10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q /A

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2011

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number:   000-53770

Loto Inc.

(Exact Name of Registrant as Specified in its Charter)

Nevada	27-0156048
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

Suite 502, 25 Adelaide Street

Toronto, Ontario, Canada M5C 3A1

(Address of principal executive offices)

(416) 479-0880

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year,

if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.323.405 of this chapter) during the preceding 12 months (or shorter period that the registrant was required to submit and post such files).  Yes o   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-Accelerated Filer	¨	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x

As of October 14, 2011, the Issuer had 31,739,630 shares of its Common Stock outstanding.

Explanatory Note

Loto, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (the “Amendment”) to the Company’s quarterly report on Form 10-Q for the period ended August 31, 2011 (the “Form 10-Q”), filed with the Securities and Exchange Commission on October 17, 2011 (the “Original Filing Date”), to furnish Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. Exhibit 101 consists of the following materials from the Company’s Form 10-Q, formatted in XBRL (eXtensible Business Reporting Language):

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Schema
101.CAL	XBRL Taxonomy Calculation Linkbase
101.DEF	XBRL Taxonomy Definition Linkbase
101.LAB	XBRL Taxonomy Label Linkbase
101.PRE	XBRL Taxonomy Presentation Linkbase

The Company has also amended "Note 11 - Subsequent Events" and the subsequent events section of the Management's Discussion and Analysis of Financial Condition and Results of Operations to delete the references to Stock Option Grants.  No other changes have been made to the Form 10-Q. This Amendment speaks as of the Original Filing Date, does not reflect events that may have occurred subsequent to the Original Filing Date, and does not modify or update in any way disclosures made in the Form 10-Q.

Pursuant to Rule 406T of Regulation S-T, the interactive data files attached as Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION
Item 1: Financial Statements	1
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operation	9
Item 3: Quantitative and Qualitative Disclosures about Market Risk	14
Item 4: Controls and Procedures	15
PART II: OTHER INFORMATION
Item 1: Legal Proceedings	16
Item 1A: Risk Factors	16
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3: Defaults Upon Senior Securities	16
Item 4: Reserved	16
Item 5: Other Information	16
Item 6: Exhibits	17
SIGNATURES	18

i 

PART I FINANCIAL INFORMATION

LOTO INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEET

	August 31, 2011			May 31, 2011
	UNAUDITED			AUDITED
CURRENT ASSETS:
Cash	$	97,321		$	153,162
Prepaid rent		10,836			10,836
Receivables (Note 3)		19,886			110,848
TOTAL CURRENT ASSETS		128,043			274,846
Property and equipment, at cost		31,060			31,060
Accumulated amortization		(19,170	)		(17,160	)
Net capital assets (Note 4)		11,890			13,900
TOTAL ASSETS	$	139,933		$	288,746
LIABILITIES and STOCKHOLDERS' (DEFICIENCY) EQUITY
CURRENT LIABILITIES:
Accrued liabilities (Note 5)	$	305,780		$	226,836
Standby loan (Note 6)		453,502			448,737
Due to stockholders		2,192			312
CURRENT LIABILITIES AND TOTAL LIABILITIES		761,474			675,885
STOCKHOLDER'S EQUITY:
Common stock, par value $0.0001 (note 7) 100,000,000 shares authorized 31,739,630 issued and outstanding (2010-54,572,963)		3,174			5,533
Additional paid-in capital		2,026,260			2,073,780
Other comprehensive gain (loss)		5,546			(10,046	)
Deficit accumulated during development stage		(2,656,521	)		(2,456,406	)
TOTAL STOCKHOLDERS' (DEFICIENCY) EQUITY	$	(621,541	)	$	(387,139	)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY	$	139,933		$	288,746

See notes to the consolidated financial statements

1

LOTO INC.

(A Development Stage Company)

CONSOLIDATED STATEMENT OF OPERATIONS

							From Inception
	For the Three Months			For the Three Months			(September 16, 2008)
	Ended August 31, 2011			Ended August 31, 2010			to August 31, 2011
	UNAUDITED			UNAUDITED			UNAUDITED
REVENUE		-			-			-
EXPENSES
General and administrative expenses		195,350			399,566			2,616,249
OPERATING LOSS		195,350			399,566			2,616,249
OTHER EXPENSE
Interest Expense		4,765			5,591			40,272
NET LOSS FOR THE PERIOD		200,115			405,157			2,656,521
Basic and fully diluted earnings per share	$	(0.01	)	$	(0.01	)
Weighted Average Shares Outstanding		36,660,000			54,662,903

See notes to the consolidated financial statements

2

LOTO INC.

(A Development Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)

FROM INCEPTION (SEPTEMBER 16, 2008) TO AUGUST 31, 2011

										Deficit
										Accumulated
										During			Other
							Additional			Development			Comprehensive
	Shares			Amount			Paid-In Capital			Stage			Loss			Total
BALANCE - SEPTEMBER 16, 2008
Capital contribution in connection with formation of Mobilotto, Inc.								91									91
Net loss											(10,979	)					(10,979	)
Sale of 20,000,000 shares		20,000,000			2,000			18,000									20,000
Shares issued in connection with Acquisition of Mobilotto, Inc.		20,000,000			2,000			(2,000	)								0
BALANCE - MAY 31, 2009		40,000,000			4,000			16,091			(10,979	)		0			9,112
Sale of shares		15,000,000			1,500			148,500									150,000
Cancellation of Founders' shares		(1,000,000	)		(100	)											(100	)
Sale of  shares		572,963			57			859,386									859,443
Other comprehensive loss resulting from foreign exchange transactions														(598	)		(598	)
Net loss											(1,122,792	)					(1,122,792	)
BALANCE - MAY 31, 2010		54,572,963			5,457			1,023,977			(1,133,771	)		(598	)		(104,935	)
Other comprehensive gain / (loss) resulting from foreign exchange conversions														(9,448	)		(9,448	)
Issuance of shares for Consulting services		200,000			20			149,980									150,000
Sale of  shares		1,400,000			140			1,049,860									1,050,000
Cancellation of Founders' shares		(1,212,592	)		(121	)											(121	)
Issuance of shares to certain existing shareholders		572,963			57			(57	)								0
Cancellation of shares issued for Consulting services		(200,000	)		(20	)		(149,980	)								(150,000	)
Net loss											(1,322,635	)					(1,322,635	)
BALANCE - May 31, 2011		55,333,334			5,533			2,073,780			(2,456,406	)		(10,046	)		(387,139	)
Other comprehensive gain / (loss) resulting from foreign exchange conversions														15,592			15,592
Cancellation of Founders' shares (Note 7)		(18,793,704	)		(1,879	)											(1,879	)
Cancellation of Shares (Note 7)		(4,800,000	)		(480	)		(47,520	)								(48,000	)
Net loss											(200,115	)					(200,115	)
BALANCE - August 31, 2011		31,739,630			3,174			2,026,260			(2,656,521	)		5,546			(621,541	)

See notes to the consolidated financial statements

3

LOTO INC.

