UNITED STATES
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FORM
CURRENT REPORT
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Item 2.02 Results of Operations and Financial Condition.
On November 15, 2021, Lottery.com Inc. (the “Company”) issued a press release announcing the Company’s financial results for the third quarter ended September 30, 2021. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. A slide presentation, which includes supplemental information relating to the Company’s third quarter financial results, is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
The information in this Item 2.02, including Exhibits 99.1 and 99.2, is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number |
Description | |
| 99.1 | Press Release, dated November 15, 2021. | |
| 99.2 | Slide Presentation. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
1
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
LOTTERY.COM INC. | ||
| Date: November 15, 2021 | By: | /s/ Kathryn Lever |
| Name: Kathryn Lever | ||
| Title: Chief Legal Officer | ||
2
Exhibit 99.1
Lottery.com Announces Strong Third Quarter Results and Year-to-Date Revenue Increase of $42.8 Million Over Prior-Year Period
Third quarter 2021 revenue of $32.2 million and net income of $11.2 million
Strong growth in user transaction profitability
AUSTIN, Texas, November 15, 2021 -- (GLOBE NEWSWIRE) -- Lottery.com Inc. (Nasdaq: LTRY, LTRYW) (“Lottery.com” or the “Company”), a leading technology company that is transforming how, where and when lottery is played, reported financial results for the third quarter ended September 30, 2021. These results were achieved prior to the closing of the Company’s business combination with Trident Acquisitions Corp. on October 29, 2021. The Company’s unaudited financial statements for the third quarter of 2021 and other information have been filed in a Current Report on Form 8-K/A today with the U.S. Securities and Exchange Commission (“SEC”).
Tony DiMatteo, Lottery.com Co-Founder and CEO, commented, “We are proud of the strong revenue and profitability growth we achieved in the third quarter. While we were working toward the completion of our business combination, we acted decisively to advance our plans for our global affiliate program and monetize one of our assets by leveraging a B2B partner relationship. The start of this program provided increased revenue in the third quarter and is an essential building block of our B2B2C strategy, which we expect will lead to an increased user base and additional revenue from those end users going forward. Additionally, the implementation of a dynamic pricing model and improvements to our app, such as push notifications, contributed to strong growth in gross profit per transaction compared to the prior year period.”
Mr. DiMatteo continued, “Now that we have successfully completed our business combination, we are focused on utilizing the proceeds we realized from the transaction, along with our third quarter profits, to accelerate our targeted user marketing campaigns, enter new markets, expand our product offerings, and execute strategic and synergistic acquisitions. With our low customer acquisition costs, large addressable markets and leading brands, we look forward to realizing the profitable growth opportunities before us.”
Third Quarter 2021 Results
| Q3 2021 Financial Highlights | Three Months Ended September 30, | |||||||||||
| 2021 | 2020 | Change | ||||||||||
| (in millions, except percentages; unaudited) | ||||||||||||
| Revenues | $ | 32.2 | $ | 1.6 | $ | 30.6 | ||||||
| Gross Profit | $ | 20.3 | $ | 0.9 | $ | 19.4 | ||||||
| Gross Margin | 63.0 | % | 54.9 | % | 8.1 | % | ||||||
| Net Income | $ | 11.2 | $ | (1.2 | ) | $ | 12.3 | |||||
| Q3 2021 User Metrics (1) | Three Months Ended September 30, | |||||||||||
| 2021 | 2020 | Change | ||||||||||
| Transactions per user | 12.4 | 11.2 | 1.2 | |||||||||
| Tickets per transaction | 3.8 | 3.5 | 0.3 | |||||||||
| Revenue per transaction | $ | 9.52 | $ | 8.20 | $ | 1.32 | ||||||
| Gross profit per transaction | $ | 1.69 | $ | 0.93 | $ | 0.76 | ||||||
| Gross margin per transaction | 17.8 | % | 11.3 | % | 6.4 | % | ||||||
(1) Excludes B2B users who made purchases through an affiliate or API partner
Third quarter 2021 revenue was $32.2 million, an increase of $30.6 million from the third quarter of 2020. The growth was driven by the global affiliate marketing program.
Third quarter 2021 gross profit was $20.3 million, an increase of $19.4 million from the third quarter of 2020. The increase was driven by the global affiliate marketing program as well as improved user profitability.
Third quarter 2021 gross profit per transaction was $1.69, or a $0.76 increase from the third quarter of 2020. The increase was driven by the implementation of a dynamic pricing model and improvements made to the Company’s platform, including push notifications, which contributed to higher tickets sold per transaction and higher revenue per transaction.
Third quarter 2021 net income was $11.2 million, compared to a net loss of $1.2 million in the third quarter of 2020. The improvement was driven by the increase in gross profit partially offset by expenses associated with the business combination.
