Lottery balls

Note: This article was originally published 8/23/22, but technical issues required it to be re-posted.

A complete mess

The end is likely near for, the lottery ticket management service that lets people play the lottery and keep track of their entries from their phones. On Monday, the Portnoy Law Firm announced that it has filed a class action lawsuit against the company on behalf of shareholders.

The complaint alleges a number of transgressions. We’ll let the law firm speak for itself (emphasis added):

“According to the Complaint, the Company made false and misleading statements to the market. failed to maintain appropriate accounting controls. The Company also failed to maintain appropriate controls over financial reporting including revenue recognition and the reporting of cash. The Company was not in compliance with laws related to the sale of lottery tickets. Based on these facts, the Company’s public statements were false and materially misleading throughout the class period. When the market learned the truth about, investors suffered damages.”

Those alleged poor accounting controls and controls over financial reporting reared their ugly heads in the middle of last month, when admitted that it overstated its cash balance by a whopping $30 million. It also recognized revenue of that same exact amount the previous fiscal year when it should not have.

Employees aren’t getting paid

The real capper on the company’s troubles came in late July, when it announced that was short $425,000 on its payroll obligations. And since it did not foresee being able to scrounge up the cash, it was likely going to cut staff. anticipated a possible chain reaction in which it would have to lay off developers and engineers, which would disrupt its product rollout and maintenance, which would lose the company customers and force it to break its contracts.

The natural end game would be the company closing up shop completely.

The news of the payroll shortfall destroyed the company’s stock (LTRY), which had already been in freefall. On July 28, shares closed at $0.8150. The following day, they closed at $0.2950, a loss of 63.8%.

But, as mentioned, that was really just a dramatic percentage drop after what was already a year-long devastation of the company’s market value. On November 5, shares of LTRY closed at $15.70; in less than nine months, the company lost nearly all of its value. The stock price has ticked up slightly since July, closing Tuesday at $0.4011.

In May, touted its supposedly fantastic first quarter financials. Co-founder and CEO Anthony DiMatteo said, “We believe that the combination of our multi-pronged growth strategy, focus on profitability, and strong balance sheet all position us for future success.”

It doesn’t look like that future is going to happen. DiMatteo resigned from his position last month.

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