LOTTERY.COM INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

The following dialogue and evaluation of our monetary situation and outcomes of
operations along with the condensed consolidated monetary statements and the
associated notes showing elsewhere on this Quarterly Report incorporates
forward-looking statements that contain dangers and uncertainties. Our precise
outcomes and the timing of occasions could differ materially from these expressed or
implied in such forward- trying statements because of this of varied elements,
together with these set forth in “Cautionary Note Regarding Forward-Looking
Statements” included herein and “Risk Factors” included on this Quarterly Report
and our Annual Report on Form 10-Ok for the yr ended December 31, 2021, filed
with the SEC on April 1, 2022 (our “Annual Report”).

Overview

Lottery.com (previously often known as Trident Acquisitions Corp., or “TDAC”) is a
main supplier of home and worldwide lottery merchandise and providers. As
an unbiased third-party lottery sport service, we provide a platform that we
architected, developed, and function to allow the distant buy of legally
sanctioned lottery video games within the U.S. and overseas (the “Platform”). Our income
producing actions consist of (i) providing the Platform through our Lottery.com
app and our web sites to customers situated within the U.S. and worldwide
jurisdictions the place the sale of lottery video games is authorized and our providers are
enabled for the distant buy of sanctioned lottery video games (our “B2C
Platform”); (ii) promoting credit (“LotteryHyperlink Credits”) that may be exchanged
for versatile promotion packages that embrace our advertising collateral, pay as you go
promoting, improvement providers, account administration, and pay as you go lottery video games
to be used in promotions to our third-party grasp internet affiliate marketing companions
(our “Master Affiliates”) to be used by them and by their sub-affiliates (collectively
with the Master Affiliates, the “Affiliates”) in enterprise internet affiliate marketing
actions and selling our B2C Platform (“LotteryHyperlink”); (iii) providing an
internally developed, created, and operated business-to-business utility
programming interface (“API”) of the Platform to allow our business companions,
in permitted U.S. and worldwide jurisdictions, to buy sure legally
operated lottery video games from us and to resell them to customers situated inside their
respective jurisdictions (“B2B API”); and (iv) delivering world lottery knowledge,
comparable to profitable numbers and outcomes, and subscriptions to knowledge units of our
proprietary, anonymized transaction knowledge pursuant to multi-year contracts to
business digital subscribers (“Data Service”).

We at the moment derive considerably all of our income from the sale of
LotteryHyperlink Credits, service charges paid to us by customers of our B2C Platform,
income share preparations with business companions taking part in our B2B
API, and subscription charges from customers of our Data Service. We intend to pursue
progress by implementing new merchandise and options inside our B2C Platform
providers, rising our LotteryHyperlink program, increasing our B2C providing into new
home and worldwide jurisdictions, coming into into extra agreements
with new business companions for our B2B API, rising our LotteryHyperlink Credit
program, executing on strategic acquisitions and different synergistic
alternatives, together with having access to complementary and new expertise
by such acquisitions, and investing in and growing new expertise and
enhancing our current expertise in every of our enterprise strains, together with
distributed ledger expertise. In December 2021, we finalized the acquisition of
the area title https://sports.com and are exploring alternatives for the
supposed strategic entry into authorized sports activities gaming verticals, which can embrace
the distribution of sports activities lottery video games.

In addition, we additionally count on to develop our model and dedication to social consciousness
by our affiliation with WinTogether. WinTogether is a registered 501(c)(3)
charitable belief that helps charitable, academic and scientific causes.
Messrs. DiMatteo and Clemenson fashioned WinTogether and proceed to behave as
trustees. We function the WinTogether Platform on behalf of WinTogether, as nicely
because the sweepstakes provided by https://wintogether.org (the “WinTogether
Platform”), which help charitable causes chosen by the trustees of
WinTogether. These sweepstakes work to incentivize individuals to donate to
these chosen causes. Donors to every marketing campaign are robotically entered into the
sweepstakes for the prospect to win money prizes, luxurious objects, and distinctive
experiences. In change for working the WinTogether Platform and the
sweepstakes on behalf of WinTogether, we obtain a price from the gross donations
from every sweepstakes. While the income obtained from the Company’s providers
referring to the WinTogether Platform are at the moment nominal, we imagine that our
operation of the WinTogether web site and sweepstakes might be a scalable supply
of income sooner or later in addition to a mechanism to extend our model status
and recognition by sweepstake individuals, which might end result within the
acquisition and monetization of new customers to our B2C Platform.

