the Company believes it is advisable
that the Company should be authorized to move to adjourn the Annual Meeting in order to enable the Board to solicit additional proxies
for the approval of Proposal 2. If we determine that this is necessary, we will ask our stockholders to vote only on Proposal 1, Proposal
3 and Proposal 4 and not on Proposal 2. We do not intend to call a vote on this Proposal 4 if Proposal 2 is approved by the requisite
number of shares of our Common Stock at the Annual Meeting.
If
our stockholders approve this Proposal 4 to adjourn the Annual Meeting, we could adjourn the Annual Meeting and use the additional time
to solicit additional proxies, including the solicitation of proxies from stockholders that have previously voted. Among other things,
approval of this Proposal 4 could mean that, even if we had received proxies representing a sufficient number of votes “AGAINST”
Proposal 2 to defeat such proposal, we could adjourn the Annual Meeting without a vote on the Reverse Stock Split and seek to convince
the holders of those shares to change their votes to votes in favor of Proposal 2.
Vote
Required
The
affirmative vote of the holders of a majority of the voting power of the shares present in person, by remote communication, or represented
by proxy and entitled to vote on the matter will be required to approve this Adjournment Proposal.
OUR
BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE ADJOURNMENT PROPOSAL.
EXECUTIVE
OFFICERS
The
following table sets forth certain information with respect to our current executive officers as of June 26, 2023.
Name |
|
Age |
|
Position |
Mark
Gustavson |
|
54 |
|
Chief
Executive Officer |
Mark
Gustavson has been our Chief Executive Officer since February 2023. Mr. Gustavson has 17 years of business development, transactional,
alliance management, finance, operational, company formation, and IP experience with emerging businesses. During his career he has acquired
extensive experience in the integration of business disciplines, with an emphasis on turnaround transactions. Mr. Gustavson held senior
management positions in a variety of technology companies.
In
his various executive capacities, Mr. Gustavson was responsible for transactions ranging from acquisitions and strategic collaborations
to ordinary course transactions. He was also engaged in strategic planning for business development, product development, and in-licensing
activities, and participated in the consummation of numerous collaborations. Sector specialties include biotechnology, IP based banking,
mobile payment systems, social media, mobile gaming applications, fiber optics, and mixed and virtual reality technologies.
Mr.
Gustavson is a co-founder and currently serves as Chief Executive Officer of ZENIOS Technologies Corporation, a position he has held
since May 2022. Said company is involved in the business of augmented and mixed-reality based internet search technology.
In
March of 2020, Mr. Gustavson and a group of investors acquired control of Sansar from Linden Labs Corporation, implementing an expansion
plan, and successfully deploying, virtual reality applications for live events and festivals. These included the renowned London based
Lost Horizons festival Glastonbury, gaining an audience in excess of 4.2 million attendees. The assets of Sansar were transferred to
Sansar, Inc, in June 2022, and Mr. Gustavson has served as a Board member of Sansar, Inc. since June 2022.
From
February 2020 to April 2021, Mr. Gustavson served as Chief Executive Officer of Regnum Corp (OTC:RGMP). Mr. Gustavson served as President,
CFO and co-founder of Tri Capital Energy Corporation, from June 2019 to March 2021. From March 2025 to May 2018, Mr. Gustavson served
as Chief Financial Officer and Director of Wookey Search Technologies Corporation. From July 2016 to August 2017, Mr. Gustavson served
as Chief Financial Officer and Director of Sharkreach Corporation.
Mr.
Gustavson also previously served as President and co-founder of MedicuRx Corporation, a position he held from February 2013 to June 2015.
During this time, he was responsible for managing the company formation and transactional activities in collaboration with co-founder
Dr. Joseph Rubinfeld, as well as taking care of business development, finance, and research and alliance management. MedicuRx Corporation
business was a pharmaceutical company developing cancer therapeutics addressing Glioblastoma Multiforme.
Mr.
Gustavson began his career as a Private Banker at the banking and financial business known as HSBC in Saipan, Commonwealth of the Northern
Mariana Islands. From April 1997 through February 1999, Mr. Gustavson was Vice President of Private Banking and was charged with co-launching
the Commonwealth of the Northern Mariana Islands branch of the Pacific Regional Division during the bank’s expansion period.