Outlook and Update Following Business Combination
The Company expects to meet or exceed its previous guidance of $71 million for full year 2021 revenue.
On October 29, 2021, the Company successfully completed its business combination with Trident Acquisitions Corp. As a result of the transaction, Lottery.com received $42.8 million in net proceeds and converted $60 million of debt and accrued interest into equity. Following the completion of the business combination, the Company’s top strategic priorities include:
| ● | Continuing development of Project Nexus’ blockchain-based gaming platform and launch of its first proprietary lottery game in 2022; |
| ● | Initiating new targeted marketing campaigns to broaden its B2C user base; |
| ● | Entering new markets in both the U.S. and internationally by the end of 2021 and entering New York and New Jersey in 2022; |
| ● | Developing and continually introducing new products to the Lottery.com platform, including additional state-specific games and digital scratcher games; |
| ● | Adding new affiliates and API partners to the Company’s B2B segment; and |
| ● | Executing on strategic and synergistic acquisitions, including those that will drive the Sports.com platform. |
2
About Lottery.com
Lottery.com is a leading technology company that is transforming how, where and when lottery is played. Its engaging mobile and online platforms enable players and commercial partners located in the United States and internationally to remotely purchase legally sanctioned lottery games. Fans and subscribers look to Lottery.com for compelling, real-time results on more than 800 lottery games from more than 40 countries. Additionally, through WinTogether.org, Lottery.com is fundamentally changing how non-profit donors are incentivized to action by gamifying charitable giving. In all that it does, Lottery.com’s mission remains the same: an uncompromising passion to innovate, grow a new demographic of enthusiasts, deliver responsible and trusted solutions, and promote community and philanthropic initiatives. For more information, visit http://www.lottery.com.
Important Notice Regarding Forward-Looking Statements
This press release contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of present or historical fact included in this press release, regarding the company’s future financial performance, as well as the company’s strategy, future operations, revenue guidance, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this press release, the words “could,” “should,” “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Except as otherwise required by applicable law, Lottery.com disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release. Lottery.com cautions you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Lottery.com. In addition, Lottery.com cautions you that the forward-looking statements contained in this press release are subject to the following factors: (i) the outcome of any legal proceedings that may be instituted against Lottery.com; (ii) Lottery.com’s ability to maintain effective internal controls over financial reporting, including the remediation of identified material weaknesses in internal control over financial reporting relating to segregation of duties with respect to, and access controls to, its financial record keeping system, and Lottery.com’s accounting staffing levels; (iii) the effects of competition on Lottery.com’s future business; (iv) risks related to Lottery.com’s dependence on its intellectual property and the risk that Lottery.com’s technology could have undetected defects or errors; (v) changes in applicable laws or regulations; (vi) risks related to the COVID-19 pandemic and its effect directly on Lottery.com and the economy generally; (vii) risks relating to privacy and data protection laws, privacy or data breaches, or the loss of data; (viii) the possibility that Lottery.com may be adversely affected by other economic, business, and/or competitive factors; (ix) the ability of Lottery.com to achieve its strategic and growth objectives as stated or at all; and (x) those factors discussed in the proxy statement/prospectus filed by Lottery.com with the SEC under the heading “Risk Factors” and the other documents filed, or to be filed, by Lottery.com with the SEC. Should one or more of the risks or uncertainties described in this press release materialize or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact the operations and projections discussed herein can be found in the reports that Lottery.com has filed and will file from time to time with the SEC. These SEC filings are available publicly on the SEC’s website at www.sec.gov.
3
AutoLotto, Inc.
