Company: LTRYW
Filing Date: 2025-05-21
Form Type: 10-Q
Source: 0001641172-25-011865
Chunk: 11

Company: Lottery.com Inc.
Filing Date: 2025-05-21
Form: 10-Q
Item: Part I, Item 1
Chunk 11
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 of the individual members to report the taxable income and tax credits, and to pay
any resulting income taxes. Therefore, the income and losses incurred by the limited liability companies 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

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; and
(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.

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,

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

  F-12  

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.

Recent
Account