Mr.
Gustavson received a Bachelor of Science in Political Science degree (minor in sociology, concentration in economics) from the University
of Oregon in 1991.
EXECUTIVE
COMPENSATION
This
section discusses the material components of the executive compensation program for the executive officers of Lottery.com who were “named
executive officers,” or NEOs for fiscal 2022. This discussion may contain forward-looking statements that are based on our current
plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt
may differ materially from the existing and currently planned programs summarized or referred to in this discussion.
As
an emerging growth company, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting
companies” as such term is defined in the rules promulgated under the Securities Act, which, in general, require compensation disclosure
for our principal executive officer and its two other most highly compensated executive officers, referred to herein as our NEOs.
Introduction
The
primary objectives of our executive compensation programs are to attract and retain talented executives to effectively manage and lead
our Company. Our NEOs for fiscal 2022 are:
|
● |
Our former CEOs, Tony DiMatteo and Sohail S. Quraeshi;
and |
|
|
|
|
● |
Our former executive officers, Edward Moffly, Ryan Dickinson
and Matthew Clemenson. |
Summary
Compensation Table
The
following table provides summary information concerning compensation of our named executive officers for services rendered to us during
fiscal years noted.
Name
and Principal Position | |
Year | | |
Salary(1)
($) | | |
Bonus
($) | | |
Stock
Awards (2)
($) | | |
Option
Awards ($) | | |
Non-Equity
Incentive Plan Compensation ($) | | |
All
Other Compensation ($) | | |
Total
($) | |
Tony
DiMatteo | |
| 2022 | | |
| 269,231 | | |
| 227,740 | | |
| | | |
| | | |
| | | |
| | | |
| 496,971 | |
Former
CEO | |
| 2021 | | |
| 500,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 500,000 | |
| |
| 2020 | | |
| 250,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 250,000 | |
Sohail
S. Quraeshi | |
| 2022 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Former
CEO | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Edward
Moffley | |
| 2022 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Former
CFO | |
| | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Ryan Dickinson | |
| 2022 | | |
| 250,000 | | |
| 227,740 | | |
| — | | |
| | | |
| | | |
| | | |
| 477,740 | |
Former
CFO and President | |
| 2021 | | |
| 500,000 | | |
| — | | |
| 34,504,435 | | |
| — | | |
| — | | |
| — | | |
| 35,004,453 | |
| |
| 2020 | | |
| 250,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 250,000 | |
Matthew
Clemenson Former
CRO | |
| 2022 | | |
| 250,000 | | |
| 227,740 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 477,740 | |
(1) |
Amounts
reflect the NEO’s base salary earned during the fiscal year presented. |
(2) |
Amount
represents the aggregate grant date fair value of restricted share awards (“Restricted Shares”) made to the named executive
officer computed in accordance with Financial Accounting Standards Codification Topic 718, Compensation - Stock Compensation (“Topic
718”). As required by SEC rules, awards are reported in the year of grant. For more information, see “Narrative Disclosure
to Summary Compensation Table — Supplemental Table” below. |
Narrative
Disclosure to Summary Compensation Table
Equity
Awards
Fiscal
2021
On
October 28, 2021, AutoLotto awarded 778,250 restricted shares of common stock (which were exchanged for 2,339,286 restricted shares of
Common Stock (“Restricted Shares”) in connection with the Business Combination Closing) to Mr. Dickinson and 155,809 restricted
shares of common stock (which were exchanged for 468,335 Restricted Shares in connection with the Business Combination Closing) to Ms.
Lever, in each case, under the AutoLotto, Inc. 2015 Stock Option/Stock Issuance Plan (the “2015 Plan”) (together, such equity
grants are referred to herein as the “Fiscal 2021 Equity Awards”).
The
Fiscal 2021 Equity Awards rewarded Mr. Dickinson and Ms. Lever for their respective service to the Company during a critical period for
the Company and as a result of their significant efforts in growing the Company’s business and preparing the Company to be a public
company, as well as for completing the Business Combination during fiscal 2021. In particular, Mr. Dickinson joined the Company in June
2018, serving the Company for over three years, including through the Business Combination process, but had not previously received equity
compensation for his services to the Company and previously had no equity in the Company. Ms. Lever joined the Company in March 2021,
heading the Company’s legal function through the Business Combination process, without previously receiving any grant of equity
for her services.