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Business Combination

On October 29, 2021, we consummated a enterprise mixture (the “Business
Combination”) with AutoLotto, Inc. (“AutoLotto”). Following the closing of the
Business Combination (the “Closing”) we modified our title from “Trident
Acquisitions Corp.” to “Lottery.com Inc.” and the enterprise of AutoLotto turned
our enterprise. The Business Combination was pursuant to the phrases of that sure
Business Combination Agreement, dated as of February 21, 2021 (the “Business
Combination Agreement”), by and amongst TDAC, Trident Merger Sub II Corp., a
wholly-owned subsidiary of TDAC (“Merger Sub”) and AutoLotto. Pursuant to the
phrases of the Business Combination Agreement, Merger Sub merged with and into
AutoLotto with AutoLotto surviving the merger as a completely owned subsidiary of
TDAC, which was renamed “Lottery.com Inc.” The mixture worth of the
consideration paid by TDAC to the holders of AutoLotto frequent inventory within the
Business Combination (excluding shares that could be issued to former AutoLotto
stockholders (the “Sellers”) as earnout consideration) was roughly $440
million, consisting of roughly 40,000,000 shares of Common Stock valued at
$11.00 per share. In addition, the Sellers and TDAC’s founders are additionally entitled
to obtain as much as 3 million and 2 million extra shares of Common Stock,
respectively, to the extent that sure share value targets are achieved
following the Closing.

Recent Developments

COVID-19 Update

In a typical yr, the gross sales quantity of draw video games relies upon closely on the
improvement of just a few notably giant jackpots. Suppression of gross sales (owing, for
occasion, to restricted visits by gamers to places the place tickets are bought as
a end result social distancing or different measures put in place because of this of
COVID-19, even when the drawings are themselves continued as scheduled) works
in opposition to the continued improvement of these notable jackpots. By distinction, the
betting alternatives provided by instantaneous win video games, comparable to scratchers, are
usually unaffected by the amount of play, and subsequently, tickets for fast
win video games are thought-about extra like merchandise (just like canned items) that
could also be “purchased forward,” even in the course of the curtailment of retail, or
person-to-person, visits. According to the World Lottery Association, throughout
2020, gross sales of instantaneous win video games remained inside 1% of the 2019 ranges for such
gross sales, regardless of pandemic-related restrictions that resulted within the short-term
closure of retail places which might be the first level of sale for fast

win
video games.

Throughout the COVID-19 pandemic, gross sales of on-line lottery video games, that are paid
solely from cellular units or computer systems (“Online Lottery”) through digital
channels, skilled extra ticket gross sales progress than the choice,
person-to-person gross sales. The proportion of all gross sales occurring by digital
channels reached 17% throughout World Lottery Association membership in 2021, an
enhance of 11% over the identical determine in 2020.

The shift in shopper buying exercise towards on-line buying has catalyzed
demand for the cellular and on-line supply of lottery video games. As an early entrant
within the supply of digitized illustration of lottery video games with a longtime
and rising person base within the U.S. and overseas, we imagine that we stay
well-positioned to capitalize on what we count on to be a continued shift in direction of
a brand new demography of prospects who depend on cellular and on-line means for
acquisition of shopper items, together with lottery video games and different kinds of on-line
gaming. For instance, we skilled a 123% year-over-year enhance in our
worldwide sale of distinctive lottery video games between 2020 and 2021, which we primarily
attribute to the shift in shopper buying habits to cellular and on-line
purchases as a consequence of COVID-19.

We imagine in attracting one of the best expertise wherever it’s situated and {that a}
distributed distant workforce is one of the best goal of the Company’s
organizational wants. We additionally reassess our enterprise continuity applications on an
ongoing foundation and in gentle of new developments referring to the COVID 19 pandemic
to make sure that our staff stay protected, and that demand for our merchandise
and providers stays constant.

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Launch of Project Nexus

We are growing a proprietary, blockchain-enabled gaming platform, which we
have named Project Nexus. The Project Nexus platform is designed to deal with excessive
volumes of person site visitors with the aim of enhancing customers’ expertise by
enhancing the safety pace of our platforms and making them extra dependable. The
preliminary section of Project Nexus was carried out within the second quarter of 2022.
See beneath for extra data.

Key Elements of our Business

Mobile Lottery Game Platform Services

Both our B2C Platform and our B2B API present customers with the flexibility to buy
legally sanctioned draw lottery video games through a cellular machine or laptop, securely
keep their acquired lottery sport, robotically redeem a profitable lottery
sport, as relevant, and obtain help, if required, for the claims and
redemption course of. Our registration and person interfaces are designed to be straightforward
to make use of, present for the creation of an account and buy of a lottery sport
with minimal friction and with out the creation of a cellular pockets or requirement
to pre-load minimal funds and – importantly – to offer instantaneous affirmation of
the person’s lottery sport numbers, whether or not chosen at random or picked by the
person. In consideration of our B2C Platform providers, customers pay a service price
and, in sure non-U.S. jurisdictions, a mark-up on the acquisition value. We
generate income from that service price and mark-up.

