What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-06-15 compared with 2022-04-01 · 751 added, 704 removed, 90 unchanged (94% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following

discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and the

related notes appearing elsewhere in this Annual Report.

This discussion contains forward-looking statements that reflect our plans, estimates,

and beliefs that involve risks and uncertainties.

As a result of many factors, such as those set forth under the “Risk Factors”

and “Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary” sections and elsewhere in this Annual Report,

our actual results may differ materially from those anticipated in these forward-looking statements.

We are a leading provider of

domestic and international lottery products and services.

As an independent third-party lottery game service, we offer the Platform, which

we architected, developed, and operate to enable the remote purchase of legally sanctioned lottery games in the U.S.

generating activities are consist of (i) offering the Platform via our BC2 Platform to users located in the U.S.

and abroad where

the sale of lottery games is legal and our services are enabled for the remote purchase of sanctioned lottery games;

(ii) selling LotteryLink

Credits that can be exchanged for flexible promotion packages that include our marketing collateral, prepaid advertising, development

services, account management, and prepaid lottery games for use in promotions to our Master Affiliates for use by them and by their Sub

Affiliates in undertaking affiliate marketing activities and promoting our B2C Platform;

(iii) offering an internally developed,

created, and operated business-to-business API of the Platform, or our B2B API, that enables our commercial partners, in permitted U.S.

and international jurisdictions, to purchase certain legally operated lottery games from us and resell them to users located within their

respective jurisdictions;

and (iv) providing our Data Service, which entails delivering global lottery data, such as winning numbers

and results, to commercial digital subscribers and subscriptions to data sets of our proprietary, anonymized transaction data pursuant

to multi-year contracts.

We currently derive substantially

all of our revenue from service fees paid to us by users of our B2C Platform, sale of LotteryLink Credits, revenue share arrangements

with commercial partners participating in our B2B API, and subscription fees from users of our Data Service.

We intend to pursue growth

by implementing new products and features within our B2C Platform services, growing our LotteryLink program, expanding our B2C offering

into new domestic and international jurisdictions, entering into additional agreements with new commercial partners for our B2B API, growing

our LotteryLink Credit program, executing on strategic acquisitions and other synergistic opportunities, including gaining access to complementary

and new technology through such acquisitions, and investing in and developing new technology and enhancing our existing technology in

each of our business lines, including distributed ledger technology.

In December 2021, we finalized the acquisition of the domain name

https://sports.com and are exploring opportunities for the intended strategic entry into legal sports gaming verticals, which may include

the distribution of sports lottery games.

In addition, we also expect

to grow our brand and commitment to social awareness through our affiliation with WinTogether.

WinTogether is a registered 501(c)(3) charitable

trust that supports charitable, educational and scientific causes.

DiMatteo and Clemenson formed WinTogether and continue to act

We operate the WinTogether Platform on behalf of WinTogether, as well as the sweepstakes offered through the WinTogether

Platform, which support charitable causes selected by the trustees of WinTogether.

These sweepstakes work to incentivize participants

to donate to those chosen causes.

Donors to each campaign are automatically entered into the sweepstakes for the chance to win cash prizes,

luxury items, and exceptional experiences.

In exchange for operating the WinTogether Platform and the sweepstakes on behalf of WinTogether,

we receive a fee from the gross donations from each sweepstakes.

While the revenue received from the Company’s services relating

to the WinTogether Platform are currently nominal, we believe that our operation of the WinTogether website and sweepstakes could be a

scalable source of revenue in the future as well as a mechanism to increase our brand reputation and recognition by sweepstake participants,

which could result in the acquisition and monetization of new users to our B2C Platform.

Recent Developments

Business Combination

On October 29, 2021, we

consummated the Business Combination with Trident Acquisitions Corp.

(“TDAC” and after the Business Combination described

herein, the “Company”), pursuant to the terms of that certain Business Combination Agreement, dated as of February 21,

2021 (the “Business Combination Agreement”), by and among TDAC, Trident Merger Sub II Corp., a wholly-owned subsidiary

of TDAC (“Merger Sub”) and AutoLotto.

Pursuant to the terms of the Business Combination Agreement, Merger Sub merged with

and into AutoLotto with AutoLotto surviving the merger as a wholly owned subsidiary of TDAC, which was renamed “Lottery.com Inc.”

The aggregate value of the consideration paid by TDAC to the holders of AutoLotto common stock in the Business Combination (excluding

shares that may be issued to former AutoLotto stockholders (the “Sellers”) as earnout consideration) was approximately $440 million,

consisting of approximately 40,000,000 shares of Common Stock valued at $11.00 per share.

In addition, the Sellers and TDAC’s founders

are also entitled to receive up to 3 million and 2 million additional shares of Common Stock, respectively, to the extent that certain

share price targets are achieved following the Closing.

Impacts of COVID-19

The continued outbreak of COVID-19,

including its variant strains, and efforts to control its spread has significantly impacted, and continues to impact, economic conditions

In response to the COVID-19 pandemic U.S.

federal, state, local and international governments continue to institute restrictive

measures to mitigate the spread of the virus and its variants and combat this public health crisis.

The preventative measures that have

primarily impacted us include limitations on individual and business activities through stay-at-home orders, operational and travel restrictions

and physical distance requirements.

In a typical year, the sales

volume of draw games depends heavily on the development of a few notably large jackpots.

Suppression of sales (owing, for instance, to

restricted visits by players to locations where tickets are sold as a result social distancing or other measures put in place as a result

of COVID-19, even if the drawings are themselves continued as scheduled) works against the continued development of these notable jackpots.

By contrast, the betting opportunities offered through instant win games, such as scratchers, are typically unaffected by the volume of

play, and therefore, tickets for instant win games are considered more like merchandise (similar to canned goods) that may be “bought

ahead,” even during the curtailment of retail, or person-to-person, visits.

According to the World Lottery Association, during 2020,

sales of instant win games remained within 1% of the 2019 levels for such sales, despite pandemic-related restrictions that resulted in

the temporary closure of retail locations that are the primary point of sale for instant win games.

Throughout the COVID-19 pandemic,

sales of Online Lottery games via digital channels experienced more ticket sales growth than the alternative, person-to-person sales.

The proportion of all sales occurring through digital channels reached 17% across World Lottery Association membership in 2021, an increase

of 11% over the same figure in 2020.

The shift in consumer purchasing

activity toward online purchasing has catalyzed demand for the mobile and online delivery of lottery games.

As an early entrant in the

delivery of digitized representation of lottery games with an established and growing user base in the U.S.

and abroad, we believe that

we remain well-positioned to capitalize on what we expect to be a continued shift towards a new demography of customers who rely on mobile

and online means for acquisition of consumer goods, including lottery games and other forms of online gaming.

For example, we experienced

a 123% year-over-year increase in our worldwide sale of unique lottery games between 2020 and 2021, which we primarily attribute to the

shift in consumer purchasing habits to mobile and online purchases due to COVID-19.

As the COVID-19 pandemic remains

ongoing, we continue to take steps to ensure the health and safety of our employees by having an entirely remote workforce.

We also reassess

our business continuity programs on an ongoing basis and in light of new developments and governmental mandates to ensure that our employees

remain protected, our business is able to function with minimal disruptions to normal work operations while employees work remotely, and

that demand for our products and services remains consistent.

For more information on the COVID-19-related impacts we may experience,

should read the following discussion and analysis of our financial condition and results of operations together with the consolidated

financial statements and the related notes appearing elsewhere in this Report.

This discussion contains forward-looking statements that

reflect our plans, estimates, and beliefs that involve risks and uncertainties.

As a result of many factors, such as those set forth

under the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary” sections

and elsewhere in this Report, our actual results may differ materially from those anticipated in these forward-looking statements.

and Recent Developments

Investigation and Operational Cessation

July 6, 2022, the Company announced that the Audit Committee (the “Audit Committee”) of the board of directors of the Company

(the “Board”) had retained outside counsel to conduct an independent investigation that revealed instances of non-compliance

with state and federal laws concerning the states in which lottery tickets were procured as well as order fulfillment.

The investigation

also identified issues pertaining to the Company’s internal accounting controls (the “Internal Investigation”).

a report on the filings of the Internal Investigation, on June 30, 2022, the Board terminated the employment of Ryan Dickinson as the

Company’s President, Treasurer and Chief Financial Officer, effective July 1, 2022.

Subsequently, the Company initiated a review

of its cash balances and related disclosures as well as its revenue recognition processes and other internal accounting controls.

July 20, 2022, Armanino LLP (“Armanino”), the Company’s registered independent public accountant for the fiscal years

ended December 31, 2021 and 2020, advised the Company that its audited financial statements of for the year ended December 31, 2021 (the

“2021 Audit”) and the unaudited financial statements for the quarter ended March 31, 2022 (the “March 2022 Financials”),

should no longer be relied upon.

Armanino advised that it had determined, subsequent to the 2021 Audit and review of the March 2022 Financials,

that the Company had entered into a line of credit in January 2022 that was not disclosed in the footnotes to the 2021 Audit and was

not properly recorded in the March 2022 Financials.

July 28, 2022, the Board determined that the Company did not have sufficient financial resources to fund its operations or pay certain

existing obligations, including its payroll and related obligations, due to a significant misstatement of our cash balances.

following day, on July 29, 2022, the Company effectively ceased operations (the “Operational Cessation”), when it furloughed

the majority of its employees and generally suspended its lottery game sales.

The Company’s remaining employees were limited to

the heads of the product, information technology and human resources teams as well as the entire legal and compliance team.

week, several additional employees were recalled from furlough.

All non-furloughed employees were retained, at the discretion of the

Company’s then Chief Operating Officer and Chief Legal Officer, to provide the minimal business functions needed to address the

Company’s legal and compliance issues and to secure necessary funding to resume the Company’s operations.

Less than half

of these non-furloughed employees remain active in the efforts to restore Company operations and as of December 31, 2022, approximately

$1.6 million in outstanding payroll obligations remain unpaid.

September 27, 2022, Armanino resigned as the independent registered public accounting firm of the Company, effective immediately.

October 7, 2022, the Audit Committee approved the engagement of Yusufali & Associates, LLC, (“Yusufali”) as the Company’s

new independent registered public accounting firm.

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 (as described in more detail under “- Plans for Recommencement of Company Operations ” below),

completing the restatements of the Company’s 2021 Audit and March 2022 Financials and preparing and filing the Company’s

delinquent periodic reports, including Amendment No.

1 to the Company’s Annual Report on Form 10-K/A for the year ended December

31, 2021, which the Company filed on May 10, 2023, Amendment No.

1 to the Company’s Quarterly Report on Form 10-Q/A for the three

months ended March 31, 2022, which the Company filed on May 15, 2023, the Company’s Quarterly Reports on Form 10-Q for the three

months ended June 30, 2022 and September 30, 2022, which the Company filed on May 22 and 24, 2023, respectively, the Company’s

Quarterly Report on Form 10-Q for the three months ended March 31, 2023, and this Report.