Vesting
Terms. Mr. Dickinson’s Restricted Shares vest in full six months following the Business Combination Closing, or on April 29,
2022. In the event Mr. Dickinson’s Service terminates for any reason, all unvested Restricted Shares at the time of such termination
will be forfeited. With respect to Ms. Lever’s grant:
|
● |
234,168
of Ms. Lever’s Restricted Shares are subject to time vesting, with 25% (or 58,542 Restricted Shares) vesting on October 28,
2022 (the one year anniversary of the Grant Date) and the remaining 75% vesting monthly over the subsequent 36 month period (with
4,878 Restricted Shares vesting each month). |
|
|
|
|
● |
234,167
of Ms. Lever’s Restricted Shares are subject to performance vesting, with 79,617 Restricted Shares (or 34%) vesting six months
following the Business Combination Closing, or on April 29, 2022, and 154,550 of her Restricted Shares (or 66%) vesting based on
stock price performance hurdles, with half of such shares vesting if the stock price equals or exceeds $14.50 for any 20 trading
days in any 30 consecutive day trading period during the one year period following the Business Combination Closing and the other
half vesting if the stock price equals or exceeds $16.00 for any 20 trading days in any 30 consecutive day trading period during
the one year period following the Business Combination Closing. In the event that one or both closing price goals are not satisfied
within 12 months following the Business Combination Closing, the remaining unvested performance-vested Restricted Shares will vest
monthly over the 36 month period commencing with the 13 month anniversary of the Business Combination Closing, or on November 29,
2022. |
In
the event Ms. Lever’s service terminates for any reason, all unvested Restricted Shares at the time of such termination will be
forfeited.
Fiscal
2022
There
were no equity awards granted to our named executive officer during fiscal 2022.
Cash
Compensation
Base
Salary
Base
salaries are generally set at levels deemed necessary to attract and retain our executives. We provide each named executive officer with
a base salary for the services that the executive officer performs for us. This compensation component constitutes a stable element of
compensation while other compensation elements may be variable. Base salaries are generally reviewed annually and may be increased based
on any number of factors at the discretion of the Compensation Committee, including the individual performance of the named executive
officer, company performance, any change in the executive’s position within our business, the scope of their responsibilities and
market data. For fiscal 2022, the amounts earned by our named executive officers are shown in the Summary Compensation Table above.
Bonuses
In
addition to base salaries, the named executive officers may receive discretionary annual bonuses, guaranteed and/or retention bonuses
in the discretion of the Compensation Committee. Our NEOs did not earn any cash bonuses during fiscal 2020 or fiscal 2021; however, during
fiscal 2022, the Compensation Committee in its discretion awarded one-time retention bonuses to each of Messrs. DiMatteo, Dickinson and
Clemenson, who each received a cash award of $227,740. Such bonuses are being reported as fiscal 2022 compensation in the Summary Compensation
Table above.
Retirement
Benefits, and Termination and Change in Control Provisions at December 31, 2021 and 2020
There
were no pension or retirement benefits pursuant to any existing plan provided or contributed to by the Company or any of its subsidiaries.
In addition, there were no termination and change in control provisions in effect for our NEOs.
Outstanding
Equity Awards at December 31, 2022
None
of our named executive officers have any outstanding equity awards. Any outstanding equity awards were forfeited as of the date of their
resignation or separation from the Company.
DIRECTOR
COMPENSATION
In
February 2022, our Board approved a Non-Employee Director Compensation Program generally providing for an annual cash fee of $62,000,
an annual equity grant of restricted stock units with an award value of $65,000, and an initial equity grant of restricted stock units
with an award value of $85,000. Notwithstanding this program adopted by our Board, no cash fees were paid to our directors during fiscal
2022 and all outstanding equity awards were forfeited in connection with director resignations from the Board.