LotteryHyperlink Credits

In the third quarter of 2021, we launched LotteryHyperlink, our internet affiliate marketing
program. As half of LotteryHyperlink, we pay every of our Affiliates a share of
the revenues derived from every new buyer they check with us and, if such
buyer is situated in a jurisdiction during which they could lawfully use our B2C
Platform, is transformed to a person. These commissions are paid for a contractually
specified length of such person’s exercise on the B2C Platform. In help of
their promotional actions, our Master Affiliates buy credit, referred
to as a LotteryHyperlink Credit, from us that may be redeemed for versatile promotion
packages, consisting of advertising collateral, pay as you go promoting, improvement
providers, account administration, and pay as you go promotional rewards that will redeemed
by customers, upon account activation, to accumulate lottery video games that can be utilized in
promotions. We generate income from the sale of the LotteryHyperlink Credits and we
imagine that we could generate extra income by LotteryHyperlink within the
future by these Affiliates buying extra LotteryHyperlink Credits.

Data Services

Our utility and web sites provide complete multi-jurisdiction lottery
end result data, with out the requirement to create an account. Additionally,
our Data Service delivers every day outcomes of home and worldwide lottery
video games from greater than 40 nations to over 400 digital publishers and media
organizations, pulled from actual time major supply knowledge.

We generate income from the subscription charges paid by our subscribers for
annual entry and additionally extra per report charges. We additionally generate charges from
multi-year contracts pursuant to which we promote proprietary, anonymized
transaction knowledge.

The WinTogether Platform

Unlike lottery video games and different video games of probability, participation in sweepstakes is
permissible in nearly each state inside the U.S. and sweepstakes provided on the
WinTogether Platform are open to individuals inside the U.S. and sure
worldwide jurisdictions, until prohibited by native regulation or regulation. When
a participant donates to a marketing campaign trigger on the WinTogether Platform, they’re
robotically entered to win a prize; supplied, nevertheless, in accordance with the
sweepstakes necessities of most jurisdictions and the phrases of service for every
sweepstakes, no buy or donation is required for entry into sweepstakes
provided 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 obtain a share of the gross
donations to a marketing campaign, from which we pay sure dividends and all
administration prices. We count on that participation within the sweepstakes provided on
the WinTogether Platform will proceed to develop as we and WinTogether’s trustees
proceed to develop its choices. In addition to the profit of the
philanthropic alternatives generated by the WinTogether Platform, we view its
operation as a scalable supply of income in addition to a mechanism to extend the
Company’s model status and recognition.

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Synergistic Growth

In addition to natural progress of our present income producing actions, we
intend to develop our enterprise by synergistic acquisitions, as evidenced by
our acquisition of 100% of the fairness of Global Gaming Enterprises, Inc., a
Delaware company (“Global Gaming”), which holds 80% of the fairness of every of
Medios Electronicos y de Comunicacion, S.A.P.I de C.V. (“Aganar”) and
JuegaLotto, S.A. de C.V. (“JuegaLotto”) in June 2021, which we imagine gives
progress potential for us within the Mexican and Latin American markets, and our
current acquisition of the “Sports.com” area as half of our plan to enter
sports activities betting in December 2021.

Performance Measures

In managing our enterprise and assessing monetary efficiency, we complement the
data supplied by our monetary statements with different working metrics.
We use these metrics to guage our enterprise, measure our efficiency, establish
developments affecting our enterprise, formulate projections and make strategic
selections. The major working metrics we use are:

? transactions per person;

? tickets per transaction;

? gross income per transaction;

? gross revenue per transaction; and

? gross margin per transaction.

These metrics assist allow us to guage pricing, price and buyer
profitability. We imagine it’s helpful to offer traders with the identical
metrics that we use internally to make comparisons of our historic working
outcomes, establish developments in our working outcomes and consider our enterprise.
These metrics monitor our B2C enterprise and exclude customers who have been referred by an
affiliate or who made purchases by an API companion.

Three Months Ended
March 31,
2022 2021
Transactions Per User (annualized) 12.58 9.46
Tickets Per Transaction 3.68 4.09
Gross Revenue Per Transaction $ 8.75 $ 10.16
Gross Profit Per Transaction $ 1.30 $ 1.48
Gross Margin per Transaction 14.9 % 14.6 %

Transactions Per User

Transactions per person is the typical quantity of particular person transactions per person
in a given interval. An particular person transaction is outlined as the position of an
order by a person on our Platform. We use this measure to find out the general
efficiency of our merchandise on a per person foundation. When thought-about with the opposite
working metrics, transactions per person gives perception into person stickiness
and shopping for patterns and is a useful gizmo to establish our most lively customers,
which allows us to deploy extra focused advertising and different strategic
initiatives. This metric additionally provides us the flexibility to categorize customers primarily based on
their efficiency and decide the place to expend advertising and/or operational
sources. Transactions per person could also be topic to variables which might be exterior of
our management, for example the dimensions and reputation of a specific lottery sport.

