Lottery.com Inc. (NASDAQ:LTRY), a prepackaged software services company with a market capitalization of $3 million, has entered into a stock purchase agreement with Generating Alpha Ltd., a St. Kitts and Nevis company, according to a recent 8-K filing with the U.S. Securities and Exchange Commission.
According to InvestingPro data, the company's stock has declined over 81% in the past year, highlighting the significance of this financing arrangement. The agreement, finalized on November 21, 2024, allows for the investor to acquire up to $100 million of Lottery.com's registered common stock.
Under the terms of the agreement, Lottery.com can request the investor to purchase its stock at 90% of the market price, which is defined as the average volume-weighted average price (VWAP) of the stock for the twenty trading days preceding the request. Each transaction must be at least $20,000, with the maximum not exceeding 100% of the stock's average daily trading volume. Additionally, the investor's ownership is capped at 4.99% of Lottery.com's common stock at any time.
As part of the transaction, Lottery.com will issue shares equivalent to 1.5% of half of the commitment amount as a commitment fee to the investor. Once half of the commitment amount has been utilized, an additional 1.5% of the remaining half will be issued in shares. If this issuance would result in the investor owning more than 4.99% of the company's outstanding shares, the excess will be provided in the form of a prefunded warrant to purchase common stock.
This strategic move comes as Lottery.com aims to secure additional capital resources and strengthen its financial position. InvestingPro analysis reveals concerning financial metrics, including a weak financial health score of 1.07 and negative EBITDA of $16.26 million. The company recently faced challenges, including a review of its internal accounting controls and the need to secure additional capital to continue as a going concern. InvestingPro subscribers have access to 15+ additional key insights about LTRY's financial condition and market position.
Current financial indicators support these concerns, with a low current ratio of 0.7 suggesting potential liquidity challenges, though the stock is trading at a modest 0.1 times book value. The company has previously disclosed risks in its Form 10-K filed on April 3, 2024, and continues to provide updates through SEC filings.
In other recent news, Lottery.com has secured approval from the U.S. Securities and Exchange Commission for its Form S-1 Registration Statement, which is a significant milestone in overcoming past financial and operational challenges. The company plans to offer up to 50 million shares of common stock, potentially fueling future growth and market expansion. Lottery.com has also made strategic acquisitions such as S&MI Ltd, the technology firm behind the Sports.com brand and app, and CMF Media, a sports content production house. These acquisitions are expected to enhance Lottery.com's presence in the digital sports entertainment sector.
The company is also dealing with potential delisting from Nasdaq due to not meeting the required minimum bid price, and the resignation of board member Mark Bernard Battles. These are recent developments in the company's ongoing journey to enhance its global presence and offerings.
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