The
following table sets forth the total compensation paid to each of our non-employee directors for their service on the Board during fiscal
2022:
Name(1) | |
Fee
Earned
or
Paid in Cash ($) | | |
Stock
Awards ($)(1) | | |
Total
($) | |
Barney Battles(2) | |
| — | | |
| — | | |
| — | |
Matthew McGahan(3) | |
| — | | |
| — | | |
| — | |
Richard Kivel(4) | |
| — | | |
| 155,870 | | |
| 155,870 | |
Lisa Borders(5) | |
| — | | |
| 155,870 | | |
| 155,870 | |
Steven Cohen(5) | |
| — | | |
| 155,870 | | |
| 155,870 | |
Joseph Kaminkow(6) | |
| — | | |
| 90,870 | | |
| 90,870 | |
William Thompson (7) | |
| — | | |
| 155,870 | | |
| 155,870 | |
Amer Rustom(8) | |
| — | | |
| — | | |
| — | |
Vladimir Klechtchev(9) | |
| — | | |
| — | | |
| — | |
Naila Chowdhury(10) | |
| — | | |
| — | | |
| — | |
|
(1) |
Represents
all non-employee directors who served on our Board during fiscal 2022. All stock awards granted to our directors during fiscal 2022
were forfeited in connection with the director resignations from the Board noted below. |
|
|
|
|
(2) |
Mr.
Battles was appointed to our Board on November 3, 2022. Mr. Battles did not receive compensation for his service on the Board during
fiscal 2022. |
|
|
|
|
(3) |
Mr.
McGahan was appointed to our Board on October 19, 2022. Mr. McGahan did not receive compensation for his service on the Board during
fiscal 2022. |
|
|
|
|
(4) |
Mr.
Kivel served on our Board until November 4, 2022. |
|
|
|
|
(5) |
Mr.
Cohen and Ms. Borders served on our Board until September 2, 2022. |
|
|
|
|
(6) |
Mr.
Kaminkow resigned from our Board on June 9, 2022. |
|
|
|
|
(7) |
Mr.
Thompson served on our Board from March 10, 2022 to September 2, 2022. |
|
|
|
|
(8) |
Dr.
Rustom served on our Board from September 12, 2022 to November 23, 2022. Dr. Rustom did not receive compensation for his service
on the Board during fiscal 2022. |
|
|
|
|
(9) |
Mr.
Klechtchev served on our Board from September 12, 2022 to October 19, 2022. Mr. Klechtchev did not receive compensation for his service
on the Board during fiscal 2022. |
|
|
|
|
(10) |
Ms.
Chowdhury served on our Board from November 3, 2022 to March 9, 2023. Ms. Chowdhury did not receive compensation for his service
on the Board during fiscal 2022. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table shows information with respect to the beneficial ownership of our common stock as of June 26, 2023 for:
|
● |
each
person known to us to own beneficially 5% or more of our outstanding common stock; |
|
|
|
|
● |
each
of our directors or director nominees; |
|
|
|
|
● |
each
of our NEOs; and |
|
|
|
|
● |
all
of our directors and executive officers as a group. |
As
of June 26, 2023 there were 50,925,271 shares of our Common Stock outstanding. Except as indicated by footnote and subject to
community property laws where applicable, to our knowledge, the persons named in the table below have sole voting and investment power
with respect to all shares of common stock shown as beneficially owned by them:
The
amounts and percentages of shares beneficially owned are reported on the basis of SEC regulations governing the determination of beneficial
ownership of securities. Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has
or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person
is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60
days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person’s ownership percentage,
but not for purposes of computing any other person’s percentage. Under these rules, more than one person may be deemed to be a
beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has
no economic interest.