(A Development Stage Company)

CONSOLIDATED STATEMENT OF CASH FLOWS

UNAUDITED

	For the Three			For the Three			From Inception
	Months Ended			Months Ended			(September 16, 2008)
	August 31, 2011			August 31, 2010			to August 31, 2011
OPERATING ACTIVITIES:
Net loss for the period		(200,115	)		(405,157	)		(2,656,521	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization		2,010			1,763			19,170
Common stock issued for services		0			150,000			150,000
Cancellation of Common stock issued for services		0						(150,000	)
Interest expensed but not paid		4,765			5,591			27,571
Changes in operating assets and liabilities:
Prepaid rent		0			0			(10,836	)
Other current assets		90,962			(12,560	)		(19,886	)
Accrued liabilities		80,824			(6,812	)		307,660
NET CASH USED IN OPERATING ACTIVITIES		(21,554	)		(267,175	)		(2,332,842	)
INVESTING ACTIVITIES:
Acquisition of capital assets		0			0			(31,060	)
NET CASH USED IN INVESTING ACTIVITIES		0			0			(31,060	)
FINANCING ACTIVITIES:
Deposit for stock subscription		0			0			150,000
Proceeds from loan		0			0			425,931
Issuance (net of redemption) of common stock		(49,879	)		0			1,879,555
Proceeds from stockholder loan		0			0			191
NET CASH PROVIDED BY INVESTING ACTIVITIES		(49,879	)		0			2,455,677
Effect of exchange rates on cash		15,592			3,808			5,546
(DECREASE) INCREASE IN CASH		(55,841	)		(263,367	)		97,321
CASH - BEGINNING OF PERIOD		153,162			309,018			0
CASH - END OF PERIOD		97,321			45,651			97,321
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year
Interest paid		0			0			0
Income taxes		0			0			0

See notes to the consolidated financial statements

4

LOTO INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2011

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Organization and Business Description

Loto Inc. (“Loto” or the “Company”), together with its wholly owned subsidiary Mobilotto systems, Inc. (“Mobilotto”), are development stage companies. The Company is developing a patent-pending software application that permits the secure purchase of lottery tickets on commercially available “smart” phones and similar mobile telecommunications devices. A smart phone is a mobile phone offering advanced capabilities, often with personal computer-like functionality, such as e-mail, Internet access and other applications. Proprietary technology for facilitating the purchase of lottery tickets addresses all elements of lottery play, including secure player registration and authorization, number selection, settlement, winning number notification and other direct-to-customer marketing opportunities. It is the intention to operate or license software applications with governments and other lottery operators as the primary source of revenue. There is no intention to become a lottery operator. The mobile lottery software application has not yet been utilized by any lottery operator, and no revenues have yet been generated from the technology.

Basis of Consolidation and Development Stage Activities

These consolidated financial statements include the accounts of Loto Inc., which was incorporated on April 22, 2009 in the state of Nevada and its wholly-owned subsidiary, Mobilotto Systems, Inc., which was incorporated in Ontario, Canada on September 16, 2008. On May 13, 2009 the stockholders of Mobilotto contributed all of the outstanding equity interests in Mobilotto to the Company in exchange for 20,000,000 shares of the Company’s common stock. This transaction has been accounted for as a transaction between entities under common control in accordance with authoritative guidance issued by the Financial Accounting Standards Board. Accordingly, the net assets were recognized in the consolidated financial statements at their carrying amounts in the accounts of Mobilotto at the transfer date and the results of operations of Mobilotto are included as though the transaction had occurred at the beginning of the period.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. All intercompany balances and transactions have been eliminated.

5

Since inception the Company has been engaged in organizational activities, has been developing its business model and software, and marketing its product to lottery operators, but has not earned any revenue from operations. Accordingly, the Company’s activities have been accounted for as those of a “Development Stage Enterprise”, as set forth in authoritative guidance issued by the Financial Accounting Standards Board. Among the disclosures required are that the Company’s financial statements be identified as those of a development stage company, and that the statements of operations, stockholders’ equity and cash flows disclose activity since the date of the Company’s inception.

NOTE 2 – GOING CONCERN

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any revenues since inception, has an accumulated loss of $2,656,521 as of August 31, 2011 and is unlikely to generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon, among other things, the continued financial support from its shareholders, the ability of the Company to obtain necessary equity or debt financing, and the attainment of profitable operations. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. There is no assurance that the Company will be able to generate revenues in the future. These financial statements do not give any effect to any adjustments that would be necessary should the Company be unable to continue as a going concern.

NOTE 3 – RECEIVABLES

Receivables totalled $19,886 relating to goods & service tax receivables.

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

			Accumulated				August 31,
	Cost		Depreciation		Net		2010
Leasehold improvements	$	3,500	$	3,500	$	0	$	1,788
Computer equipment	$	18,950	$	12,040	$	6,910	$	14,806
Office furniture and equipment	$	8,610	$	3,630	$	4,980	$	7,134
Total	$	31,060	$	19,170	$	11,890	$	23,728

Total depreciation expense for the three months ended August 31, 2011 was $2,010 (2010 - $1,763).

NOTE 5 – ACCRUED LIABILITIES

Accrued liabilities totalled $305,780 and included the following: Payments due for programming and system testing of $149,306, accrued legal expenses of $15,241, accrued audit fees of $14,900, deferred rent payable of $14,896, accrued consulting of $59,186, payable due to former shareholders $48,000 and general and administration payables of $4,251.

