LottoGopher

Providing Online Lottery Services to the US Lottery Industry

This profile is part of a paid investor education campaign.*

Overview

LottoGopher Holdings Inc. (CSE:LOTO, OTCQB:LTTGF, FWB:2LG) is a lottery messenger service with a subscription revenue model that operates in California, Texas and Virginia. LottoGopher operates under a subscription-based revenue model and subsequently offers three subscription packages for users to choose from. The subscription packages include a variety of services based on the package users choose.

In the US, 80 million people buy lottery tickets and make purchases online, making this group an ideal target market for LottoGopher’s product. LottoGopher’s easy-to-use online platform allows users to easily and safely order state lottery tickets using a credit card, manage their tickets and winnings and stay up-to-date with jackpot alerts, the latest lottery draws and lottery news. Their platform allows users to play by themselves or in a group pool and gives users a choice to purchase MEGA Millions, Powerball and Superlotto Plus tickets.

In 2016, US lotto industry sales totaled $80.5 billion and rivaled the combined sales of the movie, music and book industries. Within that, California is the second largest state in lottery sales at $6.3 billion. In addition to capitalizing on the substantive lottery industry, LottoGopher is compliant with the rules and regulations outlined in the Unlawful Internet Gaming Act of 2006, Wire Act of 1961, 18 US Code 1301 and State Lottery Laws & Regulations for the states of California, Texas and Virginia. The company offers additional assurances to its users as a publicly listed company working on ensuring transparency and enforcing compliance.

Focused on capitalizing on the US lottery industry, LottoGopher has plans to expand into an additional 20 states. LottoGopher has also recently acquired PlasmaNet’s FreeLotto.com website, which will allow them to offer their platform around the world. In addition to that, LottoGopher has acquired SMS-Engine and is looking forward to being able to offer their lottery services via text messaging.

LottoGopher has a number of significant shareholders, board members and partners. One significant partner is Lottoland, a major lottery company that has 6 million customers worldwide and has made over 300 million euros in annual sales. Lottoland’s general counsel and group company secretary, Lloyd John Lemmon, is on the advisory board of LottoGopher. Kevin Harrington is also a shareholder and advisor. Harrington is a business executive and marketing tycoon known best for his time on the Emmy-winning TV show, Shark Tank. Finally, William Shatner partnered with LottoGopher in September 2017 and is an advocate for the LottoGopher brand.

Company Highlights

  • Capitalizing on an $80.5 billion dollar industry.
  • Operating in California, the second largest lottery market in the US.
  • Operating in Texas and Virginia with plans to expand into 20 additional states.
  • Acquisition of PlasmaNet’s FreeLotto.com offers international expansion opportunities.
  • Fully compliant with state laws and regulations for lotteries.
  • Easy and safe-to-use platform that offers a variety of services to users.
  • Subscription model used to generate revenue.
  • Shark Tank’s Kevin Harrington is an advisor and shareholder.
  • Major European online lottery company, Lottoland, is a long-standing shareholder.

Subscription Revenue Model

LottoGopher generates revenue by using a subscription model. Using this model allows the company to generate revenue over time and provides data that helps predict the trends in the industry. Site users are encouraged to opt into purchasing one of three subscriptions options. The plans are $3 per day, $12 per month and $99 per year.

The $3 subscription allows the user to order an unlimited amount of tickets with their credit car and provides access to lottery analytics tools. The $99 subscription will automatically renew every year, allowing for unlimited ticket orders, automatic ticket subscriptions, and to join and create public and private lottery pools. Once signed up for a subscription, users are prompted to select the game and types of tickets that they wish to purchase and the numbers they wish to play.

Users are ordering the lottery tickets at the same price that they would pay at a store. In order to be compliant with regulations, LottoGopher acquires the physical ticket for the user from retailers and will update the users account after drawings are complete.

The Lotto Industry in the US

In 2016, the US lotto industry sales totaled $80.5 billion, which is more than what is spent on movies, music and books combined. In addition to the record breaking sales, 57 percent of Americans purchased lottery tickets within the past year. In 2016, California residents alone spent approximately $6.3 billion on lottery tickets making California the second largest lottery industry in the US.

Updating the industry

The current lottery system is outdated and inconvenient for players. Consumers still have to travel to a lottery retailer approximately four times a week in order to purchase or redeem tickets at locations where retailers only accept cash. Additionally, many consumers cannot play in a pool unless it is set up by their place of employment. Many players are also notorious for forgetting to buy or check their tickets or they end up losing them. In the end, this means that approximately $2 billion worth of prize money is unclaimed across the US every year.