NAME
OF BENEFICIAL OWNER | |
AMOUNT
AND NATURE OF BENEFICIAL OWNERSHIP | | |
PERCENT
OF COMMON STOCK OUTSTANDING | |
DIRECTORS,
NAMED EXECUTIVE OFFICERS AND 5% STOCKHOLDERS(1) | |
| | | |
| | |
Tony DiMatteo(2) | |
| 1,489,484 | | |
| 2.9 | % |
Matt Clemenson(3) | |
| 6,289,487 | | |
| 12.4 | % |
Ryan Dickinson | |
| 2,339,286 | | |
| 4.6 | % |
Mark Gustavson | |
| — | | |
| — | |
Barney
Battles | |
| — | | |
| — | |
Matthew
McGahan | |
| — | | |
| — | |
Nick Kounoupias | |
| — | | |
| — | |
Suhail
Quraeshi | |
| — | | |
| — | |
Edward
Moffly | |
| — | | |
| — | |
Woodford
Eurasia Assets Ltd. | |
| 10,118,257 | | |
| 19.9 | % |
DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP (FOUR PERSONS) | |
| 0 | | |
| 0 | % |
(1)
|
The
business address of each of these stockholders is c/o Lottery.com Inc., 20808 State Hwy 71 W, Unit B, Spicewood, TX 78669. |
(2) |
Interests
shown are held by ALD Holdings Group, LLC (“ALD Holdings”). Mr. DiMatteo may be deemed to beneficially own the shares
held by ALD Holdings. |
(3) |
Interests
shown are held by MC Holdings, LLC (“MC Holdings”). Mr. Clemenson may be deemed to beneficially own the shares held by
MC Holdings. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Services
Agreement with Master Goblin Games, LLC
In
March 2020, the Company entered into a service agreement (as amended, the “Service Agreement”), with Master Goblin Games,
LLC (“Master Goblin”), an entity that is wholly owned by our President and CFO, Ryan Dickinson. Master Goblin leases retail
locations in certain U.S. jurisdictions from which it operates tabletop game retail stores and, ancillary to such retail operations,
acts as sales agent or retailer licensed by the state lottery commission of such jurisdiction to sell lottery game tickets from such
retail stores. The Company acquires lottery games as requested by users from Master Goblin on a non-exclusive basis in such jurisdictions.
Pursuant
to the Service Agreement, Master Goblin is authorized and approved by the Company to incur up to $100,000 in initial expenses per location
for the commencement of operations at each location, including, without limitation, tenant improvements, furniture, inventory, fixtures
and equipment, security and lease deposits, and licensing and filing fees. Similarly, pursuant to the Service Agreement, during each
month of operation, Master Goblin is authorized to submit to the Company for reimbursement on-going expenses of up to $5,000 per location
for actually incurred lease expenses. The initial expenses are submitted by Master Goblin to the Company upon Master Goblin securing
a lease, and leases are only secured by Master Goblin in any location upon request of the Company. On-going expenses are submitted by
Master Goblin to the Company for reimbursement on a monthly basis, subject to offset. To the extent Master Goblin has a positive net
income in any month, exclusive of the sale of lottery games, such net income reduces or eliminates such reimbursable expenses for that
month. In addition, from time to time Master Goblin may incur certain additional reimbursable expenses for the benefit of the Company.
The Company paid Master Goblin an aggregate of approximately $440,000 and $800,000, including expense reimbursements under the Service
Agreement and additional reimbursable expenses, as of December 31, 2022 and 2021, respectively.
Investor
Rights Agreement
Simultaneously
with the closing of the Business Combination on October 29, 2021 (the “Business Combination Closing”), the Company entered
into an investor rights agreement (the “Investor Rights Agreement”) with the initial stockholders of Trident Acquisition
Corp. and certain stockholders of AutoLotto, including Lawrence Anthony DiMatteo III, our former chief executive officer, and Matthew
Clemenson, our former chief revenue officer (collectively, the “Stockholder Parties”). Pursuant to the Investor Rights Agreement,
such parties agreed to vote or cause to be voted all shares owned by them or take such other necessary action to ensure that (i) our
Board was made up of at least five directors at Closing, (ii) one director nominated by the Initial Stockholders (the “Initial
Stockholders Director”) and the remaining directors nominated by the AutoLotto stockholders (the “AutoLotto Directors”)
would be elected to our initial Board, with the Initial Stockholders Director designated as a Class II director, and (iii) following
the nomination of our initial Board, neither the Initial Stockholders nor the AutoLotto Stockholders shall have ongoing nomination rights,
except that in the event that a vacancy is created on our Board at any time by the death, disability, resignation or removal of the Initial
Stockholders Director or any AutoLotto Director during their initial term, then (x) the AutoLotto Stockholders, with respect to a vacancy
created by the death, disability, resignation or removal of an AutoLotto Director, or (y) the Initial Stockholders, with respect to a
vacancy created by the death, disability, resignation or removal of an Initial Stockholders Director, will be entitled to designate an
individual to fill the vacancy. In addition, the Investor Rights Agreement provides that we will register for resale under the Securities
Act, certain shares of Common Stock and other equity securities that are held by the parties thereto from time to time as well as other
customary registration rights for the parties thereto. The Investor Rights Agreement was termination in connection with the Woodford
Loan Agreement.