March 23, 2023, the Company requested a hearing before the Nasdaq Hearings Panel (the “Panel”) to appeal a determination

by the Listing Qualifications department (the “Staff”) of Nasdaq dated February 23, 2023, to delist the Company’s securities

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.

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 satisfied these conditions 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.

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.

The Company’s securities were suspended

from trading on that date but the securities were not delisted because 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.

June 8, 2023, 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 ultimately expiring on August 17,

2023, on which date the Company must satisfy all applicable criteria for continued listing on Nasdaq (the “June 8 th

As a result of the foregoing, the suspension from trading ceased and the Company’s securities were reinstated

for trading on Nasdaq effective with the open of the market on June 15, 2023.

See “ Risk Factors - Risks Related to Our Common

Stock and Warrants - We are not currently in compliance with the continued listing standards of Nasdaq and may not be able to regain

compliance with Nasdaq’s continued listing standards in the future ” for more information.

$30,000,000 Business Loan

January 4, 2022, AutoLotto entered into a Business Loan Agreement (the “Business Loan”) with The Provident Bank (“Provident”),

pursuant to which the Company borrowed $30,000,000 from Provident, which was evidenced by a $30,000,000 Promissory Note.

The Promissory

Note accrued interest at the rate of 2.750% per annum (7.750% upon the occurrence of an event of default) and had a maturity date of

January 4, 2024.

Monthly interest payments were due under the Promissory Note beginning February 4, 2022.

The Promissory Note could be

repaid at any time without penalty.

The Promissory Note included customary events of default for a debt obligation of the size of the

Promissory Note.

The Business Loan included representations and warranties of AutoLotto and covenants (both positive and negative) which

were customary of a customary for a transaction of this nature and size, including rights to set off.

Upon the occurrence of an event

of default, Provident could declare the entire amount owed immediately due and payable.

We were required to pay a 1% commitment fee at

the time of our entry into the Business Loan, and another 1% annual loan fee on the first year anniversary thereof.

accordance with the terms of the Business Loan, upon entering into the agreement, $30,000,000 in a separate account with Provident was

pledged as security for the amount outstanding under the loan (“Collateral Security”).

The $30,000,000 Collateral Security

became restricted and remained restricted until October 12, 2022, when AutoLotto defaulted on its obligations under the Business Loan

and Provident foreclosed on the $30,000,000 of Collateral Security.

The Collateral Security, which was in the form of restricted cash,

was presented as a contingent liability on the Company’s balance sheet from March 31, 2022 until the obligation was satisfied in

October of 2022.

See Note 3 to our consolidated financial statements for additional information.

Agreement with Woodford

December 7, 2022, the Company entered into a loan agreement (the “Loan Agreement”) with Woodford Eurasia Assets, Ltd.

(“Woodford”),

pursuant to which Woodford agreed to provide the Company with up to $52.5 million, subject to certain conditions and requirements, of

which $300 thousand was received by December 31, 2022 and is owed pursuant to the terms of the Loan Agreement.

Amounts borrowed accrue

interest at the rate of 12% per annum (or 22% per annum upon the occurrence of an event of default) and are due within 12 months of the

date of each loan.

Amounts borrowed can be repaid at any time without penalty.

borrowed pursuant to the Loan Agreement are convertible, at Woodford’s option, into shares of the Company’s common stock,

beginning 60 days after the first loan date at the rate of 80% of the lowest publicly available price per share of common stock within

10 business days of the date of the Loan Agreement (which was equal to $0.28 per share), subject to a 4.99% beneficial ownership limitation

and a separate limitation preventing Woodford from holding more than 19.99% of the issued and outstanding common stock of the Company,

without the Company obtaining shareholder approval for such issuance.

to the Loan Agreement included the resignation of four prior members of the Board (Lisa Borders, Steven M.

Cohen, Lawrence Anthony DiMatteo

and William Thompson, all of whom resigned from the Board in September 2022), and the appointment of two new independent directors.

loans under the Loan Agreement also require the Company to comply with all listing requirements, unless waived by Woodford.

Agreement also allows Woodford to nominate another director to the Board of Directors, in the event any independent member of the Board

of Directors resigns.

of the loans can only be used by to restart the Company’s operations and for general corporate purposes agreed to by Woodford.

Loan Agreement includes confidentiality obligations, representations, warranties, covenants, and events of default, which are customary

for a transaction of this size and nature.

Included in the Loan Agreement are covenants prohibiting us from (a) making any loan in excess

of $1 million or obtaining any loan in amount exceeding $1 million without the consent of Woodford, which consent may not be unreasonably

(b) selling more than $1 million in assets;

(d) encumbering any assets, except in the normal course of business, and not in an amount to exceed $1 million;

or restating our governing documents;

(f) declaring or paying any dividend;

(g) issuing any shares which negatively affects Woodford;

and (h) repurchasing any shares.

Company also agreed to grant warrants to purchase shares of common stock to Woodford (the “Woodford Warrants”) in an amount

equal to 15% of the Company’s 7,619,207 issued and outstanding shares of common stock.

Each Woodford Warrant has an exercise price

equal to the average of the closing price of the Company’s common stock for each of the ten days prior to the first amount being

debited from the bank account of Woodford, which equates to an exercise price of $0.28 per share.

In the event the Company fails to repay

the amounts borrowed when due or Woodford fails to convert the amount owed into shares, the exercise price of the warrants may be offset

by amounts owed to Woodford, and in such case, the exercise price of the warrants will be subject to a further 25% discount (i.e., will

equal $0.21 per share).

connection with our entry into the Loan Agreement, the Company also entered into a Loan Agreement Deed, Debenture Deed and Securitization,

with Woodford (the “Security Agreement”), which provides Woodford with a first floating charge security interest over all

present and future assets of the Company in order to secure the repayment of amounts owed under the Loan Agreement.

The floating charge

may be converted into a fixed charge upon the occurrence of certain events including:

an event of default;

if Woodford reasonably believes

that any secured property may be in jeopardy or danger of being seized or sold;

or if Woodford reasonably considers that it is desirable

to protect its security interest.

The floating charge may be automatically converted into a fixed charge upon the occurrence of certain

other events.

The Security Agreement prohibits the Company from providing any other security interest over our assets, even if secondary

to Woodford, while the amounts borrowed under the Loan Agreement remain unpaid.

On June 12, 2023, the Company entered into an amendment of its Loan Agreement

with Woodford (the “Loan Agreement Amendment”).

The Loan Agreement Amendment provides that Woodford shall henceforth be able

to convert, in whole or in part, the outstanding balance of its loan into the conversion shares at a conversion price that represents

a further 25% discount to the original conversion price of 20%.

All other terms and conditions of securitization remain in full force

October 29, 2021, we consummated the Business Combination with Trident Acquisitions Corp.

(“TDAC” and after the Business

Combination described herein, the “Company”), pursuant to the terms of that certain Business Combination Agreement, dated

as of February 21, 2021 (the “Business Combination Agreement”), by and among TDAC, Trident Merger Sub II Corp., a wholly-owned

subsidiary of TDAC (“Merger Sub”) and AutoLotto.

Pursuant to the terms of the Business Combination Agreement, Merger Sub

merged with and into AutoLotto with AutoLotto surviving the merger as a wholly owned subsidiary of TDAC, which was renamed “Lottery.com

Inc.” The aggregate value of the consideration paid by TDAC to the holders of AutoLotto common stock in the Business Combination

(excluding shares that may be issued to former AutoLotto stockholders (the “Sellers”) as earnout consideration) was approximately

$440 million, consisting of approximately 40,000,000 shares of common stock valued at $11.00 per share.

In addition, the Sellers and

TDAC’s founders are also entitled to receive up to 3 million and 2 million additional shares of common stock, respectively, to

the extent that certain share price targets are achieved following the Closing.

International

June 2021, we closed the acquisition of Global Gaming, which holds 80% of the equity of each of Aganar and JuegaLotto.

Aganar operates

in the licensed Online Lottery market in Mexico and is licensed to sell Mexican National Lottery draw games, instant win tickets, and

other games of chance online with access to a federally approved online casino and sportsbook gaming license.

JuegaLotto is licensed

by Mexico authorities to commercialize international lottery games in Mexico through an authorized gaming portal and to commercialize

games of chance in other countries throughout Latin America.

As of December 31, 2020 (the most recent date available), Latin America’s

estimated lottery market was approximately $9.1 billion across 26 countries.

As of December 31, 2020 (the most recent date available),

the addressable market in the countries that JuegaLotto and Aganar cover includes 664 million people and potential customers.

these acquisitions will provide inroads for the Company throughout Mexico and Latin America as we expand our international operations,

expand our portfolio of products, and expose our existing products to new markets.

Prior to Operational Cessation

to the Operational Cessation, the Company was a provider of domestic and international lottery products and services.

As an independent

third-party lottery game service, we offered a platform that we developed and operated to enable the remote purchase of legally sanctioned

lottery games in the U.S.

and abroad (the “Platform”).

Our revenue generating activities included (i) offering the Platform

via our Lottery.com app and our websites to users located in the U.S.

and international jurisdictions where the sale of lottery games

was legal and our services were enabled for the remote purchase of legally sanctioned lottery games (our “B2C Platform”);

(ii) offering an internally developed, created and operated business-to-business application programming interface (“API”)

of the Platform, which enabled our commercial partners, in permitted U.S.

and international jurisdictions, to purchase certain legally

operated lottery games from us and to resell them to users located within their respective jurisdictions (“B2B API”);

(iii) delivering global lottery data, such as winning numbers and results, and subscriptions to data sets of our proprietary, anonymized

transaction data pursuant to multi-year contracts to commercial digital subscribers (“Data Service”).

Lottery Game Platform Services

our B2C Platform and our B2B API provided users with the ability to purchase legally sanctioned draw lottery games via a mobile device

or computer, securely maintain their acquired lottery game, automatically redeem a winning lottery game, as applicable, and receive support,

if required, for the claims and redemption process.

Our registration and user interfaces were designed to be easy to use, provide for

the creation of an account and purchase of a lottery game with minimum friction and without the creation of a mobile wallet or requirement

to pre-load minimum funds and - importantly - to provide instant confirmation of the user’s lottery game numbers, whether selected

at random or picked by the user.

Users of our B2C Platform services paid a service fee and, in certain non-U.S.

jurisdictions, a mark-up

on the purchase price.

Prior to the Operational Cessation, we generated revenue from this service fee and mark-up.

Our B2B API Platform

resumed limited operations in April 2023.

As of the date of this Report, our B2C Platform is not currently operational.

We anticipate

that our B2C Platform will become operational by the end of 2023.

WinTogether Platform

to the Operational Cessation, we operated and administered of all sweepstakes offered by WinTogether, a registered 501(c)(3) charitable

organization (“WinTogether”), which was formed in April 2020 to support charitable, educational, and scientific causes.

consideration of our operation of the WinTogether platform and administration of the sweepstakes, we received a percentage of the gross

donations to a campaign, from which we paid certain dividends and all administration costs.

