UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 ---------------
                                   FORM 10-KSB

              Annual Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934
                     For the Fiscal Year Ended June 30, 2004

                           COMMISSION FILE NO. 0-22191

                        LOTTERY & WAGERING SOLUTIONS INC.
                 (Name of Small Business Issuer in its Charter)

                 Delaware                                65-0675901
     (State or other Jurisdiction of          (IRS Employer Identification No.)
     Incorporation  or Organization)


         2250 N.W. 136 Avenue, Suite 103, Pembroke Pines, Florida 33028
               (Address of Principal Executive Offices) (Zip Code)


                                 (954) 885-0560
                (Issuer's Telephone Number, Including Area Code)


Securities registered under Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g)
of the Exchange Act:                             Common Stock, $0.001 par value
                                                               (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 __

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X

The small business issuer's revenues for its most recent fiscal year are
$5,134,888.

The aggregate market value of the issuer's common stock held by non-affiliates
computed by reference to the price at which the common equity was sold, or the
average bid and asked prices, as of September 30, 2004 was $690,820.

The number of shares of the issuer's common stock outstanding at September 30,
2004 was 879,996.

Transitional Small Business Disclosure Format.   Yes __     No X


<PAGE>


                                TABLE OF CONTENTS

                                     PART I
                                                                          PAGE
Item 1.    Description of Business ....................................    3
           Company Overview............................................    3
           Recent Financial History....................................    4
           Casino Operations...........................................    4
              Plaza Hotel..............................................    4
              Golden Tulip Casino Hotel Conference and Leisure Center..    5
           Sakhalin Project............................................    5
           Lottery & Gaming System Investment..........................    6
           Employees...................................................    6
Item 2.    Description of Property.....................................    7
Item 3.    Legal Proceedings...........................................    7
Item 4.    Submission of Matters to a Vote of Security Holders.........    8

                                     PART II

Item 5.    Market for Common Equity and Related Stockholder Matters....    8
           Equity Compensation Plan Information........................    9
Item 6.    Management's Discussion and Analysis or Plan of Operations..    9
           Results of Operations.......................................    9
           Liquidity and Capital Resources.............................    13
           Recent Accounting Statements and Pronouncements.............    14
           Risk Factors................................................    16
Item 7.    Financial Statements........................................    17
Item 8.    Changes in and Disagreements with Accountants On Accounting
             and Financial Disclosure..................................    17
Item 8A    Controls and Procedures.....................................    17

                                    PART III

Item 9.    Directors and Executive Officers of the Registrant..........    18
           Section 16(a) Beneficial Ownership Reporting Compliance.....    19
           Code of Ethics..............................................    19
           Audit Committee.............................................    19
Item 10.   Executive Compensation......................................    20
           Summary Compensation Table..................................    20
           Option SAR/Grants for the Twelve Months Ended
               June 30, 2003...........................................    21
           Aggregated Option/SAR ......................................    21
           Directors Compensation......................................    21
           Identification of Directors.................................    22
Item 11.   Security Ownership of Certain Beneficial Owners and
               Management and Related Stockholder Matters..............    22





Item 12.   Certain Relationships and Related Transactions..............    23
Item 13.   Exhibits and Reports on Form 8-K............................    24
Item 14.   Principal Accountant Fees and Services......................    26
       .   Signatures..................................................    27


                                       2


<PAGE>


                           FORWARD LOOKING STATEMENTS

         This Annual Report on Form 10-KSB contains "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. All statements
other than statements of historical fact included in this document regarding the
Company's strategies, plans, objectives, expectations, and future operating
results are forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable at this
time, it can give no assurance that such expectations will prove to have been
correct. Actual results could differ materially based upon a number of factors
including but not limited to, uncertainties associated with the risks of ongoing
litigation in Suriname including the risk of the eviction of the Company's joint
venture entity from its premises in Suriname, and of the costs of relocating its
casino operations if necessary (See "Legal Proceedings"); the Company's working
capital deficit and accumulated deficit; risks associated with geographic
expansion and new lines of business; risks inherent in international businesses;
risks relating to the Company's investment in an entity engaged in the
development of the Vietnamese lottery; possible change in control; political and
economic factors; risks of foreign legal systems; restrictions and controls on
foreign investments and acquisitions of majority interests; government
regulation; nature of the gaming industry; dependence on successful gaming
operations; collectability of casino and lottery receivables; effects of
inflation and currency fluctuations; competition; reliance on advances and
dividends from subsidiaries; dependence on key personnel; lack of key man
insurance; volatility of prices of shares; potential adverse impact on market
price of shares, shares eligible for future sale, and additional registered
securities; potential adverse effect of future issuances of authorized preferred
stock; limited public market and liquidity, and other risks detailed in the
Company's Securities and Exchange Commission filings.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS
                                COMPANY OVERVIEW

         Lottery & Wagering Solutions Inc. ("LWSI") was incorporated under the
laws of the State of Delaware on March 6, 1996 as Conserver Corporation of
America, changed its name on December 2, 1997 to CCA Companies Incorporated, and
on October 1, 2001 changed its name to its present name. The current active
business of LWSI (with its subsidiaries, the "Company") is the operation of a
gaming casino in Suriname 50% owned by the Company, and the organization,
implementation and operation of an additional casino in Suriname recently leased
to a wholly owned subsidiary of the Company. The Company is also pursuing the
sale of property initially acquired by it for the development of a casino and
hotel project in Sakhalin in the Russian Federation on an island north of Japan
(the "Sakhalin Project"). In addition, in May 2001, the Company entered into a
contract under which, subject to significant pre-acquisition conditions, the
Company was to acquire an entity which held a lottery gaming system contract
which granted to it the exclusive right to provide an on-line lottery and sports
betting system in Ho Chi Minh City and the Southern Provinces of Vietnam. In
April 2003, the Company restructured its investment in this project by
exchanging its interests therein for shares and securities of Pacific Lottery
Corporation ("PLC"), a Canadian company whose shares are traded on the Canadian
Venture Exchange, and which has undertaken to pursue the development of the
lottery system in Vietnam. See "Lottery and Gaming System Investment" herein.

         Since 1998, the Suriname casino, owned by Suriname Leisure Company
A.V.V. ("SLC"), an Aruba joint venture entity 50% owned by the Company, and 50%
owned by Parbhoe Handelmij NV ("Parbhoe") has been operating in the Plaza Hotel
in Paramaribo, the Capital of Suriname. The Company's 100% owned Delaware
subsidiary, Dorsett Hotel & Resorts, Inc. ("Dorsett") manages the casino.
Substantially all of the Company's revenues are derived from these operations.

                                       3

<PAGE>


         On July 30, 2003, the Subdistrict Court of Suriname issued an order
evicting SLC from such quarters finding that Parbhoe, the lessor, did not have
the legal right to grant the lease under which SLC was occupying such premises.
The order of eviction was appealed and was temporarily stayed pending such
appeal. On July 16, 2004, the Court of Justice, the Suriname appellate court,
annulled the order of eviction holding that such an order could not be granted
without a full hearing. In August 2004, a new summary eviction proceeding was
commenced against SLC in which the plaintiff alleged that a new Suriname
regulation requiring the holder of a gaming license to commence operating in six
months required it to take possession of the Plaza Hotel and therefore justified
consideration of an eviction order in a summary proceeding. A decision on that
proceeding is expected to be rendered imminently. See "Casino Operations" and
"Legal Proceedings".

         Despite numerous discussions and several agreements, the Company was
not able to obtain the necessary financing to develop the Sakhalin Project. The
Sakhalin Project involved plans to develop a hotel/casino complex on a ten-acre
site in the center of the City of Yuzhno-Sakhalinsk. In April, 2003, the Company
transferred one half of its leasehold rights in the Sakhalin Project to a third
party for $1,300,000 (See "Sakhalin Project"). The Company continues to seek a
purchaser for the remainder of its interests in the Sakhalin Project.

RECENT FINANCIAL HISTORY

         During the years ended June 30, 2004 and June 30, 2003, the Company had
revenues of approximately $5,135,000 and $7,236,000, respectively, all from the
Suriname casino operations.

         Since August 1999, the Company's primary recurring source of cash,
exclusive of certain loans and securities sales, was the cash payments from SLC
which is the joint venture entity that owns the Suriname casino.

         On October 1, 2001, all of the shares of the common stock of the
Company were consolidated by a twenty-into-one reverse split. Unless otherwise
stated, information concerning outstanding shares of common stock and prices
thereof for periods prior to October 2001 has been adjusted to account for this
share consolidation.

CASINO OPERATIONS

PLAZA HOTEL

         Dorsett and SLC are currently operating a casino in Paramaribo,
Suriname. The Company's Suriname casino, part of a joint venture, occupies two
leased floors totaling about 20,000 square feet in the Plaza Hotel, which is a
downtown hotel in the capital city of Paramaribo. The Company began operations
of its Suriname casino in October 1998 in temporary quarters. The permanent
casino was completed and became operational in March 1999. The casino has
approximately 15 gaming tables, 174 slot machines and a 50-seat restaurant.
There are other casinos in Paramaribo, the capital city, many of which compete
with SLC for the same local gaming clientele.

         The Suriname casino was constructed by the Company pursuant to an
agreement with Parbhoe, the local company that owned the casino license and
which became the 50% owner of the joint venture entity, SLC. SLC entered into
the Suriname Casino Management Agreement in April 1998 for the Company, through
Dorsett, to operate the Casino for fifteen years at a base fee equal to 3% of
gross revenues calculated on an annual basis and payable monthly, plus an
incentive fee of ten percent of gross operating profits, payable monthly. SLC
entered into a lease agreement for the casino premises from Parbhoe, which
represented to Dorsett that it was the hotel owner, for fifteen years beginning
February 1998 for $200,000 per year, subject to locally based escalation. As set
forth above, the Company was subject to an order of eviction from such premises
which has been annulled on appeal. Prior to the issuance of the eviction order,
the Company had been advised that the rent required by the lease exceeded the
lawful rent permitted under the rent control laws of Suriname by approximately
$13,500 per month and was seeking a refund of rent paid and a limitation on
future rent.
                                       4

<PAGE>


         Because of uncertainties caused by the order of eviction issued by the
Suriname Court, the Company actively sought to establish its own casino
operations at another location in Paramaribo. Through its subsidiaries the
Company acquired a license to operate a casino in Suriname. Although the
appellate decision ended the initial summary eviction proceeding, the plaintiff
in August 2004, commenced a new summary eviction proceeding and, if it is
unsuccessful in this new proceeding may commence a plenary proceeding seeking
eviction if it chooses to do so. (See "Legal Proceedings").

GOLDEN TULIP CASINO, HOTEL CONFERENCE AND LEISURE CENTER

         On September 7, 2004, through a wholly owned Aruban entity created by
the Company for such transaction, The Golden Tulip Leisure A.V.V., ("GTL") the
Company entered into a five year agreement under which it leased additional
premises in Paramaribo, Suriname, and obtained the use of certain gaming and
other equipment on such premises. GTL also acquired the exclusive use, on behalf
of the owner of the hotel, of the Full Gaming License and Food and Beverage
License.

         The leased premises consist of the ground floor and first floor
compromising approximately 15,000 square feet of the Golden Tulip Casino, Hotel
Conference and Leisure Center, a six floor hotel. The premises are suitable for
and are to be used by GTL for a slot casino area, a gaming area, and restaurant,
bar and administrative and personnel areas. GTL is entitled to use the 173 slot
machines and 7 gaming tables , kitchen equipment, and related paraphernalia
located on the premises during the term.

         Under the contract and lease, GTL is obligated to pay US $40,000 per
month, and has an option to extend the agreement for an additional five year
term. LWSI has not guaranteed the obligations or performance of GTL under the
contract and lease.

         The Company is in the process of undertaking a comprehensive review of
the operations to be conducted at these premises and is currently undertaking
maintenance and upgrading of mechanical equipment, software and hardware.

SAKHALIN PROJECT

         The Company entered into a stock purchase agreement on October 24,
1997, (the "Sakhalin Agreement") with Sakhalin General Trading Investments
Limited ("SGTI") and an assignment agreement with Sovereign Gaming and Leisure
Limited ("Sovereign") on December 12, 1997, each a limited liability company
organized under the laws of Cyprus. Pursuant to the Sakhalin Agreement, the
Company acquired all of the outstanding shares of SGTI and SGTI's rights and
interest in a project to develop the Sakhalin Project, and SGTI's ownership
interest in 85% of Sakhalin City Center Ltd. ("SCC"). SCC is a closed joint
stock company incorporated under the laws of the Russian Federation that holds
certain rights, including a 101-year ground lease on the proposed site of the
Sakhalin Project, and a guarantee by the city of Yuzhno-Sakhalinsk (the "City")
to issue a gaming license to SCC.

         Pursuant to the Sakhalin Agreement, SCC was to develop, subject to
obtaining financing, a hotel/casino complex on a ten-acre site in the center of
the City of Yuzhno-Sakhalinsk. Because the Company has been unable to obtain
financing for this project, it has made efforts to sell its rights in the
Sakhalin Project or sub-lease all or a portion of the property, which it has
leased from the City for the Sakhalin Project.

         In April 2003, SGTI entered into a series of agreements (dated as of
March 20, 2003) under which it transferred one half of the leasehold rights held
by SCC to a third party in return for payment of $1,300,000. Under these
agreements, SCC transferred to the purchaser the sublease rights to
approximately five acres of the property, and one half of the shares of SCC
which it held. Consummation of the transactions were conditioned upon the
registration by the purchaser of the Sublease of such five acres from the City
of Yuzhno-Sakhalinsk which has now occurred. The purchaser has agreed to return
to SGTI, for nominal consideration, the shares of SCC if it acquires a direct
lease from the City for the portion of the property subject to the sublease.
SGTI paid a fee of $200,000 to a consultant for assistance in connection with
matters related to this transaction.


                                       5

<PAGE>

         Approximately $700,000 expended in connection with obtaining the
original lease agreement and demolition costs remains on the Company's
consolidated balance sheet at June 30, 2004.

         The Company is continuing to explore alternatives for the sale or other
disposition of its remaining interests in the Sakhalin Project.

LOTTERY & GAMING SYSTEM INVESTMENT.

         In May 2001, the Company entered into a contract to acquire an entity
("EMSI") which held the exclusive right and obligation to supply an on-line
lottery and sports lottery system, and to operate it, in Ho Chi Minh City and
the Southern provinces of Vietnam. Certain conditions to that contract were not
fulfilled, and the Company subsequently determined that it was in its best
interests to assign its rights in the contract to a Canadian entity, Pacific
Lottery Corporation ("PLC"), and to restructure its cash investment in the
project into common shares of PLC. In a transaction which was consummated as of
April 7, 2003, the Company acquired from PLC 7,962,620 of its common shares in
satisfaction of indebtedness owed to the Company by PLC at a deemed purchase
price of $.30CDN per share. The transaction was part of a debt and equity
reorganization of PLC, and a private placement by PLC of its common shares and
warrants to a wholly owned subsidiary of Genting International ("Genting") for
$4.50 Million CDN. The funds from the private placement are to be exclusively
used in connection with the development of the online lottery program in Ho Chi
Minh City and the Southern provinces of Vietnam. Securities of PLC are traded on
the Canadian Venture Exchange under the symbol TSX-Venture: "LUK".

         The Company also received from PLC a "finders option" upon the closing
of the private placement to compensate the Company for assisting in bringing
about the private placement. The finders option consists of common stock
purchase warrants to purchase 1,400,000 additional common shares of PLC at
$.30CDN per share (exercisable for a twenty-four month period).

         The acquisition of these securities gave the Company ownership of
approximately 19.7% of the common shares of PLC (or 13.6% of such common shares
following the conversion to common shares of the outstanding preferred shares),
or 11.9% of the common shares on a fully diluted basis.

         In the private placement, Genting acquired an approximate 30% equity
stake in PLC, assuming all the preferred shares are converted into common shares
of PLC, and potentially up to a 47% equity stake (fully diluted) assuming
Genting exercises all of the warrants it received. Genting is a diversified
investment company whose subsidiaries include investment holdings, property
development and provision of sales and marketing services to resort-related
businesses. Securities of Genting are listed on the Luxembourg Stock Exchange
and quoted on the Singapore Stock Exchange.

         EMPLOYEES

         As of June 30, 2004, the Company had 266 employees, including its 2
executive officers.

                                       6

<PAGE>

         ITEM 2.  DESCRIPTION OF PROPERTY

         The Company maintained its principal executive office at 8201 Peters
Road, Suite 1000, Ft. Lauderdale, Florida 33324 through September 30, 2004.
Effective October 1, 2004 the Company moved its executive offices to 2250 NW 136
Avenue, Suite 103, Pembroke Pines, Florida 33028 under a one year lease at the
monthly rental of $850.

         The Company's Sakhalin Project is managed from a 450 square foot leased
office in Sakhalin City pursuant to a one-year renewable lease. The monthly
rental for the office is approximately $1,100.

         Mr. Dempster operates an office of the Company in London out of his
residence for which the Company pays him $3500 per month.

         See "Casino Operations" above for a description of the Company's leased
premises in Suriname, and "Legal Proceedings" for a description of issues
involving its lease agreement at the Plaza Hotel.

         The Company believes its existing facilities will be adequate to meet
current needs.

         ITEM 3.  LEGAL PROCEEDINGS

         On July 30, 2003, the Cantonal Court in Suriname issued an order
evicting SLC from the premises it occupies in the Plaza Hotel and from which it
conducted all of its casino operations. The Court ruled that Stichting Dim (Dim
Foundation) ("Dim") the plaintiff in the eviction proceeding which took title to
the Plaza Hotel through a mortgage foreclosure, was not bound by the 1998 casino
lease between SLC and Parbhoe, as Parbhoe did not hold registered title to the
premises. SLC appealed the decision, and on July 16, 2004, the Court of Justice
in Suriname denied Dim's request and "annulled" the order of eviction. The Court
of Justice determined that the Cantonal Court could not properly issue such an
eviction order in a summary or "Kort Geding" proceeding because the consequences
thereof could not be adequately considered by such Court, and that a full
proceeding was necessary to properly determine the rights and interests of the
parties. Neither party has commenced such a full proceeding, but either one may
do so in the future. If a full proceeding is commenced, it is likely to take
several years to be resolved by the Suriname Courts. The written decision of the
Court of Justice has not yet been issued.

         In August 2004, Dim commenced a new summary proceeding again seeking
eviction of SLC from the Plaza Hotel. Dim claims that a regulation requiring all
holders of gaming licenses to start operations in six months, which became
effective on August 20, 2004, justifies such a summary proceeding because Dim
claims it may lose its license if it does not urgently obtain the whole
building. In the opinion of Suriname counsel for SLC, based upon the
considerations in the judgment rendered on July 16, 2004 by the Court of
Justice, the chances of Dim winning this case are slim. A decision in this
action may be rendered in October 2004.

         As there was no assurance that the appeal in the first summary
proceeding case would be successful, the Company through its subsidiaries sought
alternative locations in Paramaribo to relocate its casino operations. SLC has
recently filed an action against Parbhoe seeking damages of US $694,000,
incurred as a result of the eviction proceeding and related matters.

                                       7

<PAGE>


         In a series of cases in Suriname commencing in July 2001, Parbhoe
initiated garnishment and other proceedings in the name of SLC against Dorsett
and Mr. Clague, the General Manager, claiming that Dorsett was transferring
SLC's money illegally, that Clague was not authorized to act as General Manager,
and that Dorsett and Clague owe to SLC US $4,152,254. The garnishments were
lifted in summary proceedings which are currently on appeal. The Company
believes there is no substance to the claims. The Suriname attorneys for the
Company are of the opinion that because Parbhoe was not authorized and had no
right to initiate legal action in the name of SLC, SLC was not legally
authorized to commence these proceedings, and that the cases are likely to be
dismissed.