LottoGopher believes that the best way to fix these issues is by moving the lottery system online. LottoGopher has developed an online platform that does the following for users:

  • Purchase tickets online and with a credit card
  • Create or join lottery groups
  • Automates prize tracking and ticket subscriptions
  • Allows the purchase of gift tickets
  • Alerts users of big jackpots
  • Immediate access to drawings
  • Access to lottery pickers and analyzers
  • Social media capabilities

This online platform addresses several shortcomings of the lottery industry and is based off of a subscription model where the company charges a fee for the access to these services.

Compliance

Most importantly, the LottoGopher platform is complaint with the regulations of the states that they operate in. LottoGopher is compliant with the following acts and regulations:

  • Unlawful Internet Gaming Act of 2006: the act prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the internet and that is unlawful under any federal or state law.
  • Wire Act of 1961: the act prohibits any person or entity engaged in the business of sports betting from using wire communication facilities to transmit bets or wagers on sporting events across state lines.
  • 18 USC 1301: Individuals and corporations are prohibited to offer lottery services outside of the lottery game state of origin.
  • State Lottery Laws & Regulations: are dependent upon the state a company is operating under.

In addition to the regulations, LottoGopher added another level of compliance, transparency and legitimacy to their operations to ensure piece of mind for their users by being a publicly-listed company. The mandatory filings provide transparency and regulations regarding their listing status ensures that they remain compliant to lottery regulations and rules.

Furthermore, competition from the state is non-existent due to the regulations that govern the industry. The state runs the risk of alienating the established retail network if they compete online and they face extensive legal hurdles in order to establish an online presence.

GopherChain

LottoGopher is developing a blockchain-based platform called GopherChain to provide additional transparency and improved compliance to the lottery industry. The blockchain platform can be used online and via text with the potential be used by state lotteries and online lotteries worldwide.

Lottoland Partnership

Lottoland launched in 2013 and has 600 million customers across the globe. The company has offices in British territory Gibraltar and Hamburg, Germany. Lottoland has also made over 300 million euros in annual sales and has reported an impressive 820 percent revenue growth between 2012 and 2015.

The company is vertically-integrated in the lottery value chain and offer services such as product development, technology, online channel management and in-house developed IT solutions and systems. Additionally, Lottoland has developed globally-scaled back-end and front-end solutions for the online lottery industry.

Lottoland first purchased shares in LottoGopher while the company was still private and still retains an interest in the company. Lloyd John Lemmon, Lottoland’s general counsel and group company secretary, is also an advisor to LottoGopher.

PlasmaNet’s FreeLotto.com Acquisition

In July 2018, LottoGopher acquired an 88 percent interest in PlasmaNet Inc., one of the largest online sweepstakes, marketing and free member acquisition companies in the US. PlasmaNet has attracted over 65 million members and has awarded over $100 million in prize money through its FreeLotto.com website. Over 3.7 billion games have been played through the FreeLotto website since its inception in 1999. Currently, it attracts an average of over 7.3 million visitors per month and produces over 11,000 winners per month.

“We are thrilled to welcome FreeLotto and PlasmaNet into the LottoGopher family,” said LottoGopher CEO James Morel. “We believe its revenue traction, profitability, strong brand name and trademark, highly scalable operating model, highly efficient customer acquisition engine and advanced tools for front-end marketing will spur growth in our existing business and allow us to expand internationally. Its current business model of recurring monthly subscriptions is highly predictable and scalable. We look forward to integrating and expanding business together.”

PlasmaNet made over US$6.3 in revenue in 2017 and derives its revenues from fees paid by its members for services provided by PlasmaNet’s FreelottoPlus subscription service, from paid advertisers and from monetizing both its websites and its database of members. The FreelottoPlus subscription is an optional paid service where subscribers pay PlasmaNet a recurring fee to be automatically entered into the six daily FreeLotto drawings.

SMS-ENGINE Acquisition

In May 2018, LottoGopher entered a definitive agreement to acquire SMS-ENGINE, a text-based gaming engine for use in lottery, sports betting and sweepstakes. SMS-ENGINE is a proprietary platform which allows a user to play the lottery via text message and can also support sports betting, sweepstakes and other games. The technology allows users to pay for the games they’ve played on their phones bills.

“We are really excited about this opportunity which will allow people to participate in lottery, sports betting and sweepstakes via text messaging,” said LottoGopher CEO James Morel. “We expect to be able to deploy this internationally and utilize our GopherChain blockchain application to track transactions.”