OTHER
MATTERS
We
know of no other business that will be presented at the Annual Meeting. If any other matter properly comes before the stockholders for
a vote at the Annual Meeting, however, the proxy holders will vote your shares in accordance with their best judgment. This discretionary
authority is granted by the execution of the form of proxy.
OTHER
INFORMATION
Householding
of Proxies
SEC
rules permit companies and intermediaries such as brokers to satisfy delivery requirements with respect to two or more stockholders sharing
the same address by delivering a single annual report and proxy statement or a single notice of internet availability of proxy materials
addressed to those stockholders. This process, which is commonly referred to as “householding”, can reduce the volume of
duplicate information received at households. While the Company does not household, a number of brokerage firms with account holders
have instituted householding. Once a stockholder has consented or receives notice from their broker that the broker will be householding
materials to the stockholder’s address, householding will continue until the stockholder is notified otherwise or until one or
more of the stockholders revokes their consent. If your your annual report and proxy statement have been househeld and you wish to receive
separate copies of these documents now and/or in the future, or if your household is receiving multiple copies of these documents and
you wish to request that future deliveries be limited to a single copy, you may notify your broker. You can also request and we will
promptly deliver a separate copy of the proxy materials by writing to: 20808 State Hwy 71 W, Unit B, Spicewood, TX 78669, by email
to: compliance@lottery.com, or by telephone at: (737) 309-4500.
Additional
Filings
The
Company’s reports on Forms 10-K, 10-Q, 8-K and all amendments to those reports are available without charge through the SEC’s
website, https://www.sec.gov, as soon as reasonably practicable after they are electronically filed with, or furnished to, the
SEC.
You
may request a copy of our SEC filings, as well as the foregoing corporate documents, at no cost to you, to the Company by writing to:
20808 State Hwy 71 W, Unit B, Spicewood, TX 78669, by emailing: compliance@lottery.com, or by calling: (737) 309-4500.
Stockholder
Proposals for 2024 Annual Meeting of Stockholders
Stockholders
of the Company may submit proposals that they believe should be voted upon at the Company’s annual meeting of Stockholders or nominate
persons for election to the Board. Pursuant to Rule 14a-8 under the Exchange Act, stockholder proposals meeting certain requirements
may be eligible for inclusion in the Company’s proxy statement (the “2024 Proxy Statement”) for the Company’s
2024 annual meeting of stockholders (the “2024 Annual Meeting”). To be eligible for inclusion in the 2024 Proxy Statement,
any such stockholder proposals must be submitted in writing to the Chief Compliance Officer of the Company no later than Saturday,
March 9, 2024, in addition to complying with certain rules and regulations promulgated by the SEC. The submission of a stockholder
proposal does not guarantee that it will be included in the 2024 Proxy Statement.
Alternatively,
stockholders seeking to present a stockholder proposal or nomination at the 2024 Annual Meeting, without having it included in the 2024
Proxy Statement, must timely submit notice of such proposal or nomination. To be timely, a stockholder’s notice must be received
by the Chief Compliance Officer at the principal executive offices of the Company not later than the close of business on the 90th
day nor earlier than the closing of business on the 120th day prior to the first anniversary of the 2023 Annual Meeting.
For the 2024 Annual Meeting, this means that any such proposal or nomination must be submitted no earlier than Tuesday, April 9,
2024 and no later than Thursday, May 9, 2024. Notwithstanding the foregoing, if the date of the 2024 Annual Meeting is more than
30 days before or more than 60 days after the first anniversary of the 2023 Annual Meeting, to be timely, a stockholder’s notice
must be received by the Chief Compliance Officer at the principal executive offices of the Company not later than the later of the close
of business on the 90th day prior to the 2024 Annual Meeting, or the close of business on the 10th day following
the day on which public announcement of the date of the 2024 Annual Meeting is first made by the Company.
In
order for stockholders to give timely notice of director nominations at our 2024 Annual Meeting for inclusion on a universal proxy card
under Rule 14a-19 of the Exchange Act (“Rule 14a-19”), notice must be submitted by the same deadline as disclosed above under
the advance notice procedures set forth in our Bylaws and must also include the information in the notice required by our Bylaws and
by Rule 14a-19(b)(2) and Rule 14a-19(b)(3) of the Exchange Act.