Condensed Consolidated Balance Sheets
| As of September 30, | As of December 31, | |||||||
| 2021 | 2020 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Cash | $ | 1,179,467 | $ | 3,825,511 | ||||
| Restricted cash | - | 6,950,000 | ||||||
| Accounts receivable | 33,072,278 | 26,195 | ||||||
| Prepaid expenses | 10,815,458 | 22,013,110 | ||||||
| Other current assets | 238,627 | 788,033 | ||||||
| Total current assets | 45,305,830 | 33,602,849 | ||||||
| Investments | 250,000 | 250,000 | ||||||
| Goodwill | 17,937,691 | 12,997,048 | ||||||
| Intangible assets, net | 27,820,753 | 3,211,250 | ||||||
| Property and equipment, net | 1,297,885 | 670,952 | ||||||
| Total assets | $ | 92,612,159 | $ | 50,732,099 | ||||
| Liabilities | ||||||||
| Trade payables | $ | 2,986,762 | $ | 2,176,621 | ||||
| Deferred revenue | 598,214 | 7,763,593 | ||||||
| Convertible debt, net - current | 8,912,163 | 8,882,665 | ||||||
| Notes payable - current | 4,077,982 | 12,207,180 | ||||||
| Accrued interest | 3,435,111 | 721,717 | ||||||
| Accrued and other expenses | 4,992,522 | 2,335,350 | ||||||
| Total current liabilities | 25,002,754 | 34,087,126 | ||||||
| Convertible debt, net - non current | 31,569,218 | 10,000 | ||||||
| Other long term liabilities | 1,600,000 | - | ||||||
| Total liabilities | 58,171,972 | 34,097,126 | ||||||
| Stockholders’ Equity | ||||||||
| Controlling Interest | ||||||||
| Common stock | 5,912 | 5,159 | ||||||
| Par value $.001, 8,610,000 shares authorized, 5,910,980 and 5,158,607 issued and outstanding as of September 30, 2021 and December 31, 2020 respectively | ||||||||
| Preferred stock - series seed | 63 | 63 | ||||||
| Par value $.0001, 633,000 shares authorized, 633,000 issued and outstanding as of September 30, 2021 and December 31, 2020 respectively | ||||||||
| Preferred stock - series A | 122 | 122 | ||||||
| Par value $.0001, 1,220,000 shares authorized, 1,220,000 issued and outstanding as of September 30, 2021 and December 31, 2020 respectively | ||||||||
| Preferred stock - series A1 | 22 | 22 | ||||||
| Par value $.0001, 225,000 shares authorized, 223,749 issued and outstanding as of September 30, 2021 and December 31, 2020 respectively | ||||||||
| Preferred stock - series A2 | 30 | 30 | ||||||
| Par value $.0001, 305,000 shares authorized, 302,668 issued and outstanding as of September 30, 2021 and December 31, 2020 respectively | ||||||||
| Additional paid-in capital | 123,368,737 | 111,770,147 | ||||||
| Accumulated deficit | (91,577,868 | ) | (95,140,570 | ) | ||||
| Total AutoLotto Inc. stockholder’s equity | 31,797,018 | 16,634,973 | ||||||
| Noncontrolling Interest | 2,643,169 | - | ||||||
| Total Stockholders’ Equity | 34,440,187 | 16,634,973 | ||||||
| Total Liabilities & Stockholders’ Equity | $ | 92,612,159 | $ | 50,732,099 | ||||
4
AutoLotto, Inc.
Condensed Consolidated Statements of Operations
Three Months Ended September 30, 2021 and 2020 and Nine Months Ended
September 30, 2021 and 2020
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Revenue | $ | 32,248,036 | $ | 1,602,916 | $ | 47,035,327 | $ | 4,197,314 | ||||||||
| Cost of revenue | 11,920,721 | 722,363 | 15,925,072 | 1,770,885 | ||||||||||||
| Gross profit | 20,327,315 | 880,554 | 31,110,255 | 2,426,429 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Personnel costs | 1,614,063 | 974,139 | 4,138,240 | 2,975,464 | ||||||||||||
| Professional fees | 976,679 | 182,502 | 5,174,378 | 638,878 | ||||||||||||
| General and administration | 1,085,431 | 163,691 | 4,355,760 | 593,380 | ||||||||||||
| Depreciation and amortization | 1,530,026 | 355,671 | 2,904,000 | 1,065,490 | ||||||||||||
| Total operating expenses | 5,206,199 | 1,676,004 | 16,572,378 | 5,273,211 | ||||||||||||
| Income (loss) from operations | 15,121,116 | (795,450 | ) | 14,537,877 | (2,846,782 | ) | ||||||||||
| Other expenses | ||||||||||||||||
| Interest expense | 3,789,316 | 296,517 | 9,318,638 | 881,553 | ||||||||||||
| Other expense | 178,952 | 68,218 | 1,656,540 | 416,858 | ||||||||||||
| Total other expenses, net | 3,968,268 | 364,735 | 10,975,178 | 1,298,411 | ||||||||||||
| Net income (loss) | $ | 11,152,848 | $ | (1,160,185 | ) | $ | 3,562,699 | $ | (4,145,193 | ) | ||||||
| Net income (loss) per common share | ||||||||||||||||
| Basic | $ | 1.89 | $ | (0.22 | ) | $ | 0.64 | $ | (0.80 | ) | ||||||
| Diluted | $ | 0.24 | $ | (0.22 | ) | $ | 0.08 | $ | (0.80 | ) | ||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic | 5,900,980 | 5,158,607 | 5,534,794 | 5,158,607 | ||||||||||||
| Diluted | 45,956,427 | 5,158,607 | 45,590,241 | 5,158,607 | ||||||||||||
5
AutoLotto, Inc.