6

NOTE 6 – STANDBY LOAN

On August 3, 2009, two shareholders, Mhalka Capital Investments Ltd. and 1476448 Ontario Inc., made a standby financing commitment to Loto under which they agreed to provide funding to Loto. (the “Standby Loan”). On April 19, 2010, 2238646 Ontario Inc. entered into a Novation to the Standby Financing Commitment with the Company pursuant to which 2238646 Ontario Inc. has agreed to the remaining commitments of Mhalka Capital Investment Ltd. Draws made on the commitment amount are subject to interest as of the date of the draw at prime rate plus two percent per annum. These amounts are repayable thirty calendar days after demand at any time following the earlier of (a) September 30, 2010 or (b) the date upon which the Company is in receipt of revenues or proceeds from the sales of equity securities. If Loto breaches any of the covenants, the default rate will be 15% per annum. The standby financing commitment expired on September 30, 2010. As of August 31, 2011, $367,826 including accrued interest was drawn and payable against this commitment.

In addition, A Few Brilliant Minds, a related party, has advanced $85,676 including accrued interest. As a result of a Share Cancellation Agreement (see Note 7), this loan is to be repaid.

NOTE 7 – CHANGES TO STOCKHOLDERS’ EQUITY (DEFICIENCY)

On June 16, 2011 the Company entered into a Share Cancellation Agreement with one of the founders and his company A Few Brilliant Minds Inc. (AFBMI). The founder desired to pursue other business interests and submitted his resignation from the Company's Board together and tendered for cancellation 18,793,704 common shares owned by AFBMI. Concurrent with the execution of the agreement, the Company agreed to repay $85,675 (part of the standby loan, see Note 6) due to the founder within 90 days of that Agreement.

In addition, the Company also entered into Share Cancellation Agreements dated June 20, 2011 with two shareholders to cancel 4,800,000 common shares in return for the original purchase price of $48,000. The amount due is included in accounts payable.

NOTE 8 – COMMITMENTS

The Company is obligated under a lease agreement to lease the premises at 25 Adelaide Street in Toronto, Ontario, Canada until November 29, 2013. The minimum payments due are as follows:

2011 – $ 24,208

2012 – $ 72,624

2013 – $ 66,572

NOTE 9 – STOCK OPTION GRANTS

On April 19, 2010, the Company granted 1,900,000 options to three members of the Company’s Board of Directors at an exercise price of $1.50 per share. The options vested on April 19, 2011, and 950,000 options may be exercised on April 19, 2011 and a further 950,000 options may be exercised on April 19, 2012. The right to exercise all of the options will expire and terminate on April 19, 2013. The Company has determined that the options were issued at fair value and as such no expense has been recorded.

7

On April 19, 2010 a director of the Company was granted compensation arrangements which provide that he may elect compensation in either cash or in options of the Company as follows: in 2010, $75,000 if election for cash or 250,000 shares at the option exercise price of $1.00 per share if election for options; in 2011 $150,000 if election for cash or 300,000 shares at the option exercise price of $1.00 per share if election for options. The director may elect compensation either in cash or in options with respect to 2010 on April 19, 2011 and April 19, 2012 with respect to 2011. In the event options are selected all such options shall be fully vested and exercisable upon the respective date of grant and may exercised until expiration on April 19, 2013. The Company has determined that the options were issued at fair value and as such no expense has been recorded. The director chose 250,000 options for his 2010 grant.

No options were exercised during the quarter ended August 31, 2011 and none were exercisable during the quarter ended August 31, 2010. The Company has determined that the vested options had an exercise price in excess of fair value and as such no expense was recorded.

NOTE 10 – CONTINGENT CANCELLATION OF SHARES OF COMMON STOCK

The Company has sold 2,212,592 shares of the Company’s common stock in private placements to foreign persons in reliance on the exemption from securities registration under Section 4(2) of the U.S. Securities Act of 1933, as amended, and Regulation S promulgated thereunder. In connection therewith, two of the Company’s shareholders, A Few Brilliant Minds Inc. and 2238646 Ontario Inc., had each entered into an agreement with the Company, the Tender And Cancellation Agreement Re Company Private Placements, dated as of April 19, 2010, pursuant to which they have each agreed to tender one-half-of-one share for each one share to be sold by the Company in private placements, and to each tender up to 4,000,000 shares of the Company’s common stock for cancellation, such that a total of up to 8,000,000 shares in the aggregate would be tendered and cancelled by such shareholders collectively.

As of August 31, 2011, the Shareholders had agreed to cancel an aggregate total of 2,212,592 common shares. A Few Brilliant Minds Inc. is no longer a party to this agreement.

NOTE 11 – SUBSEQUENT EVENTS

$200,000 Loan to the Company

On September 27, 2011, Brantford Resources Ltd. advanced $200,000 to the Company under the terms of a Secured Promissory Note. The terms of this note are as follows: (i) interest shall be calculated at an annual rate of 5%; (ii) the note shall be due on or before September 19, 2012; and (iii) security for the payment of the note shall include any and all assets of Loto and its subsidiaries. In the event of a default, the interest rate on this note shall increase to 15% per annum.

8

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Report.  Some of the statements contained in this Report that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. However, as the Company intends to issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, the Company is ineligible to rely on these safe harbor provisions. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Report, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

· Our ability to attract and retain management, and to integrate and maintain technical information and management information systems;

· Our ability to raise capital when needed and on acceptable terms and conditions;

· The intensity of competition;

· General economic conditions; and

· Changes in government regulations.

The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments.

Unless otherwise provided in this Report, references to the "Company," “Loto,” the "Registrant," the "Issuer," "we," "us," and "our" refer to Loto Inc.

Critical Accounting Policies and Estimates

The Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different conditions.

9

Plan of Operation

We are a development stage company and now also a deployment stage company.  We are developing a patent-pending software application which permits the secure purchase of lottery tickets on commercially available “smart” phones and similar mobile telecommunications devices.  A smart phone is a mobile phone offering advanced capabilities, often with personal computer-like functionality, such as e-mail, Internet access and other applications.  Our proprietary technology for facilitating the purchase of lottery tickets through commercially available smart phones and other mobile devices addresses all elements of lottery play, including secure player registration and authorization, number selection, settlement, winning number notification and other direct-to-customer marketing opportunities. We intend to license our software application to governments and other lottery operators as our primary source of revenue.  We do not intend to become a lottery operator.  During the foreseeable future, we expect to pursue our business outside of the United States.  Our business plan calls for launching our mobile lottery application in the target markets of the Caribbean, Canada, Mexico, South America, Asia (China, Vietnam), Africa, Europe (Turkey and the United Kingdom of Great Britain) and the Eastern bloc region.

