Note 4. Business Combination and Acquisitions

TDAC Combination

On October 29, 2021, the Company and AutoLotto consummated the transactions contemplated by the Merger Agreement. At the Closing, each share of common stock and preferred stock of AutoLotto that was issued and outstanding immediately prior to the effective time of the Merger (other than excluded shares as contemplated by the Merger Agreement) was cancelled and converted into the right to receive approximately 3.0058 shares (the “Exchange Ratio”) of Lottery.com. common stock.

The Merger closing was a triggering event for the Series B convertible notes, of which $63.8 million was converted into 2,320 shares of AutoLotto that were then converted into 6,975 shares of Lottery.com common stock using the Exchange Ratio and applying subsequent reverse stock splits.

At the Closing, each option to purchase AutoLotto’s common stock, whether vested or unvested, was assumed and converted into an option to purchase a number of shares of Lottery.com common stock in the manner set forth in the Merger Agreement.

The Company accounted for the Business Combination as a reverse recapitalization whereby AutoLotto was determined as the accounting acquirer and TDAC as the accounting acquiree. Refer to Note 2, Significant Accounting Policies, for further details. Accordingly, the Business Combination was treated as the equivalent of AutoLotto issuing stock for the net assets of TDAC, accompanied by a recapitalization. The net assets of TDAC are stated at historical cost, with no goodwill or other intangible assets recorded.

The accompanying consolidated financial statements and related notes reflect the historical results of AutoLotto prior to the merger and do not include the historical results of TDAC prior to the consummation of Business Combination.

Upon the closing of the transaction, AutoLotto received total gross proceeds of approximately $42,794,000, from TDAC’s trust and operating accounts. Total transaction costs were approximately $9,460,000, which principally consisted of advisory, legal and other professional fees and were recorded in additional paid in capital. Cumulative debt repayments of approximately $11,068,000, inclusive of accrued but unpaid interest, were paid in conjunction with the close, which included approximately $5,475,000 repayment of notes payable to related parties, and approximately $5,593,000 payment of accrued underwriter fees.

Pursuant to the terms of the Business Combination Agreement, the holders of issued and outstanding shares of AutoLotto immediately prior to the Closing (the “Sellers”) were entitled to receive up to 4,286 additional shares of Common Stock (the “Seller Earnout Shares”) and Vadim Komissarov, Ilya Ponomarev and Marat Rosenberg (collectively the “TDAC Founders”) were also entitled to receive up to 2,857 additional shares of Common Stock (the “TDAC Founder Earnout Shares” and, together with the Seller Earnout Shares, the “Earnout Shares”). One of the earnout criteria had not been met by the December 31, 2021 deadline thus no earnout shares were granted specific to that criteria. 2,143 of the Seller Earnout Shares and 1,429 TDAC Founder Earnout Shares were still eligible Earnout Shares until December 31, 2022. Conditions for the earnout were not met and the potential earnout shares were forfeited on December 31, 2022. [Share counts reflect the effect of subsequent reverse stock splits]

Global Gaming Acquisition

On June 30, 2021, the Company completed its acquisition of 100 percent of the equity of Global Gaming Enterprises, Inc., a Delaware corporation (“Global Gaming”), which holds 80% of the equity of each of Medios Electronicos y de Comunicacion, S.A.P.I de C.V. (“Aganar”) and JuegaLotto, S.A. de C.V. (“JuegaLotto”). JuegaLotto is federally licensed by the Mexico regulatory authorities with jurisdiction over the ability to sell international lottery games in Mexico through an authorized federal gaming portal and is licensed for games of chance in other countries throughout Latin America. Aganar has been operating in the licensed Lottery market in Mexico since 2007 and is licensed to sell Mexican National Lottery draw games, instant win tickets, and other games of chance online with access to a federally approved online casino and sportsbook gaming license and additionally issues a proprietary scratch lottery game in Mexico under the brand name Capalli. The opening balance of the acquirees have been included in our consolidated balance sheet since the date of the acquisition. Since the acquirees’ financial statements were denominated in Mexican pesos, the exchange rate of 22.0848 pesos per dollar was used to translate the balances.

The net purchase price was allocated to the assets and liabilities acquired as per the table below. Goodwill would represent the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. As part of correcting the errors and restating financial statements as described elsewhere in this report, no Goodwill has been recognized on the Global Gaming acquisition. The fair values of the acquired identifiable intangible assets were determined using Level 3 inputs which were not observable in the market.

The total purchase price of $2,039,691, consisted of cash of $1,530,000 and 98,205 shares of common stock of AutoLotto at $4.69 per share (after accounting for subsequent reverse stock splits). The total consideration transferred was approximately $1,055,214, reflecting the purchase price, net of cash on hand at Global Gaming and the principal amount of certain loans acquired. The purchase price is for an 80% ownership interest and is therefore grossed up to $1,965,843 to reflect the 20% minority interest in the acquirees. The purchase price was allocated to the identified tangible and intangible assets acquired based on their estimated fair values at the acquisition date as follows:

Schedule of Identified Tangible and Intangible Asset Acquired

Following are details of the purchase price allocated to the intangible assets acquired.

Schedule of Intangible Assets Acquired

S&MI Ltd. Acquisition (September 1, 2024)

On September 1, 2024, the Company finalized an agreement for the acquisition of S&MI, Ltd. which was renamed Sports.com Media Services Ltd. on September 12, 2024 and subsequently renamed Sports.com Media Group Ltd. on February 17, 2025 (“Sports.com Media”). In the agreement with Sports.com Media shareholders (the “Share Purchase and Sale Agreement”), the Purchase Price was the total equivalent One Million Dollars USD ($1,000,000.00) in restricted stock units of common shares in the Company. (the “Payment-In-Kind”) fixed at Two Hundred Ten Dollars USD ($210.00) per share (the “Fixed Price”) after accounting for reverse stock splits that occurred after the acquisition. The Purchase Price was to be paid out over five payments on the following schedule: The first payment of $150,000 in restricted common stock (714 shares) of the Company was due and payable on September 1, 2024 (the “Completion Date” and the “First Issuance Date”.). The remaining payments in restricted common stock to the shareholders of Sports.com Media by the Company were to be made as follows: (i) a second payment of $212,500 (1,012 shares) due on or before the 31^st day following ninety days after the Completion Date (the Second Issuance Date”); (ii) a third payment, of $212,500 (1,012 shares) due on or before the 31^st day following ninety days after the Second Issuance Date (the Third Issuance Date”); (iii) a fourth payment of $212,500 (1,012 shares) due on or before the 31^st day following ninety days after the Third Issuance Date (the “Fourth Issuance Date”); and (vi) a final and fifth payment of $212,500 (1,012 shares) due on or before the 31^st day following ninety days after the Fourth Issuance Date.

In the event that the closing price of the restricted stock units of common shares of the Company to be issued to the shareholders of Sports.com Media is lower than the Fixed Purchase Price on the six (6) month anniversary of any issuance date of said shares (collectively the “Anniversary Issuance Price”), then the Fixed Purchase Price shall be adjusted downward to the volume-weighted average price (“VWAP”) of the common stock for the five (5) consecutive trading days immediately preceding the six (6) month anniversary date of said issuance date. Accordingly, the Company shall be obligated to tender to the shareholders of Sports.com Media additional restricted stock units of common shares of the Company to make up the difference between the Fixed Purchase Price and the Anniversary Issuance Price.

The opening balances of Sports.com Media have been included in our consolidated balance sheet since the date of the acquisition. Since the Sports.com Media’s financial statements were denominated in British Pounds, the exchange rate of 1.3141 pounds per dollar was used to translate the balances.

The net purchase price was allocated to the assets and liabilities acquired as per the table below. Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The fair values of the acquired intangible assets were determined using the valuation analysis performed by a third-party valuation firm.

The total purchase price of $1,000,000 consists of 4,762 shares of common stock at $210.00 per share after accounting for reverse stock splits that occurred after the acquisition. The total consideration transferred after net assets and assumption of long-term debt was approximately $440,000, reflecting the purchase price, net of cash on hand at Sports.com Media and the principal amount of certain loans assumed by the Company. The purchase price was for a 100% ownership interest. The purchase price was allocated to the identified tangible and intangible assets acquired based on their estimated fair values at the acquisition date as follows:

Schedule of Identified Tangible and Intangible Asset Acquired

PlusEVO Ltd. Acquisition and Formation of Spektrum Ltd. (March 2025)

On March 6, 2025, the Company entered into a Stock Purchase and Sale Agreement to acquire certain assets from PlusEVO Ltd. and to form a new entity, Spektrum Ltd., which is intended to become a provider of technology supporting international lottery and gaming operations.

The purchase price for the asset acquisition was $1.5 million, payable in 7,143 shares of the Company’s restricted common stock at a fixed price of $210.00 per share after accounting for reverse stock splits that occurred after the acquisition. The shares were to be issued in five installments over a 30-month period following closing, subject to specified vesting and restriction terms. The agreement includes a price protection feature under which additional shares may be issued if the Company’s stock price is below the fixed price at certain measurement dates.

DotCom Ventures Inc. Asset Acquisition (July 2025) and Converted to Acquisition of Controlling Interest (February 2026)

On July 23, 2025, the Company acquired a 51% interest in the assets of DotCom Ventures Inc., consisting primarily of the Concerts.com and TicketStub.com domain names and certain related technology assets. The Company’s auditors evaluated the transaction under the applicable accounting guidance and concluded that the acquired set of assets did not meet the definition of a business under US GAAP because there was no substantive process where a set of inputs could be converted into specific outputs and there was no workforce consisting of employees or organized contractors in place for converting acquired inputs into outputs as of December 31, 2025. Accordingly, the transaction was initially accounted for as an asset acquisition, with the purchase price allocated to the acquired assets based on their relative fair values. The acquired assets are included within intangible assets on the consolidated balance sheet for the year ended December 31, 2025. In February of 2026, the Company added resources to operate and manage this business, and systems had been developed to enable inputs to be converted into specific outputs. Accordingly, the Asset Acquisition was converted into an acquisition of controlling interest applying guidance for Purchase Accounting effective February 1, 2026. Subsequently, the Company exercised call options provided in the Purchase Agreement and increased its Controlling interest from 51% on February 1 to 61% as of March 31, 2026.

Schedule of transaction to change to controlling interest

Veloce Esports Limited Acquisition (February 17, 2026)

On February 17, 2026, the Company acquired a controlling interest in Veloce Esports Limited, an England and Wales company operating in digital media, esports, motorsports, and content, including its Quadrant Esports Limited subsidiary, through two linked transactions: (i) a Subscription Agreement under which the Company subscribed for 4,634 newly issued A1 ordinary Veloce shares and (ii) seven Share Purchase Agreements under which the Company acquired 20,008 existing Veloce ordinary shares from Daniel Bailey, James MacLaurin, Jack Clarke, Darryl Eales, Andrew Webb, MPA Creative Limited (“MPA”), and Crimson Swordblade Limited (“Crimson”). Following the closing, the Company owned approximately 67.9% of Veloce’s outstanding shares, with the remaining interest held by Veloce’s other existing shareholders as a noncontrolling interest.

Consideration under the Subscription Agreement totaled £5,675,444 (approximately $7.7 million), consisting of £3,187,500 in cash and 48,337 shares of common stock valued at $70.00 per share. Consideration under the Share Purchase Agreements totaled £25,135,262 (approximately $34.2 million), consisting of 303,869 shares of the Company’s common stock valued at $70.00 per share, a pre-funded warrant to purchase 227,500 shares issued to Crimson, and cash payable in installments through February 15, 2027. In total, the Company issued 352,207 shares of common stock valued at $70 per share in connection with the acquisition. Share counts and share values referenced here reflect the August reverse stock split.

The opening balances of Veloce have been included in the Company’s consolidated balance sheet since the Acquisition Date. Because Veloce’s financial statements are denominated in British pounds, the exchange rate in effect on February 17, 2026 ($1.36 per £1) was used to translate Veloce’s assets and liabilities to U.S. dollars for purposes of the purchase price allocation below.

The purchase price allocation below is preliminary. Consistent with the treatment applied to the Global Gaming and Sports.com Media acquisitions described above, the Company is in the process of obtaining a third-party valuation of Veloce’s identifiable intangible assets and expects to finalize the categories and useful lives of those assets, and the resulting purchase price allocation, in connection with the Form 10-Q for the quarter ending September 30, 2026, or the Form 10-K for the year ending December 31, 2026.

Schedule of Veloce Acquisition