Company: LTRYW
Filing Date: 2025-05-07
Form Type: S-1/A
Source: 0001641172-25-009053
Chunk: 203

Company: Lottery.com Inc.
Filing Date: 2025-05-07
Form: S-1/A
Chunk 203
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 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.

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 2020 through 2023 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 2019 through 2023 tax years remain open for examination by the tax authorities under the normal four-year statute of limitations.

Fair Value of Financial Instruments

The Company determines the fair value of its financial instruments in accordance with the provisions of ASC 820, Fair Value Measurements and Disclosures(“ASC 820”) ,which establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

| ● | Level                                                                                                                                    
 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or         
 liabilities                                                                                                                              |
| ● | Level                                                                                                                                    
 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially        
 the full term of the asset or liability                                                                                                  |
| ● | Level                                                                                                                                    
 3 - Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable 
 assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability.               |

Determination of fair value and the resulting hierarchy requires the use of observable market data whenever available.

| F-15 |

The classification of an asset or liability in the hierarchy is based upon the lowest level of input that is significant to the measurement of fair value.

Fair value of stock options and warrants

Management uses 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 the Company’s share price. In making these assumptions and estimates, management relies on historical market data.

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