         SLC is engaged in other legal proceedings in Suriname in which SLC
seeks to recover approximately $315,000 in rental payments which were made to
Parbhoe. According to a decision of the district commissioner, rendered July 28,
2000, such payments were in excess of the maximum rentals permitted by law. In
conformity with this decision, SLC thereafter paid Parbhoe a monthly rental of
$3,200 rather than $16,700, the rent stipulated in the lease. SLC is also a
party to a lawsuit against Parbhoe seeking from Parbhoe approximately $360,000
which SLC advanced for facilities and improvements to the hotel where the casino
operates which were contractually the responsibility of Parbhoe. Parbhoe has
counterclaimed in each of these proceedings seeking dissolution of the lease and
alleging it is due payment of back rent in the amount of $484,000. Management of
the Company is vigorously contesting these counterclaims.

         SLC is also involved in other routine litigation currently pending in
Surname.

         ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matters were submitted during the fourth quarter of the fiscal year
ended June 30, 2004, to a vote of the security holders of the Company.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Price Range of Common Stock. The Company's Common Stock is traded on
the OTC Bulletin Board or Pink Sheets of the National Quotation Service.

         The following sets forth, for the quarterly periods indicated, high and
low per share closing price information for the Common Stock as reported on the
OTC Bulletin Board, or pink sheets:

         For the Quarterly Periods Beginning July 1, 2002 and ending
June 30, 2004

                                            HIGH                LOW
July 1-Sept. 30, 2002                       $.81                $.35
Oct. 1-Dec. 31, 2002                        1.00                 .15
Jan. 1, 2002-March 31, 2003                 1.05                 .22
April 1-June 30, 2003                       1.35                 .61
July 1-Sept. 30, 2003                       1.30                 .80
Oct. 1-Dec. 31, 2003                        1.35                1.01
Jan. 1-March 31, 2004                       1.30                1.00
April 1-June 30, 2004                       1.10                 .70

         (The above prices reflect inter-dealer prices, without retail mark-up,
markdown or commission, and may not represent actual transactions).

         Approximate Number of Security Holders. As of September 30, 2004 the
Company had approximately 400 registered holders of record of its Common Stock.

         Dividend Information. The Company has not paid any cash dividends to
date and does not anticipate or contemplate paying dividends in the foreseeable
future. It is the present intention of management to utilize all available funds
and profits, if any, in the development of the Company's business.

         Sales of Unregistered Securities.  Not Applicable

                                       8

<PAGE>


         EQUITY COMPENSATION PLAN INFORMATION.

         The following table indicates certain information with respect to
compensation plans (including individual compensation arrangements) under which
equity securities of the Company are authorized for issuance:

                                                              Number of
                                                              securities
                                                              remaining
                   Number of                                  available for
                   Securities to be  Weighted-                future issuance
                   issued upon       average                  under equity
                   exercise of       exercise price           compensation
                   outstanding       of outstanding           plans (excluding
                   options,          options,                 securities
                   warrants and      warrants and             reflected in
                   rights            rights                   column (a))
-------------------------------------------------------------------------------
                     (a)                 (b)                       (c)
-------------------------------------------------------------------------------
Equity
compensation
plans approved      188,750              $ .50                   2,811,250
by security
holders
-------------------------------------------------------------------------------
Equity
compensation
plans not           103,333              $3.34                         __
approved by
security holders
-------------------------------------------------------------------------------
 Total              292,083              $1.51                   2,811,250
-------------------------------------------------------------------------------


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


             RESULTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2004
AS COMPARED WITH THE YEAR ENDED JUNE 30, 2003

         Net (Loss) Income. The Company generated a net loss of $1,039,607 or
$1.05 per share for the year ended June 30, 2004 as compared to net income of
$261,710 or $.22 per share during the year ended June 30, 2003. During the year
ended June 30, 2003, net income included the recovery of a $840,329 reserve
recorded during the 2002 fiscal year on advances related to the Vietnam lottery
project. Excluding the recovery of this reserve, the results of the prior year
generated a net loss of $578,619. The current period's net loss included a
$300,000 reserve recorded on the Sakhalin property without which, the net loss
would have been $739,607. Excluding the effects of the Sakhalin reserve and the
recovery of advances, the net loss increased during the current year by $160,988
primarily due to the significantly reduced revenues and operating income at the
Suriname casino as described below.

                                       9
<PAGE>

         Revenues. During the year ended June 30, 2004, the Company generated
revenues of $5,134,888 attributable to its casino operations in Suriname. For
the year ended June 30, 2003, the Company generated revenues of $7,235,667 from
its Suriname casino. As described hereinabove, SLC has been engaged in
litigation with the new owner of the Suriname Plaza Hotel where the casino is
located. Management believes that the 29% decrease in revenues during the
current year's period resulted primarily from increased competition from new
casino openings and from the harassment of casino customers and other
disruptions during the first half of the current fiscal year apparently caused
by guests of the Plaza Hotel after the acquisition of the hotel by its new
owners. These disruptions together with the increased competition and the
uncertainty of the eviction litigation contributed to the lower attendance
experienced by the Suriname casino during the current year.

         Marketing and Promotional Expenses. During the year ended June 30,
2004, marketing and promotional expenses were $411,886 as compared with $400,500
for the year ended June 30, 2003. The Company continued its many programs
designed to increase activity and wagering at the Suriname casino in an effort
to help offset declines in activity caused by increased competition from new
casino openings and from the harassment of casino customers and other
disruptions as described above.

         Salaries and Bonuses. Salaries and bonuses were $2,099,310 for the year
ended June 30, 2004 as compared to $2,595,075 for the year ended June 30, 2003.
The decrease of $495,765 or 19% in the current year is primarily due to (i)
reductions in casino personnel and salaries in reaction to the lower revenues
currently being generated by the casino, and (ii) non-cash compensation charges
of $112,500 incurred during the prior year's period related to a bonus paid to
the Company's Chief Executive Officer through the issuance of 150,000 shares of
common stock of the Company valued at $.75 per share. No such charges were
incurred during the current year.

         General and Administrative Expenses. General and administrative
expenses were $3,104,943 for the year ended June 30, 2004 as compared to
$3,421,029 for the year ended June 30, 2003. Included in the current year's
expenses were $2,219,532 of operating expenses associated with the Company's
Suriname casino and $885,411 for general corporate overhead including
consulting, professional fees and travel. Included in the prior year's expenses
were $2,259,131 of operating expenses associated with the Company's Suriname
casino and $1,161,898 for general corporate overhead. Excluding the $238,713
increase in casino tax assessed on gaming equipment during the current year, the
Suriname casino expenses decreased by $278,312 primarily due to reductions in
general operating expenses of the casino in reaction to the lower revenues
currently being generated by the casino. The casino tax assessed on gaming
equipment commenced January 1, 2003 and amounted to $509,285 during the current
year and $270,572 during the prior year which included only six-months of such
tax. General corporate overhead decreased during the current period by $276,487
or 24% primarily due to (i) franchise, dividend and other taxes of approximately
$110,000 accrued for during the prior year's period as compared to $17,000
during the current year, and (ii) decreased consulting fees, legal fees and
other expenses.

         Reserve for Sakhalin Development Costs. As required by SFAS No. 144
regarding evaluation of assets for financial impairment, the Company charged to
operations during the year ended June 30, 2004, $300,000 of the costs it had
capitalized in connection with the Sakhalin project due to the uncertainty that
a sale of its lease rights will be consummated and that the Company will be able
to recover the $1,000,000 remaining capitalized costs on its balance sheet. The
Company, based on recent negotiations with third parties and other factors, has
reserved for $300,000 leaving a capitalized balance of $700,000 on its balance
sheet which it believes will be recovered.

                                       10

<PAGE>


         Recovery on Advances to EMSI. As required by SFAS No. 114 regarding
evaluation of advances for financial impairment, the Company charged to
operations during fiscal 2002, $840,329 of the amounts it had advanced in
connection with the Vietnam lottery project because of the then uncertainty that
(i) the EMSI Agreement would be consummated, and (ii) the Company would be able
to recover the amounts it advanced for the Vietnam project, whether or not the
EMSI Agreement was consummated. In April 2003, the Company restructured its
investment in EMSI, and exchanged its interests therein into shares of PLC, as
described above. As a result of this transaction, during the year ended June 30,
2003, the Company has recorded a recovery of the $840,329 reserve previously
charged to operations. The Company has recorded the recovery of this reserve
based upon the value of the PLC shares and warrants it received as payment on
its advances.

         Foreign Exchange Fees. During the year ended June 30, 2003, the Central
Bank in Suriname in September 2002 set the legal exchange rate of 2,800 Suriname
Guilders to $1 U.S. dollar. As a result, revenues generated and expenses
incurred from Guilders after this date by the Suriname casino were recorded by
the Company in U.S. dollars based on this legal exchange rate. However, no
Suriname banks or government agencies maintain or supply U.S. dollars for
exchange and therefore the Suriname casino continued to exchange its Guilders
for U.S. dollars at the local cambios as it had done in the past. As a result of
the new legal limit placed on the exchange rate, cambios began charging fees to
exchange currency at this rate. These fees in effect, represented the difference
between the legal exchange rate and the actual market exchange rate and amounted
to $384,596 during the prior year. No such fees were recorded during the
current year as there were no significant fluctuations during such year between
the market and legal exchange rates.

         Foreign Exchange Gain/Loss. During the year ended June 30,2004, a gain
from foreign exchange amounted to $23,689 as compared with a loss of $41,174 for
the year ended June 30, 2003. These gains and losses resulted from fluctuations
in the currency translations experienced as a result of the Central Bank in
Suriname in September 2002, setting a legal exchange rate of 2,800 Suriname
Guilders to $1 U.S. dollar, and in January, 2004, setting a legal exchange rate
of 2.8 Suriname Dollars to $1 U.S. Dollar.

         Minority Interest. The Company's Suriname casino joint venture began
operations during the 1999 fiscal year. The Company controls the management of
the joint venture company and has a 50% equity interest. The casino's operations
are consolidated with those of the Company and a minority interest has been
recorded for the current and prior fiscal year of $373,871 and $700,173
respectively, representing 50% of the net income generated by the casino.

         Foreign Income Taxes. Taxes due to the Suriname Government are based on
a tax rate of 50% of the estimated net taxable income pursuant to the Suriname
Hazard Games Act of 1962. During the year ended June 30, 2004, SLC recorded an
income tax benefit of $89,544 related to its Suriname operations. During the
year ended June 30, 2003, SLC recorded income tax expenses of $310,688 payable
to the Suriname Government. The reduction in the current year's tax expense
resulted primarily from the substantial decrease in the Suriname casino's
pre-tax income during the current year and a $104,000 reversal in the current
year of a prior years over accrual of income tax.

RESULTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2003
AS COMPARED WITH THE YEAR ENDED JUNE 30, 2002

         Net Income (Loss). The Company generated net income of $261,710 or $.22
per share for the year ended June 30, 2003 as compared to a loss of $604,511 or
$.61 per share during the year ended June 30, 2002. The loss during the prior
year was due to the reserve recorded on advances of $840,329 related to the
Vietnam lottery project. Excluding such reserve, the Company's net results
during the prior year generated net income of $235,818. During the current year
period, the $840,329 reserve was recovered resulting in net income of $261,710.
Excluding such recovery, current year results generated a net loss of $578,619.
This reduction in net income during the current year (excluding the effects of
the reserve and recovery of advances) resulted primarily from increased
operating expenses and foreign exchange fees as more fully described below.

                                       11
<PAGE>

         Revenues. During the year ended June 30, 2003, the Company generated
revenues of $7,235,667 attributable to its casino operations in Suriname. For
the year ended June 30, 2002, the Company generated revenues of $7,113,988 from
its Suriname casino. Although revenues increased by approximately 1.5%, the
costs to generate such revenues increased substantially as more fully described
below.

         Marketing and Promotional Expenses. During the year ended June 30,
2003, marketing and promotional expenses were $400,500 as compared, with
$322,064 for the year ended June 30, 2002. The current years increase resulted
from programs designed to increase activity and wagering at the Suriname casino
in an effort to help offset declines in activity caused by Suriname currency
devaluations and the weak economy.

         Salaries and Bonuses. Salaries and bonuses were $2,595,075 for the year
ended June 30, 2003 as compared to $2,183,546 for the year ended June 30, 2002.
The increase of $411,529 or 19%, in the current year is primarily due to higher
personnel costs at the Suriname casino together with non-cash compensation
charges of $112,500 related to a bonus paid during the current year to the
Company's Chief Executive Officer through the issuance of 150,000 shares of
common stock of the Company valued at $.75 per share. No such charges were
incurred during the prior year.

         General and Administrative Expenses. General and administrative
expenses were $3,421,029 for the year ended June 30, 2003 as compared to
$2,598,127 for the year ended June 30, 2002. Included in the current year's
expenses were $2,259,131 of operating expenses associated with the Company's
Suriname casino and $1,161,898 for general corporate overhead including
consulting, professional fees and travel. Included in the prior year's expenses
were $1,674,526 of operating expenses associated with the Company's Suriname
casino and $923,601 for general corporate overhead. The current period's
Suriname casino operating expenses increased by $584,605 or 35% primarily due to
costs associated with various programs initiated by the Company designed to
increase activity and wagering at the Suriname casino in an effort to help
offset declines in activity caused by Suriname currency devaluations and the
weak economy, and the new casino tax assessed on gaming equipment which
commenced January 1, 2003 and amounted to $270,572 during the current year.
General corporate overhead increased during the current period by $238,297 or
26%, primarily due to franchise, dividend and other taxes of approximately
$110,000, and increased professional and consulting fees and other expenses
incurred related to the sublease of a portion of the Sakhalin property, and the
restructuring of the Company's investment in the Vietnamese lottery project.

         Interest Expense. For the year ended June 30, 2003, interest expense
amounted to $6,455 compared to $94,520 for the year ended June 30, 2002. The
decrease during the current period was attributable to the reduction in the
amount outstanding on loans made by the Company's Suriname joint venture partner
during 1998 and 1999 for the completion of the construction of the Suriname
casino.

                                       12

<PAGE>


         Reserve/Recovery on Advances to EMSI. As required by SFAS No. 114
regarding evaluation of advances for financial impairment, the Company charged
to operations during fiscal 2002, $840,329 of the amounts it had advanced in
connection with the Vietnam lottery project because of the then uncertainty that
(i) the EMSI Agreement would be consummated, and (ii) the Company would be able
to recover the amounts it advanced for the Vietnam project, whether or not the
EMSI Agreement was consummated. In April 2003, the Company restructured its
investment in EMSI, and exchanged its interests therein into shares of PLC, as
described above. As a result of this transaction, during the year ended June 30,
2003, the Company has recorded a recovery of the $840,329 reserve previously
charged to operations. The Company has recorded the recovery of this reserve
based upon the value of the PLC shares and warrants it received as payment on
its advances.

         Foreign Exchange Fees. During the year ended June 30,2003, the Central
bank in Suriname in September 2002 set the legal exchange rate of 2,800 Suriname
Guilders to $1 U.S. dollar. As a result, revenues generated and expenses
incurred from Guilders after this date by the Suriname casino were recorded by
the Company in U.S. dollars based on this legal exchange rate. However, no
Suriname banks or government agencies maintain or supply U.S. dollars for
exchange and therefore the Suriname casino continued to exchange its Guilders
for U.S. dollars at the local cambios as it had done in the past. As a result of
the new legal limit placed on the exchange rate, cambios began charging fees to
exchange currency at this rate. These fees in effect, represent the difference
between the legal exchange rate and the actual market exchange rate. Such fees
amounted to $348,596 during the current year.

         Foreign Exchange Loss. During the year ended June 30, 2003, the loss
from foreign exchange amounted to $41,174 as compared with $80,595 for the year
ended June 30, 2002. These losses resulted from fluctuations in the currency
translations experienced prior to the Central Bank in Suriname in September
2002, setting a legal exchange rate of 2,800 Guilders to $1 U.S. dollar.

         Minority Interest. The Company's Suriname casino joint venture began
operations during the 1999 fiscal year. The Company controls the management of
the joint venture company and has a 50% equity interest. The casino's operations
are consolidated with those of the Company and a minority interest has been
recorded for the current and prior fiscal year of $700,173 and $880,133
respectively, representing 50% of the net income generated by the casino.

         Foreign Income Taxes. During the year ended June 30, 2003, SLC recorded
income tax expenses of $310,688 payable to the Suriname Government based on a
tax rate of 50% of the estimated net taxable income pursuant to the Suriname
Hazard Games Act of 1962. During the year ended June 30, 2002, SLC recorded
income tax expenses of $756,306 payable to the Suriname Government. The
reduction in the current year's tax expense resulted primarily from a reduction
of approximately $800,000 in the Suriname casino's pre-tax income during the
current year.

         LIQUIDITY AND CAPITAL RESOURCES.

         Since August 1999, the Company's almost sole recurring source of cash,
exclusive of loans and securities sales, was the cash payments from SLC which is
the joint venture entity that owns the Suriname casino. Cash payments from SLC
to LWSI, Parbhoe or their affiliates are made by SLC, under the management
control of Dorsett, the Company's subsidiary, according to a cash allocation
priority established under the parties' Joint Venture Agreement. Such payments
were initially allocated to management fees and the repayment of construction
and other loans and interest. As of June 30, 2004, all loans have been repaid by
SLC in full and all distributions are currently first used to pay management
fees to Dorsett and then are to be distributed equally to the two venture
partners. Significant disputes and litigation have arisen between Parbhoe and
the Company and its affiliates, and a Suriname Court has held the lease
agreement to be unenforceable by SLC, a decision which was annulled on appeal,
but remains at issue in a new legal proceeding commenced in August 2004. Such
disputes and litigation, and the manner in which they are resolved, may
materially adversely effect the cash flow of the Company.

                                       13
<PAGE>

         The Sakhalin Project has consistently generated cash losses for the
Company. Under an agreement entered into in April 2003, the Company transferred
one half of its leasehold rights to a third party, and is seeking to dispose of
its remaining interests in the Project.

         As of June 30, 2002, the Company had advanced $1,271,472 to EMSI to
develop the Lottery Gaming System Contract and to support its operations and
those of PLC in Vietnam in anticipation of the acquisition of EMSI by the
Company. As set forth above, the Company has converted its interests in EMSI
into common shares and warrants of PLC.

         On June 30, 2004, the Company had approximately $2,800,000 in cash or
cash equivalents on hand. The current liabilities reflected on the balance sheet
of the Company as of June 30, 2004 are approximately $3,500,000. Approximately
$2,500,000 of such liabilities relates to amounts the Company has recorded as
payable to Parbhoe. The Company believes it has significant offsets against
these liabilities (see "Legal Proceedings, and Note 9 to the Financial
Statements"), and that therefore it has adequate cash reserves for its
operations for the next twelve months.

         Off-Balance Sheet Arrangements. The Company has no off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on the Company's financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that is material to investors.

         RECENT ACCOUNTING STATEMENTS AND PRONOUNCEMENTS

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of." The statement retains the previously existing
accounting requirements related to the recognition and measurement of the
impairment of long-lived assets to be held and used while expanding the
measurement requirements of long-lived assets to be disposed of by sale to
include discontinued operations. It also expands the previously existing
reporting requirements for discontinued operations to include a component of an
entity that either has been disposed of or is classified as held for sale. The
Company's adoption of SFAS No. 144 did not have a material effect on the
Company's financial statements.