WinTogether platform continued operating after the Operational Cessation, until all sweepstakes campaigns were completed and all prizes

On March 29, 2023, the board of directors of WinTogether voted to suspend its relationship with the Company.

the Operational Cessation, certain of the Company’s wholly-owned subsidiaries have continued to operate under the direction of

the leadership teams that were in place prior to the Company’s acquisition of such companies.

While the operational activities

of these subsidiaries vary, from the Operational Cessation through the date of this Report, each of TinBu, Aganar and JuegaLotto has

decreased its expenses and has had its revenue remain consistent or decrease slightly from pre-Operational Cessation levels.

2018, we acquired TinBu, LLC (“TinBu”), a digital publisher and provider of lottery data results, jackpots, results, and

other data, as a wholly-owned subsidiary.

Through TinBu, our Data Service delivers daily results of over 800 domestic and international

lottery games from more than 40 countries, including the U.S., Canada, and the United Kingdom, to over 400 digital publishers and media

organizations.

See “ Item 1A.

Risk Factors — We face risks related to health epidemics and other widespread outbreaks of contagious

disease, which could disrupt our operations and impact our operating results .”

International Expansion

In June 2021, we closed

the acquisition of Global Gaming, which holds 80% of the equity of each of Aganar and JuegaLotto.

Aganar operates in the licensed Online

Lottery market in Mexico and is licensed to sell Mexican National Lottery draw games, instant win tickets, and other games of chance online

with access to a federally approved online casino and sportsbook gaming license.

JuegaLotto is licensed by Mexico authorities to commercialize

international lottery games in Mexico through an authorized gaming portal and to commercialize games of chance in other countries throughout

Latin America.

As of December 31, 2020, Latin America’s estimated lottery market was approximately $9.1 billion across 26 countries.

As of December 31, 2020, (the most recent date available) the addressable market in the countries that JuegaLotto and Aganar cover includes

664 million people and potential customers.

We believe these acquisitions will provide inroads for the Company throughout Mexico

and Latin America as we expand our international operations, expand our portfolio of products, and expose our existing products to new

In the first quarter of 2022,

we announced the signing of an agreement with ICARO pursuant to which ICARO will join LotteryLink as a Master Affiliate.

As part of this

agreement, ICARO has agreed to market and promote the Company’s products to its customers in jurisdictions where ICARO operates,

including markets outside of the U.S.

ICARO expects to launch its marketing efforts in one of the Latin American markets where it operates.

Launch of LotteryLink

Our success relies, in part,

on our ability to attract new customers to our B2C Platform and convert such customers to ongoing users of the B2C Platform.

this objective, in the third quarter of 2021, we launched LotteryLink, an affiliate marketing program.

See below for more information.

Launch of Project Nexus

We are developing a proprietary,

blockchain-enabled gaming platform, which we have named Project Nexus.

The Project Nexus platform is designed to handle high volumes of

user traffic with the goal of improving users’ experience through enhancing the security speed of our platforms and making them

more reliable.

The initial phase of Project Nexus is expected to be implemented in the second quarter of 2022.

See below for more information.

Key Elements of our Business

Mobile Lottery Game Platform Services

Both our B2C Platform and our

B2B API provide users with the ability to purchase legally sanctioned draw lottery games via a mobile device or computer, securely maintain

their acquired lottery game, automatically redeem a winning lottery game, as applicable, and receive support, if required, for the claims

and redemption process.

Our registration and user interfaces are designed to be easy to use, provide for the creation of an account and

purchase of a lottery game with minimum friction and without the creation of a mobile wallet or requirement to pre-load minimum funds

and — importantly — to provide instant confirmation of the user’s lottery game numbers, whether

selected at random or picked by the user.

In consideration of our B2C Platform services, users pay a service fee and, in certain non-U.S.

jurisdictions, a mark-up on the purchase price.

We generate revenue from that service fee and mark-up.

LotteryLink Credits

In the third quarter of 2021,

we launched LotteryLink, our affiliate marketing program.

As part of LotteryLink, we pay each of our Affiliates a percentage of the revenues

derived from each new customer they refer to us and, if such customer is located in a jurisdiction in which they may lawfully use our

B2C Platform, is converted to a user.

These commissions are paid for a contractually specified duration of such user’s activity

on the B2C Platform.

In support of their promotional activities, our Master Affiliates purchase credits, referred to as a LotteryLink

Credit, from us that can be redeemed for flexible promotion packages, consisting of marketing collateral, prepaid advertising, development

services, account management, and prepaid lottery games that can be used in promotions.

We generate revenue from the sale of the LotteryLink

Credits and we believe that we may generate additional revenue through LotteryLink in the future by these Affiliates purchasing more LotteryLink

Data Services

Our application and websites

offer comprehensive multi-jurisdiction lottery result information, without the requirement to create an account.

Additionally, our Data

Service delivers daily results of domestic and international lottery games from more than 40 countries to over 400 digital publishers

and media organizations, pulled from real time primary source data.

We generate revenue from the

subscription fees paid by our subscribers for annual access and also additional per record fees.

We also generate fees from multi-year

contracts pursuant to which we sell proprietary, anonymized transaction data.

The WinTogether Platform

Unlike lottery games and other

games of chance, participation in sweepstakes is permissible in every state within the U.S.

and most international jurisdictions and sweepstakes

offered on the WinTogether Platform are open to participants within the U.S.

and internationally, unless prohibited by local law or regulation.

When a participant donates to a campaign cause on the WinTogether Platform, they are automatically entered to win a prize;

provided, however,

in accordance with the sweepstakes requirements of most jurisdictions and the terms of service for each sweepstakes, no purchase or donation

is required for entry into sweepstakes offered on the WinTogether Platform.

We are the operator and administrator

of all sweepstakes on the WinTogether Platform.

In consideration of our operation of the WinTogether Platform and administration of the

sweepstakes, we receive a percentage of the gross donations to a campaign, from which we pay certain dividends and all administration

We expect that participation in the sweepstakes offered on the WinTogether Platform will continue to grow as we and WinTogether’s

trustees continue to develop its offerings.

In addition to the benefit of the philanthropic opportunities generated by the WinTogether

Platform, we view its operation as a scalable source of revenue as well as a mechanism to increase the Company’s brand reputation

and recognition.

Synergistic Growth

In addition to organic growth

of our current revenue generating activities, we intend to grow our business through synergistic acquisitions, as evidenced by our acquisition

of Global Gaming in June 2021, which we believe provides growth potential for us in the Mexican and Latin American markets, and our recent

acquisition of the “Sports.com” domain as part of our plan to enter sports betting in December 2021.

Performance Measures

In managing our business and

assessing financial performance, we supplement the information provided by our financial statements with other operating metrics.

these metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate projections and make

strategic decisions.

Risk Factors – We are party to pending litigation and investigations in various jurisdictions

and with various plaintiffs and we may be subject to future litigation or investigations in the operation of our business.

outcome in one or more proceedings could adversely affect our business, financial condition, and results of operations ” for

more information about our relationship with Tinbu.

technology pulls real time primary source data, and, in some instances, we acquire data from dedicated data feeds from the lottery authorities.

Our data is constantly monitored to ensure accuracy and timely delivery.

We are not required to obtain licenses or approvals from the

lottery authorities to pull this primary source data or to acquire the data from such dedicated feeds.

Commercial acquirers of our Data

Service pay a subscription for access to the Data Service and, for acquisition of certain large data sets, an additional per record fee.

additionally enter into multi-year contracts pursuant to which we sell proprietary, anonymized transaction data pursuant to multi-year

agreements and in accordance with our Terms of Service in consideration of a fee and in other instances provide the Data Service within

a bundle of provided services.

and JuegaLotto

June 30, 2021, we acquired 100% of the equity of Global Gaming Enterprises, Inc., a Delaware corporation (“Global Gaming”),

which holds 80% of the equity of each of Medios Electronicos y de Comunicacion, S.A.P.I de C.V.

(“Aganar”) and JuegaLotto,

(“JuegaLotto”).

JuegaLotto is federally licensed by the Mexican regulatory authorities with jurisdiction over

the ability to commercialize lottery games in Mexico through an authorized federal gaming portal and to commercialize games of chance

in other countries throughout Latin America.

Aganar has been operating in the licensed Online Lottery market in Mexico since 2007 and

has certain rights to sell Mexican National Lottery draw games, instant win tickets, and other games of chance online with access to

a federally approved online casino and sportsbook gaming license and additionally issues a proprietary scratch lottery game in Mexico

under the brand name Capalli.

See “ Item 1A.

Risk Factors – We need additional capital to,

among other things, support and restart our operations, re-hire employees and pay our expenses.

Such capital may not be available on commercially

acceptable terms, if at all.

If we do not receive the additional capital, we may be forced to curtail or abandon our plans to recommence

our operations and we may need to permanently cease our operations” for additional information.

December 2021, we finalized the acquisition of the domain name https://sports.com and on November 15, 2022, we formed a wholly-owned

subsidiary called Sports.com, Inc., a Texas corporation (“Sports.com”).

Subsequently, Sports.com announced a partnership

with the Saudi Motorsports Company, which enabled the Company to roll out the Sports.com brand at the FIFA World Cup decider at the end

of November 2022.

In December 2022, Sports.com signed an agreement with Data Sports Group, GmbH (“ DSG ”), which provides

Sports.com the exclusive North American distribution rights for sports data products offered and maintained by DSG (the “DSG Data”).

The DSG Data is being sold through the same sales resources and sales channels as the lottery data offered by TinBu.

for Recommencement of Company Operations

noted above, 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.

The Company has developed a three phase plan to recommence its operations, which plan is

outlined below.

1 - Relaunch B2B API Platform .

During the Operational Cessation, the Company maintained positive relationships with its ticket-printing

and courier partners, as well as several distribution partners that have been found to be in compliance with local, state, and federal

rules related to ticket procurement and distribution.

These partners have implemented the Lottery.com API and have advised the Company

that they expect to be ready to offer lottery games to their customers through their sales channels when the Company resumes operations.

As such, the Company believes that it has sufficient demand to resume operation of its B2B API platform operations, assuming it is able

to maintain the core employee team to manage the lottery ticket fulfillment process and access sufficient capital to relaunch Project

Nexus, which was designed to, among other things, handle high levels of user traffic and transaction volume, while maintaining expediency,

security, and reliability in the administrative and back-office functionality required by the B2B API.

Our B2B API Platform resumed limited

operations in April 2023.

2 - Resume B2C Platform Operations.

The Company believes that it will be in a position to relaunch its B2C Platform by the end of

As of the date of this Report, the Company expects that it will initially relaunch its B2C Platform to customers in Texas for a

period of time before rolling it out to other jurisdictions.