Condensed Consolidated Statements of Cash Flows
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| (unaudited) | ||||||||
| Cash flow from operating activities | ||||||||
| Net income (loss) | $ | 3,562,698 | $ | (4,145,193 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 2,904,000 | 1,065,490 | ||||||
| Amortization of debt discount | 2,296,747 | 126,096 | ||||||
| Amortization of beneficial conversion feature | 4,191,530 | 494,639 | ||||||
| Stock based compensation expense | 6,479 | 13,872 | ||||||
| Forgiveness of PPP Loan | (493,225 | ) | - | |||||
| Loss on extinguishment of debt | 71,174 | - | ||||||
| Issuance of debt to pay expenses | 1,003,983 | - | ||||||
| Changes in assets & liabilities: | ||||||||
| Accounts receivable | (33,046,083 | ) | 1,625 | |||||
| Prepaid expenses | 11,202,143 | 103,253 | ||||||
| Other current assets | 561,321 | (23,975 | ) | |||||
| Trade payables | 808,670 | (391,352 | ) | |||||
| Deferred revenue | (7,165,379 | ) | 578,759 | |||||
| Accrued interest | 2,758,009 | 260,818 | ||||||
| Accrued and other expenses | 3,979,552 | 399,445 | ||||||
| Net cash used in operating activities | (7,358,379 | ) | (1,516,522 | ) | ||||
| Cash flow from investing activities | ||||||||
| Purchases of property and equipment | (1,097,993 | ) | (21,915 | ) | ||||
| Purchases of intangible assets | (3,000,000 | ) | - | |||||
| Cash paid for acquisitions, net of cash acquired | (10,012,540 | ) | - | |||||
| Net cash used in investing activities | (14,110,533 | ) | (21,915 | ) | ||||
| Cash flow from financing activities | ||||||||
| Issuance of digital securities | 108,332 | 487,494 | ||||||
| Proceeds from exercise of options | 47,130 | - | ||||||
| Proceeds from issuance of convertible debt | 13,483,500 | 365,000 | ||||||
| Proceeds from government loan | - | 643,125 | ||||||
| Proceeds from issuance of notes payable | - | 27,699 | ||||||
| Principal payments on notes payable | (1,766,093 | ) | (44,148 | ) | ||||
| Net cash provided by financing activities | 11,872,869 | 1,479,170 | ||||||
| Net change in net cash and restricted cash | (9,596,044 | ) | (59,266 | ) | ||||
| Cash at beginning of period | 10,775,511 | 158,492 | ||||||
| Cash at end of period | $ | 1,179,467 | $ | 99,226 | ||||
| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Interest paid in cash | $ | 40,916 | $ | - | ||||
| Non cash investing and financing activities | ||||||||
| Conversion of convertible debt into common stock | $ | 935,000 | $ | - | ||||
| Capitalization of interest from loan extinguishment | $ | 44,614 | - | |||||
| Purchase of intangible assets through the issuance of convertible debt | $ | 15,450,000 | $ | - | ||||
| Issuance of convertible debt in exchange for outstanding liabilities | $ | 2,108,983 | $ | - | ||||
| Issuance of convertible debt in exchange for notes payable | $ | 4,531,250 | ||||||
| Common stock issued as part of acquisition | $ | 459,691 | $ | - | ||||
Lottery.com Contact:
Matthew Schlarb
VP, Investor Relations
(512) 585-7789
ir@lottery.com
6
Exhibit 99.2
INVESTOR PRESENTATION November 2021 Nasdaq: LTRY
2 DISCLAIMER RIDER This investor presentation (the “presentation”) is for informational purposes only and does not constitute an offer to sell, a s olicitation of an offer to buy, or a recommendation to purchase any equity, debtor other financial instruments of Lottery.com In c (“Lottery.com” or the “Company”) or any of its respective affiliates. Forward - looking statements This presentation contains statements that constitute “forward - looking statements” within the meaning of Section 27 A of the Securities Act of 1933 , as amended (the “Securities Act”), and Section 21 E of the Securities Exchange Act of 1934 , as amended (the “Exchange Act”) . All statements, other than statements of present or historical fact included in this press release, regarding the company’s future financial performance, as well as the company’s strategy, future operations, revenue guidance, projected costs, prospects, plans and objectives of management are forward - looking statements . When used in this press release, the words “could,” “should,” “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” the negative of such terms and other similar expressions are intended to identify forward - looking statements, although not all forward - looking statements contain such identifying words . These forward - looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events . Except as otherwise required by applicable law, Lottery . com disclaims any duty to update any forward - looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release . Lottery . com cautions you that these forward - looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Lottery . com . In addition, Lottery . com cautions you that the forward - looking statements contained in this presentation