         In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". Among other provisions, SFAS No. 145 rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt". Accordingly, gains or
losses from extinguishment of debt shall not be reported as extraordinary items
unless the extinguishment qualifies as an extraordinary item under the criteria
of Accounting Principles Board ("APB") Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions".
Gains or losses from extinguishment of debt that do not meet the criteria of APB
No. 30 should be reclassified to income from continuing operations in all prior
periods presented. The Company's adoption of SFAS No. 145 did not have a
material effect on the Company's financial statements.

                                       14

<PAGE>


         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" which is effective for exit or
disposal activities that are initiated after December 31, 2002. This statement
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. SFAS No. 146 also
establishes that fair value is the objective for initial measurement of the
liability. There was no material impact on the Company's financial statements as
a result of adopting SFAS No. 146.

         On November 25, 2002, the FASB issued FASB Interpretation No. 45 ("FIN
45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others, an interpretation of
FASB Statements No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34."
FIN 45 clarifies the requirements of FASB Statement No. 5, "Accounting for
Contingencies", relating to the guarantor's accounting for, and disclosure of,
the issuance of certain types of guarantees. The disclosure requirements of FIN
45 are effective for financial statements of interim or annual periods that end
after December 15, 2002. The disclosure provisions have been implemented and no
disclosures were required at June 30, 2003. The provisions for initial
recognition and measurement are effective on a prospective basis for guarantees
that are issued or modified after December 31, 2002, irrespective of the
guarantor's year-end. FIN 45 requires that upon issuance of a guarantee, the
entity must recognize a liability for the fair value of the obligation it
assumes under that guarantee. The Company's adoption of FIN 45 in 2003 has not
and is not expected to have a material effect on the Company's financial
statements.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation, Transition and Disclosure". SFAS No. 148 provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. SFAS No. 148 also
requires that disclosures of the pro forma effect of using the fair value method
of accounting for stock-based employee compensation be displayed more
prominently and in a tabular format. Additionally, SFAS No. 148 requires
disclosure of the pro forma effect in interim financial statements. The
transition and annual disclosure requirements of SFAS No. 148 are effective for
the Company's June 30, 2003 financial statements. The Company's adoption of SFAS
No. 148 did not have a material effect on its financial statements.

         In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities - an interpretation of ARB No. 51", which addresses
consolidation of variable interest entities. FIN 46 expands the criteria for
consideration in determining whether a variable interest entity should be
consolidated by a business entity, and requires existing unconsolidated variable
interest entities (which include, but are not limited to, Special Purpose
Entities, or (SPEs)) to be consolidated by their primary beneficiaries if the
entities do not effectively disperse risks among parties involved. This
interpretation applies immediately to variable interest entities created after
January 31, 2003, and to variable interest entities in which an enterprise
obtains an interest after that date. It applies in the first fiscal year or
interim period beginning after June 15, 2003, to variable interest entities in
which an enterprise holds a variable interest that it acquired before February
1, 2003. The adoption of FIN 46 is not expected to have a material effect on the
Company's financial statements.

                                       15

<PAGE>

RISK FACTORS

         An investor should carefully consider the following risk factors and
all other information contained herein before purchasing shares of common stock.
Investing in our Company involves a high degree of risk and may result in the
complete loss of your investment

The SLC Litigation May Have a Material Adverse Effect on Our Business

         Although as set forth under "Legal Proceedings" , the order evicting
SLC from the Plaza Hotel issued by the lower Court in Suriname has been
"annulled" by the Court of Justice, the plaintiff in that action has initiated a
new action for eviction which may be decided imminently. While Suriname counsel
is of the opinion that Dim's chances of success in this proceeding are "slim",
if SLC is evicted in the new summary proceeding, the disruption to SLC's
continued operations and to the Company's cash flow, as well as the costs to
relocate and outfit a new casino, will create significant uncertainties.
Furthermore, there is the potential for a full or partial impairment of the
leasehold improvements in SLC which as of June 30, 2004, had a net book value of
approximately $2,780,000. Even if this summary proceeding is dismissed, Dim may
bring a plenary proceeding seeking eviction. The Company has been advised that
the resolution of any such new action is likely to take several years before it
is resolved. The uncertainty created by the pendency of such a proceeding may
adversely impact the attendance at the casino and employee morale, and may
provide incentives for increased competition, all of which may result in
decreased revenues and cash flow, and the possibility of continued losses.

All of The Company's Operations are Now Conducted in Suriname and Are Subject
to Extensive Regulations

         The Company now conducts virtually all of its operations in Suriname,
and is therefore subject to increased risks and uncertainties which may result
from political and economic conditions in Suriname and changes in gaming
regulations and taxes affecting the casino business, as well as changes in
regulations affecting exchange rates, and controls, judicial proceedings and
other matters.

The Company is Engaged in Developing a New Casino Operation in Suriname

         The Company's wholly owned entity entered into an agreement on
September 7, 2004, under which we anticipate operating an additional casino and
restaurant in Paramaribo. Such operations are subject to all of the risks of a
new business. The Company has no historical basis for projecting revenues,
earnings, or the amount of investment required for the new operations. In
addition, other casinos which recently opened in Paramaribo are likely to pose
increased challenges and costs to the Company in attracting customers and
trained personnel for the new casino.

Capital Resources

      The Company has suffered losses from its operations and has a working
capital deficit (see "Liquidity and Capital Resources). If unanticipated losses
or demands for capital are encountered, the Company may not have sufficient cash
available, and additional funding through debt or equity financing may not be
available, or if available, may not be available on economically reasonable
terms.

                                       16
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

See pages F-1 through F-32 contained herein as part of this Form 10-KSB annual
report.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         The accounting firm which was previously engaged as the principal
accountant to audit the financial statements of the Company, Spear, Safer,
Harmon & Co., has determined to withdraw from practicing before the Securities
and Exchange Commission, and has accordingly resigned as the Company's
accountant.

         No report on the financial statements of the Company for either of the
last two years contained an adverse opinion or a disclaimer of opinion or was
qualified or modified as to uncertainty, audit scope, or accounting principles.

         During the two most recent fiscal years of the Company, and the
subsequent interim period, there were no disagreements with Spear, Safer, Harmon
& Co. on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Spear, Safer, Harmon & Co., would have caused it to make
reference to the subject matter of the disagreement(s) in connection with its
report.

         Effective February 26, 2004, the Company engaged the firm of Berkovits,
Lago & Company LLP as its new principal accountant to audit its financial
statements. Prior to engaging Berkovits, Lago & Company LLP, neither the Company
nor anyone on its behalf consulted such firm regarding (i) the application of
accounting principles to a specified transaction, either completed or proposed;
or the type of audit opinion that might be rendered on the Company's financial
statements, or (ii) any matter that was the subject of a "disagreement" or a
"reportable event" as those terms are described in Item 304 of Regulation S-K.
The decision to retain new accountants was approved by the Board of Directors of
the Company.

ITEM 8A. CONTROLS AND PROCEDURES.

         The management of the Company with the participation of the principal
executive and financial officers of the Company have evaluated the disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) or
15d-15(e)) of the Company as at June 30, 2004, and concluded that they are
adequate.

                                       17
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

         The Board of Directors is divided into three classes. The terms of each
class expire successively over a three-year period. At each annual meeting of
stockholders, successors to directors whose terms expire at that meeting are to
be elected for three-year terms. The directors and officers of the Company on
June 30, 2004 are as follows:


Name                       Age          Position and Office Held
--------                   -----        ------------------------------

Dallas Dempster            62           President, Chief Executive Officer
                                        and Director

James V. Stanton           72           Vice Chairman of the Board of Directors

Miles R. Greenberg         47           Chief Financial Officer, Senior Vice
                                        President, Secretary and Director

CLASS A DIRECTOR

DALLAS DEMPSTER was elected to the Board and also elected President and Chief
Executive Officer on July 20, 1998. Since its inception he has been one of the
two executive directors of the entity developing the Sakhalin Project, and is a
founder of that project. From 1985 to 1991 Mr. Dempster was the Chairman and
Managing Director of Burswood Resort Complex, of which he was the founder.
Burswood is the largest tourist destination resort development in Western
Australia, costing $320 million, employing over 2,700 employees, and with
revenues in excess of $400 million. Between 1983 and 1990 he was Chairman of the
Rottenest Island Authority on behalf of the Western Australia government. Mr.
Dempster was principal project director and/or owner of substantial other
property development projects in Sydney and Perth, a member of the Airline
Deregulation Committee, and a member of the Board of the Aboriginal Enterprise
Company Limited. Mr. Dempster worked as an independent consultant since 1991
until joining the Company in July 1998.

CLASS B DIRECTORS

JAMES V. STANTON has been a director of the Company since its inception and Vice
Chairman of the Company since 1998. Mr. Stanton has his own law and lobbying
firm, Stanton & Associates, in Washington, D.C. From 1971 to 1978, Mr. Stanton
represented the 20th Congressional District of Ohio in the United States House
of Representatives. While in Congress Mr. Stanton served on the Select Committee
on Intelligence, the Government Operations Committee, and the Public Works and
Transportation Committee. Mr. Stanton has held a wide variety of public service
positions, including service as the youngest City Council President in the
history of Cleveland, Ohio and membership on the Board of Regents of the
Catholic University of America in Washington, D.C. Mr. Stanton is also former
Executive Vice President of Delaware North, a privately held international
company which, during Mr. Stanton's tenure, had annual sales of over $1 billion
and became the leading pari-mutual wagering company in the United States, with
worldwide operations including horse racing, harness racing, dog racing, and
Jai-Lai. Delaware North also owned the Boston Garden and the Boston Bruins
hockey team. From 1985 to 1994 Mr. Stanton was a principal and co-founder of
Western Entertainment Corporation, which pioneered one of the first Indian
gaming operations in the United States, a 90,000 square foot bingo and casino
gaming operation located on the San Manuel Indian Reservation in California,
which generated annual revenues in excess of $50 million. Mr. Stanton also
serves on the board of Mountaineer Gaming Group, Inc.

                                       18

<PAGE>


MILES R. GREENBERG was appointed Vice President and Chief Financial Officer upon
joining the Company in September 1996 and appointed Senior Vice President on
January 18, 1997. He was elected a director in September 2001, by the Board of
Directors to fill a vacancy on the Board at that time. From 1994 until joining
the Company, Mr. Greenberg served as Vice President and Chief Financial Officer
of F3 Software Corporation ("F3"), a developer and marketer of electronic forms
composition and automation software. From 1992 until assuming his positions at
F3, he served as Controller of BLOC Development Corporation (former parent
company of F3), a publicly held entity primarily engaged in the development,
publishing and direct marketing of computer software and hardware products. From
1985 to 1992, Mr. Greenberg served as Vice President and Chief Financial Officer
of The Levenshon Companies, Inc. and its affiliates, a diversified financial
services company. Mr. Greenberg is a Certified Public Accountant formerly with
KPMG Peat Marwick.

CLASSIFIED DIRECTORSHIPS

         The Company currently has authorized five directorships, two of which
are currently vacant. In 1997, the Company amended its Certificate of
Incorporation to provide for a classified Board of Directors. The Company's
Board of Directors is divided into three classes. Class A has two directorships,
of which one is held by Mr. Dempster and one of which is vacant and previously
held by Mr. Haft. Mr. Dempster was elected a director in July 1998 by the Board
of Directors, to replace a director who had resigned. Class B has two
directorships, one of which is now held by Mr. Stanton and the other of which is
held by Mr. Greenberg. Class C consists of one directorship, and that
directorship is vacant. At each annual stockholder meeting commencing with the
1998 annual meeting, the successors to directors whose terms then expire are to
be elected to serve from the time of election and qualification until the third
annual meeting following election and until their successors have been duly
elected and qualified but no directors have been nominated or elected at any
subsequent annual meeting. Any additional directorships resulting from an
increase in the number of directors are to be distributed among the three
classes so that, as nearly as possible, such class will consist of an equal
number of directors. All stockholders of the Company's Common Stock are entitled
to vote in elections for the directors of each Class.

         SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Under the provisions of Section 16(a) of the Exchange Act, the
Company's officers, directors and 10% beneficial stockholders are required to
file reports of their transactions in the Company's securities with the
Commission. The Company believes that as of June 30, 2004, all of its directors
and executive officers, were in compliance with all filing requirements
applicable to them during the fiscal year ending June 30, 2004.

         CODE OF ETHICS

         The Board of Directors of the Company has adopted a Code of Ethics
applicable to the directors and executive officers of the Company, a copy of
which has been filed as an Exhibit to this Annual Report on Form 10-KSB.

         AUDIT COMMITTEE

         The Company does not have an audit committee financial expert. The
Board of Directors acts as the audit committee of the Company.

                                       19
<PAGE>


ITEM 10.  EXECUTIVE COMPENSATION

         The following table sets forth the compensation awarded to, paid to, or
earned by Mr. Dempster, the Company's President, and Chief Executive Officer and
two others (all, "Named Executive Officers") during the period July 1, 2001 to
June 30, 2004. No other executive officer of the Company serving as an executive
officer on June 30, 2003, or since that date, received a total salary and bonus
of $100,000 for the periods specified.


<TABLE>
<CAPTION>
                                        SUMMARY COMPENSATION TABLE


                                                                                    Long Term Compensation
                                                                                     Awards                   Payouts
                                                                        Other      Restricted    Securities    LTIP     All other
Name and                                     Annual Compensation        Annual        Stock      Underlying    Payouts  Compensation
Principal Position           Year            Salary       Bonus      Compensation  Compensation Options/SAR's
                                              ($)          ($)            ($)          ($)           ($)         ($)        ($)
<S>                      <C>               <C>          <C>          <C>           <C>          <C>            <C>      <C>
Dallas Dempster            July 1, 2003 to
President, Chief           June 30, 2004      $300,000
Executive Officer and      July 1, 2002 to
Director                   June 30, 2003      $300,000    $112,500(1)  (2)(3)
                           July 1, 2001
                           to June 30, 2002   $300,000

Miles R. Greenberg         July 1, 2003 to
Chief Financial            June 30, 2004      $150,000                    (3)
Officer, Senior Vice       July 1, 2002 to
President, Secretary       June 30, 2003      $150,000                                              25,000
and Director               July 1, 2001 to
                           June 30,2002       $140,000                                              25,000

David Hartley              July 1, 2002 to
President Casino           March 31, 2003     $112,500
Division (4)               July 1, 2001 to
                           June 30, 2002      $200,000
</TABLE>

All figures are adjusted to reflect the twenty-into-one share consolidation in
October 2001.

(1) A grant of 150,000 shares of common stock priced at $.75 per share was
awarded to Dallas Dempster as a bonus during the year ended June 30, 2003 which
shares are held in the name of Tilden Park Limited, for the benefit of Mr.
Dempster's family.

(2) Does not include $31,500 paid to Mr. Dempster during fiscal 2004 for
allocated rental payments for the London office located in his residence.

(3) Does not include the value of rights granted to Messrs. Dempster and
Greenberg to acquire 398,130, and 199,065 shares of PLC common stock owned by
the Company, respectively, for a purchase price of $.30 CDN per share, the cost
to the Company of such shares. Such rights were granted to these individuals on
November 28, 2003 at a time when the closing market price of the shares was $.22
CDN per share, and may be exercised at any time until November 28, 2006.


                                       20
<PAGE>


(4) Reflects amounts paid to Star Casinos Limited ("Star") for the personal
services of Mr. Hartley provided by such entity. Beginning July 1, 2002, Mr.
Hartley resigned his post as President of the Casino Division, but continued to
act as a consultant to the Company until March 2003. Does not include $36,500
paid to Star by the Company in July 2003, for the repurchase by the Company of
36,500 shares of common stock previously issued to Star in payment of fees and a
bonus for services rendered.

         The Company has no defined benefit plan, actuarial plan, pension plan
or long-term incentive plan.

         OPTION/SAR GRANTS FOR THE TWELVE MONTHS ENDED JUNE 30, 2004


         The Company did not grant any options to purchase any stock of the
Company to any of the executive officers of the Company during the last fiscal
year.

             AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
                            FY-END OPTION/SAR VALUES

         The following table sets forth information about the number and value
of options held as of June 30, 2004 by each of the Company's executive officers
named in the Summary Compensation Table, adjusted to reflect the twenty-into-one
share consolidation in fiscal 2002.
<TABLE>
<CAPTION>

                                                      Number of Securities       Value of Unexercised
                                                     Underlying Unexercised          In-the-Money
                           Shares                  Options at Fiscal Year End  Options at Year End($)(1)
                        Acquired on    Value       -----------------------------------------------------
                       Exercise (#)  Realized ($)  Exercisable  Unexercisable Exercisable  Unexercisable

<S>                    <C>           <C>           <C>          <C>           <C>          <C>
Dallas Dempster            0               -       $   100,000                              $20,000
Miles R. Greenberg         0               -            53,750                               10,750
</TABLE>

(1) Based on the per share closing price of the Company's Common Stock of $.70
on June 30, 2004, as reported on the OTC Bulletin Board.

         The Company's outstanding options at June 30, 2004 totaled 238,750. The
Company uses the Black-Scholes option-pricing model to value options issued to
non-employee directors and consultants. Other options issued are valued using
APB 25 and FASB Interpretation 44. See Note 1 to the Consolidated Financial
Statements included in this Form 10-KSB.

         DIRECTORS COMPENSATION

         Directors who are employees of the Company receive no additional
compensation for their services rendered as directors. Mr. Stanton, a director,
acts as a consultant to the Company for which he receives a fee of $5000 per
month. In fiscal year 2004, Mr. Stanton also received a grant of options to
purchase until November 28, 2006, 199,065 shares of PLC common stock owned by
the Company at a price of $.30 CDN per share, which is the cost to the Company
of such shares. All directors are reimbursed for reasonable expenses incurred in
connection with their services rendered as directors.

                                       21
<PAGE>

         INDEMNIFICATION OF DIRECTORS AND OFFICERS AND RELATED MATTERS

         The Company's Certificate of Incorporation limits, to the maximum
extent permitted by the Delaware General Corporation Law ("DGCL"), the personal
liability of directors and officers for monetary damages for breach of their
fiduciary duties as directors and officers (other than liabilities arising from
acts or omissions which involve intentional misconduct, fraud or knowing
violations of law or the payment of distributions in violation of the DGCL). The
Certificate of Incorporation provides further that the Company shall indemnify
to the fullest extent permitted by the DGCL any person made a party to an action
or proceeding by reason of the fact that such person was a director, officer,
employee or agent of the Company. Subject to the Company's Certificate of
Incorporation, the By-laws provide that the Company shall indemnify directors
and officers for all costs reasonably incurred in connection with any action,
suit or proceeding in which such director or officer is made a party by virtue
of his being an officer or director of the Company, except where such director
or officer is finally adjudged to have been derelict in the performance of his
duties as such a director or officer.

         There is no pending litigation or proceeding involving any director,
officer, employee or agent of the Company where indemnification will be required
or permitted. The Company is not aware of any threatened litigation or
proceeding which may result in a claim for such indemnification.

         ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

         The following table sets forth information as of September 20, 2004, to
the best of the Company's knowledge, about (i) each person (including any
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934) known to the Company to be the beneficial owner of more than 5% of the
Company's Common Stock, and (ii) as to each class of equity securities owned by
the directors and named executive officers of the Company, and the directors and
executive officers of the Company as a group. The percentage of shares
outstanding is based on the Company's shares of Common Stock outstanding as of
September 30, 2004, as adjusted in each case pursuant to Rule 13-3(d)1 under the
Securities and Exchange Act of 1934. As of September 30, 2004, there were
879,996 shares of Common Stock outstanding.