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Tickets Per Transaction

Tickets per transaction is the typical quantity of lottery sport tickets bought
by a person per transaction. We use this measure to investigate the affect of product
efficiency with our prospects on the quantity of tickets bought in a single transaction.
We imagine this metric is helpful for our traders as a result of it provides perception into
the shopping for habits of our customers. Similar to transactions per person, tickets per
transaction could also be topic to variables which might be exterior of our management, for
occasion the dimensions and reputation of a specific lottery sport.

Gross Revenue Per Transaction

Gross income per transaction is the typical gross quantity of income per
transaction. We use this measure to find out how our prime line income is
acting on a per transaction foundation, which helps us to establish and consider
pricing developments. We imagine this metric is helpful for our traders as a result of it
gives perception into our income progress potential on a per transaction foundation.

Gross Profit Per Transaction

Gross revenue per transaction is our common gross revenue per transaction,
calculated as gross income much less the associated fee of the lottery sport ticket and any
processing charges, together with labor, printing and fee processing, per
transaction. We imagine this metric to be helpful to guage and analyze our
prices and price construction throughout product choices and person cohorts, and
moreover, helps our traders as a result of it gives perception into our revenue
progress potential on a per transaction foundation.

Gross Margin Per Transaction

Gross margin per transaction is calculated by dividing gross revenue per
transaction by gross income per transaction. We contemplate this metric to be a
measure of general efficiency that gives helpful details about the
profitability of our B2C Platform.

Components of Our Results of Operations

Our Revenue

Revenue from B2C Platform. Our income is the retail worth of the acquired
lottery sport and the service price charged to the person, which we impose on every
lottery sport bought from our B2C Platform. The quantity of the service price is
primarily based upon a number of elements, together with the retail worth of the lottery sport
bought by a person, the quantity of lottery video games bought by a person, and
whether or not such person is situated inside the U.S. or internationally. Currently, in
the U.S, the minimal service price is $0.50 for the acquisition of a $1 lottery sport
and $1 for the acquisition of a $2 lottery sport; the service price for added
lottery video games bought in the identical transaction is 6% of the face worth of all
lottery video games bought. For instance, the service price for the acquisition of 5
$2 tickets is $1.60, being the $1 base service price, plus 6% of the mixture
worth of the face worth of all lottery video games bought. In the quarter-ended
March 31, 2022, our home B2C Platform customers bought a mean of 3.7
lottery video games per transaction at a mean service price of $0.37 per lottery
sport. For the twelve months ended March 31, 2022, we had a mean gross revenue
per home B2C Platform person, the place the definition of gross revenue is similar
as outlined beneath “Gross Profit per Transaction”, of roughly $34.60. During
the quarter-ended March 31, 2022, the Company’s digital advertising spend was
centered on testing the effectiveness of pattern advertising campaigns. We had a
retention price of home customers of 85% for the twelve months ended March 31,
2022, excluding any prospects referred by an affiliate or API companion, which
leads to a lifetime person worth, on common, of $176.55.

6

Internationally, B2C gross sales in jurisdictions the place we should not have direct or
oblique authority generate an immaterial quantity of income, and we’re
assessing our operations in these jurisdictions.

Revenue from Sale of LotteryHyperlink Credits. We promote LotteryHyperlink Credits to our
third-party Affiliates, which can be redeemed for promoting credit, advertising
collateral, improvement providers, account administration providers and pay as you go
promotional rewards. In the three months ended March 31, 2022, we bought $18.0
million in LotteryHyperlink Credits for pay as you go promotional rewards, advertising
supplies and improvement providers. Revenue from the sale of LotteryHyperlink Credits
in future durations could fluctuate as a consequence of regulatory or contractual obligations
relevant to our associates or sub-affiliates, which can affect our, our
associates’, or their sub-affiliates’ potential to undertake the marketing campaign that
administration initially anticipated.

Revenue from B2B API. Together with our third-party business companion, we agree
on the quantity of the mark-up on the associated fee to be imposed on the sale of every
lottery sport bought by the B2B API, if any, along with a service price
to be charged to the person; we obtain as much as 50% of the online revenues from such
mark-up and service price pursuant to our business settlement with every
business companion. In the U.S., the Company’s common gross income per such
lottery sport sale was $2.00 within the three months ended March 31, 2022. We
at the moment don’t cost our business companions a price for the use of the B2B
API.