If the Texas Bill is enacted into law as drafted, the Company may elect

to accelerate the relaunch of its Platform to customers in another state.

The Company plans to limit the rollout in order to give it

additional time to properly vet and confirm compliance with local, state and federal rules related to ticket procurement and distribution.

For more information, see “ Item 1A.

Risk Factors - Regulatory and Compliance Risks - A jurisdiction may enact, amend, or reinterpret

laws and regulations governing our operations in ways that impair our revenues, cause us to incur additional legal and compliance costs

and other operating expenses, or are otherwise not favorable to our existing operations or planned growth, all of which may have a material

adverse effect on us or our results of operations, cash flow, or financial condition .” The Company has also maintained various

pre-paid media credits that it expects to use to launch and maintain promotional campaigns geared towards encouraging prior customers

to return to the Platform and to acquire new customers.

3 - Restore Other Business Lines and Projects.

Assuming the success of Phase 1 and Phase 2, the Company expects to restore other

products it used to offer, such as supplying lottery tickets to consumers in approved domestic jurisdictions, partnering with licensed

providers in international jurisdictions to supply legitimate domestic lottery games, and reviving other products and services that were

under development when the Operational Cessation occurred.

of the date of this Report, the current estimated cash balance of the Company and subsidiaries is approximately $102,766.

believes that this cash on hand, along with future borrowings, will be sufficient for the Company to pay its service providers in connection

with the filings of its deficient periodic reports, including this Report and the Company’s Quarterly Report on Form 10-Q for the

three months ended March 31, 2023.

of the date of this Report, our common stock and warrants are traded on The Nasdaq Stock Market LLC (“Nasdaq”) under the

ticker symbols “LTRY” and “LTRYW,” respectively.

As of the date of this Report, we are not in compliance with

Nasdaq’s continued listing requirements (the “Listing Rules”), as discussed in greater detail below under “ Risk

Factors - Risks Related to Our Common Stock and Warrants - We are not currently in compliance with the continued listing standards of

Nasdaq and may not be able to regain compliance with Nasdaq’s continued listing standards in the future ,” and have been

granted a limited exception from Nasdaq to continue the listing of our securities.

Additionally, under its new management, the Company

continues to work to improve its disclosure and reporting controls, and plans to overhaul its systems of internal control over financial

reporting and invest in additional legal, accounting, and financial resources.

if the Company’s three phase plan to recommence its operations is successful, there can be no assurance that the Company will be

able to regain compliance with the applicable Listing Rules, or that the hearings panel will continue to stay the delisting of the Company’s

securities from Nasdaq.

If the Company’s securities are delisted from Nasdaq, it could be more difficult to buy or sell the Company’s

common stock and warrants or to obtain accurate quotations, and the price of the Company’s common stock and warrants could suffer

a material decline.

Delisting could also impair the Company’s ability to raise additional capital needed to funds its operations

and/or trigger defaults and penalties under outstanding agreements or securities of the Company.

can be no assurance that we will have sufficient capital to support our operations and pay expenses, repay our debt, or that additional

funds will be available on favorable terms, if at all.

We may not be able to restart our operations and/or generate sufficient funding

to support such operations in the future.

The Company’s ability to continue its current operations, prepare and refile deficient

and restated reports, and restart its prior operations, is dependent upon obtaining new financing.

Future financing options available

to the Company include equity financings, debt financings or other capital sources, including collaborations with other companies or

other strategic transactions.

Equity financings may include sales of common stock.

Such financing may not be available on terms favorable

to the Company or at all.

The terms of any financing may adversely affect the holdings or rights of the Company’s stockholders

and may cause significant dilution to existing stockholders.

There can be no assurance that the Company will be successful in obtaining

sufficient funding on terms acceptable to the Company, if at all, which would have a material adverse effect on its business, financial

condition and results of operations, and it could ultimately be forced to discontinue its operations and liquidate.

These matters, when

considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable

period of time, which is defined as within one year after the date that the financial statements are issued.

The accompanying financial

statements do not contain any adjustments to reflect the possible future effects on the classification of assets or the amounts and classification

of liabilities that might result from the outcome of this uncertainty.

managing our business and assessing financial performance, we supplement the information provided by our financial statements with other

operating metrics.

We use these metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate

projections and make strategic decisions.

The primary operating metrics we use are:

● transactions per user;

● tickets per transaction;

● gross revenue per transaction;

● gross profit per transaction;

● gross margin per transaction.

These metrics help enable us

to evaluate pricing, cost and customer profitability.

We believe it is useful to provide investors with the same metrics that we use internally

to make comparisons of our historical operating results, identify trends in our operating results and evaluate our business.

These metrics

track our B2C business and exclude users who were referred by an affiliate or who made purchases through an API partner.

per transaction;

revenue per transaction;

profit per transaction;

margin per transaction.

metrics help enable us to evaluate pricing, cost and customer profitability.

We believe it is useful to provide investors with the same

metrics that we use internally to make comparisons of our historical operating results, identify trends in our operating results and

evaluate our business.

These metrics track our B2C business and exclude users who were referred by an affiliate or who made purchases

through an API partner.

Year Ended December 31,

4 unchanged sentences

Gross Margin per Transaction

Transactions Per User

Transactions per user is the

average number of individual transactions per user in a given period.

An individual transaction is defined as the placement of an order

by a user on our Platform.

per user is the average number of individual transactions per user in a given period.

An individual transaction is defined as the placement

of an order by a user on our Platform.

We use this measure to determine the overall performance of our products on a per user basis.

When considered

with the other operating metrics, transactions per user provides insight into user stickiness and buying patterns and is a useful tool

to identify our most active users, which enables us to deploy more targeted marketing and other strategic initiatives.

This metric also

gives us the ability to categorize users based on their performance and determine where to expend marketing and/or operational resources.

Transactions per user may be subject to variables that are outside of our control, for instance the size and popularity of a particular

lottery game.

Tickets Per Transaction

Tickets per transaction is

the average number of lottery game tickets purchased by a user per transaction.

We use this measure to analyze the impact of product performance

with our customers on the number of tickets sold in one transaction.

We believe this metric is useful for our investors because it gives

insight into the buying habits of our users.

Similar to transactions per user, tickets per transaction may be subject to variables that

are outside of our control, for instance the size and popularity of a particular lottery game.

Gross Revenue Per Transaction

Gross revenue per transaction

is the average gross amount of revenue per transaction.

We use this measure to determine how our top line revenue is performing on a per

transaction basis, which helps us to identify and evaluate pricing trends.

We believe this metric is useful for our investors because

it provides insight into our revenue growth potential on a per transaction basis.

Gross Profit Per Transaction

Gross profit per transaction

is our average gross profit per transaction, calculated as gross revenue less the cost of the lottery game ticket and any processing fees,

including labor, printing and payment processing, per transaction.

We believe this metric to be useful to evaluate and analyze our costs

and fee structure across product offerings and user cohorts, and additionally, helps our investors because it provides insight into our

profit growth potential on a per transaction basis.

Gross Margin Per Transaction

Gross margin per transaction

is calculated by dividing gross profit per transaction by gross revenue per transaction.

We consider this metric to be a measure of overall

performance that provides useful information about the profitability of our B2C Platform and B2B API businesses.

Components of Our Results of Operations

Revenue from B2C Platform.

revenue is the retail value of the acquired lottery game and the service fee charged to the user, which we impose on each lottery game

purchased from our B2C Platform.

The amount of the service fee is based upon several factors, including the retail value of the lottery

game purchased by a user, the number of lottery games purchased by a user, and whether such user is located within the U.S.

When considered with the other operating metrics, transactions per user provides insight into user stickiness and buying patterns and

is a useful tool to identify our most active users, which enables us to deploy more targeted marketing and other strategic initiatives.

This metric also gives us the ability to categorize users based on their performance and determine where to expend marketing and/or operational

Transactions per user may be subject to variables that are outside of our control, for instance the size and popularity of

a particular lottery game.

Per Transaction

per transaction is the average number of lottery game tickets purchased by a user per transaction.

We use this measure to analyze the

impact of product performance with our customers on the number of tickets sold in one transaction.

We believe this metric is useful for

our investors because it gives insight into the buying habits of our users.

Similar to transactions per user, tickets per transaction

may be subject to variables that are outside of our control, for instance the size and popularity of a particular lottery game.

Revenue Per Transaction

revenue per transaction is the average gross amount of revenue per transaction.

We use this measure to determine how our top line revenue

is performing on a per transaction basis, which helps us to identify and evaluate pricing trends.

We believe this metric is useful for

our investors because it provides insight into our revenue growth potential on a per transaction basis.

Profit Per Transaction

profit per transaction is our average gross profit per transaction, calculated as gross revenue less the cost of the lottery game ticket

and any processing fees, including labor, printing and payment processing, per transaction.

We believe this metric to be useful to evaluate

and analyze our costs and fee structure across product offerings and user cohorts, and additionally, helps our investors because it provides

insight into our profit growth potential on a per transaction basis.

Margin Per Transaction

margin per transaction is calculated by dividing gross profit per transaction by gross revenue per transaction.

We consider this metric

to be a measure of overall performance that provides useful information about the profitability of our B2C Platform and B2B API businesses.

of Our Results of Operations (Prior to the Operational Cessation)

from B2C Platform.

Our revenue is the retail value of the acquired lottery game and the service fee charged to the user, which we

impose on each lottery game purchased from our B2C Platform.

The amount of the service fee is based upon several factors, including the

retail value of the lottery game purchased by a user, the number of lottery games purchased by a user, and whether such user is located

within the U.S.

or internationally.

Currently, in the U.S, the minimum service fee is $0.50 for the purchase of a $1 lottery game and $1 for the purchase of a $2 lottery

the service fee for additional lottery games purchased in the same transaction is 6% of the face value of all lottery games purchased.

For example, the service fee for the purchase of five $2 tickets is $1.60, being the $1 base service fee, plus 6% of the aggregate value

of the face value of all lottery games purchased.

In 2021, our domestic B2C Platform users purchased an average of 4.0 lottery games per

transaction at an average service fee of $0.37 per lottery game.

In 2021, we had an average gross profit per domestic B2C Platform user,

where the definition of gross profit is the same as defined under “ Gross Profit per Transaction ”, of approximately

The Company did not conduct any digital marketing spending in 2021.

The average customer acquisition cost during 2020 was $4.01

per new user.

Average customer acquisition costs per new user include digital marketing costs, but exclude non-digital market costs and

exclude any user referred by an affiliate.

We had a year-over-year retention rate of domestic users of 72%, excluding any customers referred

by an affiliate or API partner, which results in a lifetime user value, on average, of $57.43.

Internationally, we impose

a mark-up on the cost to be imposed on the sale of each lottery game together with a service fee to be charged to the user.

international B2C Platform users purchased an average of 2.1 lottery games per transaction at an average service fee and ticket price

mark-up of $2.30 per lottery game.