<TABLE>
<CAPTION>
                                                   TOTAL NUMBER OF SHARES    PERCENTAGE OF
NAME AND ADDRESS OF STOCKHOLDER                      BENEFICIALLY OWNED     VOTING SHARES*

<S>                                                <C>                    <C>
Dallas Dempster (1) President, Director                    267,418             27.3%

James V. Stanton (2) Vice Chairman, Director               115,160             11.7%

Miles R. Greenberg-Senior Vice President-Finance,
Treasurer and Chief Financial Officer, Director (3)         53,750              5.8%

Danville Investment Pty Ltd
30 Irvine Street
Peppermint Grove, Western Australia                         74,053              8.4%

All executive officers and directors
      as a group (3 persons)                               436,329             38.2%

----------
</TABLE>

(1) Represents currently exercisable non-Plan options granted in September 1998
to purchase 50,000 shares at $.50 and Plan options granted in December 1999 to
purchase 50,000 shares at $.50 in the name of Tilden Park Limited for the
benefit of Mr. Dempster's family.

                                       22
<PAGE>


(2) Includes 1,000 shares of Common Stock which are held by Mr. Stanton, a
Director of the Company, as joint tenant with his wife, Margaret M. Stanton,
currently exercisable warrants to purchase 32,500 shares of Common Stock at a
price equal to $.50 per share, and currently exercisable options to purchase
75,000 shares of Common Stock at $.50 per share. Does not include shares of
Common Stock owned by Michael J. Stanton, Bridget M. Stanton, Richard P. Stanton
and Joseph M. Stanton each of whom are adult children of Mr. James Stanton and
each of whom own 1,000 shares of Common Stock. Mr. Stanton denies beneficial
ownership of such 4,000 shares.

(3) Represents currently exercisable options to purchase 53,750 shares of Common
Stock at $.50 per share.

         As used in the table above, "beneficial ownership" means the sole or
shared power to vote or direct the voting or to dispose, or direct the
disposition of any security. A person is deemed to have "beneficial ownership"
of any security that such person has a right to acquire within 60 days of the
date of the above table. Any security that any person named above has the right
to acquire within 60 days is deemed to be outstanding for purposes of
calculating the ownership of such person but is not deemed to be outstanding for
purposes of calculating the ownership percentage of any other person. Unless
otherwise noted, each person listed is believed by the Company to have the sole
power to vote, or direct the voting of, and power to dispose, or direct the
disposition of all such shares. The amount of outstanding shares of Common Stock
is the amount actually outstanding plus shares deemed outstanding pursuant to
Rule 13d-3(d)(1) under the Securities and Exchange Act of 1934.

         In acquiring Sakhalin General Trading and Investments Limited ("SGTI")
the Company issued 100,000 shares to the former stockholders in SGTI. The
Company does not know the ultimate beneficial ownership of these shares.

         ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In January 2000, Mr. Stanton provided a loan to the Company of
$300,000, which the Company used to repay past due obligations. The loan bears
interest at the bank prime rate to be calculated and billed monthly by the
National City Bank of Cleveland, Ohio. The loan was to be repaid on December 31,
2000. Mr. Stanton also received warrants to purchase 25,000 shares of Common
Stock at an exercise price of $5.00 per share exercisable on or before January
18, 2004. On October 18, 2000 the exercise price was reduced to $2.00 per share
and further reduced to $.50 on October 16, 2002 and the option exercise dated
was extended to January 18, 2006. After December 2000, the due date of the loan
was extended and the balance of the loan was paid off in January 2002. (On
January 25, 1999 Mr. Stanton converted all $75,000 principal and $1,600 of
accrued unpaid interest on a $75,000 loan he had made to the Company in October
1998 into 153,200 shares at a conversion price of $10.00 per share.) Since
August, 2002 Mr. Stanton has acted as a consultant to the Company on a month to
month basis for which he receives a fee of $5,000 per month.


                                       23
<PAGE>

         ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K

         (a) See list of Exhibits below.

Exhibit No.
----------

2.1       Contract on the Extension of the Concession Period for the Operation
          of a Casino dated 21 July 1997 issued by the Minister of Finance in
          favor of Roulette; Loan Agreement dated 9 April 1998 between Roulette
          and Dorsett providing for a US $420,000 loan to Roulette; Amendment
          No.1 dated 5 June 1998 to the Agreement dated 3 April 1998 between
          CBC, Juste and Dorsett (incorporated by reference to the Company's
          Form 10-Q for the period ended September 30, 1998)

3.1       Certificate of Incorporation and amendments thereto (incorporated
          herein by reference to the Company's Registration Statement on Form
          S-1 (File No. 333-16571))

3.2       Amendment to Company's Certificate of Incorporation (incorporated
          herein by reference to the Company's Registration Statement on Form
          S-1 (File No. 333-16571), Amendment No. 5)

3.3       Amendment to Company's Certificate of Incorporation (incorporated
          herein by reference to the Company's Proxy Statement dated November
          27, 1997)

3.4       By-law of Company (incorporated herein by reference to the Company's
          Registration Statement on Form S-1 (File No. 333-16571)

4.2       Form of certificate evidencing shares of Common Stock (incorporated
          herein by reference to the Company's Registration Statement on Form
          S-1 (File No. 333-16571), Amendment No. 2)

4.3       Form of Underwriter's Warrant Agreement between Company and the
          Underwriter Janssen-Meyers Associates L.P. (including form of
          Underwriter's Warrant) (incorporated herein by reference to the
          Company's Registration Statement on Form S-1 (File No. 333-16571),
          Amendment No. 5)

4.5       Amendatory Agreement dated November 6, 1996  between the Company and
          the SES Family Investment and Trading Partnership, L.P. (incorporated
          herein by reference to the Company's Registration Statement on
          Form S-1 (File No. 333-16571))

4.6       Form of 10% Debenture dated September 1996 (incorporated herein by
          reference to the Company's Registration Statement on Form S-1 (File
          No. 333-16571))

4.7       Form of 10% Convertible Debenture dated November 1996 (incorporated
          herein by reference to the Company's Registration Statement on Form
          S-1 (File No. 333-16571))

10.1      1996 Stock Option Plan, as amended and restated (incorporated herein
          by reference to the Company's Registration Statement on Form S-1 (File
          No. 333-16571))

10.2      Form of Stock Option Agreement (incorporated herein by reference to
          the Company's Registration Statement on Form S-1 (File No. 333-16571))

                                       24
<PAGE>


10.3      Distribution Agreement dated October 9, 1996 between Company and
          Agrotech 2000, S.L. (incorporated herein by reference to the Company's
          Registration Statement on Form S-1 (File No. 333-16571), Amendment No.
          4)

10.4      Employment Agreement between Charles H. Stein and the Company,
          effective as of June 13, 1997

10.5      Form of $5.00 Warrant Agreement dated August 1996 (incorporated herein
          by reference to the Company's Registration Statement on Form S-1 (File
          No. 333-16571))

10.6      Loan Agreement dated October 9, 1996 between the Company and Conserver
          Purchasing Corporation ("CPC"), as amended by Letter Agreement dated
          December 31, 1996 between the Company and CPC (incorporated herein by
          reference to the Company's Registration Statement on Form S-1 (File
          No. 333-16571), Amendment No. 2)

10.7      Form of Financial Consulting Agreement between Company and Underwriter
          (incorporated herein by reference to the Company's Registration
          Statement on Form S-1 (File No. 333-16571), Amendment No. 5)

10.8      Agreement dated as of August 12, 1997 by and among the Company,
          Sakhalin Trading and Investments Limited ("SGTI") and Sovereign Gaming
          and Leisure Limited ("Sovereign") (incorporated herein by reference to
          Exhibit 10.8 to the Company's Form 10-K for the fiscal year ended June
          30, 1997)

10.9      Amendment dated as of August 12, 1997 by and among the Company, SGTI
          and Sovereign (incorporated herein by reference to Exhibit 10.9 to the
          Company's Form 10-K for the fiscal year ended June 30, 1997)

10.10     Development Services Agreement dated as of October 2, 1997 between the
          Company and Dato David Chiu (incorporated herein by reference to
          Exhibit 10.10 to the Company's Form 10-K for the fiscal year ended
          June 30, 1997)

10.11     Consulting Agreement effective as of August 14, 1997 between the
          Company and Star Casino Limited (incorporated herein by reference to
          Exhibit 10.11 to the Company's Form 10-K for the fiscal year ended
          June 30, 1997)

10.12     Proposed form Pledge Agreement by and among the Company, Brian J.
          Bryce, Jasmine Trustees, Ltd., Jay M. Haft and James V. Stanton
          (incorporated herein by reference to Exhibit 10.12 to the Company's
          Form 10-K for the fiscal year ended June 30, 1997)

10.13     Hotel Management Agreement dated as of October 2, 1997 between the
          Company and Dorsett Hotels and Resorts International Ltd.
          (incorporated herein by reference to Exhibit 10.13 to the Company's
          Form 10-K for the fiscal year ended June 30, 1997)

                                       25
<PAGE>


10.15     Heads of Agreement dated October 3, 1997 between the Company and
          Parbhoe's Handelmij N.V. (incorporated herein by reference to Exhibit
          10.15 to the Company's Form 10-K for the fiscal year ended June 30,
          1997)

10.16     Agreement of Ownership Structure in the Sakhalin Palace Resort Project
          dated as of June 25, 1999 between the Company, Arter Capital Ltd. And
          Valmet S.A. (filed herewith)

14.       Code of Ethics*

16.1      Letter regarding change in certifying accountant (incorporated herein
          by reference to the Company's Form 8-K dated December 18, 1997 and
          Form 8-K dated June 16, 1998)

16.2      Letter regarding change in certifying accountant (incorporated herein
          by reference to the Company's Form 8-K dated July 23, 1999 and Form
          8-K dated October 13, 1999)

16.2      Letter regarding change of Accountants (incorporated herein by
          reference to the Company's Form 10-QSB dated February 26, 2004)

31.1      Certification of principal executive officer pursuant to Rule 15d-14.*

31.2      Certification of principal financial officer pursuant to Rule 15d-14.*

32.1      Certification of Chief Executive Officer pursuant to 18 U.S.C Section
          1350.*

32.2      Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
          1350.*

*         Filed herewith.

         (b) No reports on Form 8-K were filed by the registrant during the last
quarter of the fiscal year ended June 30, 2004. The registrant filed a report on
Form 8-K in September, 2004 relating to a press release concerning an agreement
under which the Company's wholly owned entity leased additional premises in
Suriname for casino operations.

         ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

                  The following sets forth the aggregate fees billed for each of
the last two fiscal years for various professional services rendered by the
principal accountants of the Company:

Principal              Year          Audit     Audit Related   Tax     All Other
Accountants            Ended         Fees          Fees        Fees      Fees
-----------            -----        --------  --------------   ----    ---------
Berkovits, Lago
and Company, LLP  June 30, 2004     $76,500*        __          __         __

Spear, Safer,
Harmon & Co.      June 30, 2003     $98,000         __       $7,000        __

*Amounts billed through September 30, 2004.

         The Company has no audit committee. Such functions are undertaken by
the Board of Directors.

                                       26
<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                         LOTTERY & WAGERING SOLUTIONS INC.

                                             /s/  Miles R. Greenberg
                                             -----------------------------
                                             Miles R. Greenberg
                                             Senior Vice President

Date: October 12, 2004

         In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

Signature                      Title                                  Date
-----------                    ------                                 ------
s/ Dallas R. Dempster    Chief Executive Officer,
----------------------   Chief Operating Officer
Dallas R. Dempster       and President (Principal
                         Executive Officer), Director          October 12, 2004

s/James V. Stanton       Vice Chairman and Director            October 12, 2004
----------------------
James V. Stanton

s/Miles R. Greenberg     Chief Financial Officer and
----------------------   Director (Principal Financial
Miles R. Greenberg       Officer and Chief Accounting
                         Officer)                              October 12, 2004




                                       27

<PAGE>

               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES

                        F/K/A CCA COMPANIES INCORPORATED

                                    CONTENTS

<TABLE>
<CAPTION>
                                                                                                   PAGE
<S>                                                                                                   <C>
Report of Independent Registered Public Accounting Firm............................................ F-2

Independent Auditors' Report....................................................................... F-3

Consolidated Balance Sheets as of June 30, 2004 and 2003............................................F-4

Consolidated Statements of Operations for the years ended June 30, 2004, 2003 and 2002............. F-5

Consolidated Statements of Stockholders' Equity for the years ended June 30, 2004, 2003 and 2002....F-6

Consolidated Statements of Cash Flows for the years ended June 30, 2004, 2003 and 2002............. F-9

Notes to Consolidated Financial Statements.........................................................F-11
</TABLE>

                                       F-1



<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors
Lottery and Wagering Solutions, Inc and Subsidiaries
F/K/A CCA Companies, Incorporated
Pembroke Pines, Florida

We have audited the accompanying consolidated balance sheet of Lottery and
Wagering Solutions, Inc and Subsidiaries, f/k/a CCA Companies Incorporated (the
"Company") as of June 30, 2004, and the related consolidated statement of
operations, stockholders' equity, and cash flows for the year ended June 30,
2004. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on this
consolidated financial statement based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above presents
fairly, in all material respects, the consolidated financial position of Lottery
and Wagering Solutions, Inc and Subsidiaries f/k/a CCA Companies Incorporated
(the "Company"), as of June 30, 2004, and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.

As discussed in note 10, the Company's subsidiary, Suriname Leisure Company, is
facing a lawsuit for eviction, which if successful will require the company to
vacate the premises they occupy in Suriname where a substantial portion of
casino operations are conducted. The casino provides the company with the
majority of its working capital. The company is presently seeking a favorable
judgment in this case. There is no assurance that a favorable outcome will
occur. The company's plans, should they be unsuccessful at defending this case,
are discussed in Note 10. The consolidated financial statements do not included
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.


/s/ Berkovits, Lago and Company, LLP

Fort Lauderdale, Florida
October 5, 2004



                                       F-2




<PAGE>


                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

To the Board of Directors and Stockholders
of Lottery & Wagering Solutions, Inc. and Subsidiaries
F/K/A CCA Companies Incorporated
Fort Lauderdale, Florida

We have audited the accompanying consolidated balance sheets of Lottery &
Wagering Solutions, Inc. and Subsidiaries, F/K/A CCA Companies Incorporated (a
Delaware corporation) (the "Company") as of June 30, 2003, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years ended June 30, 2003 and 2002. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lottery & Wagering
Solutions, Inc. and Subsidiaries, F/K/A CCA Companies Incorporated as of June
30, 2003, and the results of their operations and their cash flows for each of
the years ended June 30, 2003 and 2002 in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 9 to the consolidated financial statements as of June 30,
2003 and 2002 and for each of the years ended June 30, 2003, 2002 and 2001, the
Company's consolidated subsidiary, Suriname Leisure Company, received an order
evicting them from the premises they occupy in Suriname where all casino
operations are conducted. This casino provides the Company with the majority of
its working capital. The Company is presently appealing the order and seeking an
extension of a previously granted stay of the order of eviction. However, there
is no assurance that an extension of the stay will be granted or that the appeal
will be successful. The Company's plans are discussed in Note 9 to the
consolidated financial statements as of June 30, 2003 and 2002 and for each of
the years ended June 30, 2003, 2002 and 2001, should they be unsuccessful in the
appeal process. The consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.

SPEAR, SAFER, HARMON & CO.

Miami, Florida
October 3, 2003

                                       F-3
<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
                           Consolidated Balance Sheets
                             June 30, 2004 and 2003

                                   A S S E T S
<TABLE>
<CAPTION>
                                                                   2004                      2003
                                                      -------------------------------------------
<S>                                                   <C>                      <C>
Current Assets:
   Cash and cash equivalents                          $       2,769,918        $        3,521,418
   Prepaid and other current assets                             166,616                    67,554
                                                      -----------------        ------------------

           Total Current Assets                               2,936,534                 3,588,972

Property, equipment and leasehold improvements, net           3,016,049                 3,429,045
Sakhalin development costs, net                                 700,000                 1,000,000
Investment in PLC                                             1,271,472                 1,271,472
Gaming license - Suriname                                       200,000                   200,000
Other assets                                                     20,300                    20,300
                                                      -----------------        ------------------

                                                      $       8,144,355        $        9,509,789
                                                      =================        ==================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable and accrued expenses              $         704,225        $          932,612
   Interest payable                                             291,448                   291,448
   Income tax payable                                           328,464                   556,884
   Note payable                                                 515,900                   515,900
   Dividend payable, minority interest                        1,690,492                   753,173
                                                      -----------------        ------------------

         Total Current Liabilities                            3,530,529                 3,050,017
                                                      -----------------        ------------------

Minority interest in consolidated subsidiary                  1,248,115                 1,811,561
                                                      -----------------        ------------------
Stockholders' equity:
   Preferred stock                                                   -                         -
   Common stock                                                     906                     1,110
   Additional paid-in capital                                47,690,488                47,933,177
   Accumulated deficit                                      (44,325,683)              (43,286,076)
                                                      -----------------        ------------------

         Total Stockholders' equity                           3,365,711                 4,648,211
                                                      -----------------        ------------------

                                                      $       8,144,355        $        9,509,789
                                                      =================        ==================
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       F-4

<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
                      Consolidated Statements of Operations
                    Years Ended June 30, 2004, 2003 and 2002
<TABLE>
<CAPTION>
                                                       2004                    2003                    2002
                                            ------------------      ------------------       -----------------
<S>                                        <C>                     <C>                      <C>
Casino revenues                             $        5,134,888      $        7,235,667       $       7,113,988
                                            ------------------      ------------------       -----------------
Operating expenses:
   Marketing and promotional                           411,886                 400,500                 322,064
   Salaries and bonuses                              2,099,310               2,595,075               2,183,546
   General and administrative                        3,104,943               3,421,029               2,598,127
                                            ------------------      ------------------       -----------------
         Total operating expenses                    5,616,139               6,416,604               5,103,737
                                            ------------------      ------------------       -----------------
(Loss) Income from operations                         (481,251)                819,063               2,010,251
                                            ------------------      ------------------       -----------------

Other (expense) income:
   Recovery of reserve for advances to EMSI                  -                 840,329                       -
   Reserve for impairment of advances to EMSI                -                       -                (840,329)
   Reserve for impairment of Sakhalin
     development costs                                (300,000)                      -                       -
   Interest income                                       2,282                   9,404                  37,121
   Interest expense                                          -                  (6,455)                (94,520)
   Foreign exchange gains (losses)                      23,689                 (41,174)                (80,595)
   Foreign exchange fees                                     -                (348,596)                      -
                                            ------------------      ------------------       -----------------
         Total other (expense) income                 (274,029)                453,508                (978,323)
                                            ------------------      ------------------       -----------------
Foreign income tax benefit (expense)                    89,544                (310,688)               (756,306)
                                            ------------------      ------------------       -----------------
(Loss) Income from operations before
     Minority interest                                (665,736)                961,883                 275,622

Minority interest                                     (373,871)               (700,173)               (880,133)
                                            ------------------      ------------------       -----------------
Net (Loss) Income                           $       (1,039,607)     $          261,710       $        (604,511)
                                            ==================      ==================       ==================
Basic (loss) earnings  per share            $            (1.05)     $             0.22       $           (0.61)
                                            ==================      ==================       ==================
Diluted (loss) earnings  per share          $            (1.05)     $             0.18       $           (0.61)
                                            ==================      ==================       ==================
Weighted average number of common
  shares outstanding                                   987,407               1,189,872                 985,664
                                            ==================      ==================       ==================
Weighted average number of common
   shares outstanding - assuming dilution              987,407               1,461,122                 985,664
                                            ==================      ==================       ==================
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       F-5


<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
                 Consolidated Statements of Stockholders' Equity
                            Year Ended June 30, 2004
<TABLE>
<CAPTION>
                                            Common Stock
                                            Par Value $.001
                                      ----------------------------
                                                                        Additional       Accumulated
                                         Shares         Amount        Paid-In Capital      Deficit           Total
                                      ------------------------------------------------------------------------------
<S>                                   <C>            <C>              <C>             <C>               <C>
Balance - June 30, 2003                 1,110,277      $1,110           $47,933,177     $(43,286,076)     $4,648,211

Repurchase of shares from Star
    Casinos Ltd.                         (36,500)         (36)              (36,464)               -         (36,500)
Repurchase of shares from Richard
    DeVries Professional Corporation     (66,667)         (67)              (79,933)               -         (80,000)
Repurchase of shares from Auschina
    Investment Co.                       (75,000)         (75)              (93,675)               -         (93,750)
Repurchase of shares from
    other investors                      (26,114)         (26)              (32,617)               -         (32,643)

Net loss for 2004                              -           -                     -        (1,039,607)     (1,039,607)
                               -------------------------------------------------------------------------------------

Balance - June 30, 2004                   905,996      $  906           $47,690,488     $(44,325,683)     $3,365,711
                                      ===========      ======           ===========     ============      ==========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.




