Lottery(LTRY) - 2020 Q3 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements (Unaudited) The unaudited financial statements for the quarter ended September 30, 2020, show a net loss of $0.62 million, a decrease in total assets to $63.59 million, and increased liabilities due to related-party promissory notes, raising going concern doubts Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (as of September 30, 2020) | Account | Sep 30, 2020 (Unaudited, in USD) | Dec 31, 2019 (in USD) | | :--- | :--- | :--- | | Assets | | | | Cash | $217,858 | $55,461 | | Marketable securities held in Trust Account | $63,154,834 | $74,376,617 | | Total Assets | $63,589,535 | $74,536,195 | | Liabilities & Equity | | | | Promissory notes – related party | $3,825,000 | $180,000 | | Deferred underwriting fee payable | $5,031,250 | $5,031,250 | | Total Liabilities | $9,170,488 | $6,050,058 | | Common stock subject to possible redemption | $49,419,038 | $63,486,129 | | Total Stockholders' Equity | $5,000,009 | $5,000,008 | Condensed Consolidated Statements of Operations Statement of Operations Summary (Unaudited) | Metric | Three Months Ended Sep 30, 2020 (in USD) | Nine Months Ended Sep 30, 2020 (in USD) | Nine Months Ended Sep 30, 2019 (in USD) | | :--- | :--- | :--- | :--- | | Loss from operations | $(532,732) | $(1,129,649) | $(783,698) | | Interest income | $6,267 | $347,246 | $2,818,877 | | Net (Loss) Income | $(362,526) | $(618,464) | $2,345,649 | | Basic and diluted net loss per common share | $(0.05) | $(0.12) | $(0.07) | Condensed Consolidated Statements of Changes in Stockholders' Equity - Total Stockholders' Equity remained stable at approximately $5.0 million as of September 30, 2020, compared to the beginning of the year, with changes primarily driven by net losses offset by adjustments related to common stock subject to possible redemption[14] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for the Nine Months Ended September 30 | Cash Flow Activity | 2020 (in USD) | 2019 (in USD) | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,603,006) | $(1,199,673) | | Net cash provided by investing activities | $11,569,029 | $577,315 | | Net cash used in financing activities | $(9,803,626) | $0 | | Net Change in Cash | $162,397 | $(622,358) | - For the nine months ended September 30, 2020, the company experienced significant cash movements related to stock redemptions, with cash provided by investing activities of $11.57 million primarily from Trust Account withdrawals for redemptions, and cash used in financing activities of $9.80 million reflecting these redemptions and proceeds from related-party loans[19] Notes to Condensed Consolidated Financial Statements - The company, a blank check entity, extended its business combination deadline multiple times, most recently to December 1, 2020, with a further extension to March 31, 2021, pending stockholder approval[21][40][44] - Multiple stockholder redemptions significantly reduced outstanding shares and Trust Account cash, with stockholders redeeming 13.08 million shares, 0.63 million shares, and 0.63 million shares at various meetings in connection with extensions[37][39][41] - The company raised significant working capital through non-interest bearing promissory notes from related parties, totaling $3.83 million as of September 30, 2020, to fund operations and transaction expenses[88][89][90] - Substantial doubt exists about the company's ability to continue as a going concern due to its need to complete a business combination by its deadline and its reliance on additional, non-guaranteed financing from related parties[54] Management's Discussion and Analysis of Financial Condition and Results of Operations As a blank check company with no operations, the company reported a $0.62 million net loss for the nine months ended September 30, 2020, facing liquidity constraints and a December 1, 2020 deadline (with a potential March 31, 2021 extension) to complete a business combination, relying on related-party loans and experiencing significant shareholder redemptions that reduced Trust Account funds to $63.2 million - The company repeatedly extended its Business Combination deadline, most recently to December 1, 2020, with a further extension to March 31, 2021 subject to stockholder approval, leading to significant common stock redemptions and reduced Trust Account funds[117][118][119] Results of Operations Comparison | Period | Net (Loss) Income (in USD) | Key Drivers | | :--- | :--- | :--- | | Nine Months Ended Sep 30, 2020 | $(618,464) | Operating costs of $1.1 million, offset by interest income and tax benefit | | Nine Months Ended Sep 30, 2019 | $2,345,649 | Interest income of $2.8 million and unrealized gains of $0.95 million | - The company's liquidity is constrained, with only $0.22 million in cash held outside the Trust Account as of September 30, 2020, relying on loans from related parties like VK Consulting and BGV Group Limited to fund working capital and transaction expenses[131][133][134] - Management expressed substantial doubt about the company's ability to continue as a going concern if it cannot raise additional capital and complete a Business Combination by its deadline[137] - Key contractual obligations include a deferred underwriting fee of $5.03 million payable upon closing a Business Combination and a monthly administrative fee of $7,500 to related party VK Consulting[139][140] Quantitative and Qualitative Disclosures Regarding Market Risk The company's market risk is minimal as IPO proceeds in the Trust Account are invested in short-term U.S. government treasury bills or money market funds that solely invest in U.S. treasuries - The company's market risk is considered minimal as funds in the Trust Account are invested in short-term U.S. government securities or money market funds investing solely in U.S. treasuries[147] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2020, the company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective[149] - No changes occurred during the fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[150] Part II. Other Information Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities The company's June 2018 IPO generated $201.25 million in gross proceeds, with $205.28 million placed into the Trust Account, leaving $0.22 million in cash outside for working capital as of September 30, 2020 - The company's IPO of Units, including the full exercise of the over-allotment option, generated gross proceeds of $201.25 million[155][156] - Total net proceeds from the IPO and the sale of Private Units were $206.68 million, of which $205.28 million was placed in the Trust Account, with the remaining cash held outside the Trust Account at $0.22 million as of September 30, 2020[159] Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including CEO and CFO certifications and XBRL data files - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, along with XBRL filings[164]