We typically charge a higher service fee on lottery games in our international jurisdictions, and,

as a result, in 2021, the average service fee per international transaction was 90% higher than domestic transactions.

In 2021, our average

gross profit per international user of our B2C Platform was $31.71.

The Company did not conduct any digital marketing spending in 2021.

The average customer acquisition cost during 2020 was $4.26 per new user.

The year-over-year retention rate was slightly lower internationally,

at 69%, resulting in a user lifetime value of $102.92.

Although revenues from our international jurisdictions comprised 10% of our total

revenues in 2021, we are focused on the growth of this business organically and through the pursuit of strategic acquisitions and other

synergistic opportunities.

In 2021, we delivered approximately

2,585,000 lottery games to users of our B2C Platform worldwide.

Revenue from Sale of LotteryLink

We sell LotteryLink Credits to our third-party Affiliates, which may be redeemed for advertising credits, marketing collateral,

development services, account management services and prepaid lottery games for promotional activities.

In 2021, we sold $47.1 million

in LotteryLink Credits for prepaid advertising, prepaid lottery games, marketing materials and development services.

Revenue from B2B API.

with our third-party commercial partner, we agree on the amount of the mark-up on the cost to be imposed on the sale of each lottery game

purchased through the B2B API, if any, together with a service fee to be charged to the user;

we receive up to 50% of the net revenues

from such mark-up and service fee pursuant to our commercial agreement with each commercial partner.

In the U.S., the Company’s

average gross revenue per such lottery game sale was $2.59.

Internationally, the Company’s average gross revenue per lottery game

sale was $3.96.

We currently do not charge our commercial partners a fee for the use of the B2B API.

In the third quarter of 2021,

we launched LotteryLink, which is intended to leverage third party Affiliates across multiple industries and marketing channels to acquire

users on our behalf.

The initial phase of this program involved the sale and transfer of LotteryLink Credits to a Master Affiliate for

use in providing affiliate marketing packages to other third party Affiliates.

Affiliate marketing packages include the LotteryLink Credits,

which, in the next phase of this program, such third party Affiliates will be able to use to promote and distribute our products on their

We believe that we may generate additional revenue through LotteryLink in the future by these third party Affiliates purchasing

more LotteryLink Credits.

In 2021, we had agreements

to acquire and sell lottery games through the B2B API with three international third-party commercial partners, including a French betting

solution and one U.S.

third-party commercial partner, which operates a proprietary mobile wallet for use at traditionally coin-operated

machines, such as arcade games, vending machines, and laundry machines, which enabled our offerings on its mobile application.

Collectively,

these agreements provided us with access to over 420,000 unique points of sale for users to acquire lottery games via our B2B API.

In 2021, we delivered 333,485

lottery games to end users of our B2B API, worldwide.

Data Services.

acquirers of our Data Service pay a subscription for access to the Data Service and, for acquisition of certain large data sets, an additional

per record fee.

The Company additionally enters into multi-year contracts pursuant to which it sells proprietary, anonymized transaction

data pursuant to multi-year agreements and in accordance with our Terms of Service in consideration of a fee.

Our Operating Costs and Expenses

Personnel Costs.

costs include salaries, payroll taxes, health insurance, worker’s compensation and other benefits for management and office personnel.

Professional Fees.

fees include fees paid for legal and financial advisors, accountants and other professionals related to the Business Combination and other

transactions.

General and Administrative.

and administrative expenses include marketing and advertising, expenses, office and facilities lease payments, travel expenses, bank fees,

software dues and subscriptions, expensed research and development (“R&D”) costs and other fees and expenses.

Depreciation and Amortization.

and amortization expenses include depreciation and amortization expenses on real property and other assets.

Key Trends and Factors Affecting Our Results

The following describes the

trends associated with our business that have impacted, and which we expect will continue to impact, our business and results of operations

in a material way:

trends and other impacts related to the COVID-19 pandemic that may continue to impact our business and results of operations, please see

“ Recent Developments—Impacts of COVID-19 ,” above.

Currently, in the U.S, the minimum service fee is $0.50 for the purchase of a $1 lottery game and

$1 for the purchase of a $2 lottery game;

the service fee for additional lottery games purchased in the same transaction is 6% of the

face value of all lottery games purchased.

For example, the service fee for the purchase of five $2 tickets is $1.60, being the $1 base

service fee, plus 6% of the aggregate value of the face value of all lottery games purchased.

Internationally,

B2C sales in jurisdictions where we do not have direct or indirect authority generate an immaterial amount of revenue, and we are assessing

our operations in these jurisdictions.

As discussed above, our B2C Platform is not currently operational.

We anticipate that our B2C

Platform will become operational by the end of 2023.

from B2B API.

Together with our third-party commercial partner, we agree on the amount of the technology usage fee to be imposed

on the sale of each lottery game purchased through the B2B API, if any, together with a service fee to be charged to the user;

up to 50% of the net revenues from such technology usage fee and service fee pursuant to our commercial agreement with each commercial

As discussed above, following the Operational Cessation, our B2B API Platform resumed limited operations in April 2023.

Commercial acquirers of our Data Service pay a subscription for access to the Data Service and, for acquisition of certain

large data sets, an additional per record fee.

The Company additionally enters into multi-year contracts pursuant to which it sells proprietary,

anonymized transaction data pursuant to multi-year agreements and in accordance with our Terms of Service in consideration of a fee.

Our Data Services operations were not impacted by the Operational Cessation.

Operating Costs and Expenses

Personnel costs include salaries, payroll taxes, health insurance, worker’s compensation and other benefits for management

and office personnel.

Professional fees include fees paid for legal and financial advisors, accountants and other professionals related to the Business

Combination and other transactions.

and Administrative.

General and administrative expenses include marketing and advertising, expenses, office and facilities lease

payments, travel expenses, bank fees, software dues and subscriptions, expensed research and development (“R&D”) costs

and other fees and expenses.

and Amortization.

Depreciation and amortization expenses include depreciation and amortization expenses on real property and other

Trends and Factors Affecting Our Results

following describes the trends associated with our business prior to the Operational Cessation that have impacted, and which we expect

will continue to impact, our business and results of operations in a material way:

International

We face challenges related to expanding our footprint globally and the related process of obtaining the licenses

and regulatory approvals necessary to provide services and products within new and emerging markets.

Largely as a result of the COVID-19

pandemic and more recently as a result of the war in Ukraine, the international jurisdictions where we operate and seek to expand have

been subject to increasing foreign currency fluctuations against the U.S.

dollar, soaring inflation and political and economic instability.

We expect these trends to continue during fiscal 2022 and believe they are likely to cause a material decrease in consumer spending, which

could have a material impact on our revenues.

We expect that it will take a longer period of time to achieve revenue gains or generate

cash in the new regions or any new international jurisdictions in which we expand, outside of our domestic geographies.

We face challenges related to expanding our footprint globally and the related process of obtaining the licenses and

regulatory approvals necessary to provide services and products within new and emerging markets.

The international jurisdictions where

we operate and seek to expand have been subject to increasing foreign currency fluctuations against the U.S.

dollar, soaring inflation

and political and economic instability.

We expect these trends to continue during fiscal 2023 and believe they are likely to cause a

material decrease in consumer spending, which could have a material impact on our revenues.

We expect that it will take a longer period

of time to achieve revenue gains or generate cash in the new regions or any new international jurisdictions in which we expand, outside

of our domestic geographies.

of a new gaming platform .

9 unchanged sentences

growth plans and the competitive landscape.

Our direct competitors operate in the global entertainment and gaming industries

and, like us, seek to expand their product and service offerings with integrated products and solutions.

Our short-to-medium term focus

is on increasing our penetration in our existing U.S.

Our direct competitors operate in the global entertainment and gaming industries and,

like us, seek to expand their product and service offerings with integrated products and solutions.

Our short-to-medium term focus is

on increasing our penetration in our existing U.S.

jurisdiction by increasing direct to consumer marketing campaigns, introducing our

B2C Platform into new U.S.

and international jurisdictions, growing our LotteryLink program through the addition of new Affiliates, and

acquiring synergistic regulated and sports betting enterprises domestically and abroad.

Competition in the sale of online lottery games

has significantly increased in recent years, is currently characterized by intense price-based competition, and is subject to changing

technology, shifting needs and frequent introductions of new games, development platforms and services.

To maintain our competitive edge

alongside other established industry players (many of which have more resources, or capital), we expect to incur greater operating expenses

in the short-term, such as increased marketing expenses, increased compliance expenses, increased personnel and advisory expenses associated

with being a public company, additional operational expenses and salaries for personnel to support expected growth, additional expenses

associated with our ability to execute on our strategic initiatives including our aim to undertake merger and acquisition activities,

as well as additional capital expenditures associated with the ongoing development and implementation of Project Nexus.

Results of Operations

Year Ended December 31, 2021 Compared

to Year Ended December 31, 2020

The following table summarizes

our results of operations for the years ended December 31, 2021 and December 31, 2020, respectively.

Years Ended December 31,

and international jurisdictions and acquiring synergistic regulated and sports betting enterprises domestically

Competition in the sale of online lottery games has significantly increased in recent years, is currently characterized by

intense price-based competition, and is subject to changing technology, shifting needs and frequent introductions of new games, development

platforms and services.

To maintain our competitive edge alongside other established industry players (many of which have more resources,

or capital), we expect to incur greater operating expenses in the short-term, such as increased marketing expenses, increased compliance

expenses, increased personnel and advisory expenses associated with being a public company, additional operational expenses and salaries

for personnel to support expected growth, additional expenses associated with our ability to execute on our strategic initiatives including

our aim to undertake merger and acquisition activities, as well as additional capital expenditures associated with the ongoing development

and implementation of Project Nexus.

Plan of Operations

of the date of this Report, the Company’s primary revenue drivers are the resumption of its B2B API platform and the launch of

It is anticipated that operational costs for the next 12 months through April 30, 2024 will be greater than revenues.

is anticipated that the liquidity gap will be satisfied by equity or debt raised, of which there is no assurance.

We anticipate that

our B2C Platform will become operational by the end of 2023.

the next 12 months, the Company plans to continue to expand in domestic and international jurisdictions.

The Company plans to enhance

its mobile application to include pool plays, tickets subscriptions, loyalty programs and various gamification modules.

of Operations

consolidated financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include

adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should

we be unable to continue in operation.

We will require additional capital to meet our long-term operating requirements.

to raise additional capital through, among other things, the sale of equity or debt securities.

Ended December 31, 2022 Compared to Year Ended December 31, 2021

following table summarizes our results of operations for the years ended December 31, 2022 and December 31, 2021, respectively.