                                       F-6
<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
           Consolidated Statements of Stockholders' Equity (Continued)
                            Year Ended June 30, 2003
<TABLE>
<CAPTION>

                                            Common Stock
                                            Par Value $.001
                                      ----------------------------
                                                                        Additional       Accumulated
                                         Shares         Amount        Paid-In Capital      Deficit           Total
                                      ------------------------------------------------------------------------------
<S>                                   <C>            <C>              <C>             <C>               <C>
Balance - June 30, 2002                 1,273,109      $1,273           $48,210,642    $(43,547,786)     $4,664,129

Issuance of common stock to
   Dempster's nominee as bonus
   at $0.75 per share                     150,000         150               112,350               -         112,500
Repurchase of shares from MSC              (4,450)         (5)               (9,340)              -          (9,345)
Repurchase of shares from the
    Four Private Investors               (300,000)       (300)             (374,700)              -        (375,000)
Repurchase of shares from
    other investors                        (8,382)         (8)               (5,775)              -          (5,783)

Net income for 2003                             -           -                     -         261,710         261,710
                               ------------------------------------------------------------------------------------

Balance - June 30, 2003                 1,110,277      $1,110           $47,933,177    $(43,286,076)     $4,648,211
                                      ===========      ======           ===========    ============      ==========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.






                                       F-7

<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
           Consolidated Statements of Stockholders' Equity (Continued)
                            Year Ended June 30, 2002
<TABLE>
<CAPTION>

                                            Common Stock
                                            Par Value $.001
                                      ----------------------------
                                                                        Additional       Accumulated
                                         Shares         Amount        Paid-In Capital      Deficit           Total
                                      ------------------------------------------------------------------------------
<S>                                   <C>            <C>              <C>             <C>               <C>
Balance - June 30, 2001                   907,002      $       907      $47,697,910      $(42,943,275)    $4,755,542
Cancellation of shares due to non-
 performance of obligation under
 the contract with FEC & EA               (18,893)             (19)              19                 -              -
Gain on cancellation of shares issued
    to FEC & EA                                 -                -          (18,900)                -        (18,900)
Sale of common stock at
    $2.00 per share                       225,000              225           327,046                -        327,271
Issuance of shares for private
    placement services                     50,000               50            72,677                -         72,727
Issuance of shares for services at
    $1.20 per share                       100,000              100           119,900                -        120,000
Issuance of shares to consultants
    for services                           10,000               10            11,990                -         12,000
Net loss for 2002                               -                -                 -         (604,511)      (604,511)
                               -------------------------------------------------------------------------------------
Balance - June 30, 2002                 1,273,109      $     1,273       $48,210,642     $(43,547,786)    $4,664,129
                                      ===========      ===========       ===========     ============     ==========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.






                                       F-8
<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
                      Consolidated Statements of Cash Flows
                    Years Ended June 30, 2004, 2003 and 2002
<TABLE>
<CAPTION>
                                                       2004          2003            2002
                                                   -----------     ----------    -----------
<S>                                                <C>             <C>           <C>
Cash flows from operating activities:
 Net (loss) income                                 $(1,039,607)    $  261,710    $  (604,511)
                                                   -----------     ----------    -----------
Adjustments to reconcile net (loss)
income to net cash (used in) provided
by operating activities:
     Minority interest                                 373,871        700,173        880,133
     Gain on cancellation of shares                          -              -        (18,900)
     Recovery of reserve for advances to EMSI                -       (840,329)             -
     Reserve for impairment of advances to EMSI              -              -        840,329
     Reserve for impairment of Sakhalin
        development costs                              300,000              -              -
     Depreciation and amortization                     479,120        755,476        755,562
     Loss on sale/disposal of assets                         -          5,174         35,461
     Bonus paid to Dempster by the issuance of
       common stock to Dempster's nominee                    -        112,500              -
     Consulting services provided for common stock           -              -        132,000
     Deferred income taxes                                   -              -       (287,884)
     Changes in current assets and liabilities:
       Prepaid expenses and other current assets       (99,062)        83,768        (81,607)
       Accounts payable, accrued expenses and
        interest payable                              (228,387)       277,742          4,994
       Income taxes payable                           (228,420)       (42,112)       436,996
                                                   -----------     ----------    -----------
         Total Adjustments                             597,122      1,052,392      2,697,084
                                                   -----------     ----------    -----------
Net cash (used in) provided by
   continuing operations                              (442,485)     1,314,102      2,092,573
Net cash used in discontinued operations                     -              -        (37,000)
                                                   -----------     ----------    -----------
Net cash (used in) provided by
   operating activities                               (442,485)     1,314,102      2,055,573
                                                   -----------     ----------    -----------

Cash flows from investing activities:
   Additions to property and equipment                 (66,122)      (196,475)       (40,409)
   Proceeds from sale of equipment                           -             -           1,360
   Proceeds from sale of rights to one half
     of the Sakhalin Project                                 -      1,300,000              -
   Commissions paid on sale of rights to
     one half of the Sakhalin Project                        -       (200,000)             -
   Payment for gaming license - Suriname                     -        (60,000)             -
   Costs incurred on behalf of and funds
     advanced to EMSI                                        -       (181,143)      (722,535)
                                                   -----------     ----------    -----------
Net cash (used in) provided by
    investing activities                               (66,122)       662,382       (761,584)
                                                   -----------     ----------    -----------
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       F-9
<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
                Consolidated Statements of Cash Flows (Continued)
                    Years Ended June 30, 2004, 2003 and 2002
<TABLE>
<CAPTION>

                                                       2004              2003            2002
                                                    ----------       ----------       ----------
<S>                                           <C>                      <C>            <C>
Cash flows from financing activities:
   Investor deposits refunded                       $        -         $(30,000)      $        -
   Proceeds from sale of common stock                        -                -          150,000
   Repurchase of shares from Star Casinos Ltd          (36,500)               -                -
   Repurchase of shares from Richard DeVries
     Professional Corp                                 (80,000)               -                -
   Repurchase of shares from Auschina Inv. Co.         (93,750)               -                -
   Repurchase of shares from Four Private
     Investors                                               -         (375,000)               -
   Repurchase of shares from other investors           (32,643)          (5,783)               -
   Repurchase of MSC shares                                  -           (9,345)               -
   Private placement fees                                    -                -          (50,000)
   Repayments of notes payable                               -                -         (130,800)
                                                    ----------       ----------       ----------
Net cash used in financing activities                 (242,893)        (420,128)         (30,800)
                                                    ----------       ----------       ----------
Net (decrease) increase in cash
   and cash equivalents                               (751,500)       1,556,356        1,263,189
Cash and cash equivalents, beginning of year         3,521,418        1,965,062          701,873
                                                    ----------       ----------       ----------
Cash and cash equivalents, end of year              $2,769,918       $3,521,418       $1,965,062
                                                  ============       ==========       ==========

Supplemental disclosures of cash flow information:
     Cash paid during the years for:
       Interest                                   $          -       $        -       $    7,014
       Foreign income taxes                            138,732          352,800          607,194
     Non-cash transactions:
       Conversion of the advances to EMSI
        into investment in PLC                               -        1,271,472                -
       Purchase of gaming licence                            -          200,000                -
       Portion of gaming licence deferred                    -         (140,000)               -
       Dividend declared, but not paid to
        minority interest partner                      937,319          753,173                -
       Issuance of common stock to consultants
        for services                                         -                -           12,000
       Issuance of common stock for services                 -                -          120,000
       Issuance of common stock for private
         placement fees                                      -                -           72,727
       Issuance of common stock against
         investors' deposit                                  -                -          300,000
       Gain on cancellations of shares issued to
         FEC and EA                                          -                -           18,900

</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.




                                       F-10

<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
                   Notes to Consolidated Financial Statements
                    Years Ended June 30, 2004, 2003 and 2002

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         INCORPORATION AND NATURE OF OPERATIONS - Lottery & Wagering Solutions,
         Inc., ("LWSI") was incorporated under the laws of the State of Delaware
         on March 6, 1996 as Conserver Corporation of America and changed its
         name on December 2, 1997 to CCA Companies Incorporated. Subsequently,
         on October 1, 2001, the Company changed its name from "CCA Companies
         Incorporated" to "Lottery & Wagering Solutions, Inc.". The Company
         believes that the new name provides a more distinct and recognizable
         corporate identity that better reflects the Company's current and
         future plans.

         The Company's principal line of operation is to provide gaming services
         through the ownership and management of a casino in Suriname. The
         Company presently relies (except for occasional debt and equity
         offerings) on the working capital generated in Suriname to finance
         substantially all of its activities (see Notes 3 and 10).

         During 2003, the Company transferred one half of its rights in the land
         lease it acquired for developing and operating a casino and mountain
         resort project on Sakhalin Island and is attempting to sell its
         remaining rights (see Note 3).

         In addition, the Company has entered into various agreements for equity
         participation in an on-line lottery and sports betting operation in
         Vietnam (see Note 12).

         PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
         include the accounts of LWSI and its subsidiaries (collectively, the
         "Company"). The subsidiaries are Suriname Leisure Company A.V.V.
         ("SLC"), based and operating in Suriname, and Dorsett Hotel & Resorts
         Inc. ("Dorsett"), based in the United States. Sakhalin General Trading
         and Investments Ltd. ("SGTI") is based in Cyprus and its subsidiary,
         Sakhalin City Center Ltd. ("SCC"), is based in the Russian Federation.
         Inter-company transactions and balances have been eliminated in
         consolidation.

         MINORITY INTEREST - SCC is currently generating losses and the minority
         shareholders are not obligated to fund these losses. Accordingly, the
         minority interest held in SCC is not reflected in the consolidated
         financial statements.

         The Company's Suriname casino joint venture began operations during the
         1999 fiscal year. The Company controls the management of the joint
         venture company and has a 50% equity interest. The casino's operations
         are consolidated with those of the Company and a minority interest is
         recorded representing 50% of the net pre-tax income generated by the
         casino.

         CASINO REVENUE - Casino revenue is the net win from gaming activities,
         which is the difference between gaming wins and losses.

         CASH AND CASH EQUIVALENTS - The Company considers investments with
         original maturities of three months or less at the time of purchase to
         be cash equivalents. At times, cash balances in the Company's bank
         accounts in the United States may exceed federally insured limits.
         Uninsured amounts in cash at June 30, 2004 include (i) $1,019,000
         deposited in a U.S. bank investment account under a repurchase
         agreement fully collateralized by highly rated securities held by the
         bank and (ii) $407,000 deposited in a national government owned bank in
         Suriname. (See Note 3 regarding risks in Suriname). The Company is
         required contractually to set aside 2% of the annual revenues of SLC in
         a segregated bank account to fund the cost of future tangible property
         replacements. At June 30, 2004, cash set aside for replacements net of
         expenditures amounted to approximately $124,000.

         USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
         preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and

                                       F-11

<PAGE>

               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         liabilities at the date of the financial statements and the reported
         amounts of revenues and expenses during the reporting period. Actual
         results could differ from those estimates.

         FINANCIAL INSTRUMENTS - The carrying amounts of financial instruments
         including accounts payable, accrued expenses and notes payable
         approximate fair value.

         PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS - Property and equipment
         are recorded at cost. Depreciation and amortization is computed by the
         straight-line method based on the estimated useful lives (2 - 5 years)
         of the related assets. Leasehold improvements are amortized over the
         shorter of the life of the asset or the lease term.

         INVESTMENTS - The Company accounts for its investment in the common
         stock of Pacific Lottery Corporation("PLC") at cost. PLC is a
         development stage company and is traded on the Canadian Venture
         Exchange. As such, the Company does not recognize any increased value
         in its PLC shareholding based on the market price on the Canadian
         Venture Exchange.

         FOREIGN EXCHANGE FEES - During the year ended June 30, 2003, the
         Central bank in Suriname in September 2002 set the legal exchange rate
         of 2800 Suriname Guilders ("Guilders") to $1 U.S. dollar. In January
         2004, the Suriname government changed its currency from the Suriname
         Guilder to the Suriname Dollar at a new exchange rate of 2.8 Suriname
         Dollars to $1 U.S. dollar. As a result, revenues generated and expenses
         incurred from Suriname Guilders and Dollars after September 2002 by the
         Suriname Casino were recorded by the Company in U.S. dollars based on
         this legal exchange rates. However, no Suriname banks or government
         agencies maintain or supply U.S. dollars for exchange and therefore the
         Suriname Casino continues to exchange its Suriname Guilders and Dollars
         for U.S. dollars at the local cambios as it has done in the past. As a
         result of the legal limit placed on the exchange rate, cambios began
         charging fees to exchange currency at the new legal exchange rate which
         in effect, represent the difference between the legal exchange rate and
         the actual market exchange rate. Such fees amounted to approximately
         $349,000 during the year ended June 30, 2003. During the current
         fiscal year, the market exchange rates in Suriname remained stable with
         the legal exchange rates and the Company did not record any foreign
         exchange fees.

         ADVERTISING COSTS - Costs incurred to produce marketing material or
         advertise are generally expensed when incurred. Advertising costs for
         the years ended June 30, 2004, 2003 and 2002 were approximately $7,000,
         $24,000 and $12,800, respectively.

         INCOME TAXES - For the purpose of these consolidated financial
         statements, the Company has adopted the provisions of Statement of
         Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
         Taxes" for all periods presented. Under the asset and liability method
         of SFAS 109, deferred taxes are recognized for differences between
         financial statement and income tax bases of assets and liabilities.

         REVERSE SPLIT - In an attempt to meet certain listing requirements on
         recognized securities markets, on September 26, 2001, the Company
         approved a resolution in a special meeting of stockholders of a
         twenty-into-one reverse split of all the Company's outstanding shares
         of common stock ("Share Consolidation"). The Company effectuated the
         reverse split in order to help increase the Company's per share market
         price of its common stock and to comply with certain other listing
         requirements. The Share Consolidation was also a condition precedent of
         the contract to purchase EMSI (see Notes 4 and 12).

         STOCKHOLDERS' EQUITY - The stockholders' equity consists of accumulated
         deficit, additional paid-in capital, preferred stock and common stock.
         In 2004 and 2003, the Company was authorized to issue 5,000,000 shares
         of preferred stock with a par value of $.01 per share. Specific powers,
         preferences, rights, qualifications, limitations and restrictions are
         to be designated by the Company's Board of Directors at the time of
         issuance. In 2004 and 2003, there were no shares of preferred stock
         issued. In 2004 and 2003, the Company was authorized to issue
         50,000,000 shares of common stock with a par value of $.001 per share
         of common stock.

                                       F-12

<PAGE>

               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         As of June 30, 2004, after giving effect to the Share Consolidation,
         there were 905,996 common shares issued and as of June 30, 2003, there
         were 1,110,277 common shares issued. The number of common shares,
         warrants and options for all periods are presented retroactively and
         reflects stock splits and reverse splits effected by the Company.

         STOCK BASED COMPENSATION - The Company accounts for stock options
         issued to employees in accordance with SFAS No. 123, "Accounting for
         Stock-Based Compensation," as amended by SFAS No. 148,
          "Accounting for Stock-Based Compensation - Transition and Disclosure,"
         which permits entities to continue to apply the provisions of
         Accounting Principles Board ("APB") Opinion No. 25, "Accounting for
         Stock Issued to Employees," and provide pro forma disclosures in its
         annual consolidated financial statements of the effect on net income
         (loss) and net earnings (loss) per share for employee stock option
         grants as if the fair value based method, as defined in SFAS No. 123
         and 148, has been applied. The Company has elected to apply the
         provisions of APB Opinion No. 25 and provide the pro forma disclosures
         required by SFAS No. 123 and 148. Under APB Opinion No. 25, the Company
         recognizes no compensation expense related to employee stock options,
         as no options are granted at a price below the fair market value on the
         day of grant (See Note 11).

         On September 26, 2001, the Company approved a resolution, in a special
         meeting of stockholders, to increase the number of shares of common
         stock available for grant under the 1996 Stock Option Plan of the
         Company. After giving effect to the Share Consolidation pursuant to the
         reverse split, the number of shares available was increased from
         250,000 shares to 3,000,000 shares.

         IMPAIRMENT OF LONG-LIVED ASSETS - The Company reviews the
         recoverability of the excess cost over the fair value of assets
         acquired on an on going basis. The Company utilizes SFAS No. 144,
         "Accounting for the Impairment or Disposal of Long-Lived Assets". Under
         the provisions of this statement, the Company has evaluated its
         long-lived assets for financial impairment and will continue to
         evaluate them as events or changes in circumstances indicate that the
         carrying amount of such assets may not be fully recoverable.

         The Company evaluates the recoverability of long-lived assets by
         measuring the carrying amount of the assets against the estimated
         undiscounted future cash flows associated with them. At the time such
         evaluations indicate that impairment may exist, the assets are adjusted
         to their fair values.

         The Company expenses costs as incurred on the Sakhalin project for
         routine operational expenses. The total expenditure recorded for the
         years ended June 30, 2004, 2003 and 2002 was approximately $255,000,
         $306,000 and $208,500, respectively. Additionally, the Company recorded
         a charge during the year ended June 30, 2004 of $300,000 representing
         an impairment reserve on the carrying amount of the Sakhalin project
         development costs recorded on the Company's balance sheet (See Note 3).

         IMPAIRMENT OF LOANS AND ADVANCES - The Company utilizes SFAS No. 114,
         "Accounting by Creditors for Impairment of a Loan". Under the
         provisions of this statement, the Company recorded a charge during the
         year ended June 30, 2002 for approximately $840,000 representing an
         impairment reserve on certain advances. The advances were not secured
         and there was no assurance that the advances would be repaid to the
         Company as of June 30, 2002.

         During April 2003, the Company received shares of common stock of
         Pacific Lottery Corporation in full payment of the Advances.
         Accordingly, the Company during the year ended June 30, 2003, reversed
         the impairment reserve of approximately $840,000 (see Notes 3 and 12).

         EARNINGS PER SHARE - Basic net earnings (loss) per share of common
         stock is based on the weighted average number of common shares
         outstanding during each period. Diluted earnings (loss) per share of
         common stock are computed on the basis of the weighted average number
         of common shares and common shares equivalent

                                       F-13

<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         securities outstanding. Diluted earnings per share reflects the
         potential dilution that could occur if securities or other contracts
         were exercised or converted into common stock. Due to their
         anti-dilutive effect, common share equivalents are not included in
         computing diluted earnings per share when either their exercise price
         exceeds their fair market value or when the Company has a net loss.