are subject to the following factors : (i) the outcome of any legal proceedings that may be instituted against Lottery . com ; (ii) Lottery . com’s ability to maintain effective internal controls over financial reporting, including the remediation of identified material weaknesses in internal control over financial reporting relating to segregation of duties with respect to, and access controls to, its financial record keeping system, and Lottery . com’s accounting staffing levels ; (iii) the effects of competition on Lottery . com’s future business ; (iv) risks related to Lottery . com’s dependence on its intellectual property and the risk that Lottery . com’s technology could have undetected defects or errors ; (v) changes in applicable laws or regulations ; (vi) risks related to the COVID - 19 pandemic and its effect directly on Lottery . com and the economy generally ; (vii) risks relating to privacy and data protection laws, privacy or data breaches, or the loss of data ; (viii) the possibility that Lottery . com may be adversely affected by other economic, business, and/or competitive factors ; (ix) the ability of Lottery . com to achieve its strategic and growth objectives as stated or at all ; and (x) those factors discussed in the proxy statement/prospectus included in the Company’s registration statement on Form S - 4 (File no . 333 - 257734 ) filed by Lottery . com with the SEC under the heading “Risk Factors” and the other documents filed, or to be filed, by Lottery . com with the SEC . Should one or more of the risks or uncertainties described in this presentation materialize or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward - looking statements . Additional information concerning these and other factors that may impact the operations and projections discussed herein can be found in the reports that Lottery . com has filed and will file from time to time with the SEC . These SEC filings are available publicly on the SEC’s website at www . sec . gov . Use of Projections This presentation contains financial forecasts. The Company's independent auditors have studied, reviewed, compiled or perfor med any procedures with respect to the projections for the purpose of their inclusion in this presentation, and accordingly, neit he r of them has expressed an opinion or provided any other form of assurance with respect thereto for the purpose of this presentation. These pr ojections are for illustrative purposes only and should not be relied upon as being necessarily indicative of future results. In this presentation, certain of the above - mentioned projected information has been provided for purposes of providing comparisons with historical data. The assumptions and estimates underlying the prospective financial information are inherently uncertain and are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results t o d iffer materially from those contained in the prospective financial information. Projections are inherently uncertain due to a nu mber of factors outside of the Company's control. Accordingly, there can be no assurance that the prospective results are indicative of futur e p erformance of the Company or that actual results will not differ materially from those presented in the prospective financial in formation. Inclusion of the prospective financial information in this presentation should not be regarded as a representation by any per son that the results contained in the prospective financial information will be achieved. Industry and Market Data In this presentation, we rely on and refer to information and statistics regarding market participants in the sectors in whic h t he Company competes and other industry data. We obtained this information and statistics from third - party sources, including rep orts by market research firms and company filings. Being in receipt of the presentation you agree you may be restricted from dealing in (or enc ouraging others to deal in) price sensitive securities.
3 KEY INVESTMENT HIGHLIGHTS 1 2 4 3 5 Large Global Market Opportunity $398 BILLION 2020 GLOBAL TAM (1) Foremost Brand Name and Premier Provider of Global Lottery Data 13.0 MILLION UNIQUE VISITORS LTM 9/30/21 Strong User Economics $47.0 MILLION YTD Q3 2021 REVENUE INCREASE OF $42.8M YOY Strong Revenue Growth $73 & $93 U.S / INT’L CUSTOMER LIFETIME VALUE (2) Focus on Profitability $31.1 MILLION (1) Source: Technavio: Lottery Market by Type and Geography - Forecast and Analysis 2020 - 2024 (2) Excludes user purchase through B2B affiliates or API partners; calculated as the avg. annual new user gross profit divide d b y the churn rate YTD Q3 2021 GROSS PROFIT INCREASE OF $28.7M YOY
4 CONSUMER SHIFT TO CONVENIENCE IS INEVITABLE OLD MODEL NEW MODEL It has been proven time - and - time again that consumers choose convenience, no matter the industry.