In the third quarter of 2021, we launched LotteryHyperlink, which is meant to
leverage third get together Affiliates throughout a number of industries and advertising
channels to accumulate customers on our behalf. The preliminary section of this program
concerned the sale and switch of LotteryHyperlink Credits to a Master Affiliate for
use in offering internet affiliate marketing packages to different third get together Affiliates.
Affiliate advertising packages embrace the LotteryHyperlink Credits, which, within the subsequent
section of this program, such third get together Affiliates will be capable of use to
promote and distribute our merchandise on their platforms. We imagine that we could
generate extra income by LotteryHyperlink sooner or later by these third
get together Affiliates buying extra LotteryHyperlink Credits.

In the three months ended March 31, 2022, we had agreements to accumulate and promote
lottery video games by the B2B API with three worldwide third-party
business companions, together with a French betting answer and one U.S.
third-party business companion, which operates a proprietary cellular pockets for
use at historically coin-operated machines, comparable to arcade video games, merchandising
machines, and laundry machines, which enabled our choices on its cellular
utility. Collectively, these agreements supplied us with entry to over
420,000 distinctive factors of sale for customers to accumulate lottery video games through our B2B
API.

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Data Services. Commercial acquirers of our Data Service pay a subscription for
entry to the Data Service and, for acquisition of sure giant knowledge units, an
extra per report price. The Company moreover enters into multi-year
contracts pursuant to which it sells proprietary, anonymized transaction knowledge
pursuant to multi-year agreements and in accordance with our Terms of Service in
consideration of a price.

Our Operating Costs and Expenses

Personnel Costs. Personnel prices embrace salaries, payroll taxes, well being
insurance coverage, employee’s compensation and different advantages for administration and workplace
personnel.

Professional Fees. Professional charges embrace charges paid for authorized and monetary
advisors, accountants and different professionals associated to the Business
Combination and different transactions.

General and Administrative. General and administrative bills embrace
advertising and promoting, bills, workplace and services lease funds,
journey bills, financial institution charges, software program dues and subscriptions, expensed analysis
and improvement (“R&D”) prices and different charges and bills.

Depreciation and Amortization. Depreciation and amortization bills embrace
depreciation and amortization bills on actual property and different belongings.

Key Trends and Factors Affecting Our Results

The following describes the developments related to our enterprise which have
impacted, and which we count on will proceed to affect, our enterprise and outcomes
of operations in a cloth approach:

COVID-19. For the developments and different impacts associated to the COVID-19 pandemic that
could proceed to affect our enterprise and outcomes of operations, please see
“Recent Developments-Impacts of COVID-19,” above.

International operations. We face challenges associated to increasing our footprint
globally and the associated course of of acquiring the licenses and regulatory
approvals crucial to offer providers and merchandise inside new and rising
markets. Largely because of this of the COVID-19 pandemic, the worldwide
jurisdictions the place we function and search to develop have been topic to
rising overseas forex fluctuations in opposition to the U.S. greenback, hovering
inflation and political and financial instability. We count on these developments to
proceed throughout fiscal 2022 and imagine they’re more likely to trigger a cloth
lower in shopper spending, which might have a cloth affect on our
revenues. We count on that it’ll take an extended interval of time to realize income
features or generate money within the new areas or any new worldwide jurisdictions
during which we develop, exterior of our home geographies.

Introduction of a brand new gaming platform. We have developed a proprietary,
blockchain-enabled gaming platform, which we’ve got named Project Nexus. Project
Nexus is designed to deal with excessive ranges of person site visitors and transaction quantity,
whereas sustaining expediency, safety, and reliability in processing lottery
sport gross sales, the retail necessities of the B2C Platform, the executive and
back-office performance required by the B2B API, and the claims and redemption
course of. We count on to make the most of this platform to launch new merchandise, together with
any proprietary merchandise we could introduce. The introduction of new expertise
like Project Nexus is topic to dangers together with, for instance, implementation
delays, points efficiently integrating the expertise into our options, or
the likelihood that the expertise doesn’t produce the anticipated advantages.

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Our progress plans and the aggressive panorama. Our direct opponents function
within the world leisure and gaming industries and, like us, search to develop
their product and service choices with built-in merchandise and options. Our
short-to-medium time period focus is on rising our penetration in our current U.S.
jurisdiction by rising direct to shopper advertising campaigns, introducing
our B2C Platform into new U.S. and worldwide jurisdictions, rising our
LotteryHyperlink program by the addition of new Affiliates, and buying
synergistic regulated and sports activities betting enterprises domestically and overseas.
Competition within the sale of on-line lottery video games has considerably elevated in
current years, is at the moment characterised by intense price-based competitors, and
is topic to altering expertise, shifting wants and frequent introductions of
new video games, improvement platforms and providers. To keep our aggressive edge
alongside different established business gamers (many of which have extra sources,
or capital), we count on to incur higher working bills within the short-term,
comparable to elevated advertising bills, elevated compliance bills, elevated
personnel and advisory bills related to being a public firm,
extra operational bills and salaries for personnel to help anticipated
progress, extra bills related to our potential to execute on our
strategic initiatives together with our purpose to undertake merger and acquisition
actions, in addition to extra capital expenditures related to the
ongoing improvement and implementation of Project Nexus.