         Options amounting to 238,750 for the year ended June 30, 2004, 9,375
         for the year ended June 30, 2003, and 192,125 for the year ended June
         30, 2002 and warrants amounting to 53,333 for the year ended June 30,
         2004, 32,083 for the year ended June 30, 2003, and 185,416 for the year
         ended June 30, 2002 have not been included in the computation of
         diluted earnings (loss) per share because of their anti-dilutive
         effect.

         The weighted average number of common shares outstanding for all
         periods presented retroactively reflects stock splits and reverse stock
         splits effected by the Company.

         FOREIGN CURRENCY TRANSLATION - The statutory currencies in the
         countries in which the Company's subsidiaries are based are the Cyprus
         Pound, the Russian Rouble, the United States Dollar, the Suriname
         Guilder and commencing January 2004, the Suriname Dollar. The reporting
         currency is the United States Dollar.

         The functional currency for the Company's subsidiaries, SGTI and SLC,
         is the United States Dollar. All assets and liabilities, materially all
         contracts, transactions and normal business activities have been
         transacted, conducted, negotiated and recorded in United States
         Dollars. Pursuant to Financial Accounting Standards Board Statement No.
         52, "Foreign Currency Translation", the Company's Russian subsidiary,
         SCC, is situated in a highly inflationary economy. Accordingly, SCC's
         functional currency will be the United States Dollar.

         RECLASSIFICATIONS  - Certain prior year balances have been reclassified
         to conform to the 2004 presentation.

NOTE 2 - RECENT PRONOUNCEMENTS

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
         Impairment or Disposal of Long-Lived Assets." This statement supersedes
         SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
         for Long-Lived Assets to Be Disposed of." The statement retains the
         previously existing accounting requirements related to the recognition
         and measurement of the impairment of long-lived assets to be held and
         used while expanding the measurement requirements of long-lived assets
         to be disposed of by sale to include discontinued operations. It also
         expands the previously existing reporting requirements for discontinued
         operations to include a component of an entity that either has been
         disposed of or is classified as held for sale. The Company's adoption
         of SFAS No. 144 did not have a material effect on the Company's
         financial statements.

         In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
         Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
         Technical Corrections". Among other provisions, SFAS No. 145 rescinds
         SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt".
         Accordingly, gains or losses from extinguishment of debt shall not be
         reported as extraordinary items unless the extinguishment qualifies as
         an extraordinary item under the criteria of Accounting Principles Board
         ("APB") Opinion No. 30, "Reporting the Results of Operations -
         Reporting the Effects of Disposal of a Segment of a Business, and
         Extraordinary, Unusual and Infrequently Occurring Events and
         Transactions". Gains or losses from extinguishment of debt that do not
         meet the criteria of APB No. 30 should be reclassified to income from
         continuing operations in all prior periods presented. The Company's
         adoption of SFAS No. 145 did not have a material effect on the
         Company's financial statements.

         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
         Associated with Exit or Disposal Activities" which is effective for
         exit or disposal activities that are initiated after
         December 31, 2002. This

                                       F-14
<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 2 - RECENT PRONOUNCEMENTS (CONTINUED)

         statement requires that a liability for a cost associated with an exit
         or disposal activity be recognized when the liability is incurred.
         SFAS No. 146 also establishes that fair value is the objective for
         initial measurement of the liability. There was no material impact on
         the Company's financial statements as a result of adopting
         SFAS No. 146.

         On November 25, 2002, the FASB issued FASB Interpretation No. 45 ("FIN
         45"), "Guarantor's Accounting and Disclosure Requirements for
         Guarantees, Including Indirect Guarantees of Indebtedness of Others, an
         interpretation of FASB Statements No. 5, 57 and 107 and Rescission of
         FASB Interpretation No. 34." FIN 45 clarifies the requirements of FASB
         Statement No. 5, "Accounting for Contingencies", relating to the
         guarantor's accounting for, and disclosure of, the issuance of certain
         types of guarantees. The disclosure requirements of FIN 45 are
         effective for financial statements of interim or annual periods that
         end after December 15, 2002. The disclosure provisions have been
         implemented and no disclosures were required at June 30, 2003. The
         provisions for initial recognition and measurement are effective on a
         prospective basis for guarantees that are issued or modified after
         December 31, 2002, irrespective of the guarantor's year-end. FIN 45
         requires that upon issuance of a guarantee, the entity must recognize a
         liability for the fair value of the obligation it assumes under that
         guarantee. The Company's adoption of FIN 45 in 2003 has not and is not
         expected to have a material effect on the Company's financial
         statements.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
         Stock-Based Compensation - Transition and Disclosure". SFAS No. 148
         provides alternative methods of transition for a voluntary change to
         the fair value based method of accounting for stock-based employee
         compensation. SFAS No. 148 also requires that disclosures of the pro
         forma effect of using the fair value method of accounting for
         stock-based employee compensation be displayed more prominently and in
         a tabular format. Additionally, SFAS No. 148 requires disclosure of the
         pro forma effect in interim financial statements. The transition and
         annual disclosure requirements of SFAS No. 148 are effective for the
         Company's June 30, 2003 financial statements. The Company's adoption of
         SFAS No. 148 did not have a material effect on its financial
         statements.

         In January 2003, the FASB issued FIN 46, "Consolidation of Variable
         Interest Entities - an interpretation of ARB No. 51", which addresses
         consolidation of variable interest entities. FIN 46 expands the
         criteria for consideration in determining whether a variable interest
         entity should be consolidated by a business entity, and requires
         existing unconsolidated variable interest entities (which include, but
         are not limited to, Special Purpose Entities, or SPEs) to be
         consolidated by their primary beneficiaries if the entities do not
         effectively disperse risks among parties involved. This interpretation
         applies immediately to variable interest entities created after January
         31, 2003, and to variable interest entities in which an enterprise
         obtains an interest after that date. It applies in the first fiscal
         year or interim period beginning after June 15, 2003, to variable
         interest entities in which an enterprise holds a variable interest that
         it acquired before February 1, 2003. The adoption of FIN 46 is not
         expected to have a material effect on the Company's financial
         statements.

NOTE 3 - LINES OF BUSINESS

         THE SURINAME CASINO AND THE CASINO LEASE

         The Company is a party to an agreement (the "Suriname Casino
         Agreement") with Parbhoe Handelmij NV ("Parbhoe"), a Suriname limited
         liability company. Under the agreement, the parties formed and each
         acquired a 50% interest in SLC, an Aruban limited liability company, to
         develop a casino project (the "Suriname Casino") in Paramaribo, the
         capital city of Suriname.

         Based upon the terms in the Suriname Casino Agreement, in 1998, Parbhoe
         and SLC entered into a lease agreement (the "Casino Lease"). Pursuant
         to the Casino Lease, Parbhoe leased two floors to SLC for 15 years
         ending February 2013 (see Notes 1 and 9). The Suriname Casino currently
         occupies the two leased floors, totaling approximately 20,000 square
         feet, in the Plaza Hotel, which is in downtown Paramaribo. The Suriname
         Casino has approximately 15 gaming tables, 174 slot machines and a
         50-seat restaurant.

                                       F-15
<PAGE>

               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 3 - LINES OF BUSINESS (CONTINUED)

         Pursuant to the Suriname Casino Agreement, the Company's wholly owned
         subsidiary Dorsett, entered into the "Suriname Casino Management
         Agreement" with SLC to manage the Suriname Casino. The Suriname Casino
         Management Agreement provides for fifteen years exclusive operating
         rights of the Suriname Casino for a base fee equal to three percent of
         revenues, as defined, plus an incentive fee of ten percent of gross
         profits, as defined.

         As of June 30, 1999, the Company had advanced approximately $4.6
         million to SLC for this project, of which approximately $4.0 million
         was spent for property, equipment and leasehold improvements. The
         Company retained a lien and security interest in the property and
         equipment until the advance was paid back by SLC. Repayment was subject
         to certain restrictions based upon an obligation to repay a loan
         received from Parbhoe. In 2003, SLC repaid the balance of the loan and
         interest due to the Company.

         SAKHALIN ISLAND (RUSSIAN FEDERATION) CASINO AND RESORT

         The Company acquired rights and had secured property under a 101-year
         lease on a ten acre site to build and operate a hotel/casino resort.
         The site is located in the center of the City of Yuzhno-Sakhalinsk
         ("City") on Sakhalin Island (the "Sakhalin Project"). Sakhalin Island
         is a Russian territory located just north of Japan.

         The Sakhalin Project requires substantial financing to progress
         further. The Company began making efforts to market the plans, licenses
         and rights in order to recover the historic expenditures. In April
         2003, SGTI entered into a series of agreements (dated as of March 20,
         2003) under which it transferred one half of its leasehold rights in
         the Sakhalin Project to a third party for $1,300,000 (see Note 1).
         Under these agreements, SCC has subleased rights to approximately five
         acres of the property, and has transferred one half of the shares of
         SCC which it held. The purchaser has agreed to return to SGTI, for
         nominal consideration, the shares of SCC if it acquires a direct lease
         from the City for the portion of the property subject to the sublease.
         SGTI paid a fee of $200,000 to a consultant in connection with this
         transaction (See Note 8).

         The Company is currently negotiating with the party mentioned above
         along with other parties for the sale or transfer of its rights on the
         remaining five acre half of the Sakhalin property and is unable, at
         this time, to quantify what additional recoveries it will eventually
         attain. Upon evaluation of the remaining $1,000,000 capitalized costs
         on its consolidated balance sheet and taking into consideration the
         current negotiations for its remaining lease rights, the Company
         reserved for $300,000 thereby reducing the current cost capitalized on
         its consolidated balance sheet for the Sakhalin Project to $700,000.

         LOTTERY AND GAMING

         In May 2001, the Company entered into a contract to acquire an entity
         Emerging Market Solutions International, Inc. ("EMSI") which held the
         exclusive right and obligation to supply an on-line lottery and sports
         lottery system, and to operate it, in Ho Chi Minh City and the Southern
         provinces of Vietnam. Certain conditions to that contract were not
         fulfilled, and the Company subsequently determined that it was in its
         best interests to assign its rights in that contract to a Canadian
         entity, Pacific Lottery Corporation ("PLC"), formerly known as Applied
         Gaming Solutions of Canada, Inc. ("AGS"), and to restructure its cash
         investment in the project into common shares of PLC. In a transaction
         which was consummated as of April 7, 2003, the Company acquired from
         PLC 7,962,620 of its common shares in satisfaction of indebtedness owed
         to the Company by PLC at a deemed purchase price of $.30 CDN per share.
         The transaction was part of a debt and equity reorganization of PLC,
         and a private placement by PLC of its common shares and warrants to a
         wholly-owned subsidiary of Genting International PLC ("Genting") for
         $4.5 Million CDN. The funds from the private placement are to be
         exclusively used in connection with the development of the online
         lottery program in Ho Chi Minh City and the Southern provinces of
         Vietnam. Securities of PLC are traded on the Canadian Venture Exchange
         under the symbol TSX-Venture: "LUK" (see Notes 1 and 12).

                                       F-16
<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 3 - LINES OF BUSINESS (CONTINUED)

         The Company also received from PLC a "finders option" upon the closing
         of the private placement to compensate the Company for assisting in
         bringing about the private placement. The finders option consists of
         common stock purchase warrants to purchase 1,400,000 additional common
         shares of PLC at $.30 CDN per share (exercisable over a twenty-four
         month period).

         The acquisition of these securities gave the Company ownership of
         approximately 19.7% of the common shares of PLC (or 13.6% of such
         common shares following the conversion to common shares of the
         outstanding preferred shares), or 11.9% of the common shares on a fully
         diluted basis.

NOTE 4 - CAPITAL STRUCTURE, PUBLIC OFFERINGS AND PRIVATE PLACEMENTS

         All of the following disclosures of issuances of the Company's stock
         have been adjusted for the reverse stock split (see Note 1).

         In September 1998, the Company issued 4,450 shares of common stock to
         Maritime Services Corporation ("MSC"), the building contractor for the
         Suriname Casino. These shares were issued at a price of $45.00 per
         share or $200,250, which MSC agreed to accept as consideration and
         payment towards its construction contract with SLC. In March 2002, the
         Company agreed to pay MSC $30,000 in agreed installments and to buy
         back the 4,450 shares of the Company's common stock held by MSC for an
         amount of $9,345 after the last installment was paid. At September
         2002, all amounts had been paid and the shares that the Company bought
         back were cancelled (see Note 9).

         In January 2001, the Company issued 66,667 shares of common stock to
         Richard W. Devries, Professional Corporation, the attorney for EMSI, at
         a purchase price of $1.50 per share. In November 2003, these shares
         were purchased back by the Company for $1.20 each and thereafter
         cancelled.

         In July 2001, the Company cancelled all 12,500 shares previously issued
         but not delivered to FEC due to the non-performance of its obligations
         under its agreement with the Company (see Note 9).

         In July 2001, the Company cancelled 6,394 shares previously issued but
         not delivered to Etablissement Asteiss ("EA") due to the
         non-performance of its obligations under a contract to perform
         services.

         As a result of the aforementioned cancelled shares previously issued to
         FEC and EA, a gain of $18,900 has been included in the consolidated
         statement of operations and additional paid-in capital and common stock
         have been reduced by $18,881 and $19, respectively, for the year ended
         June 30, 2002 (fair value - $1.00 per share).

         In September 2001, the Company, at a special meeting of the
         stockholders, authorized the board of directors to affect a 1 for 20
         reverse split of its common stock. The Company affected the transaction
         on October 1, 2001. As a result, the common shares outstanding were
         consolidated from 17,762,130 shares to 888,109 and the paid-in capital
         was increased by $16,875 with a corresponding reduction in the common
         stock value (see Note 1).

         During the year ended June 30, 2002, the Company sold 150,000 shares of
         its common stock to four private investors (the "Four Private
         Investors") and another 75,000 shares to Auschina Investment Co. at
         $2.00 per share. In consideration for acting as a placement agent for
         the aforementioned sale of 225,000 shares, the Company paid $50,000 and
         issued 50,000 shares of its common stock in March 2002, to Australasian
         Capital Holdings Pty Limited ("ACH") and its nominees as private
         placement fees.

         In March 2002, the Company issued 100,000 shares of its common stock
         valued at $1.20 per share to ACH as compensation for consulting
         services provided by it to the Company relating to the EMSI and the
         Vietnam

                                       F-17
<PAGE>

               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 4 - CAPITAL STRUCTURE, PUBLIC OFFERINGS AND PRIVATE PLACEMENTS

         lottery project. The related $120,000 was treated as part of the
         Advances to EMSI, which was subsequently charged to operations during
         the year ended June 30, 2002 (see Notes 1 and 12).

         In April 2002, based upon the written instructions received from Mr.
         Frank Favretto ("Favretto"), a director of ACH, the Company allotted
         the 50,000 shares issued to ACH in March 2002 for acting as placement
         agent, and the 100,000 shares issued to ACH in March 2002 as
         compensation for consulting services relating to the EMSI and Vietnam
         Lottery project, to the Four Private Investors.

         In December 2002, the Company repurchased the 300,000 shares of its
         common stock issued and allotted to the Four Private Investors at $1.25
         per share and in January 2004, the Company repurchased the 75,000
         shares of its common stock issued to Auschina Investment Co. at $1.25
         per share.

         In April 2002, the Company issued 10,000 shares of its common stock
         valued at $1.20 per share to a consultant, Michael Davis, for
         consulting services provided during the year.

         In November 2002, the Company issued 150,000 shares of its common stock
         at a fair market value of $0.75 per share to Mr. Dallas Dempster's
         ("Dempster") nominee, as a bonus for his past services and future
         commitments as Chief Executive Officer ("CEO"), President and Director
         of the Company. The related expense of $112,500 has been recorded as
         salary (see Note 8).

         In December 2002, the Company repurchased 3,408 shares of its common
         stock valued at $0.69 per share from Oscar fund.

         In January 2003, the Company repurchased 3,855 shares of its common
         stock valued at $0.69 per share from TM Services and 1,119 shares of
         its common stock valued at $0.69 per share from TM Pension.

         In July 2003, the Company repurchased 36,500 shares of its common stock
         valued at $1.00 per share from Star Casinos Ltd.

         In January 2004, the Company repurchased 26,114 shares of its common
         stock valued at $1.25 per share from Peter Janssen.

NOTE 5 - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

         At June 30, property, equipment and leasehold improvements consist of
         the following:

                                                   2004             2003
                                                   ----             ----
         Office equipment and other
                fixed assets                   $  293,224       $   337,779
              Casino and restaurant equipment   1,952,208         1,854,345
              Casino Leasehold improvements     4,481,597         4,472,898
                                               ----------       -----------
                                                6,727,029         6,665,022
         Less:  Accumulated depreciation
                and amortization               (3,710,980)       (3,235,977)
                                               ----------       -----------
                                               $3,016,049       $ 3,429,045
                                               ==========       ===========

         Depreciation expense was $479,120 for the year ended June 30, 2004,
         $755,476 for the year ended June 30, 2003, and $755,562 for the year
         ended June 30, 2002.

                                       F-18
<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 6 - INCOME TAXES

         LWSI AND DORSETT

         At June 30, 2004, LWSI and Dorsett had United States net operating loss
         carryforwards ("NOL") of approximately $10,267,000 that expire at
         various dates through 2023. In the event of a change in ownership of
         the Company, the utilization of the NOL will be subject to limitations
         under certain provisions of the United States Internal Revenue Code. In
         addition, at June 30, 2003, LWSI and Dorsett had capital loss
         carryovers of approximately $5,595,000 which generally can only be used
         to offset capital gains. Unused capital losses are carried forward
         indefinitely until they can be used against future capital gains.

         LWSI and Dorsett will be subject to corporate income tax rates as high
         as 38% if they produce a profit in the United States in excess of the
         NOL.

         SCC

         At June 30, 2004, SCC had NOL's of approximately $3,926,000 expiring
         through 2009. NOL's are limited to 20% of the loss per year for five
         consecutive years after they are incurred.

         SGTI

         SGTI, which holds the Company's investment in SCC, is incorporated in
         Cyprus. Companies that are registered in Cyprus but are managed and
         controlled outside of Cyprus are not liable for tax on income
         occurring, derived and received outside of the country.

         SLC

         Corporate income taxes are paid by SLC in accordance with the Suriname
         Hazard Games Act of 1962 which stipulates that income taxes are payable
         at a rate of 50% of net taxable income as determined under Suriname tax
         law. SLC's corporate income taxes were settled at approximately
         $455,000 for calendar year 2001, $398,000 for calendar year 2002 and
         $64,000 for calendar year 2003. The Company has accrued for taxes of
         $110,000 for the six months ended June 30, 2004. As of June 30, 2004,
         SLC has income taxes payable of approximately $328,000 representing
         accrued income taxes for calendar year 2004 together with income taxes
         still due for calendar years 2002 and 2003.

         Additionally, efforts by the Suriname legislature to initiate a fixed
         monthly fee on cash slot machines and gaming tables used in casino
         operations have resulted in the passing of a new tax law requiring the
         collection of such fees effective January 2003. The monthly fees are
         approximately $143 per slot machine and between $1,071 and $1,429 per
         gaming table. The fees are deductible in computing the net taxable
         income of the Suriname Casino. The monthly fees will be subject to
         change as exchange rates fluctuate and as additions or reductions in
         the numbers of slot machines and gaming tables being operated by the
         Suriname Casino occur. During the year ended June 30, 2003, SLC paid
         approximately $270,000 towards these fees and approximately $510,000
         was paid during the year ended June 30, 2004.