We have advanced  our  working demonstrations of our lottery and sports betting application (which is currently operable on most Blackberry smart phones including the Pearl, the Curve, the Bold, and 8800 series and soon IOS or apple platforms such as IPhones and IPads), as well as a scratch card game that is operating on Android devices. Our current lottery software solution includes four of the six components that together will constitute our full mobile lottery application. The completed components include lottery game selection, lottery number picking, lottery number authorization, lottery player registration and some aspects of player messaging functions. The two components remaining to be developed for a complete system include financial settlement and some remaining player messaging functions. We believe our application is commercially viable and will provide a complete, fully functional and flexible mobile lottery platform for lottery operators worldwide.

As of the date of this Report, our mobile lottery software application has now been completed according to our stage 1 targets. It has been internally tested and reviewed is ready for commercial deployment for SMS and limited smart phone customers. It has not yet been commercially tested or utilized by any lottery operators and we have not yet generated any revenues from our technology. We anticipate our current in progress deployment in Haiti will generate revenues in early 2012.

Assets and Liabilities

As of August 31, 2011, the Company had total Assets of $139,933, including total current assets of $128,043.  This represented a decline from May 31, 2011, at which time the Company’s total assets were $288,746, including total current assets of $274,846. We have prepaid rent in the amount of $10,836 as a condition of renting business premises, which commenced on March 11, 2011 at Suite 502, 25 Adelaide Street in Toronto, Ontario.  We also own fixed assets with a cost of $31,060 which consists of computer equipment, office furniture and equipment and leasehold improvements.  The decrease in assets is predominately a result of using cash to fund expenses in the course of normal operations.

The Company’s total liabilities increased from $675,885 at May 31, 2011 to $761,474 at August 31, 2011.  This increase is the result of regular accruals made in the ordinary course of operations.  Accrued liabilities at August 31, 2011 totalled $305,780 and included the following: Payments due for programming and system testing of $149,306, accrued legal expenses of $15,241, accrued audit fees of $14,900, deferred rent payable of $14,896,  accrued consulting of $59,186, payable due to former shareholders $48,000 and general and administration payables of $4,251. Standby loans and interest totalled $453,502 at August 31, 2011.

Liquidity and Capital Resources

As of August 31, 2011, the Company had $97,321 in cash. As a development stage company, we have limited capital and limited operating resources. We do not have sufficient funds to pay our current accrued liabilities and the current cash on hand in our bank accounts is not sufficient to maintain our operations.

As a development stage company, we have limited capital and limited operating resources. We raised $2,079,092 under the terms of our co-founders’ agreements and our Series A private placements of restricted common stock.  The funds raised in the prior private placements will not be sufficient to meet our projected cash flow deficits from operations or to fund the development of our technology and products.

10

The cash on hand in our bank accounts is not sufficient to maintain our operations. We estimate our total overhead, costs and expenses related to completion of a commercially deployable version of our mobile lottery application, obtaining certification of our system by the Gaming Standards Association (GSA), and initiating full rollout of our products to our target markets over the next twelve months will be approximately $1,200,000.  We will need additional amounts of funding in order to expand our operations.

Management believes that without obtaining additional financing or developing an ongoing source of revenue, we will not launch successfully. Although we have actively been pursuing new business opportunities, we cannot give assurance that we will succeed in this endeavor, or be able to enter into necessary agreements to pursue our business on terms favorable to us. Should we be unable to generate additional revenues or raise additional capital, we could eventually be forced to cease business activities altogether.

Results of Operations for the Three Months Ended August 31, 2011 and August 31, 2010

Income

We are a development stage company and as of August 31, 2011 there were no contracts in place and no revenue has been received. We do not expect that revenue will be realized until late 2011.  We have concentrated our efforts on developing our business strategy and obtaining financing.  We have working models ready for demonstration and we have commenced our initial sales and marketing program.  We have had early stage meetings with some lottery operators in Canada and we are actively pursuing other opportunities in Canada and elsewhere. Our mobile lottery software application has not yet been utilized by any lottery operators and we have not yet derived any revenues from our technology.  There is no guarantee that we will be able to successfully develop and launch our technology or that it will generate sufficient revenue to sustain our operations.

Expenses

During the three months ended August 31, 2011, we incurred $195,350 in total operating expenses.  This was a decrease from the period ended August 31, 2010, during which we incurred expenses of $405,157 in total operating expenses.  Since the Company’s inception on September 16, 2008, expenses have totaled $2,656,521.

Included in the quarter August 31, 2010 was a $150,000 non-cash expense relating to the issuance of 200,000 shares of the Company’s common stock in consideration for assistance in listing on the Frankfurt Stock Exchange.

Systems development expenses of $80,238 for the three months ended August 31, 2011 were incurred for the creation and scoring of the Company’s development request for proposal which was issued in late August of 2010, and on-going refinement of the Statement of Work and contract.  Systems development expenses of $34,207 for the three months ended August 31, 2009 were incurred for the creation, modification, and maintenance of game demonstrations as well as furtherance of defining the carrier-grade product.

During the three months ended August 31, 2011, salaries expense was $57,951 compared to $127,637 for the three months ended August 31, 2010. The Company has reduced the salaries of full time staff and has allocated staff expense to systems development expense.

During the three months ended August 31, 2011, rent and office expenses of $15,824 were incurred for the head office of the company.  During the three months ended August 31, 2010 rent and office expenses were $27,315.

Legal and accounting fees of $10,176 were incurred for the three months ended August 31, 2011, for the creation of all required public company filings, financial statements and internal corporate needs.  This was a decline from the three months ended August 31, 2010, in which legal and accounting fees of $28,351 were incurred.

Director, Officer and Liability Insurance expenses of $8,117 were incurred for the three months ended August 31, 2011. This was a decrease from the $9,941 for the three months ended August 31, 2010.

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Marketing expenses for the three months ended August 31, 2011 were minimal at $981. Marketing expenses of $4,277 for the three months ended August 31, 2010 were incurred in the creation and printing of investor information, product information, specific lottery operator presentations and RFP’s.

Interest expense accrued on the Standby Loans was $4,765 for the three months ended August 31, 2011, which was a decrease from $5,591 for the three months ended August 31, 2010.

Our Plan of Operation for the Next Twelve Months

Our path to revenue is based upon completing the following work plan over the next twelve months:

1. Completion of the patent and trademark registrations.

2. Adherence to our Marketing Plan (see section below).

3. Completion of the systems development to ensure we have a robust product and all the required modules for end-to-end lottery play (including player registration, numbers selection, authorization, settlement, and player communication / marketing).  

