8-K: Lottery.com Secures $2.5M Convertible Note Funding

Lottery.com Inc. has entered into a Securities Purchase Agreement with Evergreen Capital Management, LLC for a $2.875 million Senior Secured Convertible Promissory Note, providing $2.5 million in cash.

Summary

• Lottery.com Inc. (the Company) entered into a Securities Purchase Agreement with Evergreen Capital Management, LLC (the Purchaser) on December 2, 2025.
• The Purchaser will buy a Senior Secured Convertible Promissory Note (the Note) with an aggregate principal amount of $2,875,000.
• The Note includes an Original Issue Discount (OID) of $375,000, covering the Purchaser's accounting, due diligence, monitoring, and other transactional costs.
• The actual purchase price (Consideration) for the Note is $2,500,000, calculated by subtracting the OID from the principal amount.
• The Consideration will be advanced in two tranches: $500,000 on or immediately following the Closing Date (December 2, 2025), and $2,000,000 upon the common shares issuable from the Note becoming registered under an effective registration statement and the Company obtaining requisite shareholder approval per Nasdaq Listing Rule 5635.

Sentiment

Score: 3

Explanation: While securing financing is a positive for liquidity, the terms of the convertible note (Original Issue Discount, senior secured status, and contingent funding) coupled with the explicit mention of significant risks, including the ability to continue as a going concern and Nasdaq compliance issues, indicate a highly challenging financial situation for the Company. The overall sentiment is negative despite the immediate capital injection.

Positives

• Secured $2.5 million in cash financing through a Senior Secured Convertible Promissory Note, providing immediate capital.
• The initial tranche of $500,000 provides immediate liquidity to the Company.

Negatives

• The Note carries an Original Issue Discount (OID) of $375,000, reducing the net cash received by the Company relative to the principal amount.
• The second tranche of $2,000,000 is contingent upon shareholder approval and the effectiveness of a registration statement, introducing uncertainty and potential delay in receiving the full funds.
• The Note is convertible into common shares, indicating potential future dilution for existing shareholders.
• The Note is 'Senior Secured,' which may place other creditors in a junior position.

Risks

• Future findings from ongoing review of the Company's internal accounting controls.
• Additional examination of the preliminary conclusions of the internal accounting controls review.
• Ability to secure additional capital resources beyond this current financing.
• Ability to continue as a going concern.
• Ability to respond in a timely and satisfactory manner to inquiries by Nasdaq.
• Ability to regain compliance with the Nasdaq Bid Price Requirement.
• Ability to regain compliance with all Nasdaq Listing Rules.
• Ability to remain current with SEC reports.
• General risks and uncertainties discussed under the heading 'Risk Factors' in the Form 10-K filed by the Company with the SEC on April 22, 2025.

Future Outlook

The Company's forward-looking statements indicate plans for strategy, future operations, prospects, and management objectives. However, these are subject to numerous risks and uncertainties, including ongoing internal accounting control reviews, the ability to secure additional capital, and the ability to continue as a going concern and maintain Nasdaq compliance.

Management Comments

• Robert Stubblefield, Interim Chief Executive Officer, signed the report on behalf of Lottery.com Inc.

Industry Context

This capital raise through a convertible note suggests that Lottery.com Inc. is facing significant financial challenges, a common scenario for companies struggling with liquidity or seeking to fund operations amidst market or operational difficulties. The terms, including a senior secured position and an original issue discount, are often indicative of a company in a distressed financial state, where traditional equity or unsecured debt financing may be difficult to obtain.

Corporate Governance

Stakeholder Impact

• Shareholders face potential dilution from the conversion of the Senior Secured Convertible Promissory Note into common shares.
• Shareholders are also exposed to significant risks, including the Company's ability to continue as a going concern and potential delisting from Nasdaq due to non-compliance.
• Creditors may find their positions junior to the new Senior Secured Convertible Promissory Note holder.

Next Steps

• Obtain shareholder approval for the issuance of common shares convertible from the Note, as required by Nasdaq Listing Rule 5635.
• Ensure the common shares issuable upon conversion of the Note become registered under an effective registration statement.
• Address ongoing internal accounting control reviews and related examinations.
• Work towards regaining compliance with Nasdaq Listing Rules, including the Bid Price Requirement.
• Remain current with SEC reports.

Key Dates

Recommendation

The filing reveals a company in significant financial distress, evidenced by the need for a senior secured convertible note with an Original Issue Discount, and the explicit mention of 'going concern' risk and multiple Nasdaq compliance issues. While the capital raise provides a temporary lifeline, the dilutive nature of the note, the contingent release of funds, and the extensive list of unresolved risks suggest a highly precarious future. A seasoned investor would likely view this as a high-risk situation with substantial downside potential, warranting a 'sell' recommendation.

Keywords

Lottery.com, SEC filing, 8-K, convertible note, capital raise, financing, Nasdaq compliance, going concern, dilution, Evergreen Capital Management