Results of Operations

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

The following desk summarizes our outcomes of operations for the three month
ended March 31, 2022 and March 31, 2021, respectively.

Three Months Ended
March 31,
2022 2021 $ Change % Change

Revenue $ 21,150,892 $ 5,461,539 $ 15,689,353 287 %
Cost of income 3,165,469 2,946,981 218.488 7 %
Gross revenue 17,985,423 2,514,558 15,470,865 615 %

Operating bills:
Personnel prices 25,975,863 1,095,793 24,880,070 2,271 %
Professional charges 3,055,039 2,415,198 445,146 26 %
General and administrative 3,399,896 1,388,574 2,011,322 145 %
Depreciation and amortization 1,373,925 367,259

1,006,666 274 %
Total working bills 33,804,723 5,266,824 28,716,747 542 %
Loss from operations $ (15,819,300 ) $ (2,752,266 ) (12,872,339 ) 475 %

Other bills
Interest expense (953 ) 2,472,048 (2,473,001 ) (100 )%
Other (earnings) expense (2,436 ) 231,720 (234,156 ) (100 )%

Total different (earnings) bills, internet (3,389 ) 2,703,768

(2,707,157 ) (100 )%

Net loss earlier than earnings tax $ (15,815,911 ) $ (5,456,034 ) $ (10,165,182 ) (290 )%
Income tax expense (profit) – –
Net loss (15,815,911 ) (5,456,034 )

Other complete loss
Foreign forex translation adjustment,
internet (1,064 ) –
Comprehensive loss (15,816,975 ) (5,456,034 )

Net earnings attributable to
noncontrolling curiosity 129,222 –
Net loss attributable to Lottery.com
Inc. (15,687,753 ) (5,456,034 )

Net loss per frequent share
Basic and diluted $ (0.33 ) $ (0.35 )

Weighted common frequent shares
excellent
Basic and diluted 46,832,919 15,740,414

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Revenues.

Revenue. Revenue for the three months ended March 31, 2022 was $21.2 million, an
enhance of $15.7 million, or 287%, in comparison with income of $5.5 million for the
three months ended March 31, 2021. The enhance in income was pushed by the
sale of $18 million in LotteryHyperlink Credits for pay as you go promotional rewards,
advertising supplies and improvement providers.

Cost of Revenue. Cost of income for the three months ended March 31, 2022 was
$3.2 million, a rise of $0.2 million, or 7%, in comparison with price of income of
$2.9 million for the three months ended March 31, 2021. The enhance in the associated fee
of income was pushed by a bigger share of inner improvement prices
attributable to buyer gross sales in the course of the present quarter, partially offset by
the expiration of a excessive share of the pre-paid promotional rewards
underlying the LotteryHyperlink Credits that have been issued to a Master Affiliate within the
first quarter because of this of the delayed launch of such affiliate’s promotional
program. The Company didn’t incur prices related to redemption of most of
such LotteryHyperlink credit.

Gross Profit. Gross revenue for the three months ended March 31, 2022 was $18
million in comparison with $2.5 million for the three months ended March 31, 2021, an
enhance of $15.4 million, or 615%. This enhance was primarily because of the sale
of $18.0 million of LotteryHyperlink Credits for pay as you go promotional rewards,
advertising supplies and improvement providers, which generated important gross
revenue.

Operating Costs and Expenses.

Three Months Ended
March 31,
2022 2021 $ Change % Change
Operating bills
Personnel prices $ 25,975,863 $ 1,095,793 $ 24,880,070 2,271 %
Professional charges 3,055,039 2,415,198 445,146 26 %
Sales & advertising 907,686 1,244,906 (337,220 ) (27 )%
General and Administrative 2,492,210 143,668 2,348,542 1,635 %
Depreciation and amortization 1,373,925 367,259 1,006,666 274 %
Total working bills $ 33,804,723 $ 5,266,824 $ 28,343,204 542 %

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Operating bills for the three months ended March 31, 2022 have been $33.8 million,
a rise of $28.5 million, or 542%, in comparison with $5.3 million for the three
months ended March 31, 2021. The enhance was primarily pushed by elevated
personnel bills incurred from $22.2 million of inventory compensation expense and
elevated common and administrative bills from public firm bills,
elevated headcount to help the Company’s progress, elevated advertising spends
ensuing from the use of Gatehouse Media credit, which we obtained a number of
years in the past in change for warrants, and elevated amortization bills pushed
by acquisitions made in the course of the 2021 fiscal yr

Personnel Costs. Personnel prices elevated by $24.9 million, from $1.1 million
for the three months ended March 31, 2021, to $26 million for the three months
ended March 31, 2022. The enhance was due primarily to a rise of $22.2
million in inventory compensation expense because of this of fairness grants that have been
valued on the share value quickly after the Business Combination.