Management

James Morel — President, CEO & Director

James Morel has over 25 years of experience creating and growing consumer and B2B brands. He previously founded Dr. TATTOFF, a chain of laser tattoo removal clinics located in California, Arizona, Georgia and Texas where he served as CEO and Director. Morel was also the founder and President of 1-800 POSTCARDS, the New York City based promotional printing company, and has produced reality television shows including “Star Dates” for the E! network. He holds a dual degree in Psychology and Advertising from the Newhouse School of Communications at Syracuse University.

Ainesh Mohan — CFO & Director

Alnesh Mohan has over 20 years of accounting, auditing, and tax experience providing advisory services to a wide array of clients. He has been a partner at Quantum Advisory Partners LLP, a professional services firm focused on providing Chief Financial Officer and full-cycle accounting services to private and public companies, since 2005. Acting on behalf of several public companies, Mohan has acquired considerable experience in financial reporting, corporate governance and regulatory compliance. He is a Chartered Professional Accountant (CPA, CA) and holds a Bachelor of Business Administration from Simon Fraser University.

Kevin Harrington — Advisor

Kevin Harrington is a business executive and marketing tycoon, well-known as being an original shark on the Emmy-winning TV show, Shark Tank. Kevin is also recognized as the inventor of the infomercial and pioneer of the As Seen On TV empire. Original co-founding board member of the Entrepreneurs’ Organization, he was also named one of the top 100 entrepreneurs in the world by Entrepreneur’s Magazine. He has launched over 20 businesses that saw sales exceeding $100 million annually. Through his international business network, he has been involved in generating over $5 billion in sales around the world for over 500 products.

Lloyd John Lemmon — Advisor

Lloyd Lemmon began his career in law qualifying as a solicitor with international law firm Pinsent Masons in 1998. He is a 1994 graduate of the University of Northumbria Newcastle School of Law and a 1992 graduate of Brunel University in London. Prior to his current appointment, Lemmon was Head of Legal at the TD Waterhouse (part of the Toronto dominion bank group) and previously held the same post at Newcastle Building Society. He serves as general counsel and group company secretary of the Lottoland Group.

Norman Wareham — Advisor

Norman Wareham has over 40 years of financial, accounting and international management experience. He has provided management consulting and accounting services to public companies in Canada and the United States. He brings a success-driven and fiscally responsible approach to the public companies he has been a director and officer of. Wareham studied accounting with the Certified General Accountants Association of B.C. Wareham is currently Vice-president and CFO of a craft brewery located in Ontario, Canada and a Director of Canamara Titanium & Iron Ore Corporation in Vancouver, B.C.

Ali R. Zamani — Director

Ali R. Zamani is currently the managing partner of Overlook Investments. Zamani also serves on the Board of Directors for Protos Blockchain Corp., a cryptocurrency hedge fund and asset management company leveraging artificial intelligence. Previously, Zamani served as a Portfolio Manager and CIO at Gefinor Capital Management from 2014 to 2016. Prior to Gefinor, Zamani was a Principal at SLZ Capital Management, a New York-based asset management firm, from July 2012 to December 2013. Prior to that, he was a Portfolio Manager at Goldman Sachs from 2004 to 2012 where he managed upwards of $400 million across various sectors. From 2002 to 2004, he was a mergers and acquisitions analyst at Dresdner Kleinwort Wasserstein, a boutique New York-based investment bank focused on the energy and utilities sectors. Zamani holds a B.S. in Economics from the Wharton School.

Savneet Singh — Director

Savneet Singh is the Co-founder of Tera Holdings, a holding company of niche software businesses. Prior to Tera, Singh founded GBI, the first electronic platform and asset manager that allowed investors to buy, trade and store physical precious metals. GBI is now one the largest independent provider and custody platform of precious metals in the United States and as a result he was named to the prestigious Forbes 30 under 30 list, Crain’s 40 under 40 and the Empact 100 list of top 100 entrepreneurs under the age of 30. In addition, he is an investor and advisor to a number of technology and FinTech companies including Sofi, Ripple, Lending Club and others.

Prior to GBI, he was an investment analyst at Chilton Investment Company where he covered investments in the technology, alternative energy and infrastructure space. Prior to Chilton, Singh worked in the investment banking department of Morgan Stanley. Singh received his B.S. in Applied Economics and Management from Cornell University.

In addition, Singh is a member of the Board of Directors of Blockchain Power, Owl Mountain Capital and Produce Pay, Inc. He is also Chairman of CoVenture, an emerging asset manager he helped start, that now has committed assets of over $200 million with funds in the direct lending, venture capital and the cryptocurrency space.


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