5 DIGITAL TRANSFORMATION IS COMING (1) Source: American Gaming Association: COMMERCIAL GAMING REVENUE TRACKER | State - by - state September and October handle and percent age online: USBets.com: https://www.usbets.com/october - 2020 - record - sports - betting - numbers/ (2) Source: https://www.phocuswire.com/Consumer - booking - patterns - hotel - distribution. Representative of 2018Y. (3) Source: https://www.travelweekly.com/Travel - News/Hotel - News/Hotels - direct - bookings - making - up - ground - on - OTAs. Representative of 2018Y (4) Source: Technavio: Lottery Market in US by Type and Platform - Forecast and Analysis 2020 - 2024 With only 7% of the U.S. lottery market currently online, Lottery.com is poised to capitalize on the impending digital transformation Online Ticket Agents comprise 51% of bookings (3) (1)
6 GROWING TOTAL ADDRESSABLE MARKET (“TAM”) Note: Market sizes reflect the gross lottery ticket transaction value (1) Technavio: Lottery Market by Type and Geography - Forecast and Analysis 2020 - 2024 (2) 2025 TAM was calculated using 2024 TAM of $587B and 2023 - 24 growth rate of 11.1%, according to Technavio Lottery Market by Type and Geography - Forecast and Analysis 2020 - 2024 (3) Technavio: Lottery Market by Type and Geography - Forecast and Analysis 2020 - 2024 $21.4B ONLINE LOTTERY $44.6B ONLINE LOTTERY 104% 2020 - 2025E ONLINE LOTTERY GROWTH Global lottery market projected to increase by $254B during the next 5 years. As an early entrant in the market, Lottery.com is poised to capitalize on growth of online lotteries. (1) (3) (2) (3)
7 NOTE: All Sources for data can be found in APPENDIX, COMPARING MARKET OPPORTUNITY SOURCE DATA $290B MARKET CAP $4B MARKET CAP $53B MARKET CAP $17B MARKET CAP $39B MARKET CAP $303B MARKET CAP $700M MARKET CAP $121B MARKET CAP 35% MARKET SHARE 28% MARKET SHARE 25% MARKET SHARE 27% MARKET SHARE 12% MARKET SHARE 6% MARKET SHARE .02% MARKET SHARE 50% MARKET SHARE COMPARING MARKET OPPORTUNITY
8 LOTTERY.COM’S DELIVERY MODEL Purchase • User purchases game from Lottery.com app or website • Lottery.com prints lottery game on user’s behalf • User receives digitized version of lottery game Safekeeping • Lottery.com securely safeguards all physical lottery games • No risk of losing, destroying or defacing winning lottery game • All transactions are registered using blockchain technology Collect Winnings • Users automatically notified of winning lottery games • Winnings are quickly deposited directly into digital wallets with no need to collect winning physical lottery ticket 1 • Proceeds can be used to purchase additional lottery games or withdrawn HOW IT WORKS LOTTERY.COM MODEL VS. OTHER iLOTTERY MODELS Other iLottery Models Can enter new state without act of state legislature Does not require significant investment from state lottery commission Anticipated to allow users to play multiple games in addition to lottery Ability for users to play games when traveling out of home state Lottery.com provides states with a high - potential, low - risk platform to increase sales and improve customer convenience x x x x Security (1) To maximum of federal threshold of $600; above that amount, Lottery.com assists user with collection
DIVERSE SUITE OF HIGH MARGIN PRODUCTS (1 ) All margins estimated on end of year 2023 projections 9 17% - 33% GROSS MARGINS (1) B2C DOMESTIC LOTTERY • Selling official U.S. lottery games (draw games and scratchers) with a service fee CHARITABLE SWEEPSTAKES • Players donate to qualified causes and get entered to win luxury prizes and once - in - a - lifetime experiences 34% - 54% GROSS MARGINS (1) 75% - 95% B2C B2C B2B: PARTNERSHIPS B2B: PARTNERS DATA SALES INTERNATIONAL LOTTERY • Selling official U.S. lottery games (draw games and instant win) to users internationally with each ticket containing a markup INTERNATIONAL GAMES • Lottery.com is developing its own designed and managed lottery games (draw and instant win) on the blockchain SUBSCRIPTIONS • Developing subscriber exclusive lottery pools, lottery prediction data, and other premium features DOMESTIC PARTNERS • A robust API platform enables partners to sell official U.S. lottery tickets using our operations to fulfill the order • Partners provide their payment processing • Service fee is applied to each transaction INTERNATIONAL PARTNERS • A robust API platform enables partners to sell official U.S. lottery tickets using our operations to fulfill the order • Partners provide their payment processing • Markup is applied to each ticket DATA SALES • Premier provider of global lottery data to over 200 digital publishers including Google, Amazon, and USA Today • Charged as a subscription fee for data access and on a per record fee for certain datasets GROSS MARGINS (1)