Professional Fees. Professional charges elevated by $0.6 million, or 26%, from
$2.4 million for the three months ended March 31, 2021 to $3.1 million for the
three months ended March 31, 2022. The enhance was pushed primarily by public
firm authorized and skilled charges together with non-cash warrant issuances of

an
approximate $195,000.

Sales and Marketing. Sales and advertising bills for the three months ended
March 31, 2022 have been roughly $908 thousand, in comparison with $1.3 million for
the three months ended March 31, 2021, a lower of $337,000, or 27%. This
lower was due primarily to a lower in media credit used in the course of the
present interval.

General and Administrative. General and administrative bills elevated $2.3
million, or 1,635%, from $.1 million for the three months ended March 31, 2021
to $2.5 million for the three months ended March 31, 2022. These prices elevated
usually with the expansion of the enterprise and may be damaged down additional into:
elevated journey of $0.4 million for enterprise improvement alternatives,
elevated enterprise licensing, financial institution charges, and insurance coverage of $0.9 million, and $0.8
million of extra workplace and software-related prices to help the elevated
headcount.

Depreciation and Amortization. Depreciation and amortization elevated $1.0
million, or 274%, from $0.4 million for the three months ended March 31, 2021 to
$1.4 million for the three months ended March 31, 2022. The enhance was pushed
by the acquisition of the sports activities.com area title in 2021 in addition to the
intangibles created by the acquisition of Global Gaming.

Other (Income) Expense, Net.

Three Months Ended
March 31,
2022 2021 $ Change % Change
Other bills
Interest expense (953) 2,472,048 (2,473,001) (100) %
Other (earnings) expense (2,436) 234,720 (234,156) (100) %
Total different (earnings) expense, internet $ (3,389) $ 2,703,768

(2,707,157) (100) %

Interest Expense. We had minimal curiosity bills for the three months ended
March 31, 2022, in comparison with curiosity expense of $2.5 million for the three
months ended March 31, 2021. This change was pushed by decrease debt ranges as a
end result of debt that transformed into fairness on the time of the Business
Combination or settled in money following the Closing.

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Other Expense. We had no different expense for the three months ended March 31, 2022
as in comparison with curiosity expense of $0.2 million for the three months ended

March
31, 2021.

Liquidity and Capital Resources

Our major want for liquidity is to fund working capital necessities of our
enterprise, progress, capital expenditures and for common company functions. Our
major supply of liquidity has traditionally been funds generated by financing
actions. For 2022, we count on to fund our operations, undertake anticipated
progress actions and make deliberate capital expenditures using primarily the
proceeds from the Business Combination and money flows from working actions,
though our potential to take action relies on our future working efficiency, which
is topic to prevailing financial circumstances and monetary, enterprise and different
elements, some of that are past our management.

Upon the Closing on October 29, 2021, we obtained internet proceeds of roughly
$42.8 million in money. As of March 31, 2022, we had $50.8 million of money and
money equivalents and $88.8 million of working capital (present belongings minus
present liabilities), in contrast with $62.6 million of money and $88.3 million of
working capital as of December 31, 2021.

We count on that our money available and money supplied by operations will permit us to
meet our capital necessities and operational wants for the subsequent twelve months.
As of March 31, 2022, there have been no regulatory capital necessities relevant
to our business.

We count on to deploy capital to fund our progress by implementing new merchandise
and options inside our B2C Platform providers; advertising our B2C Platform
providing to new customers; coming into into extra agreements with new business
companions for our B2B API and LotteryHyperlink credit; executing on strategic
acquisitions and different synergistic alternatives; investing in and growing
new expertise; and enhancing our current expertise in every of our enterprise
strains, together with distributed ledger expertise.

Execution of our progress plans, together with additional growth of our enterprise to
new U.S. states and worldwide jurisdictions, could require extra capital,
which we could search by the issuance of fairness or debt securities. If we’re
not capable of safe the required capital, or if the phrases of financing are much less
fascinating than we count on, we might be pressured to lower our degree of funding
in new product launches and associated advertising initiatives or to cut back our
current operations, every of which might have an antagonistic affect on our enterprise,
outcomes of operations and monetary prospects.

Convertible Debt Obligations

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

From August to October 2017, the Company entered into seven Convertible
Promissory Note Agreements with unaffiliated traders for an mixture quantity
of $821,500. The notes bore curiosity at 10% per yr, have been unsecured, and have been
due and payable on June 30, 2019. The Company and the noteholders executed
amendments in February 2021 to increase the maturity date to December 21, 2021. As
of each March 31, 2022 and December 31, 2021, the steadiness of these notes was
$771,500.