4. As opportunities arise, partner with existing suppliers of games to lottery operators in order to mobilize existing lottery games.

5. Remain flexible in our business model to operate as a lottery retailer/distributor, license the technology for use, or sell the technology for use in a pre-defined jurisdiction, preferably in that order, as conditions deem appropriate.

6. Complete appropriate certifications in promising jurisdictions to become a lottery retailer/distributor and/or supplier to specific lottery operators.

7. Partner with the emerging internet gaming suppliers and new lottery licensees to mobilize their offerings.

8. Proactively communicate and present our product and brand to prospective lottery operators, and understand their needs for new sources of revenue.

Marketing Plan

Our marketing plan is a combination of branding, lottery association participation, communication, presentations, and meetings with lottery operators, public messaging, and partnership initiatives with other corporate entities.  Specifically, our plan calls for:

1.  Attending and participating in lottery association events / tradeshows in order to meet prospective clients, speak about mobile lottery opportunities, and present the Loto and Mobilotto brands. These would include the World Lottery Association as well as the North American Association of State & Provincial Lotteries, among others.

2. Review each geographical region to justify the development of a mobile gaming environment. Prioritization would be given to those countries with a combination of material lottery revenues, a high penetration of smart phone devices, favorable internet gaming regulations, and operators who express an interest in our product and service.

3. On a prioritized country basis, study the local lottery regulations, understand global and specific country lottery issues, and contact the lottery operators for visitation and demonstration of Loto products.  Currently, opportunities appear to be strong in Canada, Africa, Mexico, Asia, and Europe.  Also, the U.S. may become a market for Loto should existing restrictions on internet lottery be changed, or Loto’s geo-locational restrictions be confirmed.

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4. While brand and product marketing will be supported by the lottery operators and by the mobile network operators, we intend on pursuing additional local marketing efforts including mass awareness campaigns, cause support, and seeking specific customer input.

5. Develop relationships with existing internet gaming companies to “mobilize” their product offerings.

6. Once Loto’s product is developed and contracts in place, generate incremental sales through direct to customer marketing through their mobile devices.

Working Capital

While we do not have in-place working capital to fund normal business activities, we are actively seeking financing in the amount of $1,200,000.

Contractual Obligations and Other Commercial Commitments

The sole on-going commitment we have is for the rental of our head office, which runs to the end of November 2013 at a rate that approximates $6,100 per month.

Warrants

As of August 31, 2011, we had no outstanding warrants.

Common Stock

As of August 31, 2011, there were 31,739,630 shares issued and outstanding, of which 18,893,704 are restricted from trading.  

Employees

We currently have seven full-time employees who are dedicated to the primary functions of proprietary technology, sales and marketing to lottery operators, development of existing and next generation games for mobile application, and corporate administration.  These include our Chief Executive Officer and CFO, our President and CTO, our CIO, our Director of Development, our Development Analyst, our Director of Human Resources and Administration, and our Creative Director.

We expect to hire additional full time employees in the coming year as necessities dictate.

We have engaged consultants for accounting, legal, and other part-time and occasional services.

Officer and Director Transitions

Resignation of Gino Porco as Director

Effective as of June 2, 2011, Mr. Gino Porco has resigned as a member of the Board of Directors of the Company. 

Appointment of Fulvio Ciano as President and Chief Technology Officer

Effective as of June 2, 2011, Mr. Fulvio Ciano has been appointed as the Company’s President and Chief Technology Officer.  Mr. Stephen Knight, who previously held the position of the Company’s President, remains as the Company’s Chief Executive Officer, Chief Financial Officer and as a member of the Company’s Board of Directors.

13

Share Cancellations

On June 16, 2011 the Company entered into a resignation and share cancellation agreement with Mr. Gino Porco, who was one of the founders of Company, and A Few Brilliant Minds Inc. (AFBMI).  The Company agreed to repay $85,675 due to the founder within 90 days. In addition, the Company also entered into share cancellation agreements dated June 20, 2011 with two shareholders to cancel 4,800,000 common shares in return for the original purchase price of $48,000.

As a result of the foregoing issuances and cancellations, the Company has 31,739,630 common shares outstanding as of the date of this Report.

Off-Balance Sheet Arrangements

There are no off balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Subsequent Events

$200,000 Loan to the Company

On September 27, 2011, Brantford Resources Ltd. advanced $200,000 to the Company under the terms of a Secured Promissory Note.  The terms of this note are as follows: (i) interest shall be calculated at an annual rate of 5%; (ii) the note shall be due on or before September 19, 2012; and (iii) security for the payment of the note shall include any and all assets of Loto and its subsidiaries. In the event of a default, the interest rate on this note shall increase to 15% per annum.

Item 3.   Qualitative and Quantitative Disclosure About Market Risk

Not applicable

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Item 4.    Controls and Procedures

Management's Report on Internal Control Over Financial Reporting

Management of our company is responsible for establishing and maintaining adequate internal control over financial reporting. Our company's internal control over financial reporting is a process, under the supervision of the Chief Executive Officer and Chief Financial Officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with United States generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:

· Pertain to the maintenance of records that in all reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets;

· Provide reasonable assurance of the completeness and authorization for checks to be issued;

· Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally acceptable accounting principles, and that the receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and

· Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

As of the end of the period covered by this report, the Company carried out, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) in ensuring that information required to be disclosed by the Company in its reports is recorded, processed, summarized and reported within the required time periods. Based on their evaluation of the Company’s disclosure controls and procedures as of August 31, 2011, the Company’s Chief Executive Officer and Chief Financial Officer has concluded that, as of that date, the Company’s controls and procedures were effective for the purposes described above.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended August 31, 2011 that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is not, and has not been during the period covered by this Quarterly Report, a party to any legal proceedings.

ITEM 1A. RISK FACTORS

Not Applicable.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not Applicable.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

ITEM 4: RESERVED

Not Applicable.

ITEM 5: OTHER INFORMATION

Not Applicable.