For the Year Ended December 31,

Cost of revenue

5 unchanged sentences

Total operating expenses

Income (loss) from operations

Loss from operations

(55,792,779 )

$ (29,878,012 )

(25,914,767 )

Other expenses

Interest expense

(19,024,612 )

Other expense

Total other expenses, net

Net loss before income tax

(18,210,839 )

Net loss before income tax

$ (60,278,909 )

2 unchanged sentences

(60,383,265 )

Other comprehensive loss

Foreign currency translation adjustment, net

Comprehensive loss

(52,910,646 )

Net income attributable to noncontrolling interest

Net loss attributable to Lottery.com Inc.

(11,092,605 )

Net loss per common share

Basic and diluted

Weighted average common shares outstanding

Basic and diluted

for the year ended December 31, 2021 was $68.5 million, an increase of $61.0 million, or 819%, compared to revenue of $7.5 million

for the year ended December 31, 2020.

The increase in revenue was driven by the sale of $47.1 million in LotteryLink Credits for

prepaid advertising, prepaid lottery games, marketing materials and development services in the third and fourth quarters of 2021.

also experienced increased lottery game sales as a result of the availability of large multi-state lottery game jackpots in the first

quarter of 2021.

Additionally, we believe that our increased brand recognition resulted in an increasing number of users on our Platform,

as well as increased lottery game sales during 2021.

Revenue for the year ended December 31, 2022 was $6.8 million, a decrease of $9.6 million, or (59.1%), compared to revenue of $16.4

million for the year ended December 31, 2021.

The decrease in revenue was driven by a decrease in services provided to business partners

in 2021 which was not reoccurring.

Cost of Revenue.

of revenue for the year ended December 31, 2021 was $19.2 million, an increase of $16.2 million, or 549%, compared to cost of revenue

of $3.0 million for the year ended December 31, 2020.

The increase in the cost of revenue was driven by the increase in the

number of lottery games sold in 2021.

Cost of revenue includes product costs, commission expense to affiliates and commercial partners,

and merchant processing fees.

Additionally, the sale of LotteryLink Credits for prepaid advertising, prepaid lottery games, marketing

materials and development services also increased cost of revenue in 2021, as there were no sales of LotteryLink credits in 2020.

Gross Profit.

profit for the year ended December 31, 2021 was $49.4 million, compared to $4.5 million for the year ended December 31,

2020, an increase of $44.9 million, or 995%.

This increase was due to the sale of $47.1 million of LotteryLink Credits for prepaid advertising,

prepaid lottery games, marketing materials and development services in 2021, which generated significant gross profit, the sale of $9

million worth of Data Services, which did not incur any costs, and an overall increase in the number of lottery games sold.

Operating Costs and Expenses .

Cost of revenue for the year ended December 31, 2022 was

$4.3 million, a decrease of $3.8 million, or (47%), compared to cost of revenue of $8.2 million for the year ended December 31, 2021.

The decrease in the cost of revenue was driven by the decrease in the number of lottery games sold in 2022.

Cost of revenue includes product

costs, commission expense to affiliates and commercial partners, and merchant processing fees.

Gross profit for the year ended December 31, 2022 was $2.5 million, compared to $8.3million for the year ended December 31,

2021, a decrease of $5.8 million, or (70%).

This decrease was due primarily to the decrease in revenue partially offset by the decrease

in commissions expense.

Costs and Expenses

For the Year Ended December 31,

Operating expenses:

1 unchanged sentence

Professional fees

Sales & marketing

General and administrative

1 unchanged sentence

Total operating expenses

Operating expenses for the year ended December 31, 2021 were $39.2

million, an increase of $31.0 million, or 377%, compared to $8.2 million for the year ended December 31, 2020.

was primarily driven by increased professional and administrative expenses associated with the Business Combination, increased stock compensation

expense, increased headcount to support the Company’s growth, increased marketing spends resulting from the use of Gatehouse Media

credits, which we received several years ago in exchange for warrants, and increased amortization expenses driven by acquisitions made

during the 2021 fiscal year.

Personnel Costs.

Personnel costs increased by $17.1 million, or 382%, from $4.5 million

expenses for the year ended December 31, 2022 were $58.3 million, an increase of $20.1 million, or 53%, compared to $38.1 million for

the year ended December 31, 2021.

The increase was primarily driven by increased administrative expenses associated with the Business

Combination, increased stock compensation expense, increased headcount to support the Company’s growth, increased marketing spends

resulting from the use of Gatehouse Media credits, which we received several years ago in exchange for warrants, and increased amortization

expenses driven by acquisitions made during the 2022 fiscal year.

Personnel costs increased by $16.6 million, or 81%, from $20.5 million for the year ended December 31, 2021, to $37.1 million

for the year ended December 31, 2022.

The increase was due primarily to increases in stock compensation expense of $13.5 million.

Professional fees decreased by $1.7 million, or (20.0%) from $8.3 million

for the year ended December 31, 2021 to $6.6 million for the year ended December 31, 2022.

The increase was due to increases in

headcount to support the growth of the Company’s business operations and to support public company functions as well as stock compensation

Professional Fees.

fees increased by $7.2 million, or 639%, from $1.1 million for the year ended December 31, 2020 to $8.3 million for the year

ended December 31, 2021.

The increase was driven by legal and professional fees associated with the Business Combination

Sales and Marketing.

and marketing expenses for the year ended December 31, 2021 were $1.9 million, compared to $0.3 million for the year ended December 31,

2020, an increase of $1.6 million, or 502%.

The Company used $1.0 million of Gatehouse media credits in 2021 as compared to

$0.3 million used in 2020, which credits were received by the Company in consideration of the issuance of the Company’s warrants.

Additionally, spend on non-digital advertising and public relations activities increased throughout the year in conjunction with our growth

General and Administrative.

and administrative expenses increased $2.4 million, or 306%, from $0.8 million for the year ended December 31, 2020 to

$3.1 million for the year ended December 31, 2021.

These costs increased in general with the growth of the business and can be broken

down further into:

increased travel of $0.4 million for business development opportunities, increased business licensing, bank fees, and

insurance of $0.9 million, and $0.8 million of additional office and software-related costs to support the increased headcount.

Depreciation and Amortization.

and amortization increased $2.8 million, or 180%, from $1.5 million for the year ended December 31, 2020 to $4.3 million

The decrease was driven by legal and professional

fees associated with the Business Combination in 2021.

and Administrative.

General and administrative expenses increased $3.9 million, or 78%, from $3.9 million for the year ended December

31, 2021 to $8.9 million for the year ended December 31, 2022.

Expenses for D&O and E&O coverage in connection with being a public

company were $2.5 million higher in 2022.

Advertising expenses increased by $732 thousand, expenses for SaaS software used to operate

the business increased by $158 thousand, and product development expenses were $179 thousand higher in 2022 than in 2021.

an expense of $412,500 was recorded for the impairment of an intangible asset that had been recorded for a software application, which

was being developed for a use with a partner, that the company determined will not be completed or put into its intended purpose as the

relationship with that partner ended in the fall of 2022.

and Amortization.

Depreciation and amortization increased $1.3 million, or 30%, from $4.3 million for the year ended December 31,

2021 to $5.6 million for the year ended December 31, 2022.

The increase was driven by amortization of intangibles acquired in 2021 and

placed in service during 2022.

For the Year Ended December 31,

The increase was driven by the acquisition of the sports.com domain name in 2021 as well as the

intangibles created through the purchase of Global Gaming.

Other Expense, Net .

Other expenses

Interest expense

(19,024,612 )

Other expense

Total other expenses, net

Interest Expense.

Interest expense increased by $18.6 million, or 1,519%, for the

year ended December 31, 2021, as compared to the year ended December 31, 2020.

This increase relates to amortization of debt

discounts and beneficial conversion features for additional convertible debt and short-term loans issued in 2021, most of which was converted

into equity at the time of the Business Combination or settled in cash following the Closing.

Other Expense.

expense increased by $2.0 million, or 231%, for the year ended December 31, 2021 as compared to the year ended December 31,

This increase was driven primarily by $1.7 million of additional revenue share expense based on increased revenue in 2021 as compared

Additionally, there was $0.5 million in fees incurred during 2021 as part of a settlement with a subsidiary’s former shareholders.

Liquidity and Capital Resources

Our primary need for liquidity

is to fund working capital requirements of our business, growth, capital expenditures and for general corporate purposes.

source of liquidity has historically been funds generated by financing activities.

For 2022, we expect to fund our operations, undertake

anticipated growth activities and make planned capital expenditures utilizing primarily the proceeds from the Business Combination and

cash flows from operating activities, although our ability to do so depends on our future operating performance, which is subject to prevailing

economic conditions and financial, business and other factors, some of which are beyond our control.

Upon the Closing on October

29, 2021, we received net proceeds of approximately $42.8 million in cash.

As of December 31, 2021, we had $62.6 million of cash

and cash equivalents and $88.3 million of working capital (current assets minus current liabilities), compared with $10.8 million

of cash and negative $0.5 million of working capital as of December 31, 2020.

The increase of $88.3 million in our working

capital was primarily due to $30.0 million in cash received the sale of LotteryLink Credits in the third quarter of 2021, $42.8 million

in net proceeds from the Business Combination, $12.2 million reduction on in current notes payable and a $8.9 million reduction in current

net convertible debt from 2020 to 2021.

We expect that our cash on

hand and cash provided by operations will allow us to meet our capital requirements and operational needs for the next twelve months.

As of December 31, 2021, there were no regulatory capital requirements applicable to our industry.

We expect to deploy capital

to fund our growth through implementing new products and features within our B2C Platform services;

expanding our B2C offering into new

domestic and international jurisdictions;

entering into additional agreements with new commercial partners for our B2B API and LotteryLink

executing on strategic acquisitions and other synergistic opportunities;

investing in and developing new technology;

and enhancing

our existing technology in each of our business lines, including distributed ledger technology.

Execution of our growth plans,

including further expansion of our business to new U.S.

states and international jurisdictions, may require additional capital, which

we may seek through the issuance of equity or debt securities.

If we are not able to secure the necessary capital, or if the terms of

financing are less desirable than we expect, we could be forced to decrease our level of investment in new product launches and related

marketing initiatives or to scale back our existing operations, each of which could have an adverse impact on our business, results of

operations and financial prospects.

For more information, see “ Item 1 A.

Risk Factors — We may require

additional capital to support our growth plans, including in connection with our expansion into new markets and our strategic acquisitions,

and such capital may not be available on reasonable terms or at all.

This could hamper our growth and adversely affect our business .”

Convertible Debt Obligations

Prior to the Closing, we funded

our operations through the issuance of convertible promissory notes.

From August to October 2017,

the Company entered into seven Convertible Promissory Note Agreements with unaffiliated investors for an aggregate amount of $821,500.

(18,210,839 )

Interest expense decreased by $19 million, or (96%), for the year ended December 31, 2022, from 19.8 million to $764 thousand

as compared to the year ended December 31, 2021.

This decrease relates to interest on convertible debt in 2021 which did not occur in

2022 following conversion of the notes in connection with the business combination on October 29, 2021.

Other expense increased by $0.8 million, or 28%, for the year ended December 31, 2022 as compared to the year ended December

31, 2021 from $2.9 million to $3.7 million.

