Company: LTRYW
Filing Date: 2025-10-15
Form Type: 10-Q/A
Source: 0001493152-25-018121
Chunk: 19

Company: Lottery.com Inc.
Filing Date: 2025-10-15
Form: 10-Q/A
Chunk 19
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 basis.

Stock-based Compensation

Effective October 1, 2019, the Company adopted ASU
2018-07, Compensation - “Stock Compensation (Topic 718): Improvements to Nonemployee Share-based Payment Accounting”(“ASC
718”), which addresses aspects of the accounting for nonemployee share-based payment transactions and accounts for share-based awards
to employees in accordance with ASC 718, Stock Compensation. Under this guidance, stock compensation expense is measured at the
grant date, based on the fair value of the award, and is recognized as an expense over the estimated service period (generally the vesting
period) on the straight-line attribute method.

| F-11 |

Income Taxes

For both financial accounting and tax reporting purposes, the Company reports
income and expenses based on the accrual method of accounting.

For federal and state income tax purposes, the Company
reports income or loss from their investments in limited liability companies on the consolidated income tax returns. As such, all taxable
income and available tax credits are passed from the limited liability companies to the individual members. It is the responsibility 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” (“ASC 740”), using the asset and liability method. Under this method, deferred
income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. A valuation allowance is provided for those deferred tax assets for which it is more likely than
not that the related benefit will not be realized.

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