From November 2019 by October 28, 2021, we issued roughly $48.2
million in mixture principal quantity of Series B convertible promissory notes.
The notes bear curiosity at 8% per yr, have been unsecured, and have been due and payable
on dates starting from December 2020 to December 2022. For these promissory notes
that may have matured on or earlier than December 31, 2020, the events prolonged the
maturity date to December 21, 2021 by amendments executed in February 2021.
The amendments additionally allowed for computerized conversion to fairness because of this of
the Business Combination. Nearly all of the aforementioned promissory notes
robotically transformed into shares of Common Stock or have been terminated pursuant
to their phrases, as relevant, in reference to the Closing. Those that stay
excellent should not have conversion phrases that have been triggered by the Closing.

12

Immediately previous to the Closing, roughly $60.0 million of convertible
debt was transformed into fairness of AutoLotto. As of March 31, 2022, we had no
convertible debt excellent.

Cash Flows

Net money supplied by working actions was $3.9 million for the three months
ended March 31, 2022, in comparison with internet money supplied by working actions of
$3.9 million for the three months ended March 31, 2021. Factors affecting
modifications in working money flows have been elevated income from operations which
have been offset by elevated bills for skilled charges, personnel prices, and
gross sales and advertising actions in 2022 as in comparison with 2021. Net money utilized in
investing actions in the course of the yr ended March 31, 2022 have been $1.1 million,
in comparison with $3.1 million for the prior yr. The lower was primarily the
end result of a lower in spending on capitalized software program improvement. Net money
utilized by financing actions was $6.8 million for the three months ended March
31, 2022, in comparison with internet money supplied of $14.5 million for the three months
ended March 31, 2021. The lower was primarily due convertible debt being
issued in 2021 which didn’t repeat in 2022 in addition to the acquisition of $6.5
million of debt in 2022.

Emerging Growth Company Accounting Election

Section 102(b)(1) of the JOBS Act exempts rising progress corporations from being
required to adjust to new or revised monetary accounting requirements till
personal corporations are required to adjust to the brand new or revised monetary
accounting requirements. The JOBS Act gives that an organization can select to not
take benefit of the prolonged transition interval and adjust to the
necessities that apply to non-emerging progress corporations, and any such election
to not take benefit of the prolonged transition interval is irrevocable. We are
an “rising progress firm” as outlined in Section 2(a) of the Securities Act of
1933, as amended, and have elected to take benefit of the advantages of this
prolonged transition interval. We count on to stay an rising progress firm
by the tip of the 2023 fiscal yr and we count on to proceed to take
benefit of the advantages of the prolonged transition interval. This could make it
troublesome or unattainable to match the monetary outcomes with the monetary
outcomes of one other public firm that’s both not an rising progress firm
or is an rising progress firm that has chosen to not take benefit of the
prolonged transition interval exemptions for rising progress corporations as a result of of
the potential variations in accounting requirements used.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This
steering requires recognition of most lease liabilities on the steadiness sheet to
give traders, lenders, and different monetary assertion customers a extra
complete view of an organization’s long-term monetary obligations, in addition to
the belongings it owns versus leases. ASU 2016-02 will likely be efficient for fiscal years
starting after December 15, 2021, and for interim durations inside annual durations
after December 15, 2022. In July 2018, the FASB issued ASU 2018-11 making
transition necessities much less burdensome. The customary gives an choice to
apply the transition provisions of the brand new customary at its adoption date as a substitute
of on the earliest comparative interval offered within the Company’s monetary
statements. We are at the moment evaluating the affect that this steering can have
on our monetary statements in addition to the anticipated adoption methodology. We don’t
imagine the adoption of this customary can have a cloth affect on our
monetary statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit
Losses: Measurement of Credit Losses on Financial Instruments”, as extra
steering on the measurement of credit score losses on monetary devices. The new
steering requires the measurement of all anticipated credit score losses for monetary
belongings held on the reporting date primarily based on historic expertise, present
circumstances and cheap supportable forecasts. In addition, the steering
amends the accounting for credit score losses on available-for-sale debt securities
and bought monetary belongings with credit score deterioration. The new steering is
efficient for all public corporations for interim and annual durations starting
after December 15, 2019, with early adoption permitted for interim and annual
durations starting after December 15, 2018. In October 2019, the FASB authorised a
proposal which grants smaller reporting corporations extra time to implement
FASB requirements on present anticipated credit score losses (CECL) to January 2023. As a
smaller reporting firm, we’ll defer adoption of ASU No. 2016-13 till
January 2023. We are at the moment evaluating the affect this steering can have on
our condensed consolidated monetary statements.

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