Notices
of any proposals or nominations for the Company’s 2024 Annual Meeting of Stockholders should be sent to Lottery.com Inc., Attention:
Chief Compliance Officer, 20808 State Hwy 71 W, Unit B, Spicewood, TX 78669, or by email at compliance@lottery.com.
Appendix
A
CERTIFICATE
OF AMENDMENT
TO SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LOTTERY.COM INC.
[_________],
2023
Lottery.com
Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), DOES
HEREBY CERTIFY AS FOLLOWS:
|
1. |
That
the Board of Directors of the Corporation (the “Board”) has duly adopted resolutions (a) authorizing the
Corporation to execute and file with the Secretary of State of the State of Delaware this Certificate of Amendment (the “Certificate
of Amendment”) to the Second Amended and Restated Certificate of Incorporation of the Corporation (the “Certificate
of Incorporation”) setting forth the proposed amendment to the Certificate of Incorporation and (b) declaring the Certificate
of Amendment to be advisable and in the best interests of the Corporation and its stockholders in accordance with Section 242 of
the DGCL. |
|
|
|
|
2. |
That
upon the effectiveness of this Certificate of Amendment, the Certificate of Incorporation is hereby amended as follows: |
Article
IV, Section 1 of the Certificate of Incorporation of the Corporation is amended and restated in its entirety to read as follows:
“The
total number of shares of all classes of stock that the Corporation shall have authority to issue is 501,000,000, which shall be divided
into two classes as follows:
500,000,000
shares of common stock, par value $0.001 per share (“Common Stock”); and
1,000,000
shares of preferred stock, par value $0.001 per share (“Preferred Stock”).
Upon
the filing and effectiveness (the “Effective Time”) of this Certificate of Amendment to the Certificate of Incorporation
of the Corporation with the Secretary of State of the State of Delaware, (i) every [___________] shares of the Corporation’s
Common Stock, either issued and outstanding or held by the Corporation in treasury stock immediately prior to the Effective Time shall,
automatically and without any further action on the part of the Corporation or the respective holder thereof, be combined into one validly
issued, fully paid and non-assessable share of Common Stock (the “Reverse Stock Split”); provided, however,
that no fractional shares of Common Stock shall be issued in connection with the Reverse Stock Split. Stockholders who otherwise would
be entitled to receive fractional shares of Common Stock shall be entitled to receive cash (without interest or deduction) from the Corporation’s
transfer agent in lieu of such fractional share interests upon the submission of a transmission letter by a stockholder holding the shares
in book-entry form in an amount equal to the product obtained by multiplying (a) the closing price per share of the Common Stock
as reported on the Nasdaq Stock Market LLC as of the date of the Effective Time, by (b) the fraction of one share owned by the
stockholder.
|
3. |
Thereafter,
pursuant to a resolution of the Board, this Certificate of Amendment was submitted to the stockholders of the Corporation for their
approval, and was duly adopted and approved in accordance with the provisions of Section 242 of the Delaware General Corporation
Law. |
|
|
|
|
4. |
That
except as amended hereby, the provisions of the Corporation’s Certificate of Incorporation shall remain in full force and effect. |
|
|
|
|
5. |
This
Certificate of Amendment shall be effective as of [__________], 2023 at [__________] [a.m./p.m.]. |
[Signature
Page Follows]
IN
WITNESS WHEREOF, Lottery.com Inc. has caused this Certificate
of Amendment to be duly executed and acknowledged in its name and on behalf by an authorized officer of the date first set forth above.
|
LOTTERY.COM
INC. |
|
|
|
By: |
|
|
Name: |
Mark
Gustavson |
|
Title: |
Chief
Executive Officer |
![](https://content.edgar-online.com/edgar_conv_img/2023/06/27/0001493152-23-022554_prxy_001.jpg)
Trident Acquisitions (NASDAQ:TDACU)
Historical Stock Chart
From Jul 2024 to Aug 2024
Trident Acquisitions (NASDAQ:TDACU)
Historical Stock Chart
From Aug 2023 to Aug 2024