                                       F-19
<PAGE>

               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 6 - INCOME TAXES (CONTINUED)

         INCOME TAX PROVISION (BENEFIT)

         The income tax provision (benefit) as of June 30, 2004 consists of the
         following:

                                                               Year Ended
                                                            -----------------
                                                              June 30, 2004
         Current:
               U.S. Federal                                              -
               State and local                                           -
               International                                       (89,544)
                                                               -----------
               Total current tax provision (benefit)               (89,544)
                                                               -----------
         Deferred:
               U.S. Federal                                              -
               State and local                                           -
               International                                             -
                                                               -----------
              Total provision (benefit) for income taxes       $   (89,544)
                                                               ===========

         Items that give rise to deferred tax accounts as of June 30, 2004 are
         as follows:

                                                               Year Ended
                                                            ----------------
                                                              June 30, 2004
         Deferred tax assets:
              U.S. loss carryforwards                       $    4,701,000
              International (Russian) loss carryforwards         1,122,700
                                                            --------------
         Net deferred tax asset before valuation
              allowances                                         5,823,700
         Deferred tax asset valuation allowance                  5,823,700
                                                            --------------
              Net deferred tax                              $            -
                                                            ==============

         Realization of any portion of the Company's deferred tax asset at June
         30, 2004 is dependent upon future earnings and capital gains. Due to
         the uncertainty of future earnings and capital gains, a full valuation
         allowance has been provided.

         Cumulative undistributed earnings of foreign subsidiaries at June 30,
         2004, 2003 and 2002 were approximately $2,918,000, $2,544,000 and
         $1,844,000, respectively. Approximately $937,000 and $753,000 was
         repatriated from the foreign subsidiary in 2004 and 2003, respectively,
         by way of dividends. The Company has sufficient NOL's to offset any
         potential income tax liability from receipts of dividends.

                                       F-20

<PAGE>

               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 7 - NOTES PAYABLE

         In January 2000, the Company borrowed $300,000 from Stanton &
         Associates ("Stanton"). The Company recorded the loan for $283,000 that
         was net of a $17,000 discount, which was recorded as deferred interest
         expense. The deferred interest expense was amortized and expensed over
         the life of the loan. Interest on the loan was calculated at the Wall
         Street Journal prime rate, payable on a monthly basis. The terms of the
         promissory note required that the Company repay the loan in four
         monthly installments of $15,000 commencing February 2000, seven monthly
         installments of $30,000 commencing June 2000, and a final payment of
         $30,000 on or before December 31, 2000. The Company granted Stanton a
         security interest, subordinated to interest on a convertible note of
         $350,000 from Danville Investments Pty. Ltd., Australia ("Danville")
         obtained by the Company in October 1999, in all principal payments,
         interest and management fees due to the Company from SLC and issued
         Stanton warrants to purchase shares of the Company's common stock. The
         Company was unable to meet the original repayment schedule on the
         Stanton debt and had made payments based on the availability of funds.
         The Company paid off the remaining balance of $75,000 plus interest in
         January 2002 (see Notes 8 and 11).

         In September 1998, LWSI borrowed $600,000 from its 50% joint venture
         partner in SLC, Parbhoe, for the construction of its permanent casino
         facilities. Subsequent to the Company making payments which brought the
         loan balance down to $515,900, no further payments were made due to
         controversy connected with certain liens filed against Parbhoe's
         estate. The funds for repayment of the loan were set aside pending the
         resolution of such claims and liens against Parbhoe. Interest on the
         loan was calculated at a rate of 3% per month until such time as the
         entire loan balance was set aside (see Note 3). Parbhoe made a demand
         on SLC for the repayment in full of the loan it made to LWSI on
         September 3, 1998. The Court denied this claim to Parbhoe on the basis
         that the loan was made to LWSI and not SLC.

NOTE 8 - RELATED PARTY TRANSACTIONS

         CONSULTANTS

         The Company was a party to an agreement (the "Casino Consulting
         Agreement") with Star Casinos Limited, (the "Casino Consultant") which
         expired in December 1999. Under the Casino Consulting Agreement, the
         Casino Consultant agreed to provide consulting and technical services
         to the Company and any affiliated entities for a period of two years.
         David Hartley, who subsequently became the president of the Casino
         Division of the Company, owned the Casino Consultant. The agreement
         also binds the Casino Consultant to a two-year non-compete,
         non-solicitation provision after termination of the agreement. After
         the Casino Consulting Agreement concluded, the Casino Consultant agreed
         to continue providing the consulting services on a month-to-month basis
         at an annualized rate of $250,000, until December 2001. Commencing
         January 2002, David Hartley was no longer the president of the Casino
         Division of the Company, but continued as a consultant. Also commencing
         January 2002, the Casino Consultant agreed to provide consultant
         services on a month to month basis at a reduced annualized rate of
         $150,000. The Casino consultant provided consulting services up to
         March 2003. The Company paid the Casino Consultant $112,500 during the
         year ended June 30, 2003 and $200,000 during the year ended June 30,
         2002.

         The Sakhalin Project (other than its financing) has been managed by SCC
         in Sakhalin City, primarily by Mr. Valery Mozolevsky ("Mozolevsky"),
         who has had long-term employment with SCC. Dempster was, and still is,
         one of two Executive Directors of SCC and is the General Director.
         Mozolevsky was, and still is, the other Executive Director. Consulting
         fees paid to Mozolevsky $75,000 for each of the years 2004, 2003 and
         2002. During 2003, SGTI paid a fee of $200,000 to the son of Mozolevsky
         for assistance in connection with matters relating to the sale of one
         half of the leasehold rights in the Sakhalin Project (See Note 3).

DIRECTORS
         The Company borrowed from Stanton $300,000 in January 2000. Mr. James
         Stanton, the owner of Stanton, is a director of the Company. During
         2002, the Company paid off the remaining balance of this note (see
         Notes 7 and 11).

                                       F-21
<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 8 - RELATED PARTY TRANSACTIONS (CONTINUED)

         Commencing September 2002, the Company agreed to pay Stanton consulting
         fees of $5,000 per month. Options and warrants previously granted to
         Stanton were extended and repriced in the year ending June 30, 2003.
         Mr. Stanton was also granted 50,000 options during the year ended June
         30, 2003 (see Note 11).

         The Company granted 25,000 options during the year ended June 30, 2003
         to Mr. Miles Greenberg ("Greenberg"), the Chief Financial Officer and
         Director of the Company (See Note 11).

         The Company granted 10,000 options during the year ended June 30, 2003
         to Mr. Jeffrey Clague ("Clague") general manager and director of SLC
         (effective from May 8, 2003)(See Note 11).

         On November 28, 2003, the Company granted as an incentive to each of
         its directors and officers, rights to acquire up to 10% or 796,260 of
         the PLC shares which the Company acquired from PLC. At the time of
         grant, the closing market price of the shares was CDN$.22 per share and
         may be purchased by the grantees at any time, at a price equal to
         CDN$.30 per share, the Company's cost of such shares. The rights to
         acquire the shares will expire November 28, 2006. Dempster received
         rights to acquire 398,130 of such shares and Stanton and Greenberg each
         received rights to acquire 199,065 shares (See Note 3).

         PRESIDENT, CEO, DIRECTOR

         In November 2002, Dempster's nominees were issued 150,000 shares of the
         Company's common stock as a bonus in consideration for his past
         services and future commitments as chief executive officer, president
         and director of the Company (see Note 4).

         In October 2003, the Company began paying $3,500 per month to Dempster
         as rental payments for the London apartment occupied by Dempster and
         used as an office (See note 9).

         The total number of unexpired options and warrants granted to
         directors, including nominees, and chief executive officers of the
         Company as at June 30, 2004, were 238,750 and 32,500, respectively. All
         options and warrants, except 10,000 options issued to Clague (exercise
         price of $0.75 per share), have an exercise price of $0.50 per share.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

         RENTAL COMMITMENTS

         In July 2002, the Company rented new office space in the United States
         for thirteen months at an average monthly rate of approximately $1,100
         and renewed the lease for an additional thirteen months in August 2003
         at an average monthly rate of approximately $1,400. In August 2004, the
         Company moved its location in the United States signing a one-year
         rental agreement at an average monthly rate of approximately $850. The
         Company also leases office space on a one-year renewable lease in
         Sakhalin City with monthly rentals of approximately $1,100 and pays
         Dempster $3,500 per month on a month to month basis for the use of
         Dempster's apartment as an office (See Note 8). The minimum future
         rental commitment for leases in effect at June 30, 2004 approximates
         the following:

                               Year Ended
                          --------------------
                              June 30, 2005          $  14,500
                              June 30, 2006                850
                                                     ---------
                                                     $  15,350
                                                     =========


                                       F-22
<PAGE>

               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

         The Suriname Casino currently occupies two leased floors, totaling
         approximately 20,000 square feet, in the Plaza Hotel, which is in
         downtown Paramaribo. The Company leased the Suriname Casino premises
         from Parbhoe, a 50% shareholder in SLC, for fifteen years ending in
         February 2013, for a yearly base rent of $200,000, subject to future
         increases based on the Suriname Consumer Price Index as stipulated in
         the Casino Lease.

         SLC continued to pay rent at the same rate from the beginning of the
         lease to June 2000 without providing for any increase in rent. Suriname
         law regulates the maximum amount of rent that a landlord can charge and
         in July 2000, the Company determined, based on a valuation validated by
         the district commissioner in Suriname, that it had been overcharged.
         Pursuant to this decision, SLC commenced paying a reduced rental of
         approximately $3,200 per month and is currently attempting to recover
         the excess rent charged prior to this date which amounts to
         approximately $315,000. As a result of liens placed on Parbhoe's assets
         by Surinaamsche Bank, SLC has and continues to set aside the reduced
         rental of approximately $3,200 per month. Parbhoe has appealed the
         decision of the district commissioner and has made a counterclaim of
         approximately $484,000 for rent in arrears and has asked for the
         dissolution of the lease agreement and payment of back rent. SLC is
         vigorously contesting these counterclaims. Only once the litigation is
         settled will the Company be able to predict the future rental expense
         in Suriname. For the years ended June 30, 2004 and 2003, the Company
         has provided a reserve of $96,000 and $60,000, respectively, for any
         contingencies relating to the Suriname Casino rent and is included in
         accounts payable and accrued expenses in the consolidated balance sheet
         (see Note 3).

         Rent expense was $115,606 for the year ended June 30, 2004, $87,140 for
         the year ended June 30, 2003 and $93,883 for the year ended June 30,
         2002.

         On July 30, 2003, the Cantonal Court in Suriname issued an order
         evicting SLC from the premises it occupies in the Plaza Hotel and from
         which it conducted all of its casino operations. The Court ruled that
         Stichting Dim ("Dim") the plaintiff in the eviction proceeding which
         took title to the Plaza Hotel through a mortgage foreclosure, was not
         bound by the 1998 casino lease between SLC and Parbhoe, as Parbhoe did
         not hold registered title to the premises. SLC appealed the decision,
         and on July 16, 2004, the Court of Justice in Suriname denied Dim's
         request and "annulled" the order of eviction. The Court of Justice
         determined that the Cantonal Court could not properly issue such an
         eviction order in a summary or "Kort Geding" proceeding because the
         consequences thereof could not be adequately considered by such Court,
         and that a full proceeding was necessary to properly determine the
         rights and interests of the parties. Neither party has commenced such a
         full proceeding, but either one may do so in the future. If a full
         proceeding is commenced, it is likely to take several years to be
         resolved by the Suriname Courts. The written decision of the Court of
         Justice has not yet been issued (see Notes 1, 3 and 13).

         In August 2004, Dim commenced a new summary proceeding again seeking
         eviction of SLC from the Plaza Hotel. Dim claims that a regulation
         requiring all holders of gaming licenses to start operations in six
         months, which became effective on August 20, 2004, justifies such a
         summary proceeding because Dim claims it may lose its license if it
         does not urgently obtain the whole building. In the opinion of Suriname
         counsel for SLC, based upon the considerations in the judgment rendered
         on July 16, 2004 by the Court of Justice, the chances of Dim winning
         this case are slim. A decision in this action may be rendered in
         October 2004 (see Note 10).

         As there was no assurance that the appeal in the first summary
         proceeding case would be successful, the Company through its
         subsidiaries sought alternative locations in Paramaribo to relocate its
         casino operations. SLC has recently filed an action against Parbhoe
         seeking damages of US $694,000, incurred as a result of the eviction
         proceeding and related matters.


                                       F-23
<PAGE>

               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

         KAI MICHAELSEN ("MICHAELSEN") AND ZAMORA INVESTMENTS PTE LTD.
         ("ZAMORA") - LEGAL ACTION

         Pursuant to the termination of certain Hotel Management Agreements in
         November 1998, Far East Consortium ("FEC") assumed any and all
         financial obligations with respect to the employment of Michaelsen, the
         President of the Company's hotel management subsidiary, Dorsett.
         Michaelsen's employment was officially terminated in April 1999 and
         Michaelsen's Company, Zamora, thereafter filed a claim against Dorsett
         for $80,000 in an arbitration claim. In September 2000, the Company
         settled the matter with Michaelsen and Zamora and paid $40,000 in
         exchange for complete releases. The Company held 12,500 shares that
         were issued but never delivered to FEC pursuant to the November 1998
         termination agreement. It was the Company's position that the
         settlement of $40,000 plus legal fees of $47,000 incurred by the
         Company must be repaid by FEC for the Company to deliver the shares. On
         July 11, 2001, the Company cancelled the shares due to FEC's failure to
         fulfill its obligations under the agreement (see Note 4).

         SLC PLAZA HOTEL EXPENDITURES - LEGAL ACTION

         SLC's landlord, Parbhoe, by contract, was required to provide air
         conditioning for the areas leased. Due to Parbhoe's failure to perform
         timely, SLC paid approximately $201,000 to have air conditioning
         equipment installed to ready the leased area for occupancy more
         quickly. Litigation is pending to recover the expenditure. Parbhoe by
         contract, is also required to provide water and electricity for the
         Suriname Casino. SLC had to incur further expenditure of approximately
         $158,000 towards expansion of water and electricity installations to
         adequately service the leased area. SLC has filed a claim to recover
         the amount. SLC also filed a claim of approximately $87,000 for costs
         incurred to renovate the Plaza Hotel building owned by Parbhoe for
         which it has received a favorable verdict and is currently awaiting the
         written decision from the Court. Parbhoe has counterclaimed in each of
         these proceedings seeking dissolution of the lease and alleging it is
         due payment of back rent in the amount of approximately $484,000.

         MARITIME SERVICES CORPORATION ("MSC") - LEGAL ACTION

         In September 2000, MSC brought an action in the United States District
         Court of Oregon seeking damages in the amount of $200,250 plus
         interest. MSC claimed that the Company issued its own shares in 1998 as
         partial payment for construction work performed and that the Company
         was obligated to buy the shares back for the amount claimed as damages.
         In March 2002, the Company and MSC entered into a settlement agreement
         (see Note 4).

         SLC JOINT VENTURE AGREEMENT

         The joint venture agreement between Parbhoe and Dorsett stipulates that
         one party obtains an option to buy the shares of the other party, if "a
         change of control" occurs within that other party. As one partner of
         Parbhoe passed away in September 2001, such a change of control
         occurred. Dorsett therefore seeks to exercise this option to purchase
         Parbhoe's shares in SLC.

         GARNISHMENT OF BANK ACCOUNTS

         On July 30, 2001,  Parbhoe  acting in the name of SLC, put a freeze on
         the bank  accounts  operated by  Dorsett,  the manager on behalf of SLC
         (SLC vs.  Dorsett & Clague,  A.R.  01-2894),  claiming that Dorsett was
         transferring SLC's money illegally,  and that Clague was not authorized
         to act as general  manager for SLC.  Parbhoe  claims  that  Dorsett and
         Clague  owe SLC  $4,152,254.  On May 10,  2002,  Parbhoe  undertook  an
         identical  action to  freeze  the bank  accounts  of  Dorsett  (SLC vs.
         Dorsett & Clague,  A.R. No. 01/3216).  The garnishments  were lifted in
         summary proceedings which are currently on appeal. The Company believes
         there is no merit to the claims.  Additionally,  the Suriname attorneys
         for the Company are of the opinion that

                                       F-24
<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

         because Parbhoe was not authorized and had no right to initiate legal
         action in the name of SLC, SLC was not legally authorized to commence
         these proceedings, and that the cases are likely to be dismissed.

         BUSINESS, POLITICAL AND ECONOMIC CONDITIONS

         The Company's operating activities are taking place principally in
         Suriname. Suriname experienced, within the last three years,
         significant devaluation of its currency. The volatility in both the
         economic and political environment is different than that of the United
         States. Therefore, the Company's results of operations and financial
         position could be materially affected by sudden changes in Suriname's
         business and political environment.

         CURRENCY EXCHANGE CONTROLS

         With regard to the activities taking place in Suriname, it is
         management's belief that it will be able to repatriate earnings without
         official impediments.

NOTE 10 - SIGNIFICANT UNCERTAINTY

         The Suriname Casino occupies two leased floors of the Plaza Hotel in
         downtown Paramaribo. The Company leased the casino premises from
         Parbhoe, its 50% joint venture partner in SLC, under a fifteen year
         lease term ending in February 2013. Stichting Dim (Dim Foundation)
         assumed this fifteen year lease from Parbhoe in a foreclosure
         proceeding. Dim Foundation, who took title of the Plaza Hotel claimed
         it was not bound by the lease agreement and commenced an eviction
         proceeding.

         On July 30, 2003, the Cantonal Court in Suriname issued an order
         evicting SLC from the premises it occupies in the Plaza Hotel and from
         which it conducted all of its casino operations. SLC appealed the
         decision, and on July 16, 2004, the Court of Justice in Suriname denied
         Dim's request and "annulled" the order of eviction. The Court of
         Justice determined that the Cantonal Court could not properly issue
         such an eviction order in a summary or "Kort Geding" proceeding because
         the consequences thereof could not be adequately considered by such
         Court, and that a full proceeding was necessary to properly determine
         the rights and interests of the parties. However, in August 2004, Dim
         commenced a new summary proceeding again seeking eviction of SLC from
         the Plaza Hotel. Dim claims that a regulation requiring all holders of
         gaming licenses to start operations in six months, which became
         effective on August 20, 2004, justifies such a summary proceeding
         because Dim claims it may lose its license if it does not urgently
         obtain the whole building. In the opinion of Suriname counsel for SLC,
         based upon the considerations in the judgment rendered on July 16, 2004
         by the Court of Justice, the chances of Dim winning this case are slim.
         A decision in this action may be rendered in October 2004 (see Note 9).

         If the Company was required to relocate the Suriname Casino to a
         different location, it will have to design and set up infrastructure,
         incur additional relocation costs associated with removal,
         transportation and installation of equipment, leasehold improvements,
         advertising and all other costs associated with relocation and
         statutory costs associated with the set up of operations at a new
         location. The Company may also need to terminate the employment of some
         or all of its existing staff and pay them compensation based upon the
         labor laws in Suriname. In addition, there is the potential for a full
         or partial impairment, depending on the outcome of the court
         proceedings, of the leasehold improvements in SLC, which have a net
         book value of approximately $2,780,000 at June 30, 2004.

                                       F-25
<PAGE>
               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 10 - SIGNIFICANT UNCERTAINTY (CONTINUED)

         The Company has approximately $2,800,000 in cash and cash equivalents
         as of June 30, 2004, which includes approximately $1,000,000 held by
         LWSI in the U.S. and approximately $1,800,000 held by SLC in Suriname.
         Management believes that if SLC were to be evicted and is required to
         relocate to a new facility, the cash presently held by the Company
         could sufficiently finance improvements required to outfit a new space
         for a casino.