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ITEM 6.	EXHIBITS
Exhibit	Description
Exhibit 10.12	Share Cancellation Agreement, by and between the Company, A Few Brilliant Minds Inc. and Gino Porco, dated as of June 16, 2011, incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 13, 2011.
Exhibit 10.13	Share Cancelation Agreement, by and between the Company and NAC Investment Ltd., dated as of June 20, 2011, incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 13, 2011.
Exhibit 10.14	Share Cancellation Agreement, by and between the Company and 2208155 Ontario Inc., dated as of June 20, 2011, incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 13, 2011.
Exhibit 31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
Exhibit 32.1	Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

*Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LOTO INC.
Date:  November 15 , 2011	By:	/s/ Fulvio Ciano
		Name:	Fulvio Ciano
		Title:	Chief Executive Officer, Principal Financial Officer and Chief Accounting Officer

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EX-31.1

Exhibit 31.1

OFFICER'S CERTIFICATION PURSUANT TO SECTION 302

I, Fulvio Ciano, certify that:

1.   I have reviewed this amended quarterly report on Form 10-Q of Loto Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 (a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 (b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 (c)  Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 (d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 (a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 (b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

November 15, 2011

By:	/s/ Fulvio Ciano
	Name:	Fulvio Ciano
	Title:	Principal Executive Officer and Principal Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Loto Inc. on the amended Form 10-Q for the quarter ended August 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fulvio Ciano, Principal Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:

 (1)   The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 (2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 15, 2011

By:	/s/ Fulvio Ciano
	Name:	Fulvio Ciano
	Title:	Principal Executive Officer and Principal Financial Officer

XML

Consolidated Balance Sheet (Parenthetical) (USD $)	Aug. 31, 2011	May 31, 2011
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	31,739,630	31,739,630
Common stock, shares outstanding	31,739,630	31,739,630

XML

Consolidated Statement of Operations (USD $)	3 Months Ended		35 Months Ended
	Aug. 31, 2011	Aug. 31, 2010	Aug. 31, 2011
REVENUE	$ 0	$ 0	$ 0
EXPENSES
General and administrative expenses	195,350	399,566	2,616,249
OPERATING LOSS	195,350	399,566	2,616,249
OTHER EXPENSE
Interest Expense	4,765	5,591	40,272
NET LOSS FOR THE PERIOD	$ 200,115	$ 405,157	$ 2,656,521
Basic and fully diluted earnings per share	$ (0.01)	$ (0.01)
Weighted Average Shares Outstanding	36,660,000	54,662,903

XML

Document and Entity Information	3 Months Ended
	Aug. 31, 2011	Oct. 14, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	Loto Inc.
Entity Central Index Key	0001464766
Document Type	10-Q
Document Period End Date	Aug. 31, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--05-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		31,739,630

XML

Standby Loan

3 Months Ended

Aug. 31, 2011

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

NOTE 6 – STANDBY LOAN

On August 3, 2009, two shareholders, Mhalka Capital Investments Ltd. and 1476448 Ontario Inc., made a standby financing commitment to Loto under which they agreed to provide funding to Loto. (the “Standby Loan”). On April 19, 2010, 2238646 Ontario Inc. entered into a Novation to the Standby Financing Commitment with the Company pursuant to which 2238646 Ontario Inc. has agreed to the remaining commitments of Mhalka Capital Investment Ltd. Draws made on the commitment amount are subject to interest as of the date of the draw at prime rate plus two percent per annum. These amounts are repayable thirty calendar days after demand at any time following the earlier of (a) September 30, 2010 or (b) the date upon which the Company is in receipt of revenues or proceeds from the sales of equity securities. If Loto breaches any of the covenants, the default rate will be 15% per annum. The standby financing commitment expired on September 30, 2010. As of August 31, 2011, $367,826 including accrued interest was drawn and payable against this commitment.

In addition, A Few Brilliant Minds, a related party, has advanced $85,676 including accrued interest. As a result of a Share Cancellation Agreement (see Note 7), this loan is to be repaid.

XML

Subsequent Events

3 Months Ended

Aug. 31, 2011

Subsequent Events [Abstract]

Subsequent Events [Text Block]

NOTE 11 – SUBSEQUENT EVENTS

$200,000 Loan to the Company

On September 27, 2011, Brantford Resources Ltd. advanced $200,000 to the Company under the terms of a Secured Promissory Note. The terms of this note are as follows: (i) interest shall be calculated at an annual rate of 5%; (ii) the note shall be due on or before September 19, 2012; and (iii) security for the payment of the note shall include any and all assets of Loto and its subsidiaries. In the event of a default, the interest rate on this note shall increase to 15% per annum.

XML

Going Concern

3 Months Ended

Aug. 31, 2011

Going Concern [Abstract]

Going Concern [Text Block]

NOTE 2 – GOING CONCERN

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any revenues since inception, has an accumulated loss of $2,656,521 as of August 31, 2011 and is unlikely to generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon, among other things, the continued financial support from its shareholders, the ability of the Company to obtain necessary equity or debt financing, and the attainment of profitable operations. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. There is no assurance that the Company will be able to generate revenues in the future. These financial statements do not give any effect to any adjustments that would be necessary should the Company be unable to continue as a going concern.

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Commitments

3 Months Ended

Aug. 31, 2011

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

NOTE 8 – COMMITMENTS

The Company is obligated under a lease agreement to lease the premises at 25 Adelaide Street in Toronto, Ontario, Canada until November 29, 2013. The minimum payments due are as follows:

2011 – $ 24,208

2012 – $ 72,624

2013 – $ 66,572

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Stock Option Grants

3 Months Ended

Aug. 31, 2011

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 9 – STOCK OPTION GRANTS

On April 19, 2010, the Company granted 1,900,000 options to three members of the Company’s Board of Directors at an exercise price of $1.50 per share. The options vested on April 19, 2011, and 950,000 options may be exercised on April 19, 2011 and a further 950,000 options may be exercised on April 19, 2012. The right to exercise all of the options will expire and terminate on April 19, 2013. The Company has determined that the options were issued at fair value and as such no expense has been recorded.

On April 19, 2010 a director of the Company was granted compensation arrangements which provide that he may elect compensation in either cash or in options of the Company as follows: in 2010, $75,000 if election for cash or 250,000 shares at the option exercise price of $1.00 per share if election for options; in 2011 $150,000 if election for cash or 300,000 shares at the option exercise price of $1.00 per share if election for options. The director may elect compensation either in cash or in options with respect to 2010 on April 19, 2011 and April 19, 2012 with respect to 2011. In the event options are selected all such options shall be fully vested and exercisable upon the respective date of grant and may exercised until expiration on April 19, 2013. The Company has determined that the options were issued at fair value and as such no expense has been recorded. The director chose 250,000 options for his 2010 grant.

