Company: LTRYW
Filing Date: 2025-10-15
Form Type: 10-Q/A
Source: 0001493152-25-018121
Chunk: 20

Company: Lottery.com Inc.
Filing Date: 2025-10-15
Form: 10-Q/A
Chunk 20
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, 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(“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-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