10 STRONG DISTRIBUTION ECOSYSTEM AFFILIATE PROGRAM • An open affiliate program allows traffic to Lottery.com's properties for a split on any proceeds those users generate for a limited time • Lottery.com has access to over 250+ Million users a month with its current affiliate partners API PROGRAM • Through a robust API offering, Lottery.com allows for partners to leverage their licenses and operating capacity to sell lottery tickets through their existing platforms • Lottery.com has access to over 420,000 Points of Sale and access to over 22 countries with their current partners DATA SERVICES • As the premier provider of global lottery data, Lottery.com is the default lottery data provider for various services across a long list of partners • 200 digital publishers including Google, Amazon, and USA Today
11 LOTTERY.COM'S UNITED STATES EXPANSION TX CA OR WA MN CO ND KS AR MI OH PA NY GA NH NJ DC CURRENT STATES NEAR TERM EXPANSION CURRENT STATES 2016 - 2019 • NH, TX, MN, OR 2020 • CA, CO, DC, GA, MI, PA, WA 2021 • OH Q4 2021 • AR, FL , IA, KS, NC, ND, VT NEAR TERM LAUNCH PLAN FUTURE EXPANSION CURRENTLY DOES NOT HAVE A STATE LOTTERY 2 02 2 • NY, NJ FL IA VT NC
12 LOTTERY.COM EXECUTES INTERNATIONAL GROWTH STRATEGY (1) Acquired 80% of the equity in Agan a r and Juega Lotto on June 30, 2021 (2) Source: The World Bank ( 3 ) https://www.statista.com/statistics/1200292/leading - gambling - companies - mexico/ ( 4 ) Technavio: Lottery Market by Type and Geography - Forecast and Analysis 2020 - 2024 (5) As of August 24, 2021 LATIN AMERICA 26 COUNTRIES 283,000 REGISTERED ONLINE PLAYERS (5) • The only company licensed by Mexican Federal government to sell international lottery games in Mexico • Also licensed to sell international lottery games throughout Latin America • Significant gross margins on international lottery ticket sales 138,000 REGISTERED ONLINE PLAYERS (5) The acquisitions of Aganar and Juega Lotto (1) are among the first of many strategic acquisitions expected to expand Lottery.com's distribution, games, and user base. These acquisitions allow Lottery.com to expand in the fast - growing online gaming market in Latin America. 652 MILLION POPULATION (2) $1.1 BILLION TAM - MEXICO (3) CENTRAL AND SOUTH AMERICA $9.8 BILLION TAM - CENTRAL & SOUTH AMERICA (4) • Sells Pronosticos National Lottery draw games, instant win, and other online games in Mexico • Anticipated to integrate sports betting into platform • Anticipated to launch sales of Sorteos Tec draw games • Utilize Lottery.com and Sports.com domain value to generate traffic to local subsidiaries • Cross - sell US and other sovereign lotteries aganar.com juegalotto.com
13 LOW ACQUISITION COST WITH HIGH RETENTION AND RETURN Note – All data excludes user purchases through B2B affiliates or API partners (1) Average from digital advertising cost per new customer in 2020 and YTD 2021 through Q3 (2) Average gross profit per customer for 12 months ended 9/30/2021 (3) Average churn rate for 12 months ended 9/30/2021 U.S. LOTTERY.COM PLAYERS ($4) Customer Acquisition Cost (1) $24 Avg. Annual New User Profit (2) } 31% Churn Rate (3) } } ($4) $32 Avg. Annual New User Profit (2) } 34% Churn Rate (3) } } INTERNATIONAL LOTTERY.COM PLAYERS ACQUIRED LOTTERY.COM PLAYERS ARE THEN INTRODUCED TO HIGHER MARGIN PRODUCTS $77 Customer Lifetime Value $93 Customer Lifetime Value Customer Acquisition Cost (1)
14 INNOVATORS IN BLOCKCHAIN (1) Pro rata amongst all token holders • Building a next - gen blockchain platform, Project Nexus, specifically to address the challenges with online gaming • Critical game mechanics such as player identity, digital tickets, and administrating draws are completely run on chain • Technology can be leveraged for lottery, sweepstakes, raffles, instant games, and to enhance API capabilities • Accepting crypto and fiat as payment methods to attract a global player base • WinTogether enables players to donate to qualified causes and get entered into sweepstakes to win luxury prizes and once - in - a - lifetime experiences • Rooted in blockchain with 7% of all donations being distributed to all holders of the ERC20 Token (1) • Anticipate that the platform will continue to grow, being a value driver to Lottery.com as it enables an additional online game in every state and almost every country www.wintogether.org Project Nexus
Recent Highlights & Roadmap to Future Growth
16 RECENT HIGHLIGHTS Completed business combination $ 42.8 million in net proceeds and <1% redemptions Q3 revenues of $32.2 million Up $30.6 million year - over - year; driven by global affiliate marketing program and improved revenue per transaction Entered into affiliate agreement with Coinstar Coinstar to market and promote Lottery.com’s products through their kiosks Q3 gross profit of $20.3 million Up $19.4 million year - over - year; driven by global affiliate marketing program and improved profitability per transaction Strong improvement in user transaction profitability Q3 gross profit per transaction of $1.69, up $0.76 year - over - year; driven by dynamic pricing model and platform improvements
(in millions, except percentages; unaudited) Revenues $ 32.2 $ 1.6 $ 30.6 Gross Profit $ 20.3 $ 0.9 $ 19.4 Gross Margin 63.0 % 54.9 % 8.1 % Net Income $ 11.2 $ (1.2) $ 12.3 Q3 2021 User Metrics (1) Three Months Ended September 30, 2021 2020 Change Transactions per user 12.4 11.2 1.2 Tickets per transaction 3.8 3.5 0.3 Revenue per transaction $ 9.52 $ 8.20 $ 1.32 Gross profit per transaction $ 1.69 $ 0.93 $ 0.76 Gross margin per transaction 17.8 % 11.3 % 6.4 % (1) Excludes B2B users who made purchases through an affiliate or API partner 17 Q3 FINANCIAL SUMMARY AND OUTLOOK Financial Highlights Q3 2021 Q3 2020 Change User Metrics (1) Q3 2021 Q3 2020 Change Outlook Expect to meet or exceed 2021 revenue guidance of $71 million
18 ROADMAP TO FUTURE GROWTH Enter new markets Includes new U.S and international markets in 2021, as well as New York and New Jersey in 2022 Continue developing Project Nexus, a blockchain based gaming platform Includes launch of Lottery.com’s first proprietary game in 2022 Expand partnerships Add new affiliates and API partners Execute strategic and synergistic M&A Includes products that will drive the Sports.com brand and opportunities to cross - sell Accelerate new targeted marketing campaigns to broaden B2C user base Enabled by new capital from business combination Develop and introduce new products Includes additional state - specific games and digital scratcher games
APPENDIX
20 COMPARING MARKET OPPORTUNITY SOURCE DATA • All Market Cap data as of November 10 , 2021 • Total Addressable Market Data: • Sports Events: Change market cap from $29B to $4B and footnote representative of sale price in November 2019 | https://techcrunch.com/2019/11/25/ebay - to - sell - ticket - marketplace - stubhub - to - viagogo - for - 4 - 05 - billion/ • Digital Music: https://www.statista.com/outlook/dmo/digital - media/digital - music/worldwide • Streaming Video: https://www.statista.com/outlook/dmo/digital - media/video - on - demand/video - streaming - svod/worldwide#:~:text=Revenue%20in%20the%20V ideo%20Streaming,to%20hit%2018.2%25%20by%202025 . • Global Sports Betting: https://www.globenewswire.com/news - release/2020/08/31/2086041/0/en/Global - Sports - Betting - Market - Worth - 85 - Billion - in - 2019 - Industr y - Assessment - and - Forecasts - Throughout - 2020 - 2025.html • Global Film Industry: https://www.forbes.com/sites/rosaescandon/2020/03/12/the - film - industry - made - a - record - breaking - 100 - billion - last - year/?sh=50ebb2be 34cd • Global Video Games: https://www.statista.com/statistics/246888/value - of - the - global - video - game - market/#:~:text=This%20timeline%20presents%20a%20forec ast,surpass%20138%20billion%20by%202021 • Cloud Software (SaaS): https://www.statista.com/statistics/510333/worldwide - public - cloud - software - as - a - service/ • Global Lottery Market: Technavio: Lottery Market by Type and Geography - Forecast and Analysis 2020 - 2024 • Global Hotel Industry: https://www.statista.com/statistics/247264/total - revenue - of - the - global - hotel - industry/ • Market Share by Industry • Spotify: https://www.statista.com/statistics/653926/music - streaming - service - subscriber - share/#:~:text=Subscriber%20share%20of%20music%20streaming%20services%20worldwide%202019&text=In%202019%2C%2035%20percent%20o f,w ere%20subscribed%20to%20Apple%20Music . • StubHub: https://finance.yahoo.com/news/stubhub - recognized - single - source - ticketing - 011011659.html • Netflix: https://www.fool.com/investing/2021/01/13/netflix - still - dominates - streaming - but - disney - steal/ • DraftKings: https://www.legalsportsreport.com/47322/pennsylvania - sports - betting - december - 2020 - revenue/#:~:text=FanDuel's%20online%20market%2 0share%20slipped,month%20from%2010.6%25%20in%20November . • Warner Bros: https://www.the - numbers.com/market/2020/summary • Electronic Arts: https://csimarket.com/stocks/competitionSEG2.php?code=EA • SalesForce: https://kinsta.com/blog/cloud - market - share/ • AirBnB: https://www.statista.com/statistics/796510/airbnb - hotel - demand - share - us - europe/