No options were exercised during the quarter ended August 31, 2011 and none were exercisable during the quarter ended August 31, 2010. The Company has determined that the vested options had an exercise price in excess of fair value and as such no expense was recorded.

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Changes to Stockholders' Equity (Deficiency)

3 Months Ended

Aug. 31, 2011

Equity [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 7 – CHANGES TO STOCKHOLDERS’ EQUITY (DEFICIENCY)

On June 16, 2011 the Company entered into a Share Cancellation Agreement with one of the founders and his company A Few Brilliant Minds Inc. (AFBMI). The founder desired to pursue other business interests and submitted his resignation from the Company's Board together and tendered for cancellation 18,793,704 common shares owned by AFBMI. Concurrent with the execution of the agreement, the Company agreed to repay $85,675 (part of the standby loan, see Note 6) due to the founder within 90 days of that Agreement.

In addition, the Company also entered into Share Cancellation Agreements dated June 20, 2011 with two shareholders to cancel 4,800,000 common shares in return for the original purchase price of $48,000. The amount due is included in accounts payable.

XML

Consolidated Statement of Cash Flows (USD $)	3 Months Ended		35 Months Ended
	Aug. 31, 2011	Aug. 31, 2010	Aug. 31, 2011
OPERATING ACTIVITIES:
Net loss for the period	$ (200,115)	$ (405,157)	$ (2,656,521)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization	2,010	1,763	19,170
Common stock issued for services	0	150,000	150,000
Cancellation of Common stock issued for services	0	0	(150,000)
Interest expensed but not paid	4,765	5,591	27,571
Changes in operating assets and liabilities:
Prepaid rent	0	0	(10,836)
Other current assets	90,962	(12,560)	(19,886)
Accrued liabilities	80,824	(6,812)	307,660
NET CASH USED IN OPERATING ACTIVITIES	(21,554)	(267,175)	(2,332,842)
INVESTING ACTIVITIES:
Acquisition of capital assets	0	0	(31,060)
NET CASH USED IN INVESTING ACTIVITIES	0	0	(31,060)
FINANCING ACTIVITIES:
Deposit for stock subscription	0	0	150,000
Proceeds from loan	0	0	425,931
Issuance (net of redemption) of common stock	(49,879)	0	1,879,555
Proceeds from stockholder loan	0	0	191
NET CASH PROVIDED BY INVESTING ACTIVITIES	(49,879)	0	2,455,677
Effect of exchange rates on cash	15,592	3,808	5,546
(DECREASE) INCREASE IN CASH	(55,841)	(263,367)	97,321
CASH - BEGINNING OF PERIOD	153,162	309,018	0
CASH - END OF PERIOD	97,321	45,651	97,321
Cash paid during the year
Interest paid	0	0	0
Income taxes	$ 0	$ 0	$ 0

XML

Receivables

3 Months Ended

Aug. 31, 2011

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 3 – RECEIVABLES

Receivables totalled $19,886 relating to goods and service tax receivables.

XML

Property and Equipment

3 Months Ended

Aug. 31, 2011

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

			Accumulated				August 31,
	Cost		Depreciation		Net		2010
Leasehold improvements	$	3,500	$	3,500	$	0	$	1,788
Computer equipment	$	18,950	$	12,040	$	6,910	$	14,806
Office furniture and equipment	$	8,610	$	3,630	$	4,980	$	7,134
Total	$	31,060	$	19,170	$	11,890	$	23,728

Total depreciation expense for the three months ended August 31, 2011 was $2,010 (2010 - $1,763).

XML

Accrued Liabilities

3 Months Ended

Aug. 31, 2011

Payables and Accruals [Abstract]

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

NOTE 5 – ACCRUED LIABILITIES

Accrued liabilities totalled $305,780 and included the following: Payments due for programming and system testing of $149,306, accrued legal expenses of $15,241, accrued audit fees of $14,900, deferred rent payable of $14,896, accrued consulting of $59,186, payable due to former shareholders $48,000 and general and administration payables of $4,251.

XML

Consolidated Statement of Stockholders' Equity (Deficiency) (USD $)	Common Stock		Additional Paid-in Capital	Deficit Accumulated During Development Stage	Other Comprehensive Loss	Total
BALANCE at Sep. 15, 2008	$ 0		$ 0	$ 0	$ 0	$ 0
BALANCE SHARES, at Sep. 15, 2008	0		0	0	0	0
Capital contribution in connection with formation of Mobilotto, Inc.	0		91	0	0	91
Net loss	0		0	(10,979)	0	(10,979)
Sale of shares	2,000		18,000	0	0	20,000
Sale of shares, shares	20,000,000		0	0	0	0
Shares issued in connection with Acquisition of Mobilotto, Inc.	2,000		(2,000)	0	0	0
Shares issued in connection with Acquisition of Mobilotto, Inc., shares	20,000,000		0	0	0	0
BALANCE at May. 31, 2009	4,000		16,091	(10,979)	0	9,112
BALANCE SHARES, at May. 31, 2009	40,000,000		0	0	0	0
Net loss	0		0	(1,122,792)	0	(1,122,792)
Sale of shares	1,500		148,500	0	0	150,000
Sale of shares, shares	15,000,000		0	0	0	0
Other comprehensive gain / (loss) resulting from foreign exchange transactions/conversions	0		0	0	(598)	(598)
Cancellation of Founders' shares	(100)		0	0	0	(100)
Cancellation of Founders' shares, shares	(1,000,000)		0	0	0	0
Sale of shares	57		859,386	0	0	859,443
Sale of shares, shares	572,963		0	0	0	0
BALANCE at May. 31, 2010	5,457		1,023,977	(1,133,771)	(598)	(104,935)
BALANCE SHARES, at May. 31, 2010	54,572,963		0	0	0	0
Net loss	0		0	(1,322,635)	0	(1,322,635)
Sale of shares	140		1,049,860	0	0	1,050,000
Sale of shares, shares	1,400,000		0	0	0	0
Other comprehensive gain / (loss) resulting from foreign exchange transactions/conversions	0		0	0	(9,448)	(9,448)
Issuance of shares for Consulting services	20		149,980	0	0	150,000
Issuance of shares for Consulting services, shares	200,000		0	0	0	0
Cancellation of Founders' shares	(121)		0	0	0	(121)
Cancellation of Founders' shares, shares	(1,212,592)		0	0	0	0
Issuance of shares to certain existing shareholders	57		(57)	0	0	0
Issuance of shares to certain existing shareholders, shares	572,963		0	0	0	0
Cancellation of shares issued for Consulting services	(20)		(149,980)	0	0	(150,000)
Cancellation of shares issued for Consulting services, shares	(200,000)		0	0	0	0
BALANCE at May. 31, 2011	5,533		2,073,780	(2,456,406)	(10,046)	(387,139)
BALANCE SHARES, at May. 31, 2011	55,333,334		0	0	0	0
Net loss	0		0	(200,115)	0	(200,115)
Other comprehensive gain / (loss) resulting from foreign exchange transactions/conversions	0		0	0	15,592	15,592
Cancellation of Founders' shares	(1,879)		0	0	0	(1,879)
Cancellation of Founders' shares, shares	(18,793,704)		0	0	0	0
Cancellation of Shares (Note 7)	(480)	[1]	(47,520)	0	0	(48,000)
Cancellation of Shares, shares (Note 7)	(4,800,000)		0	0	0	0
BALANCE at Aug. 31, 2011	$ 3,174		$ 2,026,260	$ (2,656,521)	$ 5,546	$ (621,541)
BALANCE SHARES, at Aug. 31, 2011	31,739,630		0	0	0	0