This increase was driven primarily by a discount on asset with periodic payments of $3.5

million, partially offset by a decrease in royalties expense of $1.9 million and a decrease of other expenses of $800 thousand.

and Capital Resources

to the Operational Cessation, our primary need for liquidity was to fund working capital requirements of our business, growth, capital

expenditures and for general corporate purposes.

Our primary source of liquidity had historically been funds generated by financing activities.

Upon the Closing on October 29, 2021, we received net proceeds of approximately $42.8 million in cash.

Following the Operational Cessation, our primary need for liquidity has

been to fund the restart of our business operations, re-hire employees and pay our expenses.

The most likely source of such future funding

presently available to us is through additional borrowings under the Loan Agreement or through the issuance of equity or debt securities.

If Woodford does not advance us amounts owed under the Loan Agreement or we are otherwise not able to secure the necessary capital to

restart our operations, hire new employees, and obtain funding sufficient to support and restart our operations, we may be forced to permanently

cease our operations, sell off our assets and operations, and/or seek bankruptcy protection, which could cause the value of our securities

to become worthless.

conditions, along with our current lack of material revenue producing activities, and significant debt, raise substantial doubt about

our ability to continue as a going concern for the next 12 months.

For more information, see Note 2 - Significant Accounting Policies,

Going Concern to the consolidated financial statements included herein, as well as the risk factors included in Item 1A of this Report

entitled “ In July 2022, we furloughed the majority of our employees and suspended our lottery game sales operations after determining

that we did not have sufficient financial sources to fund our operations or pay certain existing obligations, including our payroll and

related obligations.

As a result, we may not be able to continue as a going concern ” and “ We need additional capital

to, among other things, support and restart our operations, re-hire employees and pay our expenses.

Such capital may not be available

on commercially acceptable terms, if at all.

If we do not receive the additional capital, we may be forced to curtail or abandon our

plans to recommence our operations and we may need to permanently cease our operations.

Debt Obligations

to the Closing, we funded our operations through the issuance of convertible promissory notes.

August to October 2017, the Company entered into seven Convertible Promissory Note Agreements with unaffiliated investors for an aggregate

amount of $821,500.

The notes bore interest at 10% per year, were unsecured, and were due and payable on June 30, 2019.

The Company and the noteholders

executed amendments in February 2021 to extend the maturity date to December 21, 2021.

As of December 31, 2021 and December 31,

2020, the balance of these notes was $771,500 and $821,500, respectively.

From November 2019 through

October 28, 2021, we issued approximately $48.2 million in aggregate principal amount of Series B convertible promissory notes.

The Company and

the noteholders executed amendments in February 2021 to extend the maturity date to December 21, 2021.

November 2019 through October 28, 2021, we issued approximately $48.2 million in aggregate principal amount of Series B convertible promissory

The notes bear interest at 8% per year, were unsecured, and were due and payable on dates ranging from December 2020 to December

7 unchanged sentences

terms that were triggered by the Closing.

Immediately prior to the Closing,

approximately $60.0 million of convertible debt was converted into equity of AutoLotto.

As of December 31, 2021, we had no convertible

debt outstanding.

Net cash provided by operating activities was $8.1 million for

the year ended December 31, 2021, compared to net cash provided by operating activities of $4.7 million for the year ended December 31,

Factors affecting changes in operating cash flows were increased revenue from operations which were offset by increased expenses

for professional fees, personnel costs, and sales and marketing activities in 2021 as compared to 2020.

Net cash used in investing activities

during the year ended December 31, 2021 were $15.2 million, compared to $0.0 million for the prior year.

The increase was

primarily the result of the acquisition of the sports.com domain name as well as the acquisition of Global Gaming completed on June 30,

Net cash provided by financing activities was $59.0 million for the year ended December 31, 2021, compared to $6.0 million

for the year ended December 30, 2020.

The increase was primarily due to the issuance of debt and proceeds from the Business Combination

offset by repayments during 2021.

Changes in or Adoption of Accounting Practices

The following U.S.

standards have been recently issued by the Financial Accounting Standards Board (the “FASB”).

We are in the process of

assessing the impact of these new standards on future consolidated financial statements.

Pronouncements that are not applicable or where

it has been determined do not have a significant impact to the Company have been excluded herein.

ASC 606, Revenue from Contracts with

Between May 2014 and

December 2016, the FASB issued several Accounting Standards Updates (“ASUs”)’s on ASC 606, which updates superseded

nearly all previous revenue recognition guidance under U.S.

prior to the Closing, approximately $60.0 million of convertible debt was converted into equity of AutoLotto.

of December 31, 2022, we had $1,256,595 of convertible debt outstanding.

“- Recent Developments- Loan Agreement with Woodford ” above for additional information on the terms of the Loan Agreement.

Net cash used by operating activities was $31.3 million for the year ended

December 31, 2022, compared to net cash used by operating activities of $23.2 million for the year ended December 31, 2021.

Factors affecting

changes in operating cash flows were interest and stock-based compensation expense along with increased expenses for personnel costs,

and sales and marketing activities in 2022 as compared to 2021.

Net cash used in investing activities during the year ended December 31,

2022 was $1.3 million, compared to $13.9 million for the prior year.

The increase was primarily the result of the acquisition of the sports.com

domain name as well as the acquisition of Global Gaming completed on June 30, 2021.

Net cash provided by financing activities was $16

thousand for the year ended December 31, 2022, compared to $59.0 million for the year ended December 30, 2021.

The increase was primarily

due to the issuance of debt and proceeds from the Business Combination offset by repayments during 2021.

in or Adoption of Accounting Practices

following U.S.

GAAP standards have been recently issued by the Financial Accounting Standards Board (the “FASB”).

in the process of assessing the impact of these new standards on future consolidated financial statements.

Pronouncements that are not

applicable or where it has been determined do not have a significant impact on the Company have been excluded herein.

606, Revenue from Contracts with Customers

May 2014 and December 2016, the FASB issued several Accounting Standards Updates (“ASUs”)’s on ASC 606, which updates

superseded nearly all previous revenue recognition guidance under U.S.

The core principle is to recognize revenues when promised

3 unchanged sentences

estimates may be required within the revenue recognition process than are required under existing U.S.

The standards are

effective for annual periods beginning after December 15, 2017 using either of the following transition methods:

retrospective approach reflecting the application of the standards in each prior reporting period with the option to elect certain practical

or (ii) a retrospective approach with the cumulative effect of initially adopting the standards recognized at the date

of adoption (which includes additional footnote disclosures).

The Company adopted these standards effective on January 1, 2018, and

management concluded the adoption of this standard did not result in any financial statement impacts or changes to revenue recognition

policies or processes as revenue is primarily derived from arrangements in which the transfer of control coincides with the fulfillment

of performance obligations.

Critical Accounting Policies

Our financial statements are

prepared in conformity with U.S.

Certain of our accounting policies require that management apply significant judgments

and estimates in defining the appropriate assumptions integral to financial estimates.

Judgments are based on historical experience and

other factors that we believe to be reasonable under the circumstances, such as terms of contracts, industry trends and information available

from outside sources, as appropriate.

However, by their nature, judgments are subject to an inherent degree of uncertainty, and therefore

actual results could differ from our estimates.

The standards are effective

for annual periods beginning after December 15, 2017 using either of the following transition methods:

(i) a full retrospective approach

reflecting the application of the standards in each prior reporting period with the option to elect certain practical expedients;

(ii) a retrospective approach with the cumulative effect of initially adopting the standards recognized at the date of adoption (which

includes additional footnote disclosures).

The Company adopted these standards effective on January 1, 2018, and management concluded

the adoption of this standard did not result in any financial statement impacts or changes to revenue recognition policies or processes

as revenue is primarily derived from arrangements in which the transfer of control coincides with the fulfillment of performance obligations.

Accounting Policies

financial statements are prepared in conformity with U.S.

Certain of our accounting policies require that management apply significant

judgments and estimates in defining the appropriate assumptions integral to financial estimates.

Judgments are based on historical experience

and other factors that we believe to be reasonable under the circumstances, such as terms of contracts, industry trends and information

available from outside sources, as appropriate.

However, by their nature, judgments are subject to an inherent degree of uncertainty,

and therefore actual results could differ from our estimates.

We have applied significant estimates and assumptions related to the following:

Revenue and Cost Recognition

In May 2014, the Financial

Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from

Contracts with Customers (Topic 606) (“ASC 606”), amending revenue recognition guidance and requiring

a more structured approach to measuring and recognizing revenue as well as provide more detailed disclosures to enable users of financial

statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

The amended guidance is effective for accounting periods commencing on or after January 1, 2018.

We have applied ASC 606

to all revenue contracts.

The core principle of ASC 606 is that an entity recognizes revenue to depict the transfer of promised goods

or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those

goods or services.

Revenues are generally recognized upon the transfer of control of promised products provided to our users, customers

and subscribers, reflecting the amount of consideration we expect to receive for those products.

We enter into contracts that can include

various products, which are generally capable of being distinct and accounted for as separate performance obligations.

Revenue is recognized

net of any taxes collected from users, commercial partners and subscribers, which are subsequently remitted to governmental authorities.

The revenue recognition policy is consistent for sales generated directly with users and sales generated indirectly through affiliates,

other solution partners, and our commercial partners.

Revenues are recognized upon the application of the following steps:

and Cost Recognition

May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,

Revenue from Contracts with Customers (Topic 606) (“ASC 606”), amending revenue recognition guidance and requiring a more

structured approach to measuring and recognizing revenue as well as provide more detailed disclosures to enable users of financial statements

to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

guidance is effective for accounting periods commencing on or after January 1, 2018.

have applied ASC 606 to all revenue contracts.

The core principle of ASC 606 is that an entity recognizes revenue to depict the transfer

of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in

exchange for those goods or services.

Revenues are generally recognized upon the transfer of control of promised products provided to

our users, customers and subscribers, reflecting the amount of consideration we expect to receive for those products.

We enter into contracts

that can include various products, which are generally capable of being distinct and accounted for as separate performance obligations.

Revenue is recognized net of any taxes collected from users, commercial partners and subscribers, which are subsequently remitted to

governmental authorities.

The revenue recognition policy is consistent for sales generated directly with users and sales generated indirectly

through affiliates, other solution partners, and our commercial partners.

are recognized upon the application of the following steps:

Identification of a contract or contracts with a user, customer

6 unchanged sentences

is satisfied.

Contracts with users and customers

for lottery game sales are at the point of sale and may include transfer of multiple products to a user or a customer and generally do

not require future obligations.

In these situations, the Company generally considers each transferred product as a separate performance

The Company also has contracts with subscribers for the continued delivery of lottery and anonymized transaction data over

a defined period of time.

In accounting for these contracts, the Company generally considers each set of data as a separate performance

obligation and recognizes revenue on their delivery ratably over the service period of the agreement.