         The consolidated financial statements do not include any adjustments to
         reflect the possible future effects on the recoverability and
         classification of assets or the amounts and classification of
         liabilities that may result from the outcome of this uncertainty.

NOTE 11 - STOCK OPTIONS AND WARRANTS

         The Company applies FASB Interpretation 44, "Accounting For Certain
         Transactions Involving Stock Compensation" - An interpretation of APB
         25. In addition, the Company applies APB Opinion 25, Accounting for
         Stock Issued to Employees, and related interpretations in accounting
         for employee stock options. Under FASB Interpretation 44 and APB
         Opinion 25, because the exercise price of the Company's employee stock
         options equals or exceeds the market price of the underlying stock on
         the date of grant, no compensation cost is recognized.

         SFAS No. 123, "Accounting for Stock Based Compensation," as amended by
         SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and
         Disclosure," allows the continued application of APB 25 for financial
         reporting provided that the Company discloses in the notes the pro
         forma effects of the fair value based method.

         Options that have been granted are exercisable either one-third
         annually at each anniversary date from the date of grant or they are
         exercisable immediately. In addition, they have maximum terms of not
         more than four years and they are not transferable. In October 2002,
         the Company extended the terms of 186,250 warrants and options
         previously granted to current directors and executive officers through
         2006 with the month and day of their original expiration date remaining
         unchanged.

         PLAN OPTIONS

         The Company's 1996 Stock Option Plan (the "Plan") was adopted in
         November 1996, and amended in December 1996, April 1997, December 1997
         and September 2001. The Plan provides for adjustments in the number and
         type of shares covered by the Plan and options granted in the event of
         any reorganization, merger, re-capitalization or certain other
         transactions involving the Company. Accordingly, in September 2001, the
         Plan was amended to increase the number of shares available for grant
         (after giving effect to the Share Consolidation) from 250,000 shares to
         3,000,000 shares. Under the Plan, which authorizes the granting of
         incentive stock options or non-incentive stock options the maximum
         number of shares of common stock for which options may be granted is
         3,000,000 shares. As of June 30, 2004, 188,750 options to purchase
         shares of common stock had been granted under the Plan.

         In October 2002, the Company granted fully vested four-year options to
         purchase 25,000 shares of the Company to Greenberg, at an exercise
         price of $0.50 per share. In October 2002, the Company granted fully
         vested four-year options to purchase 50,000 shares of the Company to
         Mr. Stanton, at an exercise price of $0.50 per share (see Note 8).

         In April 2003, the Company granted fully vested four year options to
         purchase 10,000 shares of the Company to Clague at an exercise price of
         $0.75 per share.

                                       F-26
<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 11 - STOCK OPTIONS AND WARRANTS (CONTINUED)

         The Company has set aside 2,811,250 shares of common stock for future
         options that may be granted under the Plan. In 2004, 2003 and 2002,
         9,375, 29,000 and 1,750 options were forfeited, respectively.

         NON-PLAN OPTIONS

         In addition to the options granted under the Plan, the Company issued
         94,856 non-plan options in 1998 of which 50,000 are still outstanding
         at June 30, 2004. No options have been exercised.

         FASB Statement 123, "Accounting for Stock-Based Compensation," as
         amended by SFAS No. 148, "Accounting for Stock-Based
         Compensation-Transition and Disclosure," requires the Company to
         provide pro forma information regarding net income (loss) and net
         earnings (loss) per share as if compensation cost for the Company's
         employee stock options had been determined in accordance with the fair
         value based method prescribed in FASB Statement 123 and 148.

         The fair value of stock options or warrants granted was estimated at
         the date of grant using the Black-Scholes option pricing model. The
         Black-Scholes model was developed for use in estimating the fair value
         of traded options which have no vesting restrictions and are fully
         transferable. In addition, option valuation models require several
         inputs, including the expected stock price volatility. The model may
         not necessarily provide a reliable single measure of the fair value of
         employee and director stock options or warrants. The Company's employee
         and director stock options or warrants have characteristics
         significantly different from those of traded options or warrants and
         changes in input assumptions can materially affect the fair value
         estimates.

         The fair value of the options and warrants granted was estimated using
         an option valuation model with the following weighted-average
         assumptions:

         The Company  utilized the following  weighted-average  assumptions  to
         determine fair value:




                                                Year Ended June 30,
                                          ------------------------------
                                              2003             2002
                                          ------------------------------
             Risk-free interest rate           4.7%               6%
             Expected life                  4 years          4 years
             Expected volatility factors        0.5              0.5
             Expected dividend yield            0.0              0.0


                                       F-27
<PAGE>


               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 11 - STOCK OPTIONS AND WARRANTS (CONTINUED)

         Under the accounting provisions of FASB Statement 123 and 148, the
         Company's pro forma net (loss) income and (loss) earnings per share
         would have been as follows:

                                                 Year Ended June 30,
                                    --------------------------------------------
                                        2004             2003           2002
                                    --------------------------------------------
         Net (loss) income:
           As reported              $ (1,039,607)     $ 261,710      $ (604,511)
                                    =============     =========      ==========
           Pro forma                $ (1,039,607)     $ 241,086      $ (604,511)
                                    =============     =========      ==========

         Net (loss) earnings per
          common share basic
          and diluted:
           As reported              $      (1.05)     $    0.18      $    (0.61)
                                    =============     =========      ==========
           Pro forma                $      (1.05)     $    0.17      $    (0.61)
                                    =============     =========      ==========


         A summary of the status of the Company's fixed stock option plan and
         non-plan options as of June 30, 2004, 2003 and 2002 and changes during
         the years then ended is presented below:
<TABLE>
<CAPTION>
                                         June 30, 2004               June 30, 2003           June 30, 2002
                             -----------------------------  -------------------------------------------------------
                                                   Weighted                    Weighted                 Weighted
                                                    Average                     Average                 Average
                                                   Exercise                    Exercise                Exercise
                                     Shares          Price         Shares        Price       Shares      Price
                             --------------------------------------------------------------------------------------
<S>                               <C>              <C>         <C>            <C>        <C>           <C>
         Options outstanding
             at beginning of year    248,125          $.68        192,125        $4.64      192,625       $5.40
         Granted                           -             -         85,000         0.53        1,250        5.00
         Exercised                         -             -              -            -            -          -
         Forfeited                    (9,375)        (5.00)       (29,000)      (18.49)      (1,750)     (93.43)
                                   ---------     ---------      ---------    ---------    ---------    --------

         Options outstanding
             at end of year          238,750         $0.51        248,125        $0.68      192,125       $4.64
                                   =========     =========      =========    =========    =========    ========


         Options exercisable
             at end of year          238,750         $0.51        248,125        $0.68      191,125       $4.63
                                   =========     =========      =========    =========    =========    ========

         Weighted-average
             fair value of options
             granted during the year                 $0.00                       $0.08                    $0.13
                                                 =========                   =========                =========

</TABLE>



                                       F-28
<PAGE>

               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 11 - STOCK OPTIONS AND WARRANTS (CONTINUED)

         The  following  table  presents  information  relating to stock options
         outstanding at June 30, 2004:
<TABLE>
<CAPTION>
                                  OPTIONS OUTSTANDING                                  OPTIONS EXERCISABLE
                  -----------------------------------                   ----------------------------------
                                             Weighted                                            Weighted
                                              Average          Average                            Average
          Exercise                           Exercise         Remaining                          Exercise
            Price           Shares             Price        Life in Years        Shares            Price
       ---------------  ---------------   ---------------  ---------------   ---------------  ---------------
<S>      <C>              <C>          <C>                     <C>            <C>           <C>
           $0.50            228,750      $     0.50              2.28           228,750       $     0.50
            0.75             10,000            0.75              2.79            10,000             0.75
                       ---------------  ---------------   ---------------  ---------------   ---------------
                            238,750      $     0.51              3.19           238,750       $     0.51
                           =========         =========        =========         =========        =========
</TABLE>

         No options have been exercised in 2004, 2003 and 2002.

         WARRANTS

         At June 30, 2004, the Company had warrants amounting to 53,333
         outstanding. No warrants have been exercised. All warrants were
         exercisable on the day of grant. During 2004, no warrants were granted
         and 11,250 warrants expired.

         REPRICING OF OPTIONS AND WARRANTS

         In October 2002, the Company repriced and extended the option and
         warrants issued to current directors and executive officers, from $2.00
         to $0.50. These included 25,000 options and 32,500 warrants issued to
         Stanton (see Note 8).

         COMMON STOCK SET ASIDE

         Currently,  the Company has reserved 292,083 shares of common stock for
         exercise of options and warrants.


NOTE 12 - INVESTMENT IN PLC

         In May 2001, the Company entered into a formal, written contract (the
         "Purchase Contract") with six entities (collectively, the "Vendors") to
         purchase all of the issued and outstanding common stock of EMSI for
         5,500,000 shares of the Company's stock. The Purchase Contract was
         approved by the shareholders in September 2001. The Purchase Contract
         provided for a closing date on or before September 28, 2001, but was
         subsequently extended to December 2002.

         EMSI holds an exclusive contract (the "Lottery Gaming System Contract")
         to supply on-line lottery and sports betting systems in Ho Chi Minh
         City and the Southern provinces of Vietnam (the "Territory"). The
         Lottery Gaming System Contract is between EMSI and Detetour,
         Corporation for Development of New Technology and Tourism ("Detetour"),
         now known as NEWTATCO, an entity owned by the Sovereign Socialist
         Republic of Vietnam and extends ten years from the date that the first
         on-line sales begin on the on-line lottery gaming system. The deadline
         to implement the Lottery Gaming System Contract had been extended to
         November 2002. NEWTATCO is controlled by the National Centre of Natural
         Science and Technology. The laws of the Socialist Republic of Vietnam,
         for the most part, govern the Lottery Gaming System Contract. No
         on-line lottery or sports betting operations have previously been
         conducted under


                                       F-29
<PAGE>

               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 12 - INVESTMENT IN PLC (CONTINUED)

         Vietnamese authority within the Territory. EMSI had no other assets,
         liabilities or obligations and formal operations had not commenced as
         of June 30, 2002.

         The obligations under the Purchase Contract were conditioned on the
         Company affecting a reverse split, securing a listing of the Company's
         common stock on a reputable "exchange" and funding EMSI with
         $3,000,000. The Company was required by the Purchase Contract to use
         its best efforts to fulfill these conditions.

         The Company planned to fund EMSI by selling up to 1,500,000 additional
         shares of its common stock (the "Funding Shares") (measured after the
         Share Consolidation) for not less than $2.00 per share. The Company or
         the Vendors could cancel the Purchase Contract if the Funding Shares
         were not sold prior to September 28, 2001. If, despite its best
         efforts, the Company was unable to fulfill any of the conditions
         described above by the closing date, either the Vendors or the Company
         could declare the Purchase Contract terminated and of no effect.

         The Company advanced and incurred expenditures relating to the EMSI
         project of approximately $1,540,000 by October of 2002 (the
         "Advances"). As of June 30, 2002, approximately $1,090,000 was advanced
         to EMSI and approximately $268,000 was charged to operations. The
         Advances were funded by sale of common stock to certain private
         investors for $450,000 and the balance was funded from operating funds
         available to the Company. The Advances were not secured and there was
         no assurance that the Advances would be repaid to the Company (See
         impairment reserve provided below).

         The Company had not been able to fulfill all the conditions and,
         although the period within which to do so had been extended until
         December 31, 2002, the Company, in October 2002, had entered into an
         agreement (the "Exchange Agreement") with AGS and the Vendors. AGS
         holds a contract with NEWTATCO to manage certain aspects of the
         existing on-line lottery operations in Hanoi City. Under the terms of
         the Exchange Agreement, among other conditions, AGS agreed to acquire
         EMSI, affect a share consolidation with a ten to one reverse split and
         convert the Advances into shares of common stock of AGS (the stock of
         which is traded on the Canadian Venture Exchange), after the share
         consolidation. Under the Exchange Agreement, the Company would release
         EMSI from its obligations to repay the Advances owed to the Company and
         AGS would issue shares of its common stock at a rate of one share for
         each $.30 CDN of the Advances released provided that the then average
         quoted bid and asked price per AGS share was not less than $.30 CDN. It
         was anticipated that, upon conversion pursuant to the Exchange
         Agreement, the stockholders of the Company would indirectly hold
         approximately the same percentage of equity in the total lottery
         operation in the Territory as they held in EMSI under the Purchase
         Contract. In the event that the Exchange Agreement was not consummated,
         EMSI acknowledged to treat the Advances as unsecured loans due to be
         paid by EMSI on or before December 31, 2004 and AGS agreed to guarantee
         repayment by EMSI by that date.

         Consummation of the Exchange Agreement was subject to the fulfillment
         of various conditions, including the restructuring, prior to December
         31, 2002, by AGS of its capital stock and its debt obligations with its
         creditors, obtaining the necessary regulatory and other approvals, and
         AGS demonstrating, to the reasonable satisfaction of the Company, its
         financial ability to continue its operations and developing lottery
         operations in Ho Chi Minh City.

         In anticipation of the Exchange Agreement being fulfilled, on July 25,
         2002, the shareholders of AGS, in a special meeting, approved a
         resolution to restructure AGS, which among other things, included the
         acquisition of EMSI, effectuating a share consolidation with a ten to
         one reverse split, restructure of its debt obligations with its
         creditors, the assumption of the Advances and the issuance shares of
         AGS's common stock for the Advances assumed. AGS had approved issuance
         of 6,500,000 common shares at a deemed issue price of $.30 CDN per post
         consolidated common share in lieu of $1,950,000 CDN (approximately
         $1,284,000) advanced by LWSI to EMSI as of May 31, 2002. AGS had
         further agreed to issue additional shares of its common stock for
         further advances made to EMSI by the Company after May 2002. There was
         no assurance that the

                                       F-30

<PAGE>

               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 12 - INVESTMENT IN PLC (CONTINUED)

         Exchange Agreement would be consummated. Therefore, during the year
         ended June 30, 2002, approximately $840,000 of the Advances was charged
         to operations as a reserve for the impairment of amounts advanced (see
         Note 3) and approximately $268,000 of the advances were expensed as
         operating costs in the consolidated statement of operations.

         Certain conditions to the Purchase Contract were not fulfilled, and the
         Company subsequently determined that it was in its best interests to
         assign its rights in that contract to a Canadian entity, Pacific
         Lottery Corporation ("PLC"), and to restructure its cash investment in
         the project into common shares of PLC. In a transaction which was
         consummated as of April 7, 2003, the Company received from PLC cash of
         $69,500 and 7,962,620 of PLC's common shares in satisfaction of
         indebtedness owed (the Advances) to the Company by PLC at a deemed
         purchase price of $.30 CDN per share. The transaction was part of a
         debt and equity reorganization of PLC, and a private placement by PLC
         of its common shares and warrants to a wholly owned subsidiary of
         Genting International PLC ("Genting") for $4.5 Million CDN. The funds
         from the private placement are to be exclusively used in connection
         with the development of the online lottery program in Ho Chi Minh City
         and the Southern provinces of Vietnam. Securities of PLC are traded on
         the Canadian Venture Exchange under the symbol TSX-Venture: "LUK".

         The Company received the above-mentioned shares of PLC in full
         satisfaction of the Advances. Therefore, based upon the adequacy of the
         consideration received and change in circumstances described above, the
         Company was able to reverse the valuation reserve of approximately
         $840,000 in April 2003 pursuant to SFAS No. 114.

         The Company also received from PLC a "finders option" upon the closing
         of the private placement as compensation for assisting in consummating
         the private placement. The finders option consists of common stock
         purchase warrants to purchase 1,400,000 additional common shares of PLC
         at $.30 CDN per share (exercisable for a twenty-four month period).

         The acquisition of these securities gave the Company current ownership
         of approximately 19.7% of the common shares of PLC (or 13.6% of such
         common shares following the conversion to common shares of the
         outstanding preferred shares), or 11.9% of the common shares on a fully
         diluted basis.

NOTE 13 - NEW GAMING LICENSES

         Because of uncertainties caused by the order of eviction issued by the
         Suriname Court, the Company began to actively seeking to establish its
         own casino operations at another location in Paramaribo, the capital
         city of Suriname (see Note 10). Through its subsidiaries, the Company
         has acquired a license (the "Gaming License - Suriname") to operate a
         casino in Suriname. The Gaming License - Suriname is valid for 15 years
         from August 1, 2000 (original date on which the license was granted)
         and is renewable every five, years at the Company's request. Pursuant
         to the terms of the Gaming License - Suriname, the license holder is
         required to operate a casino in a hotel to be run by the license holder
         and to comply with certain other procedures. The Company has
         capitalized the cost of $200,000 to acquire the Gaming License -
         Suriname and paid $60,000 during the year ended June 30, 2003 and the
         balance of $140,000 during the year ended June 30, 2004. Pursuant to a
         new regulation in Suriname which became effective August 20, 2004
         requiring all holders of gaming licences to start operations within six
         months of such date, SLC intends to commence the use of its license in
         lieu of the Parbhoe license to operate the Suriname casino if it does
         not find an alternative use for such license prior to its expiration.

         The Company was also investigating the desirability of participating in
         the development and operation of a casino in Vietnam, approximately 80
         miles from Ho Chi Minh City, and was actively seeking a casino license
         (the "Gaming License - Vietnam") to conduct such operations. The
         Company posted a refundable deposit in September 2003 for $250,000 with
         an agency of the Vietnamese government as a demonstration of its
         interest in negotiating an acceptable agreement for the casino license.
         During the year ended June 30, 2003, the Company expensed $50,000
         incurred in connection with the costs associated with obtaining the
         Gaming License - Vietnam. In March 2004, the deposit was returned to
         the Company less $32,000 of professional and other costs incurred by
         the Vietnamese government in pursuing the transaction. Although the
         Company

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<PAGE>

               LOTTERY & WAGERING SOLUTIONS, INC. AND SUBSIDIARIES
                        F/K/A CCA COMPANIES INCORPORATED
             Notes to Consolidated Financial Statements (Continued)

NOTE 13 - NEW GAMING LICENSES (CONTINUED)

         requested the return of its original deposit, it intends to continue
         investigating opportunities for the development and operation of a
         casino in Vietnam.

NOTE 14 - SUBSEQUENT EVENTS

         In August 2004, Dim commenced a new summary proceeding again seeking
         eviction of SLC from the Plaza Hotel. Dim claims that a regulation
         requiring all holders of gaming licenses to start operations in six
         months, which became effective on August 20, 2004, justifies such a
         summary proceeding because Dim claims it may lose its license if it
         does not urgently obtain the whole building. In the opinion of Suriname
         counsel for SLC, based upon the considerations in the judgment rendered
         on July 16, 2004 by the Court of Justice, the chances of Dim winning
         this case are slim. A decision in this action may be rendered in
         October (See Notes 9 and 10).

         On September 7, 2004, the Company's wholly owned subsidiary, The Golden
         Tulip Leisure A.V.V., an Aruban entity, ("GTL") entered into a five
         year agreement with N.V. Trade Centre Suriname ("TCS"), granting GTL
         the right to use and occupy the restaurant, casino and certain office
         facilities located on several floors of The Golden Tulip Casino, Hotel,
         Conference and Leisure Center in downtown Paramaribo, Suriname. The
         agreement also gives GTL the exclusive use of the Full Gaming License
         and Food and Beverage License on behalf of TCS, as well as the right to
         use the 173 slot machines, 7 gaming tables, and related paraphernalia
         located on the premises. GTL is required to make monthly payments to
         TCS of US$40,000 for the lease of the facilities and the use of the
         licenses and equipment. The agreement may be extended for an additional
         five year term at the option of GTL. LWSI is not a party to the
         agreement with TCS, and has not guaranteed the performance or any of
         the obligations of GTL.






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