Business Overview
Lottery.com Inc. (NASDAQ:LTRY) is a leading provider of domestic and international lottery products and services. The company operates a proprietary platform that enables the remote purchase of legally sanctioned lottery games in the U.S. and abroad. Its revenue-generating activities include offering the platform to users in the U.S. and international jurisdictions, providing a business-to-business API to commercial partners, and delivering global lottery data and analytics to commercial subscribers.
The company's international expansion efforts, particularly the acquisition of Global Gaming Enterprises in 2021, have positioned Lottery.com to capitalize on the growing Latin American lottery market. Aganar, a subsidiary of Global Gaming, operates in the licensed online lottery market in Mexico, while JuegaLotto, another subsidiary, is licensed to commercialize international lottery games in Mexico and other Latin American countries.
Operational Challenges
In July 2022, Lottery.com faced a significant setback when the company determined that it did not have sufficient financial resources to fund its operations or pay certain existing obligations, including payroll and related obligations. This led to the furlough of the majority of the company's employees and the suspension of its lottery game sales operations, a period referred to as the "Operational Cessation."
During this time, the company has had minimal day-to-day operations and has primarily focused on restarting certain of its core businesses, including the relaunch of its B2B API platform in April 2023 and the anticipated relaunch of its B2C platform by mid-year 2024.
Financials
For the fiscal year ended December 31, 2023, Lottery.com reported annual revenue of $6,482,638, a net loss of $24,664,751, and annual operating and free cash flows of -$2,028,601. The company's quarterly results for the first quarter of 2024 showed revenue of $285,523, a net loss of $3,400,617, and operating and free cash flows of -$1,077,990.
The significant decline in revenue and the continued net losses reflect the impact of the Operational Cessation on the company's subsidiaries, which has impaired their ability to invest in customer acquisition and other growth initiatives.
Liquidity
The company's liquidity position remains a concern, with a current ratio of 0.71 and a cash balance of approximately $36,799 as of the date of this report.
Risks and Challenges
Lottery.com's operations are subject to a complex regulatory environment, both domestically and internationally. The company's internal investigation in 2022 revealed instances of non-compliance with state and federal laws concerning the states in which lottery tickets were procured, as well as order fulfillment issues. These findings have exposed the company to a number of legal proceedings, investigations, and inquiries, resulting in significant legal and other expenses.
The company has also faced challenges in maintaining compliance with the continued listing standards of the Nasdaq Stock Market. While the company is currently in compliance, there is no guarantee that it will be able to maintain its listing for any extended period of time. Delisting from Nasdaq could have a material adverse effect on the company's ability to raise capital and the liquidity of its common stock and warrants.
Lottery.com faces a number of risks and uncertainties that could impact its ability to execute its turnaround plan and achieve long-term success. These include the company's ability to maintain compliance with Nasdaq's listing requirements, the ongoing legal proceedings and investigations, the availability of sufficient capital to fund its operations, and the successful relaunch and scaling of its B2C and B2B platforms.
Additionally, the company's international expansion efforts are subject to various regulatory, political, and economic risks in the markets it operates in, which could affect its ability to generate revenue and cash flow from these operations.
Outlook
Under new management, Lottery.com has developed a three-phase plan to recommence its operations. The first phase involves the relaunch of its B2B API platform, which the company believes it has sufficient demand to resume. The second phase focuses on relaunching the company's B2C platform, initially in Texas, before potentially expanding to other jurisdictions.
The company's third phase aims to restore other business lines and projects, such as supplying lottery tickets to consumers in approved domestic jurisdictions and partnering with licensed providers in international jurisdictions to supply legitimate domestic lottery games.
Lottery.com's success in executing this plan is critical to its future, as the company's ability to continue as a going concern is dependent on its ability to secure additional funding and successfully restart its core operations. The company is exploring various financing options, including equity and debt financing, to support its turnaround efforts.
Recent Developments
The company has relaunched its B2B API platform in April 2023 and anticipates relaunching its B2C platform by mid-year 2024.
Conclusion
Lottery.com has faced significant challenges over the past year, but the company's new management team is working diligently to navigate these obstacles and chart a path to recovery. The successful execution of the company's three-phase plan, coupled with the ability to secure additional funding, will be critical to Lottery.com's future. Investors should closely monitor the company's progress as it works to regain its footing in the domestic and international lottery markets.