The Company’s products are

sold without a right of return or refund;

the Company’s terms of service and contracts generally include specific language that

disclaims any warranties.

In addition, the Company’s

performance obligation in agreements with certain third parties is to transfer previously acquired Affiliate Marketing Credits.

for these credits by the third parties is priced on a per-contract basis.

The performance obligation in these agreements is to provide

title rights of the previously acquired credits to the third party.

This transfer is point-in-time when the revenue is recognized, and

there are no variable considerations related to this performance obligation.

For both financial accounting

and tax reporting purposes, the Company reports income and expenses based on the accrual method of accounting.

For federal and state income

tax purposes, the Company reports income or loss from their investments in limited liability companies on the consolidated income tax

As such, all taxable income and available tax credits are passed from the limited liability companies to the individual members.

It is the responsibility of the individual members to report the taxable income and tax credits, and to pay any resulting income taxes.

Therefore, in relation to the income and losses incurred by the limited liability companies, they have been consolidated in the Company’s

tax return and provision based upon its relative ownership.

Income taxes are accounted

for in accordance with ASC 740, “ Income Taxes ” (“ASC 740”), using the asset and liability method.

Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary

differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which

with users and customers for lottery game sales are at the point of sale and may include transfer of multiple products to a user or a

customer and generally do not require future obligations.

In these situations, the Company generally considers each transferred product

as a separate performance obligation.

The Company also has contracts with subscribers for the continued delivery of lottery and anonymized

transaction data over a defined period of time.

In accounting for these contracts, the Company generally considers each set of data as

a separate performance obligation and recognizes revenue on their delivery ratably over the service period of the agreement.

The Company’s

products are sold without a right of return or refund;

the Company’s terms of service and contracts generally include specific

language that disclaims any warranties.

addition, the Company’s performance obligation in agreements with certain third parties is to transfer previously acquired Affiliate

Marketing Credits.

The payment for these credits by the third parties is priced on a per-contract basis.

The performance obligation in

these agreements is to provide title rights of the previously acquired credits to the third party.

This transfer is point-in-time when

the revenue is recognized, and there are no variable considerations related to this performance obligation.

both financial accounting and tax reporting purposes, the Company reports income and expenses based on the accrual method of accounting.

federal and state income tax purposes, the Company reports income or loss from their investments in limited liability companies on the

consolidated income tax returns.

As such, all taxable income and available tax credits are passed from the limited liability companies

to the individual members.

It is the responsibility of the individual members to report the taxable income and tax credits, and to pay

any resulting income taxes.

Therefore, in relation to the income and losses incurred by the limited liability companies, they have been

consolidated in the Company’s tax return and provision based upon its relative ownership.

taxes are accounted for in accordance with ASC 740, “ Income Taxes ” (“ASC 740”), using the asset and liability

Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to

temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which

these temporary differences are expected to be recovered or settled.

3 unchanged sentences

tax assets for which it is more likely than not that the related benefit will not be realized.

The Company records uncertain

tax positions in accordance with ASC 740 on the basis of a two-step process in which (i) the Company determines whether it is

more likely than not that the tax positions will be sustained on the basis of the technical merits of the position;

those tax positions that meet the more likely than not recognition threshold, the Company recognizes the largest amount of tax benefit

that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company’s policy

is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit.

date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.

Generally, the taxing authorities

can audit the previous three years of tax returns and in certain situations audit additional years.

For federal tax purposes,

the Company’s 2018 through 2020 tax years generally remain open for examination by the tax authorities under the normal three-year

statute of limitations.

For state tax purposes, the Company’s 2018 through 2020 tax years remain open for examination by the

tax authorities under the normal four-year statute of limitations.

Business combination

In a business combination,

substantially all identifiable assets, liabilities and contingent liabilities acquired are recorded at the date of acquisition at their

respective fair values.

One of the most significant areas of judgment and estimation relates to the determination of the fair value of

these assets and liabilities, including the fair value of contingent consideration, if applicable.

If any intangible assets are identified,

depending on the type of intangible asset and the complexity of determining its fair value, an independent external valuation expert may

develop the fair value, using appropriate valuation techniques, which are generally based on a forecast of the total expected future net

These valuations are linked closely to the assumptions made by our management regarding the future performance of the assets

concerned and any changes in the discount rate applied.

Fair value of financial assets and financial

Fair value of financial assets

and financial liabilities recorded in the consolidated statements of financial position, which cannot be derived from active markets,

are determined using a variety of techniques including the use of valuation models.

The inputs to these models are derived from observable

market data where possible, but where observable market data is not available, judgment is required to establish fair values.

includes, but is not limited to, consideration of model inputs such as volatility, estimated life and discount rates.

Fair value of stock options and warrants

We use the Black-Scholes option-pricing

model to calculate the fair value of stock options and warrants.

Use of this method requires management to make assumptions and estimates

about the expected life of options and warrants, anticipated forfeitures, the risk-free rate, and the volatility of our share price.

making these assumptions and estimates, management relies on historical market data.

Estimated useful lives, depreciation of

property, plant and equipment, and amortization of intangible assets

Depreciation of property, plant

and equipment and amortization of intangible assets is dependent upon estimates of useful lives based on management’s judgment.

The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic

and market conditions and the useful lives of assets.

Goodwill and intangible assets

Goodwill and indefinite life

intangible asset impairment testing require us to make estimates in the impairment testing model.

On an annual basis, we test whether

goodwill and indefinite life intangible assets are impaired.

Impairment is influenced by judgment in defining a cash-generating unit (“CGU”)

and determining the indicators of impairment, and estimates used to measure impairment losses.

The recoverable amount is the greater of

value in use and fair value less costs to sell.

The recoverable value of goodwill, indefinite and definite long-lived assets is determined

using discounted future cash flow models, which incorporate assumptions regarding projected future cash flows and capital investment,

growth rates and discount rates.

Deferred Tax Asset and Valuation Allowance

Deferred tax assets, including

those arising from tax loss carry-forwards, requires management to assess the likelihood that we will generate sufficient taxable earnings

in future periods in order to utilize recognized deferred tax assets.

Assumptions about the generation of future taxable profits depend

on management’s estimates of future cash flows.

In addition, future changes in tax laws could limit our ability to obtain tax deductions

in future periods.

To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company

to realize the net deferred tax assets recorded at the reporting date could be impacted.

Emerging Growth Company Accounting Election

Section 102(b)(1) of

the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until

private companies are required to comply with the new or revised financial accounting standards.

Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (i) the Company determines

whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position;

(ii) for those tax positions that meet the more likely than not recognition threshold, the Company recognizes the largest amount of tax

benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company’s

policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit.

To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.

the taxing authorities can audit the previous three years of tax returns and in certain situations audit additional years.

tax purposes, the Company’s 2018 through 2020 tax years generally remain open for examination by the tax authorities under the

normal three-year statute of limitations.

For state tax purposes, the Company’s 2018 through 2020 tax years remain open for examination

by the tax authorities under the normal four-year statute of limitations.

a business combination, substantially all identifiable assets, liabilities and contingent liabilities acquired are recorded at the date

of acquisition at their respective fair values.

One of the most significant areas of judgment and estimation relates to the determination

of the fair value of these assets and liabilities, including the fair value of contingent consideration, if applicable.

If any intangible

assets are identified, depending on the type of intangible asset and the complexity of determining its fair value, an independent external

valuation expert may develop the fair value, using appropriate valuation techniques, which are generally based on a forecast of the total

expected future net cash flows.

These valuations are linked closely to the assumptions made by our management regarding the future performance

of the assets concerned and any changes in the discount rate applied.

value of financial assets and financial liabilities

value of financial assets and financial liabilities recorded in the consolidated statements of financial position, which cannot be derived

from active markets, is determined using a variety of techniques including the use of valuation models.

The inputs to these models are

derived from observable market data where possible, but where observable market data is not available, judgment is required to establish

Judgment includes, but is not limited to, consideration of model inputs such as volatility, estimated life and discount

value of stock options and warrants

use the Black-Scholes option-pricing model to calculate the fair value of stock options and warrants.

Use of this method requires management

to make assumptions and estimates about the expected life of options and warrants, anticipated forfeitures, the risk-free rate, and the

volatility of our share price.

In making these assumptions and estimates, management relies on historical market data.

useful lives, depreciation of property, plant and equipment, and amortization of intangible assets

of property, plant and equipment and amortization of intangible assets is dependent upon estimates of useful lives based on management’s

The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such

as economic and market conditions and the useful lives of assets.

and intangible assets

and indefinite life intangible asset impairment testing require us to make estimates in the impairment testing model.

On an annual basis,

we test whether goodwill and indefinite life intangible assets are impaired.

Impairment is influenced by judgment in defining a cash-generating

unit (“CGU”) and determining the indicators of impairment, and estimates used to measure impairment losses.

The recoverable

amount is the greater of value in use and fair value less costs to sell.

The recoverable value of goodwill, indefinite and definite long-lived

assets is determined using discounted future cash flow models, which incorporate assumptions regarding projected future cash flows and

capital investment, growth rates and discount rates.

Tax Asset and Valuation Allowance

for deferred tax assets, including those arising from tax loss carry-forwards, requires management to assess the likelihood that we will

generate sufficient taxable earnings in future periods in order to utilize recognized deferred tax assets.

Assumptions about the generation

of future taxable profits depend on management’s estimates of future cash flows.

In addition, future changes in tax laws could

limit our ability to obtain tax deductions in future periods.

To the extent that future cash flows and taxable income differ significantly

from estimates, the ability of the Company to realize the net deferred tax assets recorded at the reporting date could be impacted.

Growth Company Accounting Election

102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards

until private companies are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company

2 unchanged sentences

We are an “emerging growth

company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and have elected to take advantage

of the benefits of this extended transition period.

We expect to remain an emerging growth company through the end of the 2023 fiscal

year and we expect to continue to take advantage of the benefits of the extended transition period.

This may make it difficult or impossible

to compare the financial results with the financial results of another public company that is either not an emerging growth company or

is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions for emerging growth companies

because of the potential differences in accounting standards used.

company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and have elected to take advantage of the benefits

of this extended transition period.

We expect to remain an emerging growth company through the end of the 2023 fiscal year and we expect

to continue to take advantage of the benefits of the extended transition period.

This may make it difficult or impossible to compare

the financial results with the financial results of another public company that is either not an emerging growth company or is an emerging

growth company that has chosen not to take advantage of the extended transition period exemptions for emerging growth companies because

of the potential differences in accounting standards used.

Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting

company” as defined by Rule 10(f)(1) of Regulation S-K, the Company is not required to provide this information.

Financial Statements and Supplementary Data.

The consolidated financial

statements required to be filed pursuant to this Item 8 are appended to this Annual Report.

An index of those financial statements is

found in Item 15.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

As a “smaller reporting company”

as defined by Rule 10(f)(1) of Regulation S-K, the Company is not required to provide this information.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis