In Lottery.com’s Q2 2022 financial report, the company highlighted several issues related to its controls and procedures for reporting financial results. These deficiencies included a lack of personnel with the necessary accounting knowledge and experience, as well as ineffective policies and procedures for reviewing and monitoring accounting functions. As a result, Lottery.com was unable to close its financial books in a timely manner, leading to incomplete segregation of duties and a revenue overstatement of $52.1 million for the year ending December 31, 2021.
To address these issues, Lottery.com has taken remedial steps, such as hiring personnel with accounting expertise and implementing a more rigorous period-end review process for financial reporting. The company has also improved its accounting processes and documented the segregation of duties for transactions. However, ongoing validation and testing of internal controls will be required, and additional measures may be necessary to address the material weaknesses in the company’s internal control over financial reporting.
In addition to these challenges, Lottery.com is facing multiple ongoing lawsuits. In August 2022, the company was served with a class action lawsuit filed by investors, accusing the company and former high-ranking employees of making false or misleading statements and failing to disclose inadequate internal accounting controls. The lawsuit seeks to recover significant losses suffered by the plaintiffs.
Alongside these legal issues, Lottery.com also experienced a significant decline in revenue for the three months ending June 30, 2022. Revenue dropped by 81% compared to the same period in the previous year, while personnel costs and professional fees increased significantly. The company’s net loss for the three-month period also saw a substantial increase.