[1] (Note 7)

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Organization and Basis of Presentation

3 Months Ended

Aug. 31, 2011

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Organization and Business Description

Loto Inc. (“Loto” or the “Company”), together with its wholly owned subsidiary Mobilotto systems, Inc. (“Mobilotto”), are development stage companies. The Company is developing a patent-pending software application that permits the secure purchase of lottery tickets on commercially available “smart” phones and similar mobile telecommunications devices. A smart phone is a mobile phone offering advanced capabilities, often with personal computer-like functionality, such as e-mail, Internet access and other applications. Proprietary technology for facilitating the purchase of lottery tickets addresses all elements of lottery play, including secure player registration and authorization, number selection, settlement, winning number notification and other direct-to-customer marketing opportunities. It is the intention to operate or license software applications with governments and other lottery operators as the primary source of revenue. There is no intention to become a lottery operator. The mobile lottery software application has not yet been utilized by any lottery operator, and no revenues have yet been generated from the technology.

Basis of Consolidation and Development Stage Activities

These consolidated financial statements include the accounts of Loto Inc., which was incorporated on April 22, 2009 in the state of Nevada and its wholly-owned subsidiary, Mobilotto Systems, Inc., which was incorporated in Ontario, Canada on September 16, 2008. On May 13, 2009 the stockholders of Mobilotto contributed all of the outstanding equity interests in Mobilotto to the Company in exchange for 20,000,000 shares of the Company’s common stock. This transaction has been accounted for as a transaction between entities under common control in accordance with authoritative guidance issued by the Financial Accounting Standards Board. Accordingly, the net assets were recognized in the consolidated financial statements at their carrying amounts in the accounts of Mobilotto at the transfer date and the results of operations of Mobilotto are included as though the transaction had occurred at the beginning of the period.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. All intercompany balances and transactions have been eliminated.

Since inception the Company has been engaged in organizational activities, has been developing its business model and software, and marketing its product to lottery operators, but has not earned any revenue from operations. Accordingly, the Company’s activities have been accounted for as those of a “Development Stage Enterprise”, as set forth in authoritative guidance issued by the Financial Accounting Standards Board. Among the disclosures required are that the Company’s financial statements be identified as those of a development stage company, and that the statements of operations, stockholders’ equity and cash flows disclose activity since the date of the Company’s inception.

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Contingent Cancellation of Shares of Common Stock

3 Months Ended

Aug. 31, 2011

Contingent Cancellation Of Shares Of Common Stock [Abstract]

Contingent Cancellation Of Shares Of Common Stock [Text Block]

NOTE 10 – CONTINGENT CANCELLATION OF SHARES OF COMMON STOCK

The Company has sold 2,212,592 shares of the Company’s common stock in private placements to foreign persons in reliance on the exemption from securities registration under Section 4(2) of the U.S. Securities Act of 1933, as amended, and Regulation S promulgated thereunder. In connection therewith, two of the Company’s shareholders, A Few Brilliant Minds Inc. and 2238646 Ontario Inc., had each entered into an agreement with the Company, the Tender And Cancellation Agreement Re Company Private Placements, dated as of April 19, 2010, pursuant to which they have each agreed to tender one-half-of-one share for each one share to be sold by the Company in private placements, and to each tender up to 4,000,000 shares of the Company’s common stock for cancellation, such that a total of up to 8,000,000 shares in the aggregate would be tendered and cancelled by such shareholders collectively.

As of August 31, 2011, the Shareholders had agreed to cancel an aggregate total of 2,212,592 common shares. A Few Brilliant Minds Inc. is no longer a party to this agreement.

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Consolidated Balance Sheet (USD $)	Aug. 31, 2011		May 31, 2011
CURRENT ASSETS:
Cash	$ 97,321		$ 153,162
Prepaid rent	10,836		10,836
Receivables (Note 3)	19,886	[1]	110,848	[1]
TOTAL CURRENT ASSETS	128,043		274,846
Property and equipment, at cost	31,060		31,060
Accumulated amortization	(19,170)		(17,160)
Net capital assets (Note 4)	11,890	[2]	13,900	[2]
TOTAL ASSETS	139,933		288,746
CURRENT LIABILITIES:
Accrued liabilities (Note 5)	305,780	[3]	226,836	[3]
Standby loan (Note 6)	453,502	[4]	448,737	[4]
Due to stockholders	2,192		312
CURRENT LIABILITIES AND TOTAL LIABILITIES	761,474		675,885
STOCKHOLDER'S EQUITY:
Common stock, par value $0.0001 (note 7) 100,000,000 shares authorized 31,739,630 issued and outstanding (2010-54,572,963)	3,174	[5]	5,533	[5]
Additional paid-in capital	2,026,260		2,073,780
Other comprehensive gain (loss)	5,546		(10,046)
Deficit accumulated during development stage	(2,656,521)		(2,456,406)
TOTAL STOCKHOLDERS' (DEFICIENCY) EQUITY	(621,541)		(387,139)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY	$ 139,933		$ 288,746

[1] Note 3

[2] Note 4

[3] Note 5

[4] Note 6

[5] Note 7