**SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
 **FORM
        10-KSB/A**
  (Mark
        One)
 x ANNUAL
        REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
        the
        fiscal year ended April 30, 2005
 
 o TRANSITION
        REPORT
        UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
        the
        transition period from ___________ to _____________
 
 Commission
        file number:
 
 **NEW
        MEDIA LOTTERY SERVICES, INC.**
 (Name
        of
        small business issuer in its charter)
 
 Delaware
                (State
                  or other jurisdiction of incorporation or organization)
              87-0705063
                (I.R.S.
                  Employer Identification No.)370
                  Neff Ave, Suite L, Harrisonburg,
                  Virginia
              22801(Address
                  of principal executive
                  offices)
              (Zip
                  code)
  Issuer's
        telephone number, including area code:  (540)
        437-1688
 
 Securities
        registered under Section 12(b) of the Exchange Act: None
 
 Securities
        registered under Section 12(g) of the Exchange Act:
 
 50,000,000
        shares of Common Stock, par value $0.001 per share
 (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. x Yes
oNo
 
 Check
        if
        there is no 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 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
  State
        the
        issuer's revenues for its most recent fiscal year:  $-0-
 
 State
        the
        aggregate market value of the voting and non-voting common equity held by
        non-affiliates computed by reference to the price at which the common equity
        was
        sold, or the average bid and asked price of such common equity, as of a
        specified date within the past 60 days. (See definition of affiliate in Rule
        12b-2 of the Exchange Act.): N/A
 
 State
        the
        number of shares outstanding of each of the issuer's classes of common equity,
        as of the latest practicable date:  11,442,143
        as of July 26, 2005.
 
 **DOCUMENTS
        INCORPORATED BY REFERENCE**
 None.
 
 Transitional
        Small Business Disclosure Format (Check one): oYes x No
 
  
 This
          Amendment Number 1 is being filed by the Registrant to (i) revise the disclosure
          under Item 8A to provide that the officers whose certifications are attached
          as
          exhibits to this filing concluded that, after evaluation, the company’s
          disclosure controls are effective to ensure that information required to
          be
          disclosed in filings required under the Securities Exchange Act of 1934,
          as
          amended, is recorded, processed, summarized and reported in a timely manner
          in
          accordance with applicable rules and forms and (ii) refile exhibits 31.1
          and
          31.2 in conformity with the wording for such exhibits presented in Item
          601(b)(31) of Regulation SB.
 -2-
 **PART
        I**
 
 **Item
        1. Description of Business**
 
 Overview.
 
 New
        Media
        Lottery Services, Inc. and its subsidiary (collectively, “NMLS”, “we”, “us”,
“our”) design, build, implement, manage, host and support Internet and wireless
        based lottery programs operated by governments and charitable organizations
        outside of the United States. We also design and distribute games for use
        on
        video lottery terminal and other electronic kiosks. We commenced providing
        services to clients in August 2003. We currently operate lottery systems
        for
        three customers and have entered into contracts with three additional lotteries
        to provide services in the future. With respect to our lottery operations,
        we
        enter into long-term agreements with our clients pursuant to which we provide
        our services in return for a percentage of the lottery’s net sales.
 
 Development
        of Business.
 
 The
        Company is a successor in interest to the lottery and gaming operations
        commenced by Lottery Network Services Ltd., a corporation organized under
        the
        laws of the Republic of Ireland on July 11, 2000 (“LNS”). Set forth below is a
        chronological progression of the manner in which the Company came to acquire
        its
        business:
 
 ·  On
        March
        19, 2004, the holders of 99.8% of the shares of capital stock of LNS exchanged
        their shares for an aggregate of 10 million shares of the common stock of
        Residential Resales, Inc. (“RRI”), a Florida corporation subject to the
        reporting requirements of the Securities Exchange Act of 1934, as amended.
        In
        this transaction, each share of LNS capital stock was exchanged for 285.7143
        shares of RRI’s common stock. In connection with this transaction, (i) the
        former shareholders of LNS acquired control of the Florida corporation and
        (ii)
        the officers and directors of the Florida corporation prior to the acquisition
        resigned and new officers and directors of said corporation were appointed
        by
        LNS.
  ·
         On
        June
        30, 2004, RRI merged with and into New Media Lottery Services, Inc. a
        corporation organized under the laws of the Commonwealth of Virginia, which
        succeeded to RRI’s reporting requirements under the Securities Exchange Act of
        1934, as amended. Under the terms of the merger agreement, each outstanding
        share of the Florida corporation automatically was changed and converted
        into
        one share of the common stock of the Virginia corporation. All of the officers
        and directors of the Florida corporation were appointed to serve as the officers
        and directors of the Virginia corporation.
 · 
In
        August, 2004, the Virginia corporation acquired the remaining outstanding
        shares
        of the capital stock of the LNS (equal to .2% of LNS’s outstanding shares on the
        date of the acquisition of said shares by the Florida
        corporation).
 
 · 
In
        February 2005, the Virginia corporation merged with and into New Media Lottery
        Services, Inc. a corporation organized under the laws of the State of Delaware,
        which succeeded to the Virginia corporation’s reporting requirements under the
        Securities Exchange Act of 1934, as amended. Under the terms of the merger
        agreement, each outstanding share of the Virginia corporation automatically
        was
        changed and converted into one share of the common stock of the Delaware
        corporation. All of the officers and directors of the Virginia corporation
        were
        appointed to serve as the officers and directors of the Delaware
        corporation.
 
 Overview
        of the Lottery Industry.
 
 The
        discussion of and information relating to the lottery industry set forth
        below
        has been compiled by us or derived from independent sources which we believe
        to
        be reliable. We cannot assure you, however, that such statements are accurate.
        It has been management’s experience that there is less public information
        available concerning the international lottery industry than the lottery
        industry in the United States.
 
 -3-
 Lotteries
        are official, government authorized/licensed fundraising organizations that
        in
        many cases subcontract all or part of their lottery operation to professional
        lottery service providers. These providers supply technology, product,
        operations, marketing and administrative support. Published reports indicate
        that lotteries operate in over 150 domestic and foreign jurisdictions throughout
        the world and that as of June 2003 there were more than 400 lottery licenses
        issued world-wide. Some jurisdictions sanction or license multiple
        lotteries which may include both government-sponsored programs and programs
        promoted by charitable organizations (CLO’s). Many governments have authorized
        national lottery programs primarily as a means of generating non-tax
        revenues intended to support specific programs, many of which are humanitarian.
        Proceeds generated by lotteries may be designated for particular public
        purposes, such as education, sports, humanitarian services and or economic
        development. Many jurisdictions have become dependent on the net proceeds
        generated from the sale of lottery tickets to support some of those public
        purposes.
 
 Of
        the
        400 plus lotteries world-wide, approximately 20% account for 85% of the
        estimated lottery sales volume of $159 billion (as officially reported).
        Many of
        the second tier lotteries do not have the financial wherewithal to develop
        and
        implement the infrastructure necessary to offer games and prizes that are
        attractive to players. These lotteries are limited to selling instant tickets
        and preprinted lotto games offering top prizes of $50,000 -
        $100,000.
 
 In
        general, lotteries can be categorized into two principal groups, online system
        lotteries and off-line lotteries, each of which includes a variety of game
        types. Online lotteries are conducted through a computerized lottery system
        in
        which lottery terminals are connected to a central computer system. Online
        lottery systems generally are utilized to conduct games such as lotto, keno
        and
        numbers, and permit a player to make his own selections. Off-line lotteries
        feature lottery games which are not computerized, such as traditional paper
        lottery games and instant-ticket games. Generally, traditional off-line lottery
        games, in which players purchase tickets which are manually processed for
        a
        future drawing, are conducted only in international jurisdictions.
        Instant-ticket games, in which players scratch-off a coating from a pre-printed
        ticket to determine if it is a winning ticket, are conducted both
        internationally and in the United States.
 
 Statistics
        show that, typically, online lotteries generate greater revenues than both
        traditional off-line lottery games and instant-ticket games. There are several
        other advantages to online lotteries as compared to traditional off-line
        lotteries. Unlike traditional off-line lottery games, online lottery systems
        allow for wagers to be accepted and processed until minutes before a drawing,
        thereby significantly increasing the lottery's revenue in cases in which
        a large
        prize has attracted substantial wagering interest. Online lottery systems
        also
        provide greater reliability and security, allow a wider variety of games
        to be
        offered and automate accounting and administrative procedures which are
        otherwise manually performed at potentially high cost to the
        sponsor.
 
 Our
        Opportunity.
 
 We
        focus
        our marketing efforts on lotteries which are not serviced by professional
        lottery service providers, such as small national lotteries and lotteries
        operated by CLO’s.
  Generally,
        the smaller government lotteries and CLO’s which constitue our target market are
        limited to offering traditional paper and instant ticket games. These games
        offer only small prizes and do not attract large audiences. Their operations
        have been constrained by personnel who lack operational experience,
        technological limitations and adequate funding. In the case of CLO’s, the causes
        they support, such as health care, environmental conservation and nationally
        sponsored athletic activities, generally enjoy wide public appeal that to
        some
        degree have been, and continue to be, funded by governments. However, financial
        pressure attributable to rising costs for social programs and poor global
        economic performance over the last several years have eroded the ability
        of
        national and local governments to fund these important social and public
        projects from revenues generated from taxes. Many national and local governments
        have sought to supplement funding for these essential programs through
        alternative means such as issue-specific lotteries. In many jurisdictions,
        governments have granted broad licenses to charitable organizations to operate
        lotteries to fund these important social programs.
  -4-
 Frequently,
        small government lotteries and CLO’s and the people who run them do not have the
        capacity to fully develop the lottery opportunity granted to them and
        consequently never realize the full extent of the revenue generating potential
        of their mandate. In many cases, they do not even understand the full gaming
        opportunities available to them. Specifically, these operations do not possess
        the experience, know-how or technology to develop new games or implement
        online
        and wireless games nor do they possess the marketing resources and expertise
        necessary to build prizes that will attract new players. These small
        organizations tend not to be competitive with larger state operated lotteries
        because the games and prizes they offer are not exciting to the average lottery
        participant. Moreover, in many of the geographic locations in which small
        government lotteries and CLO’s operate, lotteries target an older generation
        utilizing paper-based games. These entities require the assistance of a
        professional organization to design, implement, manage and fund the development
        of their opportunity to maximize net proceeds generated from ticket sales
        and,
        in many cases, to lend credibility to the organization’s lottery.
 
 We
        believe that small government lotteries and charitable lottery organizations
        are
        under-serviced. Large providers of lottery services and products have
        selectively overlooked this market because these clients do not yield the
        financial return which can be derived from servicing larger national and
        state
        run lotteries and do not warrant the significant capital investment required
        to
        implement and operate a traditional land-based lottery and the smaller lotteries
        and CLOs do not have the funding to implement the infrastructure necessary
        to
        build a competitive operation. We believe that our staff has the lottery
        experience, gaming know-how and technological expertise and presence necessary
        to attract, service and grow small to mid-size charitable lottery
        organizations.
 
 We
        offer
        our clients the potential to enter several different lottery and games markets.
        Initially, we develop and implement an on-line lottery presence offering
        traditional on-line game formats supplemented by new and exciting games that
        we
        have developed. We target our on-line lotteries to a younger adult audience
        who
        do not relate to the traditional paper-based games their parents play and
        who
        incorporate computers and new media devices such as cellular telephones and
        other wireless apparatus into their daily lives. We can implement the systems
        necessary to commence on-line lottery operations relatively quickly and
        inexpensively. Thereafter, we expect to initiate lotteries and other game
        formats delivered through new media devices. Finally, we expect to implement
        traditional paper lotteries to encompass the preferences and tastes of the
        entire population.
  **Existing
        Clients**
 
 We
        currently manage lotteries for three clients and have contracts to manage
        lotteries with three other organizations. Unless otherwise noted, the discussion
        below relating to each agreement under which we have been retained to establish
        and operate a lottery assumes that the party with which we have contracted
        is a
        duly authorized licensee of the government to operate a lottery. The discussion
        below also assumes that we will be responsible generally for all manner of
        implementation and operation of the particular lottery, including that we
        will:
        (i) provide a variety of games for the lottery; (ii) undertake all accounting
        functions; (iii) undertake all administrative aspects of the operation of
        the
        lottery; (iv) undertake all marketing, advertising and promotion of the lottery;
        (v) provide cash management systems; (vi) distribute lottery proceeds to
        the
        lottery licensee; and (vii) ensure compliance with all applicable
        laws.
 
 In
        September 2001, we entered into an agreement with Rehab Net Games Limited
        (Rehab), an Irish corporation, as amended in January 2004 and further amended
        in
        April 2004, to develop, manage and operate lottery games for the Internet
        and
        wireless telephones within the Republic of Ireland for a period of 10 years.
        This agreement is subject to automatic extensions for five-year periods in
        the
        event that Rehab earns certain agreed upon minimum proceeds during the fifth
        through tenth years of the term of the agreement and the eleventh through
        fifteenth years of the term of the agreement. The agreement may be terminated
        by
        Rehab in the event that we fail to pay Rehab the fees provided for in the
        agreement or, after the ninth year of the agreement upon twelve months notice
        of
        a party’s intention to terminate. We completed implementation of the Internet
        portion of the lottery program in August 2003 and currently are managing
        and
        operating the lottery. Over the last year, we have expanded the product
        offerings, run test marketing and are prepared to roll-out the lottery on
        a full
        scale basis, including a marketing campaign when proper funding has been
        received.
 
 -5-
 Pursuant
        to an agreement dated December 17, 2001, we have established and currently
        operate and maintain lottery programs utilizing Internet technologies for
        Rehab
        Charities UK Limited. We commenced operation of the Rehab UK lottery in December
        2003. We are responsible for all manner of operations of the Rehab UK lottery.
        We have concentrated on augmenting product offerings, running test marketing
        in
        contemplation of a commercial roll-out of the lottery. We have provided all
        funding to develop and implement the lottery for Rehab UK. Our agreement
        is for
        a term of five years.
 
 We
        are
        party to an agreement with Tropical Gaming, Belize which has the right to
        conduct a lottery using the Internet and wireless modalities in the Country
        of
        Belize. The agreement, dated November 27, 2001, provides for an initial term
        of
        10 years subject to two 5-year extensions in our sole discretion. The agreement
        may be terminated by either party upon any default in the performance of
        the
        agreement. This lottery is not currently operating; we are analyzing our
        options
        with respect to a launch date for this lottery.
 
 Under
        an
        agreement dated February 12, 2002, the Guatemalan Pediatric Foundation retained
        us to establish and operate lottery games in Guatemala through the Internet
        and
        wireless communications systems. The term of the agreement is for seven years
        and is automatically renewable for a second seven-year term. We have not
        begun
        to implement this lottery as of the date hereof and have not determined when
        we
        will commence developing the system.
 
 We
        are
        party to an agreement dated December 7, 2001 with a lottery organization
        located
        in Russia, The Intellect Foundation, to establish and operate a lottery for
        this
        entity. The agreement provides for a ten-year term subject to extension in
        our
        sole discretion for two additional five-year terms. This lottery is not yet
        operating and we have not decided when to undertake development of the system.
        Management may consider alternative lottery contracts in Russia before moving
        forward.
  On
        February 3, 2004, we entered into an agreement with Carnegie Cooke & Company
        Inc., an owner and operator of off-track betting sites and race tracks in
        Brazil, to provide consulting services with respect to the implementation
        of
        video lottery games at horse racing tracks in Brazil. Under the contract,
        we are
        obligated to (i) provide consulting services as to the types of games to
        be
        installed at these facilities; (ii) assist our client in obtaining government
        support with respect to the gaming program; (iii) prepare presentations and
        support documents which evidence the efficacy and success of similar programs
        within the US and the impact on horse racing, state lotteries and economic
        benefits; (iv) make presentations to government officials as required; and
        (v)
        otherwise assist our client in preparing business plans to develop and support
        their opportunity. In addition to consulting, we are discussing the possibility
        of introducing other gaming products in Brazil. In consideration for the
        services we will render, Carnegie Cooke & Company has agreed to issue to us
        an aggregate of 600,000 shares of its common stock issuable in four installments
        of 150,000 shares. As a result of a new JV in Brazil, NMLS management has
        chosen
        to end our relationship with Carnegie Cooke and has received 300,000 shares
        for
        the consulting services provided.
 
 On
        October 28, 2004, we entered into a Joint Venture Agreement with Latin America
        Gaming, Inc (LAG), of Sao Paulo, Brazil to launch an Internet based lottery
        sales site and to explore the possibility of delivering lottery product for
        sale
        on terminals in bingo halls throughout Brazil. LAG has been operating lotteries
        in the Brazilian market for several years and has been granted licenses to
        offer
        Internet lottery products in the Brazilian States of Para and Santa Catarina.
        Under the Joint Venture Agreement, we will provide the lottery systems and
        expertise for Internet lottery projects initiated in these states and LAG
        principally will be responsible for marketing efforts with respect to the
        Internet lotteries. As of the date hereof, we have developed lottery products
        in
        Portuguese which we can roll-out as needed. The joint venture company will
        focus
        initial marketing efforts on leveraging LAG’s existing gaming and lottery
        relationships. We anticipate providing additional marketing support for the
        Brazilian operations in August 2005. Management expects the joint venture
        company to commence offering Internet lottery product sales on behalf of
        the
        Para State lottery in July 2005 We anticipate this venture will require
        additional financing to fund marketing efforts.
  On
        December 7, 2004, we entered into an agreement with ROK Entertainment, a
        UK
        based provider of video content for mobile telephones, including proprietary
        wireless lottery and gaming content. Management believes that the companies’
        technologies and product offerings are complimentary and that joint marketing
        efforts of these technologies and products will be beneficial to each party
        and
        attractive to clients. Under the agreement, the parties will utilize their
        respective relationships worldwide to promote and sell each others wireless
        lottery products for use on mobile phones and to support each other on specific
        projects in which each may become engaged individually or jointly. The companies
        have agreed to focus initially on a project being developed by ROK and its
        Chinese joint venture partner, the Beijing Municipal Government, to develop
        a
        wireless lottery on behalf of the China Welfare Lottery. The parties may
        have an
        opportunity to pursue additional wireless based lottery programs in China,
        and,
        at this time, are jointly presenting concepts for a lottery game Internet
        site
        to the National Sports Lottery Group. Management cannot predict when, if
        ever,
        the companies will launch an Internet lottery program in China.
 
 -6-
 On
        March
        14, 2005, we entered into a three-year agreement to design and produce wireless
        gaming content for Inspired Broadcast Networks (“Inspired”). Inspired
        is Europe's leader in pay-to-play entertainment and broadband services in
        retail
        and public spaces, with an installed base of more than 15,000 networked kiosk
        terminals. Inspired’s existing terminals are located in retail shops, such as convenience
        stores and pubs, and offer a variety of entertainment products, including
        amusement games that allow small prizes of up to 25 pounds. We will supply
        lottery games for use on the terminals which will allow for more significant
        prizes up to 150,000 pounds. Management expects that Inspired will commence
        offering the company’s games on its kiosk terminals by October
        2005.
 
 **What
        We Do**
 
 We
        offer
        an integrated range of products and services to develop, build and host
        lotteries for charitable lottery organizations (CLO’s). We have assembled a
        management team that combines a strong lottery operations background, extensive
        game development experience and the technological expertise required to create
        and operate these lottery systems. We:
 
 · analyze
            our client’s operations and the gaming preferences of the indigenous
            population;
 
 · design,
            install, operate, host and maintain Internet based lottery systems that
            can
            support Internet games, wireless games, including cellular telephones
            and other
            wireless devices, and interactive TV games;
 
 · design
            and implement marketing programs to enhance ticket sales and increase
            the net
            proceeds an organization generates from its lottery;
            and
 
 · design
            innovative games to attract new players and increase prize money.
  A
        significant aspect of the value we add to our client’s operations derives from
        the credibility we contribute to the organization. Many CLO’s have operated as
        second tier lotteries within their host jurisdictions. An affiliation with
        our
        organization increases the CLO’s technological capabilities to operate a modern
        lottery program and to participate with shared technology proven and in use
        worldwide. The government greatly supports these organizations but is unable
        to
        financially support all of their needs so it gives them extremely valuable
        and
        broad gaming licenses. We show a CLO how to maximize the revenue generating
        potential of its government sanctioned gaming opportunity.
 
 We
        believe that the services we provide and the end-product we deliver to our
        clients and, ultimately, the public, can help transform these lotteries into
        first-class operations with the capacity to achieve their revenue goals.
        Our
        clients benefit from access to a professional lottery organization that grants
        them access to our lottery know-how and expertise, allows them to offer larger
        prizes, offers them access to state-of-the-art technologies, and makes available
        to them a wide variety of new gaming formats. We seek to build organizations
        founded on operational and financial integrity that inspire public confidence
        and allow the organization to realize its full potential.
 
 Our
        business model can be replicated on varying scales in discrete geographical
        areas. The fundamental elements of the lottery infrastructure, including
        the Web
        site and game concepts we have developed, can be migrated from client to
        client,
        allowing us to repeatedly re-brand our product for other CLO’s. This process,
        known as "changing the skin", allows us to simultaneously meet the needs
        of
        numerous charities, while reducing the set-up time and organizational costs
        associated with establishing each charity’s Internet/wireless presence.
 
 -7-
 We
        expect
        the preponderance of our revenues to be derived from a percentage of the
        net
        lottery proceeds received by our clients. In order to maximize net lottery
        proceeds received by our clients, the lotteries we develop and implement
        for our
        clients must attract large numbers of players who make purchases. We believe
        that as prize amounts escalate, interest in a lottery increases which creates
        a
        cycle of growing prizes and more players. In order to generate interest in
        the
        family of lotteries we operate and attract players and grow prizes, each
        of our
        clients’ Web sites has a link to our Internet portal that provides links to our
        other clients’ gaming sites, essentially, a pass-through site. Our Internet
        portal currently offers links to our existing clients in England and Ireland
        because local gaming regulations permit such link. As we further develop
        our
        Gelotto pass-through site, we believe that it will (i) be an efficient and
        cost
        effective means of increasing prize amounts, building a player base and serving
        as the basis for corporate promotions and banner advertising, (ii) lend
        credibility to our clients’ operations because of their association with a
        professionally managed organization which is trusted by lottery players
        world-wide, and (iii) help develop corporate brand recognition and loyalty.
        We
        expect that we can leverage the charity lottery concept to obtain discounts
        on
        advertising packages and merchandise prize awards. We anticipate offering
        co-op
        games that are “sponsored” by various corporations in return for advertisements
        on the lottery site. These programs can reduce operational and promotional
        costs. To the extent our Internet portal is restricted from realizing its
        full
        potential because of the laws of the jurisdictions in which our clients operate,
        our business and results of operations will be materially and negatively
        impacted. Our ability to include links to the Web sites of our clients is
        dependent upon the gaming laws and regulations of the jurisdictions in which
        our
        clients are situated.
 
 **Products
        and Services**
 
 Once
        we
        are engaged by a CLO, we analyze the local gaming environment, including
        the
        client’s existing operations, business practices and the personal gaming
        preferences of the indigenous population. We consider many factors in developing
        a new technology presence for our client, including the demographic composition
        and sociological character of the geographic locality in which the lottery
        will
        operate, to ascertain the types of games that will appeal to the local
        population and the nature of the marketing strategy which we will employ.
        We may
        compare one client’s circumstances with successful lotteries operating in other
        jurisdictions to determine the most appropriate games to offer and the most
        effective marketing techniques as they relate to that population.
 
 Most
        CLO’s do not possess the capital to implement a sophisticated lottery program.
        If, after careful analysis, we determine that a lottery warrants our financial
        assistance, we will provide the services and products required to implement,
        on
        account, and retain from the lottery’s profits all costs and expenses
        incurred.
 
 In
        a few
        jurisdictions in which we currently are seeking clients, gaming regulations
        require that the lottery managers be licensed with local gaming commissions.
        In
        such case, we seek to identify and partner with licensed local lottery managers
        who have earned the highest reputation of integrity and innovation. These
        entities often agree with us to provide on-site services after installation
        of
        the lottery system. They possess the local knowledge necessary to navigate
        the
        regulatory requirements. We work closely with our local partners and the
        regulatory authorities in each of the jurisdictions in which our clients
        operate
        to design and operate Web sites and wireless programs that conform to all
        local
        laws. These laws may pertain to the features of a lottery, such as the
        percentage of gross revenues that must be paid back to players in prize money,
        the determination of the types of games played, the price of each game and
        the
        manner in which the lottery is marketed. In addition, the Web sites we design
        for clients conspicuously post all required applicable gaming laws of that
        jurisdiction, such as any legal disclaimers.
 
 We
        work
        with the client to develop a program that is profitable to the client, efficient
        to manage and operate and cost effective to both the CLO and us. Our objective
        is to create a comprehensive program that offers games which appeal to the
        user,
        broaden the base of players and increase prizes. It is our experience that
        as
        prize amounts escalate, interest in a lottery increases. This benefits the
        CLO
        in that it draws additional attention to the charitable cause underlying
        the
        lottery and results in greater ticket sales and more proceeds to distribute
        to
        the cause. Growth becomes self-actuating in that as more people play a lottery
        to win a larger prize, lottery proceeds increase and allow for even larger
        prizes, drawing more players.
 
 We
        construct robust Web sites for our clients capable of handling a high volume
        of
        traffic. We host the Web sites on servers located in the United Kingdom and
        Ireland, five of which are owned by us and the balance of which are leased
        from
        independent third parties. Web sites are designed to ease registration and
        use
        and to promote maximum security. To date, we have retained the services of
        Globix Limited to operate and maintain our servers in the United Kingdom
        and to
        support our clients’ Web sites as required in our agreements with them on a 24/7
        basis. In Ireland, we have contracted with Hosting365 to provide servers
        and
        support in their secure hosting environment.
 
 -8-
 Visitors
        register to play games on our clients’ Web sites in confidence, securely deposit
        funds and begin playing games shortly after acknowledgement of registration
        by
        the CLO. Financial transactions are executed behind firewalls using encryption
        software and all deposits and disbursements are confirmed by independent,
        internationally reputable banks.
 
 Initially,
        our client lottery Web sites offer a variety of video lottery games. We
        continually analyze each client’s operations to devise and implement appropriate
        marketing strategies and introduce new games which we believe will be appealing
        to and attract local players. The introduction of new games retains loyal
        visitors to the site and attracts new ones. Members of our management team
        have
        extensive experience developing new lottery game formats. In addition, we
        also
        purchase and license lottery game formats from third parties. We also will
        seek
        to introduce new game formats such as bingo and video lottery games. Video
        lottery is defined as casino slot/video machines which are managed and licensed
        by a lottery. We expect that this product line will compete directly with
        the
        casino marketplace and may be a substitute for casino gaming in markets where
        casinos are not legislated. Management believes that these video lottery
        programs will become prominent on a number of devices currently existing
        in many
        countries.
 
 An
        important feature of our clients’ Web sites is the ability to include
        advertising banners on appropriate screens. In many instances, the charity
        underlying the lottery will enjoy strong public support, such as a national
        Olympic organization. These Web sites may draw a wide range of visitors,
        including those who do not normally play lottery games, who seek to support
        the
        host organization. This ability will allow us to creatively support
        co-promotions with local companies. It is our intent to market extensively
        with
        large, well-known local companies whose name will be attached to the specific
        game.
 
 With
        each
        client, we will expand distribution of various games to include access by
        way of
        wireless devices and mobile telephones. At such time as a client’s lottery is
        operating within our expected parameters, we will commence the process of
        identifying and obtaining the services of local telephone/wireless companies
        and
        establish working protocols to provide private and secure access to our client’s
        lottery games via mobile telephones and other wireless devices. Given the
        increasing pervasiveness of these apparatus, extension of our operations
        to
        include these modalities will allow us to tap into an as yet to be fully
        exploited revenue stream. Players will have access to a wide range of games
        developed specifically for these devices and will be able to play anywhere
        within their service coverage area. We believe that these games will be of
        particular appeal to young adult players who have integrated these technologies
        into their every-day lives.
 
 The
        final
        implementation phase encompasses expansion into land-based operations. We
        will
        assist the lottery organization in expanding an existing network of land-based
        retailers or creating a new retailer network, as required. In many countries,
        banks, post offices and independent kiosks act as ticket retailers and receive
        a
        per ticket fee for their services. Given the nature of the underlying charitable
        causes of our clients, these entities normally are disposed to serve as
        retailers of tickets. Moreover, our business model assumes significant margins
        on sales of land-based lottery tickets and we will be able to provide a real
        financial inducement to these entities to participate in ticket sales. In
        those
        countries where access to the Internet use is limited, land-based sales of
        lottery tickets will expand market penetration and can provide significant
        additional revenues.
 
 **Marketing
        of Our Clients’ Lotteries**
 
 As
        provided in our client agreements, marketing, advertising and promoting our
        clients’ lotteries represents an integral component of the services we provide.
        We work with our clients to develop marketing programs that account for and
        incorporate local cultural values. We devise marketing strategies that encompass
        traditional advertising media, public relations and co-promotional campaigns.
        We
        seek to place click-on banner advertisements on popular local Web sites as
        a
        means of directing traffic to our clients’ online lotteries. In addition, we
        advertise in national and regional newspapers and special interest magazines.
        We
        will actively pursue co-promotion programs with local companies for added
        exposure. When we implement the land-based phase of a client’s lottery
        operations, we believe that a significant portion of the marketing can be
        conducted through ticket sales agents at the point of sale.
 
 -9-
 **Contract
        Procurement**
 
 To
        a
        large degree, lottery contracts are secured on the basis of pre-existing
        relationships between personnel of lottery management companies such as ours
        and
        lottery licensees. We are dependent upon the relationships members of our
        management have developed during the course of their respective careers.
        Industry knowledge, personal integrity and credibility within the world-wide
        lottery community are valuable resources which are gained after years of
        operational and marketing experience. Our lottery personnel average over
        twenty
        years of experience in the industry and have fostered and maintain the types
        of
        relationships that allow us to present our programs to existing and newly
        organized lotteries. Performance is also an important factor and our management
        has been successful in demonstrating the positive results experienced by
        their
        previous clients.
 
 We
        market
        our services to potential clients on the basis that we can provide them with
        (i)
        lottery operations expertise, (ii) state-of-the-art technologies and Web
        site
        design; (iii) the ability to grow and offer prizes far larger than they have
        as
        off-line lotteries; (iv) a wide variety of new gaming formats; (v) secure
        transaction processing and accurate accounting; and, perhaps most importantly,
        (vi) greater credibility within their host jurisdiction resulting from an
        affiliation with a professional lottery organization.
 
 **Contracts
        with Clients**
 
 Under
        a
        typical client agreement, we are required to develop, install, operate and
        maintain an Internet lottery system for a client, while retaining ownership
        of
        the lottery system. In addition, we are responsible for: implementing all
        manner
        of accounting and auditing systems and maintaining financial records; the
        collection of lottery monies; the selection of winners, and the financial
        responsibility for the payment of prizes. Most importantly, we are required
        to
        maintain conformity with all local gaming laws and other applicable regulations
        pertaining to our operation of lotteries on behalf of our clients. In some
        cases, we agree to provide the funds required to implement a client’s lottery
        and are repaid from lottery proceeds on terms specified in our contract with
        a
        lottery.
 
 Because
        some jurisdictions have regulations which require that lottery managers be
        licensed with the local gaming commission, we retain or enter into partnerships
        with duly licensed local entities and consultants with whom we contract for
        representation in specific market areas. These entities are familiar with
        local
        gaming regulations and assist developing and implementing lottery programs
        and
        systems that comply with all local laws. These licensees and consultants
        often
        agree to provide on-site services after installation of the lottery
        system.
 
 We
        seek
        to enter into long-term agreements with our clients that extend for a period
        of
        at least five years. Our agreements usually are subject to automatic extensions
        for additional 5-year periods in the event we achieve certain negotiated
        benchmarks relating to the proceeds generated by a lottery and paid to the
        client.
 
 Revenues
        under our client agreements will generally be based upon a percentage
        of
        net lottery ticket sales. The level of lottery ticket sales within a given
        jurisdiction is determined by many factors, including population density,
        the
        types of games played and the games' design, the size and frequency of prizes,
        the nature of the lottery's marketing efforts and the length of time the
        lottery
        system has been in operation.
 
 We
        operate lottery systems for all of our clients through a shared central computer
        system. We assign members of our staff to interface with lottery personnel
        with
        respect to all matters of our operations, including specialists dedicated
        to Web
        site operation, marketing, and product offerings and customer service
        representatives who service and maintain the system.
 
 **Our
        Business Partners**
 
 A
        key to
        our success and the success of our clients is the underlying integrity of
        our
        organization and the product we develop for them. We market our services
        and
        products to clients on the basis that their affiliation with us will lend
        needed
        credibility to develop and support a thriving organization with the potential
        to
        increase lottery revenues. Toward that end, we have been highly selective
        with
        respect to our industry partners. We work with Barclay’s Bank in the United
        Kingdom to handle all financial transactions between us and our clients and
        visitors to our clients’ Web sites. All transactions and accounting procedures
        are automated to avoid human error.
 
 -10-
 **Games**
 
 We
        believe that an important factor in maintaining and increasing public interest
        in lotteries is innovation in game design. Our games are designed to catch
        the
        eye and interest of potential players. We work closely with lottery regulators
        and our clients to design customized lottery games which are intended to
        appeal
        to the populations in which our clients are located. We employ principles
        of
        demographics, sociology, psychology, mathematics and computer technology
        in the
        development of our games. The principal characteristics of game design include
        frequency of drawing, size of pool, cost per play and setting of appropriate
        odds. We believe that our management has extensive expertise in game design
        that
        will enhance the marketing of our lottery systems.
 
 We
        currently have a substantial number of variations of lottery games in our
        software library and new games under development. We believe that our game
        library and the "know how" and experience accumulated by our professionals
        make
        it possible for us to meet the requirements of our customers for specifically
        tailored games on a timely and comprehensive basis. In addition, we have
        engaged
        third parties to provide us with specific games that we believe will attract
        players to our clients’ sites.
 
 **Technology**
 
 We
        host
        our clients’ lotteries on our servers located in the United Kingdom and Ireland.
        The servers are operated by third parties that we have retained to undertake
        some of our operational obligations for our European clients. Our servers
        are
        designed to provide continuous availability, a high throughput rate and maximum
        security. Central computer installations include redundant computers, various
        peripheral devices (such as magnetic storage devices), and various safety,
        environmental control and security subsystems (including a redundant power
        supply systems). The software we utilize is designed to provide rapid
        processing, a high degree of security and redundancy to guard against
        unauthorized access and tampering and to ensure continued operations without
        data loss.
 
 Another
        critical ingredient to our success is the technological support we offer
        our
        clients. Avoiding Web site downtime is essential both to our reputation and
        to
        our clients’ ability to maximize their revenues. We (or our partners) monitor
        and maintain the Web sites and servers on a 24/7 basis to minimize the
        possibility of downtime or loss of service.
 
 **Competition**
 The
        lottery market is divided into three distinctive categories: large government
        operated lotteries; small government operated lotteries; and independently
        operated charity lotteries. Present lottery suppliers concentrate their
        marketing efforts on the large government operated lotteries. As government
        operated lotteries, these lotteries have the financial wherewithal to install
        substantial dedicated lottery systems and equipment. Competition for this
        clientele is competitive; however, this segment of the market is supported
        by
        only a few known companies. Competition for small and mid-sized government
        and
        charity operated lotteries has become more competitive as service providers
        explore new revenue streams. To date, neither the charity lottery market
        place
        nor the Internet/wireless lottery marketplace has been significantly penetrated.
        We have conducted an internal investigation as to those entities specifically
        engaged in servicing charitable lottery organizations and have determined
        that
        this market currently is under-serviced. We believe that by being the first
        company dedicated to serving this market and given the experience and aptitude
        of our management, we will be able to establish ourselves as the premier
        provider of services and products to charitable lottery
        organizations.
 
 Of
        important note is that the core business of all major lottery suppliers is
        based
        on land-based games and dedicated equipment. Substantial capital is invested
        in
        these systems, including print facilities to produce instant “scratch” tickets,
        sales terminals to sell on-line lottery games, or video lottery terminals.
        It is
        this substantial capital investment that drives these companies to compete
        for
        the large lottery projects. Small lottery operations do not generate the
        volume
        required to justify the capital expenditure on their part. Their products
        and
        solutions are too expensive to be competitive in the smaller lottery market.
 
 -11-
 The
        Internet-based solutions we offer do not rely on the products or services
        that
        the large lottery service organizations currently market. Entering this market
        and encouraging clients to explore this technology would have to be done
        at a
        substantial capital loss as it decreases the industry’s reliance on its current
        products. Additionally, Internet technology creates a client conflict for
        these
        companies. Currently, most of their clients protect their sales boarders
        by
        offering land-based games only. The development of Internet/wireless gaming
        formats may adversely affect the technology hold they have on their existing
        client base.
 
 We
        are
        not reliant on these large government lotteries for success. We do not have
        to
        make the large capital investment in equipment that would otherwise deter
        us
        from this approach.
 
 **Government
        Regulation**
 
 Lotteries
        may be lawfully conducted only in jurisdictions in which they are expressly
        permitted by law and are subject to extensive government regulation. Regulation
        typically includes some form of licensing of applicants and their subsidiaries.
        Applicants for, or holders of, a license are subject to a broad examination
        including, among other items, financial stability, integrity and business
        experience. Although certain of the features of a lottery, such as the
        percentage of gross revenues that must be paid back to players in prize money,
        are sometimes fixed by legislation, lottery regulatory authorities generally
        exercise significant discretion, including the determination of the types
        of
        games played, the price of each wager, the manner in which the lottery is
        marketed, the selection of the vendors of equipment and services and the
        retailers of lottery products. Laws and regulations applicable to lotteries
        in
        foreign jurisdictions evolve and are subject to change, and the effect of
        such
        changes on our ongoing and potential operations cannot be predicted with
        certainty.
 
 Many
        jurisdictions require detailed background disclosure on a continuous basis
        from,
        and conduct background investigations of, the provider, its subsidiaries
        and
        affiliates and its principal shareholders. Regulators generally conduct
        background investigations of the provider’s employees who will be directly
        responsible for the operation of the system, and most jurisdictions reserve
        the
        right to require the removal of employees whom they deem to be unsuitable
        or
        whose presence they believe may adversely affect the operational security
        or
        integrity of the lottery. Certain jurisdictions also require extensive personal
        and financial disclosure and background checks from persons and entities
        beneficially owning a specified percentage (typically five percent or more)
        of a
        provider's securities. The failure of beneficial owners of our securities
        to
        submit to background checks and provide such disclosure could jeopardize
        the
        award of a lottery contract to us or provide grounds for termination of an
        existing lottery contract.
 
 The
        award
        of lottery contracts and ongoing operations of lotteries in international
        jurisdictions also are extensively regulated. Restrictions may be imposed
        on
        foreign corporations seeking to do business in such jurisdictions and, as
        a
        consequence, we may have to partner with local companies when seeking foreign
        lottery contracts.
 
 Government
        regulation may impact the operations of our Gelotto Internet portal in some
        of
        the jurisdictions in which we may operate lotteries for clients in the
        future.
 
 We
        believe we are currently in substantial compliance with all regulatory
        requirements in the jurisdictions where we operate. Any failure to receive
        a
        material license or the loss of a material license that we currently hold
        or our
        failure to remain in compliance with local laws could have a material adverse
        effect on our overall operations and financial condition.
 
 **Employees**
 
 As
        of
        July 27, 2005, we had 15 full-time employees, including three executive officers
        and nine persons who engage in product development. Our employees are not
        represented by any labor union. We believe that our relationship with our
        employees is satisfactory.
 
 -12-
 **Risk
        Factors**
 
 An
        investment in our securities is speculative and involves a high degree of
        risk.
        Potential investors should carefully consider the risks described below and
        elsewhere herein, including the financial statements and related notes before
        purchasing our securities. The risks set forth below are not the only ones
        our
        Company will face. Additional risks and uncertainties may also adversely
        impair
        our business operations. If any of these risks actually occur, our business,
        financial condition, and/or results of operations would likely suffer
        significantly.
 
 **We
        are a young company with a limited operating history with significant losses
        and
        have generated no revenues from operations.**
 
 To
        date,
        our operations have consisted primarily of conducting an analysis of our
        industry and developing our business model. In addition, we have entered
        into
        agreements to implement and manage lotteries for five clients, three of which
        are currently operating. Accordingly, we have only a limited operating history
        on which you can base an investment decision in our securities. Since our
        inception, we have generated no revenues from operations and have not achieved
        profitability and expect to continue to incur operating losses for the
        foreseeable future. For the year ended April 30, 2005, we incurred net losses
        of
        $1,683,125 and have incurred losses since inception of $4,791,323. Specifically,
        to be profitable, we must identify sources of capital to complete the
        development of and commence operating lottery systems for existing clients
        and
        obtain new clients.
 
 We
        cannot
        assure you that we will be able to execute our business model on a widespread
        basis or that we ever will achieve profitability. The likelihood of our success
        must be considered in light of the problems, expenses and complications
        frequently encountered in connection with the development of a new business
        and
        the competitive environment in which we operate.
 
 **We
        will require additional financing to sustain our operations and without it
        we
        will not be able to continue operations.**
 
 At
        April
        30, 2005, we had a working capital deficit of $2,747,539. The independent
        auditors' report to our financial statements for the year ended April 30,
        2005,
        includes an explanatory paragraph to their audit opinion stating that our
        recurring losses from operations, negative cash flows from operations and
        working capital deficiency raise substantial doubt about our ability to continue
        as a going concern. The financial statements do not include adjustments as
        a
        result of that uncertainty.
 
 We
        do not
        currently have sufficient financial resources to fund our operations. To
        date,
        we have generated no revenues from operations. We will require significant
        additional capital to fully implement our business, operating and development
        plans, including capital to stabilize our balance sheet to satisfy the
        requirements of regulatory authorities that may review our financial condition
        in connection with approving us to provide services to lottery organizations
        and
        to finance certain operations of our clients until they are in a position
        to
        repay us for services rendered and costs and expenses incurred on their behalf.
        In addition, we are party to three contracts to provide services and products
        to
        clients but have been unable to execute our obligations under these agreements
        because we lack the capital therefor. While we have no liability under these
        agreements if we are unable to perform, our inability to initiate the provision
        of services under these agreements could negatively impact our financial
        condition and adversely reflect on our reputation, which may materially harm
        our
        business.
 
 Since
        March 19, 2004, Milton Dresner and Joseph Dresner, directors of our Company,
        have been lending us the funds required for our operations and will continue
        to
        extend loans to us as necessary; though we can not be certain for how long
        or
        the aggregate amount these individuals are willing to commit to our operations.
        As of April 30, 2005, we were obligated to the Dresners in the aggregate
        amount
        of $ **1,958,520** ,
        plus an
        additional $128,783 in accrued interest.
 
 Our
        ability to raise additional financing depends on many factors beyond our
        control, including the state of capital markets, the status of our business
        and
        the development or prospects for development of competitive business operations
        by others. The necessary additional financing may not be available to us
        or may
        be available only on terms that would result in further dilution to the current
        owners of our common stock. If we are unable to raise additional funds when
        we
        need them, we may have to curtail or discontinue our operations.
 
 -13-
 **Government
        regulations and other actions affecting the lottery industry could have a
        negative effect on our business.**
 
 In
        many
        of the jurisdictions where we currently operate or seek to do business,
        lotteries are not permitted unless expressly authorized by law. The successful
        implementation of our growth strategy and our business could be materially
        adversely affected if jurisdictions that currently authorize lotteries do
        not
        continue to permit such activities or otherwise change existing laws which
        negatively impact our operations and growth plans.
 
 The
        operations of ongoing lotteries and lottery operators are typically subject
        to
        extensive and evolving regulation. While we generally work with local partners
        who are specifically licensed and authorized to provide services by the lottery
        commission in each of the jurisdictions in which we service clients, regulatory
        authorities that oversee lotteries may desire to conduct an intensive
        investigation of us and our employees prior to and after the award of a lottery
        contract. Lottery authorities may require the removal of any of our employees
        deemed to be unsuitable and are generally empowered to disqualify us from
        receiving a lottery contract or operating a lottery system as a result of
        any
        such investigation. Some jurisdictions may seek to conduct extensive personal
        and financial disclosure and background checks on persons and entities
        beneficially owning a specified percentage (typically five percent or more)
        of
        our securities. The failure of these beneficial owners to submit to such
        background checks and provide required disclosure could jeopardize the award
        of
        a lottery contract to us or provide grounds for termination of an existing
        lottery contract.
 
 Because
        our reputation for integrity is an important factor in our business dealings
        with lottery and other governmental agencies, a governmental allegation or
        a
        finding of improper conduct on our part or attributable to us in any manner
        could have a material adverse effect on our business, including our ability
        to
        retain existing contracts or to obtain new or renewal contracts. In addition,
        continuing adverse publicity resulting from these investigations and related
        matters could have a material adverse effect on our reputation and
        business.
 
 Moreover,
        proceeds generated by lotteries are dependent upon decisions made by lottery
        authorities over which we have no control with respect to the operation of
        these
        games, such as matters relating to the marketing and prize payout features
        of
        these lottery games. Because we are typically compensated in whole or in
        part
        based on a gross lottery sales, lower than anticipated sales due to these
        factors could have a material adverse effect on our revenues.
 
 Government
        regulations promulgated by the jurisdictions in which our clients operate
        may
        prevent or limit us from including links on our Internet portal to all or
        some
        of our other clients’ lotteries websites. In such event our business will be
        materially and adversely affected and our results of operations will
        suffer.
 
 **We
        expect that our profitability will be dependent on our ability to retain
        and
        extend our existing contracts and win new contracts.**
 
 We
        expect
        to derive our revenues and generate cash flow from contracts to operate
        lotteries. Upon the expiration of a contract, lottery authorities may award
        new
        contracts through a competitive procurement process. In addition, our lottery
        contracts typically permit a lottery authority to terminate the contract
        at any
        time for failure to perform and for other specified reasons, and future
        contracts may permit the lottery authority to terminate the contract at will
        with limited notice and may not specify the compensation, if any, to which
        we
        would be entitled were such termination to occur.
 
 The
        termination of or failure to renew or extend one or more lottery contracts,
        the
        renewal or extension of one or more lottery contracts on materially altered
        terms or the loss of our assets without compensation could, depending upon
        the
        circumstances, have a material adverse effect on our business, financial
        condition, results and prospects.
 
 **Slow
        growth or declines in sales of Internet/wireless lottery goods and services
        could adversely affect our future revenues and
        profitability.**
 
 Our
        success will be predicated, in part, on the success of the lottery industry,
        as
        a whole, in attracting and retaining players in the face of increased
        competition for the consumers' entertainment dollar (which competition may
        well
        increase further in the future), as well as our own success in developing
        innovative products and systems to achieve this goal. Our failure to achieve
        these goals could have a material adverse effect on our business, financial
        condition and results and prospects.
 
 -14-
 **We
        expect to have significant foreign currency exposure.**
 
 All
        of
        our clients are based outside the United States and our results of operations
        could be significantly affected by foreign currency exchange rate fluctuations.
        Foreign currency exchange rate exposures arise from current transactions
        and
        anticipated transactions denominated in currencies other than United States
        dollars and from the translation of foreign currency balance sheet accounts
        into
        United States dollar balance sheet accounts. We expect to be exposed to currency
        exchange rate fluctuations because all of our revenues will be denominated
        in
        currencies other than the United States dollar. Exchange rate fluctuations
        may
        adversely affect our operating results and our results of
        operations.
 
 **We
        are subject to the economic, political and social instability risks of doing
        business in foreign jurisdictions.**
 
 We
        expect
        to derive all of our revenues from operations outside the United States.
        Accordingly, we are exposed to all of the risks of international operations,
        including increased governmental regulation of the lottery industry in the
        markets where we operate; exchange controls or other currency restrictions;
        and
        significant political instability. The occurrence of any of these events
        in the
        markets where we operate could jeopardize or limit our ability to transact
        business in those markets in the manner we expect and could have a material
        adverse effect on our business, financial condition, results and
        prospects.
 
 **Our
        quarterly operating results may fluctuate significantly.**
 
 We
        expect
        to experience significant fluctuations in our operating results from quarter
        to
        quarter due to such factors as the amount and timing of product sales, the
        occurrence of large jackpots in lotteries (which increase the amount wagered
        and
        our revenue) and expenses incurred in connection with lottery start-ups.
        Fluctuations in our operating results from quarter to quarter may cause our
        operating results to be below the expectations of securities analysts and
        investors.
 
 **We
        operate in a competitive environment.**
 
 The
        lottery services industry is dominated by a few large product and service
        providers, all of which have greater financial and personnel resources than
        we
        do, have greater name recognition than us and which may be more successful
        in
        developing and implementing new games that attract customers. New competition
        could adversely affect our ability to win renewals of contracts from our
        existing customers or to win contract awards from other lottery authorities.
        In
        addition, awards of contracts to us can be, from time to time, challenged
        by our
        competitors. Increased competition also may have a material adverse effect
        on
        the profitability of contracts which we do obtain.
 
 **We
        may be subject to substantial penalties for failure to perform under our
        contracts.**
 
 Our
        lottery contracts typically permit termination of the contract at any time
        for
        failure by us to perform and for other specified reasons and may contain
        demanding implementation and performance schedules. Failure to perform under
        these contracts may result in substantial monetary liquidated damages, as
        well
        as contract termination. These provisions in our lottery contracts present
        an
        ongoing potential for substantial expense.
 
 **We
        may not be able to deliver games that are appealing to players which may
        cause
        them to seek alternatives to the lotteries operated by our clients, which
        would
        negatively impact our business, financial condition, results and
        prospects.**
 
 We
        develop or acquire games that we believe will be appealing to the local
        population in which our clients operate. To the extent that we are not able
        to
        offer games that players find appealing and they seek out other lottery games
        at
        the expense of our clients, our revenues and results of operations will
        materially suffer.
 
 -15-
 **Our
        business prospects and future success depend upon our ability to attract
        and
        retain qualified employees.**
 
 To
        some
        extent, our business is built upon relationships developed by our management
        with lottery officials around the world. Our business prospects and future
        success depend, in part, upon our ability to retain and to attract qualified
        managerial, marketing and technical employees. Competition for such employees
        is
        sometimes intense, and we may not succeed in hiring and retaining the executives
        and other employees that we need. If we are not able to retain and attract
        qualified technical and management personnel, we will suffer diminished chances
        of future success.
 
 **Our
        reputation and, consequently, our business prospects are dependent on the
        integrity of our personnel and the security of our
        systems.**
 
 The
        integrity of a lottery, both real and perceived, is critical to its ability
        to
        attract players. We seek to maintain the highest standards of personal integrity
        for our personnel and system security for the Web sites we host for our clients.
        Allegations or findings of impropriety by any of our personnel or actual
        or
        alleged security defects or failures attributable to us, could have a material
        adverse effect upon our business, financial condition, results and prospects,
        including our ability to retain existing contracts or obtain new or renewal
        contracts.
 
 **Our
        intellectual property is not protected by patents and we do not intend to
        seek
        patent protection for such property. To the extent that others are able to
        obtain access to our proprietary information, our business may be materially
        harmed.**
 
 We
        have
        not sought patent protection for any of our proprietary property. We rely
        on
        trade secrets, proprietary know-how and technology which we seek to protect,
        in
        part, by confidentiality agreements with our prospective working partners
        and
        collaborators, employees and consultants. We can not assure you that these
        agreements will not be breached, that we would have adequate remedies for
        any
        breach of these agreements, or that the trade secrets and proprietary know-how
        embodied in the technologies in which we have an interest will not otherwise
        become known or be independently discovered by others.
 
 **Limitations
        on liability and indemnification matters.**
 
 As
        permitted by the corporate laws of the State of Delaware, we have included
        in
        our Certificate of Incorporation a provision to eliminate the personal liability
        of its directors for monetary damages for breach or alleged breach of their
        fiduciary duties as directors, subject to certain exceptions. In addition,
        our
        By-Laws provide that we are required to indemnify our officers and directors
        under certain circumstances, including those circumstances in which
        indemnification would otherwise be discretionary, and we will be required
        to
        advance expenses to our officers and directors as incurred in connection
        with
        proceedings against them for which they may be indemnified.
 
 **Because
        we will not pay dividends, stockholders will only benefit from owning common
        stock if it appreciates.**
 
 We
        have
        never paid dividends on our common stock and we do not intend to do so in
        the
        foreseeable future. We intend to retain any future earnings to finance our
        growth. Accordingly, any potential investor who anticipates the need for
        current
        dividends from his investment should not purchase our common stock.
 
 **You
        may not be able to sell your shares of common stock due to the absence of
        a
        trading market and thus you may never realize any monies from holding these
        securities.**
 
 There
        is
        currently no public trading market for our common stock. As of the date hereof,
        the only manner in which to dispose of our common stock is in a private
        transaction. If no active trading market develops for our common stock, holders
        of our common stock will have to rely on the appreciation thereof to realize
        any
        monies from holding these securities.
 
 -16-
 **CAUTIONARY
        NOTE REGARDING FORWARD-LOOKING STATEMENTS**
 
 This
        report contains forward-looking statements within the meaning of Section
        27A of
        the Securities Act and Section 21E of the Exchange Act. We have based these
        forward-looking statements largely on our current expectations and projections
        about future events and financial trends affecting the financial condition
        of
        our business. These forward-looking statements are subject to a number of
        risks,
        uncertainties and assumptions, including, among other things:
 
 ·
              our
                  ability to obtain capital;
 
 ·
              our
                  ability to fully implement our business
                  plan;
 
 ·
              general
                  economic and business conditions, both nationally and in our
                  markets;
 
 ·
              our
                  expectations and estimates concerning future financial performance,
                  financing plans and the impact of
                  competition;
 
 ·
              anticipated
                  trends in our business;
 
 ·
              other
                  risk factors set forth under "Risk Factors" in this
                  report.
 
 In
        addition, in this report, we use words such as "anticipates," "believes,"
        "plans," "expects," "future," "intends," and similar expressions to identify
        forward-looking statements.
 
 We
        undertake no obligation to update publicly or revise any forward-looking
        statements, whether as a result of new information, future events or otherwise
        after the date of this report. In light of these risks and uncertainties,
        the
        forward-looking events and circumstances discussed in this report may not
        occur
        and actual results could differ materially from those anticipated or implied
        in
        the forward-looking statements.
 
 **Item
        2. Description of Property**
 
 Our
        principal executive offices are located at 370 Neff Avenue - Suite L,
        Harrisonburg, Virginia, where we lease approximately 1,511 square feet of
        office
        space. We have leased this space through December 2005. The monthly rent
        for
        this space is $1,322 plus $70/month for common area maintenance. We believe
        that
        suitable space is available at competitive prices should our company vacate
        this
        space after the conclusion of this lease.
 
 We
        also
        lease approximately 2,200 square feet of office space at Hillsboro Tower,
        1800 -
        4 th Street
        S.W., Calgary, Alberta, Canada. We lease this space through December 31,
        2005 at
        a monthly rent of $3500 (Canadian). Our software and game developers operate
        from this facility.
 
 We
        have
        not determined our future requirements for office space but expect that adequate
        space will be available on acceptable terms and conditions as
        necessary.
 
 **Item
        3. Legal Proceedings.**
 
 We
        are
        not currently party to any legal proceedings.
 
 **Item
        4. Submission of Matters to a Vote of Security Holders.**
 
 On
        December 9, 2004, the holders of a majority of the outstanding shares of
        common
        stock of New Media Lottery Services, Inc., a Virginia corporation consented
        in
        writing to the merger with a Delaware company of the same name. The Company
        filed an information statement with the Securities and Exchange Commission
        describing the merger and the action taken by written consent, a copy of
        which
        was sent to each stockholder prior to the consummation of the merger between
        the
        two companies.
 
 -17-
 **PART
        II**
 
 **Item
        5. Market for Common Equity and Related Stockholder
        Matters**
 
 Market
        Information.
 
 The
        Company’s common stock is not currently traded or quoted on any
        market.
 
 Holders.
 
 At
        July
        26, 2005, there were 64 record holders of the Company’s common stock.
 
 Dividends.
 
 We
        have
        not paid any dividends on our common stock and do not anticipate paying cash
        dividends in the foreseeable future. We intend to retain any earnings to
        finance
        the growth of our business. We cannot assure you that we will ever pay cash
        dividends. Whether we pay cash dividends in the future will be at the discretion
        of our Board of Directors and will depend upon our financial condition, results
        of operations, capital requirements and any other factors that the Board
        of
        Directors decides are relevant.
 
 Recent
        Sales of Unregistered Securities.
 
 On
        March
        22, 2005, the Company issued options qualified under the 2004 Stock Option
        Plan
        to purchase an aggregate of 425,000 shares of common stock to the persons
        named
        below, all of whom are officers and or directors of the Company, in the amounts
        specified opposite their respective names. The options are exercisable for
        a
        period of ten years at a price of $.25 per share. The Company issued the
        options
        in reliance on the exemption from registration afforded by Section 4(2) of
        the
        Securities Act of 1933, as amended.
  Name
              Position
              Options GrantedJohn
                  T. Carson
              President, Chief ExecutiveOfficer and
                Director
              200,000Randolph Brownell, III
              Chief Operating Officer, Chief
                Financial
                Officer and Director
              200,000Frederick Winters
              Director
              25,000
 Effective
        February 2005, the Company merged with New Media Lottery Services, Inc, a
        Delaware corporation, and issued 11,167,000 shares of its common stock to
        the
        stockholders of the Virginia corporation. The merger was completed in reliance
        on the exemption from registration afforded by Section 3(a)(9) of the Securities
        Act of 1933, as amended.
 
 Effective
        June 30, 2004, the Company merged with Residential Resales, Inc. and issued
        10,000,000 shares of its common stock to the stockholders of RRI. The merger
        was
        completed in reliance on the exemption from registration afforded by Section
        3(a)(9) of the Securities Act of 1933, as amended.
  In March
          2004, the Company issued an aggregate of 167,143 shares of common stock
          to two
          consultants in reliance on the exemption from registration afforded by
          Section
          4(2) of the Securities Act of 1933, as amended. We valued the common stock
          issued at a price of $0.15 per share.
 
 On
        May 2,
        2002, we sold 2,000,000 shares of common stock to Harry DiFrancesco at a
        price
        of $0.01 per share for an aggregate of $2,000. We sold the shares in reliance
        on
        the exemption from registration afforded by Section 4(2) of the Securities
        Act
        of 1933, as amended. Mr. DiFrancesco returned these shares to the Company
        for
        cancellation on March 19, 2004, immediately prior to the execution of the
        share
        exchange agreement with the Company’s Irish subsidiary, Lottery Network
        Services, Ltd.
 
 During
        March and April 2002, we sold 250,000 shares of common stock to 25 individuals
        at a price of $0.01 per share for an aggregate of $2,500. We sold the shares
        in
        reliance on the exemption from registration afforded by Rule 504 of Regulation
        D, as promulgated by the Securities and Exchange Commission.
 
 -18-
 **Item
        6. Management’s Discussion or Plan of Operation.**
 
 We
        design, build, implement, manage, host and support Internet and wireless
        based
        lottery programs operated by governments and charitable organizations outside
        of
        the United States. We commenced providing services to clients in August 2003.
        We
        currently operate lottery systems for three lottery customers, one in each
        of
        Ireland, England and Brazil. We enter into long-term agreements with our
        clients
        pursuant to which we provide our services in return for a percentage of the
        lottery’s net sales, which is defined as sales less prizes.
 
 Since
        our
        inception, we have not generated any revenues and have conducted only limited
        operations consisting of:
 
 ·
              obtaining
                  long-term contracts with non-U.S. based lottery licensed organizations
                  to
                  operate specific new media game
                  programs;
 ·
              the
                  development of a proprietary software platform that supports lottery
                  operations;
 ·
              developed
                  a significant library of digital lottery game designs;
 ·
              implementing
                  the technical, operational, design, marketing and sale of lottery
                  products; and
 ·
              a
                  soft launch of our game software on behalf of three clients.
 
 Our
        ability to realize our full revenue generating potential is constrained by
        our
        lack of funding. We require significant financial resources to execute all
        of
        the aspects of our business plan. At a minimum, we require capital to roll-out
        the full range of marketing programs for the lotteries we currently operate
        in
        Brazil, England and Ireland, from which we believe we can generate revenues
        to
        support our ongoing operations and allow us to build our business.
 
 Published
        reports indicate that lotteries operate in over 150 domestic and foreign
        jurisdictions throughout the world and that as of June 2003 there were more
        than
        400 lottery licenses issued world-wide. Of the 400 plus lotteries world-wide,
        approximately 20% account for 85% of the estimated lottery sales volume of
        $135
        billion (as officially reported). Reports indicate that other forms of gaming
        such as casino, bingo and fixed odds betting are a number of times larger
        than
        the lottery sales estimates. Moreover, Internet, wireless and interactive
        television (ITV) gaming are all growing rapidly in Europe. Analysts predict
        new
        media gaming to grow beyond $50 billion in the next 5 years. Management believes
        that lotteries, because of the broad rights that are typically granted by
        a
        government, will be the major benefactors of these new media applications.
        Management also believes that the lottery industry will continue to move
        towards
        distribution through new media formats and we will attempt to position the
        Company to capitalize on this anticipated trend.
 
 Our
        market comprises small and mid-sized national and charity operated lotteries.
        The lotteries we develop and implement target the young adult generation
        of
        potential lottery players who do not relate to the traditional paper-based
        games
        their parents play and who incorporate new media devices such as cellular
        telephones, Internet and other wireless apparatus into their daily lives.
 
 We
        believe that we have the opportunity to fill a market niche that is not fully
        serviced by the large, multinational lottery service corporations that design,
        implement and operate government sponsored lotteries world-wide and has not
        yet
        been fully developed or exploited. Although competition for small and mid-sized
        government and charity operated lotteries has intensified as lottery service
        companies seek new revenue sources, we consider this segment of the market
        to be
        supported by only a few known companies and that neither the charity lottery
        market place nor the Internet/wireless lottery marketplace has been
        significantly penetrated. We believe that our management and staff has the
        lottery experience, gaming know-how and technological expertise necessary
        to
        attract, service and grow small to mid-size lottery organizations and that
        by
        being the first company, to our knowledge, dedicated to serving this market,
        we
        will be able to establish our Company as the premier provider of services
        and
        products for this market segment.
 
 -19-
 We
        provide our clients with the chance to significantly increase their
        technological capabilities to operate a modern lottery program, to participate
        with proven technology, to benefit from our lottery know-how and expertise
        and
        to maximize the revenue generating potential of their government sanctioned
        gaming opportunity. Our objective is to create a comprehensive program that
        offers a large choice of games which appeal to the player, broaden the base
        of
        players and increase the number of distribution methods to increase sales.
        It is
        our experience that increased distribution and game variety are formulas
        for
        successful lotteries.
 
 Our
        business model can be replicated on varying scales in discrete geographical
        areas. The fundamental elements of the lottery infrastructure, including
        the web
        site and game concepts we have developed, can be migrated from client to
        client,
        allowing us to repeatedly re-brand our product for other organizations. This
        process, known as "changing the skin", allows us to simultaneously meet the
        needs of numerous charities, while reducing the set-up time and organizational
        costs associated with establishing each charity’s Internet/wireless presence.
 
 We
        expect
        to generate revenues from:
 
 ·
              a
                  percentage of the lottery proceeds received by our
                  clients;
 ·
              delivery
                  of lottery products to a variety of Internet based kiosks;
                  and
 ·
              co-promotions
                  with large, well-known local companies whose names will be attached
                  to
                  specific games.
 
 We
        expect
        the preponderance of our revenues to be derived from a percentage of the
        net
        lottery proceeds received by our clients. We believe that as the distribution
        of
        lottery products is widened and the variety of games is increased the player
        will increase their volume of play. Accordingly, we will seek to implement
        comprehensive programs that offer games which broaden the base of playership
        and
        increase prizes by maximizing the revenue generating potential of our client’s
        government sanctioned gaming opportunity. Critical factors which will bear
        on
        our clients’ and our revenue generation are reducing the cost of acquiring
        customers and maximizing gross revenues generated per customer. Therefore,
        we
        will seek to increase awareness of and interest in our clients’ lotteries by
        developing games that will appeal to a younger adult and female audience
        who
        have incorporated new media devices into their daily routine. We believe
        that we
        can reach this audience relatively inexpensively (i) because there will be
        a
        relatively small infrastructure required to maintain the Company, even when
        fully operational, (ii) based upon the games we expect to offer and (ii)
        the
        manner in which our games are delivered and played (cell phones, PDA’s, Internet
        kiosks and other wireless devices). We expect to develop a customer base
        that
        starts playing games as a young adult and that these people become loyal
        customers who we can retain throughout their lifetime.
 
 We
        believe that we have developed a business plan that will allow us to capitalize
        on our early entry in the sphere of new media lottery gaming. In order to
        build
        the organizational infrastructure which will allow us to exploit fully our
        revenue generating potential and which could reduce the cost of acquiring
        customers and maximize gross revenues generated per customer, we will implement
        a business strategy based on the following components:
 ·Implement
          the entire range of
          activities for our existing clients. The first step in our course to
          profitability is to activate all aspects of lotteries operated by our existing
          clients. We will seek to initiate full scale operations for existing clients
          to
          validate our business model and provide an ongoing source of capital. To
          date,
          we have “soft” launched lotteries for three clients prior to a large scale
“rollout” to confirm the efficacy of our software and attract an initial player
          base. We will require funding to market the lottery on a larger scale to
          achieve
          positive cash flow.
  ·Complete
          the roll-out of our Gelotto
          Internet portal featuring our clients’ lotteries. Each of the sites we develop
          and implement for our clients includes a link to our Gelotto Internet portal
          which features our other clients’ lottery Web sites. People purchasing lottery
          products through one of our client’s Web sites are made aware that our other
          clients offer similar gaming sites and are given the opportunity to link
          to our
          Internet portal. Our Gelotto portal provides links to and allows player
          to gain
          access to our other client’s Web sites. Our Gelotto Internet portal currently
          has links to Web sites operated by our English and Irish lottery clients.
          We
          will seek to create links to all of our clients’ Web sites through our Gelotto
          Internet portal, subject to local gaming laws and regulations. As we further
          develop our Gelotto pass-through site, we believe that it will (i) be an
          efficient and cost effective means of increasing prize amounts, building
          a
          player base and serving as the basis for corporate promotions and banner
          advertising, (ii) lend credibility to our clients’ operations because of their
          association with a professionally managed organization which is trusted
          by
          lottery players world-wide, and (iii) help develop corporate brand recognition
          and loyalty. We expect that we can leverage the charity lottery concept
          to
          obtain discounts on advertising packages and merchandise prize awards.
          We
          anticipate offering co-op games that are “sponsored” by various corporations in
          return for advertisements on the lottery site. These programs can reduce
          operational and promotional costs. To the extent our Internet portal is
          restricted from realizing its full potential because of the laws of the
          jurisdictions in which our clients operate, our business and results of
          operations will be materially and negatively impacted.
  -20-
 ·Aggressively
                pursue new clients. We
                believe that our organization will benefit from the economies of
                scale derived
                by increasing our client base both because we will be able to capitalize
                costs
                incurred in connection with the development of our platform software
                and new
                media games over a larger number of clients but also because a larger
                client
                base potentially signifies larger prizes which will result in more
                players and
                more revenues to both the client and us.
  · Enter into new gaming markets by developing new games and increased distribution
          of these games. Industry analysis indicates that gaming types beyond lotteries,
          such as casino, bingo and fixed odds betting, are a number of times larger
          than
          the lottery sales and growing more quickly. We will seek to develop and
          launch
          the new games over new media devices to attract people who do not typically
          play
          the lottery but who may have interest in other games of chance and as a
          compliment to our lottery offerings. Specifically, we intend to add a bingo
          component to our lottery site and we have developed a video lottery game
          program. Video lottery is defined as casino slot/video machines which are
          managed and licensed by a lottery. We expect that this product line will
          compete
          directly with the casino marketplace and may be a substitute for casino
          like
          gaming in markets where casinos are not legislated. Management believes
          that
          these video lottery programs will become prominent on a number of devices
          currently existing in many countries.
 Our
        ability to undertake and complete any of the foregoing activities is predicated
        on having requisite capital. In addition, we will require capital to continue
        developing games, further develop our Gelotto Web site and market our products,
        as well as for general and administrative expenses incurred in the ordinary
        course of business. It is unlikely that revenues from operations now or in
        the
        near future will be sufficient to support the development and implementation
        of
        these activities and that we will have to rely on outside funding to enact
        the
        full range of planned activities. Since March 19, 2004, Milton Dresner and
        Joseph Dresner, directors of the Company, have been lending us the funds
        required for our operations and will continue to extend loans to us as
        necessary. These loans are payable on demand with interest calculated at
        a rate
        per annum equal to 2% above the prime rate charged by Citibank and will include
        an as yet to be determined number of warrants to purchase shares of our common
        stock. We believe that the extent of our success in the future will be dependent
        in large part on our ability to make our proposed Internet portal available
        to a
        wide range of clients and potential players.
 
 Contractual
        Obligations
 
 The
        following table presents our contractual obligations and commercial commitments
        as of April 30, 2005:
 
 Payments
                  Due By PeriodContractual
                  Cash Obligations
              
              
              Total
              
              
              Less
                  than
                One
                  Year
              
              
              1-3
                Years
              
              
              3-5
                Years
              
              
              After
                  5
                YearsCapital
                  Leases
              
              
              5,929
              
              
              3,522
              
              
              2,407
              
              
              0
              
              
              0Operating
                  Leases
              
              
              25,448
              
              
              25,448
              
              
              0
              
              
              0
              
              
              0Loans
                  Payable
              
              
              2,141,697
              
              
              2,141,697
              
              
              0
              
              
              0
              
              
              0Total
                  ContractualCash
                  Obligations
              
              
              2,173,074
              
              
              2,170,667
              
              
              2,407
              
              
              0
              
              
              0
 
 -21-
 Financing
        Activities
 
 We
        have
        not generated any revenues since our inception. We have been financing our
        operations through loans from our affiliates. During the last fiscal year,
        we
        borrowed an aggregate of $1,309,905 from affiliates of the Company.
 
 Recent
        Accounting Developments
 
 **Non** **e**
 
 Critical
        Accounting Policies
 
 **None**
 
 **Item
        7. Financial Statements**
 
 The
        Company submits with this report the financial statements and related
        information listed in the Index to Financial Statements on page 33
        following this report's signature page.
 
 **Item
        8. Changes in and Disagreements with Accountants on Accounting and Financial
        Disclosure**
 
 On
        March
        20, 2004, the Company (i) retained the services of Bouwhuis, Morrill &
        Company to serve as its principal independent accountant and (ii) dismissed
        Earl
        M. Cohen, CPA, PA, the Company’s independent accountant for the prior two fiscal
        years. The board of directors of the Company recommended and approved the
        change
        of certifying accountant because Bouwhuis, Morrill & Company has the ability
        to audit the financial statements of its Irish subsidiary under United States
        generally accepted accounting principles and prepare the reports required
        in
        connection therewith.
 
 Prior
        to
        its engagement, the Company had not consulted with Bouwhuis, Morrill &
        Company regarding the application of accounting principles to a specific
        completed or contemplated transaction, or the type of audit opinion that
        would
        be rendered on the Company’s financial statements. Moreover, the Registrant did
        not seek, and Bouwhuis, Morrill & Company did not furnish, written or oral
        advice on any matter that the Company considered an important factor in reaching
        a decision as to an accounting, auditing or financial reporting issue.
 
 The
        reports on the financial statements of the Company which were prepared by
        Mr.
        Cohen, the Company’s previous accountant, did not contain any adverse opinion or
        disclaimer of opinion, nor were any of his reports modified as to uncertainty,
        audit scope or accounting principles. Further, there were never any
        disagreements between the Company and Mr. Cohen as to any matter of accounting
        principles or practices, financial statement disclosure, or auditing scope
        of
        procedure.
  **Item
          8A. Controls and Procedures**
 
 We
          maintain disclosure controls and procedures designed to ensure that information
          required to be disclosed in our reports filed or submitted under the Securities
          Exchange Act of 1934 is recorded, processed, summarized and reported within
          the
          time periods specified in the Securities and Exchange Commission's rules
          and
          forms. As of the end of the period covered by this Quarterly Report on
          Form
          10-KSB, we carried out an evaluation, under the supervision and with the
          participation of management, including our Chief Executive Officer and
          Chief
          Financial Officer, of the effectiveness of the design and operation of
          our
          disclosure controls and procedures pursuant to Exchange Act Rule 13a-15.
          Based
          upon that evaluation, management and our Chief Executive Officer and Chief
          Financial Officer concluded that our disclosure controls and procedures
          are
          effective. During the period covered by this Annual Report on Form 10-KSB,
          there
          was no change in our internal control over financial reporting (as defined
          in
          Rule 13a-15(f) under the Exchange Act) that materially effected, or is
          reasonably likely to materially effect, our internal control over financial
          reporting.
 **Item
        8B. Other Information**
 
 None
 
 -22-
 **PART
        III**
 
 **Item
        9. Directors and Executive Officers of the Registrant; Compliance with Section
        16(a) of the Exchange Act**
 
 
 Directors
        and Executive Officers, Promoters and Control Persons
 
 The
        following table sets forth our officers and directors as of August 6,
        2004:
 
 Name
              Age
              TitleJohn
                  Carson
              50
              President,
                  Chief Executive Officerand
                  DirectorRandolph
                  H. Brownell, III
              37
              Chief
                  Operating Officer, Chief Financial Officer and DirectorSterling
                  Herbst
              38
              SecretaryJoseph
                  Dresner
              80
              DirectorMilton
                  Dresner
              80
              DirectorFrederick
                  Winters (1)
              49
              Director
  (1)  Mr.
        Winters was appointed to the Board as representative of Residential Resales,
        Inc. pursuant to its Share Exchange Agreement with Lottery Network Services
        Ltd., the Company’s Irish subsidiary, dated March 19, 2004. There are no
        agreements to retain Mr. Winters on the board.
 
 All
        directors hold office until the next annual meeting of stockholders and until
        their successors have been elected and qualified. The Board of Directors
        elects
        the officers annually.
 
 John
        Carson has been our Chief Executive Officer, President and a director of
        the
        company since July 1, 2004 and has been a director of Lottery Network Services
        Ltd. since 2001. He has been an innovator in the lottery industry, having
        introduced new lottery program delivery models and game formats. During his
        seventeen years in the industry, he has been responsible for all aspects
        of the
        operation of lottery companies, including obtaining financing, and increasing
        profits in each of the ventures in which he previously has been involved.
        From
        1993 to 2000, he was the president and chief executive officer of C.G.I.
        Inc.
        where oversaw all sales, operational and administrative functions of the
        corporation and managed all international sales efforts, securing contracts
        in
        16 countries. From 1988 to 1993, Mr. Carson was an officer at Webcraft
        Technologies, Inc., as president of the lottery division during 1990 through
        1993, as vice president of international sales from 1988 to 1990 and as director
        of financial planning and business development from 1987 to 1988. At Webcraft,
        he was responsible for developing new markets, securing financing for a number
        of international joint ventures and developing new products, including the
        introduction of licensed entertainment products to the lottery industry.
        During
        1986 and 1987, he served as a senior account executive at Columbia Pictures
        where he launched seven first run projects and sold first run television
        shows
        throughout the Midwest region.
 
 Randolph
        H. Brownell, III has been our Chief Operating Officer, Chief Financial Officer
        and a director since July 1, 2004. He had served as our Vice President of
        Development and Acquisitions from March 2004 to June 30, 2004. Since 1996,
        Mr.
        Brownell served as president of Virginia Business Planning and Investments
        LLC.
        Until 2002, he was active in the operational management of Virginia Business
        Planning and Investments LLC and conducted all day to day operating activities,
        created business and marketing plans for various clients, structured and
        closed
        financings of up to $5 million, provided business oversight for clients,
        helped
        to liquidate companies, evaluated business opportunities and handled
        international travel and management for numerous clients. Since 2002, Mr.
        Brownell has served as a director of Lottery Network Services Ltd. and was
        responsible for overseeing all company employees, co-developing business
        and
        strategic planning and preparing and managing that company’s budgets and
        investment activities. In addition, Mr. Brownell made presentations to potential
        investors and worked to develop joint ventures, managed and made presentations
        to other companies in a lead business development role and managed the filings
        and all corporate documents in Ireland and served as the chair on all board
        meetings. Mr. Brownell was a director of TreasureTrivia, an entity from which
        we
        purchased certain assets and utilized programming services.
 
 -23-
 Sterling
        Herbst has been our secretary since July 1, 2004 and had otherwise been engaged
        by the Company and it subsidiary since 2001. Mr. Herbst is active in all
        aspects
        of our day-to-day operations and is responsible for the Company’s computer
        technology management at its offices in Harrisonburg, Virginia. He also assisted
        senior management with our strategic planning and business plan development.
        From November 2000 through July 1, 2004, he was a manger at the Virginia
        Technology Incubator, LLC, an affiliate of the Company by virtue of common
        ownership, where he oversaw construction of a technology incubator and
        facilitated all company purchases, including four computer network
        installations. During that same period, he served as the Vice President of
        US
        Operations of TreasureTrivia.com, Inc., also an affiliate of the Company,
        where
        he coordinated startup of the U.S. office and managed administrative and
        support
        staff; developed and implemented the website prize structure and schedule;
        and
        created a prize fulfillment system. From November 1999 through November 2000,
        he
        was a sales representative for Clayton Homes, Inc., where he negotiated home
        sales, arranged financing of homes and real estate with multiple lending
        institutions, and supervised computer installation and all technology related
        issues in office.
 
 Joseph
        Dresner has been a director of our company since March 18, 2004. He is Chairman
        of the Highland Companies, a Detroit-area-based developer and manager of
        commercial, industrial and residential properties. Mr. Dresner is
        a member
        of the Audit Committee of the Board of Directors of the Company. Mr. Dresner
        has
        been a director of Meadowbrook Insurance Group Inc. since 1985. Mr. Dresner
        is
        the brother of Milton Dresner, a director of the Company.
 
 Milton
        Dresner has been a director of our company since March 18, 2004. For the
        past 40
        years, Mr. Dresner has been co-owner of Highland Management, Highland
        Construction, Highland Industrial Development, Highland Manufactured Home
        Properties, and Highland Motel Properties.  Together, these five
        interacting organizations were involved in every facet of land development,
        construction, management and leasing.  The Highland Companies have
        developed, constructed and managed industrial complexes, multi-family units,
        manufactured home communities, motels and residential subdivisions. 
        He is
        also a partner in several investment banking firms in New York.  Mr.
        Dresner is a life-long entrepreneur and respected businessman, Mr. Dresner
        has
        nearly 50 years of experience in a variety of industries including real estate,
        equities and retail.  Additionally, Mr. Dresner holds dozens of corporate
        positions ranging from director, partner and co-owner, to stockholder and
        investor. Mr. Dresner is the brother of Joseph Dresner, a director of the
        Company.
 
 Frederick
        Winters has been a member of our Board of directors since March 18, 2004,
        the
        date on which we closed the Share Exchange Agreement. Since 2002, Mr. Winters
        has served as the chief executive officer, vice president-business development
        and a director of NuPOW’R LLC, a company engaged in the development of electric
        power systems. During 2001 and 2002, he served as the vice president of Brighton
        Exchange Group, a business development company. From 2000 to 2001, he was
        the
        chief executive officer of Televend, Inc., a **** telephony
        based mobile commerce company. From 1978 to 2001 Mr. Winters served in the
        United States Marine Corp., achieving the rank of Lieutenant Colonel. Mr.
        Winters was appointed to the Board as representative of Residential Resales,
        Inc. pursuant to the Share Exchange Agreement. There are no agreements to
        retain
        Mr. Winters on the board after the next annual meeting at which directors
        are
        elected.
 
 -24-
 Committees
        of Board of Directors.
 
 The
        board
        does not have a nominating or a compensation committee. The selection of
        nominees for the Board of Directors is made by the entire Board of Directors.
        Compensation of management is determined by the entire Board of
        Directors.
 
 Audit
        Committee.
 
 The
        audit
        committee consists of Messrs. Joseph Dresner, Milton Dresner and Frederick
        Winters. Mr. Winters is an independent director. The audit committee meets
        at
        least quarterly with our management and our independent registered public
        accounting firm to review and help ensure the adequacy of our internal controls
        and to review the results and scope of the auditors' engagement and other
        financial reporting and control matters. Joseph Dresner is financially literate
        and is a financial expert, as such term is defined under the Sarbanes-Oxley
        Act
        of 2002.
 
 The
        audit
        committee has adopted a formal written charter specifying: (i) the scope
        of the
        audit committee's responsibilities and how it is to carry out those
        responsibilities, including structure, processes and membership requirements;
        (ii) the audit committee's responsibility for ensuring its receipt from
        the
 outside
        auditor of a formal written statement delineating all relationships between
        the
        auditor and the company, consistent with Independence Standards Board Standard
        1, adopted in January 1999 by the Independence Standards Board (the private
        sector standard-setting body governing the independence of auditors from
        their
        public company clients) and the committee's responsibility for actively engaging
        in communications with the auditor with respect to any relationships or services
        that may impact the objectivity and independence of the auditor and for taking,
        or recommending that the entire board of directors take, appropriate action
        to
        oversee the independence of the outside auditor; and (iii) the outside auditor's
        ultimate accountability to the board of directors and the audit committee,
        as
        representatives of our company's stockholders, and these stockholder
        representatives' ultimate authority and responsibility to select, evaluate
        and,
        where appropriate, replace the outside auditor (or to nominate the outside
        auditor for stockholder approval). Our audit committee will review and reassess
        the adequacy of our written charter on an annual basis.
 
 The
        audit
        committee has adopted guidelines and procedures: (i) making it directly
        responsible for the appointment, compensation and oversight of the work of
        any
        public accounting firm engaged by it (including resolution of any disagreements
        between management and the firm regarding financial reporting) for the purpose
        of preparing or issuing an audit report or related work, and each such public
        accounting firm will report directly to the audit committee; (ii) providing
        for
        the (a) receipt, retention and treatment of complaints received by our Company
        regarding accounting, internal accounting controls or auditing matters and
        (b)
        confidential, anonymous submission by Company employees of concerns regarding
        questionable accounting or auditing matters; (iii) affording it the authority
        to
        engage independent counsel and other advisers, as it may determine to be
        necessary to carry out its duties; and (iv) providing for appropriate funding
        for payment of: (a) the public accounting firm engaged by our Company for
        the
        purpose of rendering or issuing an audit report and (b) any advisers engaged
        by
        the audit committee as described under clause (iii) above.
 
 Code
        of
        Ethics.
 
 We
        have
        adopted a code of ethics, as contemplated by Section 406 of the Sarbanes-Oxley
        Act of 2002. We will post the code of ethics on our website when we establish
        an
        on-line presence. Our Code of Ethics is designed to deter wrongdoing and
        to
        promote:
 
 ·
              Honest
                  and ethical conduct, including the ethical handling of actual or
                  apparent
                  conflicts of interest between personal and professional relationships;
 ·
              Full,
                  fair, accurate, timely, and understandable disclosure in reports
                  and
                  documents that we file with, or submit to, the Commission and in
                  other
                  public communications we make;
 ·
              Compliance
                  with applicable governmental laws, rules and regulations;
 ·
              The
                  prompt internal reporting of violations of the Code of Ethics to
                  an
                  appropriate person or persons identified in the Code of Ethics;
                  and
 ·
              Accountability
                  for adherence to the Code of
                  Ethics.
 
 We
        will
        post our Code of Ethics and disclose any amendment to, or waiver of, a provision
        thereof on a Form 8-K filed with the SEC and post such information and intention
        on our Internet website at such time as we create a website.
 
 -25-
 **Item
        10. Executive Compensation.**
 
 Compensation
        of Directors.
 
 We
        do not
        compensate our directors for serving in such capacity. We reimburse outside
        directors for all costs and expenses incurred in connection with attending
        or
        participating in any board meeting.
 
 Executive
        Compensation.
 
 The
        following table sets forth the information regarding compensation paid to
        the
        Chief Executive Officer and any other person who received in excess of $100,000
        in annual compensation during the last three fiscal years.
 **SUMMARY
                    COMPENSATION TABLE**Long
                    Term CompensationAnnual
                    Compensation
                
                Awards
                
                PayoutsName
                    and Principle
                  Position
                
                Year
                
                Salary
                  ($)
                
                Bonus($)
                
                Other
                  Annual
                    Compensation ($)
                
                Restricted
                  Stock
                    Award(s) ($)
                
                Securities
                    Underlying Options/SARs (#)
                
                LTIP
                    Payouts
                  ($)
                
                All
                  Other
                    Compensation ($)John
                    Carson CEO
                  andPresident
                    (1)
                
                
                2005
                
                $
                115,000
                
                
                
                
                
                
                
                
                
                
                
                200,000Nathan
                    Miller,
                  President
                    (2)
                
                
                2004
                
                $
                1Jay
                    Sanet, President,
                
                
                2003
                
                $
                0Randolph
                    Brownell, III
                  COO
                    and CFO (3)
                
                
                2005
                
                $
                102,000
                
                
                
                
                
                
                
                
                
                
                
                200,000
  (1)
              Mr.
                  Carson commenced his tenure as the President of our Company on
                  July 1,
                  2004. Mr. Carson has deferred his earned salary from fiscal 2004
                  and 2005
                  until such time as the Company is financially capable of paying
                  it.
 (2)
              Mr.
                  Miller served as our President from March 19, 2004 through June
                  30, 2004.
 (3)
              During
                  the fiscal year ended April 30, 2004, Mr. Brownell was compensated
                  in his
                  capacity as Chief Operating Officer and a director of our Irish
                  subsidiary, Lottery Network Services Ltd. for that company’s fiscal year
                  ending March 31, 2004. Mr. Brownell has deferred his earned salary
                  from
                  fiscal 2004 and 2005 until such time as the Company is financially
                  capable
                  of paying it.
 
 Employment
        Agreements.
 
 We
        have
        not entered into written employment agreements with any member of our
        management. We have verbal agreements with each of John Carson and Randolph
        Brownell to pay them an annual salary of $168,000 and $144,000, respectively.
        In
        addition, Mr. Brownell is reimbursed in the amount of $6,000 per year to
        pay the
        cost of his health insurance premiums. As of April 30, 2005, Mr. Carson and
        Mr.
        Brownell have deferred an aggregate of $206,500 for compensation earned during
        the 2004 and 2005 fiscal years until such time as the Company is financially
        capable of making such payments.
 
 -26-
 **Option
        Grants in the Last Fiscal Year**
 
 The
        following table presents certain information concerning stock options granted
        to
        the Named Executive under our various stock option plans during the 2005
        fiscal
        year.
 
 **Option/SAR
                  Grants in Last Fiscal Year**Individual
                  GrantsName
              
              Number
                  of Securities Underlying Options/SARsGranted
                  (#)
              
              %
                  of Total Options/SARs Granted to Employees inFiscal
                  Year
              
              Exercise
                  or Base Price($/Sh)
              
              Expiration
                  DateJohn
                  T. Carson
              
              
              200,000
              
              
              47
              %
              
              .25
              
              
              March
                  21, 2015Randolph
                  Brownell, III
              
              
              200,000
              
              
              47
              %
              
              .25
              
              
              March
                  21, 2015
 
 
 **Fiscal
        Year-End Option Numbers and Values**
 
 The
        following table sets forth additional information as of April 30, 2005,
        concerning shares of our common stock that may be issued upon the exercise
        of
        options under our existing equity compensation plans, divided between plans
        approved by our stockholders and plans or arrangements not submitted to our
        stockholders for approval. The information includes the number of shares
        covered
        by, and the weighted average exercise price of, outstanding options and the
        number of shares remaining available for future grants excluding the shares
        to
        be issued upon exercise of outstanding options, warrants, and other
        rights.
 
 Aggregate
                  Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
                  ValuesName
              
              Shares
                  Acquired onExercise
                  (#)
              
              ValueRealized
                  ($)
              
              Number
                  of Securities Underlying Unexercised Options/SARs at FY-End
                  (#)
                Exercisable/Unexercisable
              
              Value
                  of Unexercised In-the Money Options/SARs at FY-End ($)
                Exercisable/UnexercisableJohn
                  T. Carson
              
              
              -0-
              
              
              -0-
              
              
              200,000/0
              
              $
              0/$0Randolph
                  Brownell, III
              
              
              -0-
              
              
              -0-
              
              
              200,000/0
              
              $
              0/$0
 
 **Equity
        Compensation Plan Information**
 
 The
        following table sets forth additional information as of April 30, 2005,
        concerning shares of our common stock that may be issued upon the exercise
        of
        options and other rights under our existing equity compensation plans and
        arrangements, divided between plans approved by our stockholders and plans
        or
        arrangements not submitted to our stockholders for approval. The information
        includes the number of shares covered by and the weighted average exercise
        price
        of, outstanding options and other rights and the number of shares remaining
        available for future grants excluding the shares to be issued upon exercise
        of
        outstanding options, warrants, and other rights.
 
 -27-
 Equity
        Compensation Plan Information
 
 Plan
                  Category
              
              Number
                  of securities to be
                issued
                  upon exercise of
                outstanding
                  options, warrants
                and
                  rights
              
              Weighted-average
                exercise
                  price of
                outstanding
                options,
                  warrants
                and
                  rights
              
              Number
                  of securities available
                for
                  future issuance under equity
                compensation
                  plans (excluding
                securities
                  reflected in column (a))Equity
                  compensationplans
                  approvedby
                  security holders
              
              
              425,000
              
              $
              .25
              
              
              1,575,000Equity
                  compensationplans
                  not approvedby
                  security holdersTotal
              
              
              425,000
              
              $
              .25
              
              
              1,575,000
 
 Section
        16(a) Beneficial Ownership Reporting Compliance.
 
 Section
        16(a) of the Securities Act of 1934 requires the Company's officers and
        directors, and greater than 10% stockholders, to file reports of ownership
        and
        changes in ownership of its securities with the Securities and Exchange
        Commission. Copies of the reports are required by SEC regulation to be furnished
        to the Company. Based on management's review of these reports and written
        representations from reporting persons, during the fiscal year ended April
        30,
        2005, all reports required to be filed were filed late. All reports required
        to
        be filed under Section 16(a) will be filed with the Securities and Exchange
        Commission within four weeks of the filing of this Report.
 
 **Item
        11. Security Ownership of Certain Beneficial Owners and
        Management**
 
 At
        July
        26, 2005, there were 11,167,143 shares of our Common Stock outstanding. The
        following table sets forth information as of July 26, 2005, regarding the
        beneficial ownership of our common stock by (1) each director and officer,
        (2)
        each person or group known by us to beneficially own 5% or more of the
        outstanding shares of Common Stock and (3) all executive officers and directors
        as a group. Unless otherwise noted, the persons named below have sole voting
        and
        investment power with respect to the shares shown as beneficially owned by
        them.
        Securities attributed to the individuals named below include securities
        convertible into common stock within 60 days of August 6, 2004.
 
 Beneficial
                  Owner
              
              Number
                  of Shares
                Beneficially
                  Owned (1)
              
              Percentof
                  Class (2)John
                  Carson (3)
              
              
              1,087,714
              
              
              8.68
              %Randolph
                  H. Brownell, III (4)
              
              
              474,286
              
              
              3.98
              %Sterling
                  Herbst
              
              
              21,429
              
              
              *Joseph
                  Dresner
              
              
              2,000,000
              
              
              17.48
              %Milton
                  Dresner
              
              
              2,000,000
              
              
              17.48
              %Frederick
                  Winters (5)
              
              
              25,000
              
              
              *All
                  officers & directors as a group (6 persons)
              
              
              5,162,000
                  (6
              )
              
              47.26
              %Nathan
                  Miller (7)
              
              
              3,345,715
              
              
              29.23
              %
  *
        Less
        than 1%.
 
 (1)
              Beneficial
                  ownership is determined in accordance with the rules of the Securities
                  and
                  Exchange Commission which generally attribute beneficial ownership
                  of
                  securities to persons who possess sole or shared voting power and/or
                  investment power with respect to those securities. Unless otherwise
                  indicated, voting and investment power are exercised solely by
                  the person
                  named above or shared with members of such person's
                  household.
 (2)
              Percent
                  of class is calculated on the basis of the number of shares outstanding
                  on
                  July 26, 2005, plus the number of shares the person has the right
                  to
                  acquire within 60 days of July 26,
                  2006.
 (3)
              Includes
                  600,000 shares of common Stock held by The John C. Carson Revocable
                  Trust
                  for which Mr. Carson is the trustee and options to purchase 200,000
                  shares
                  of common stock.
 (4)
              Includes
                  options to purchase 200,000 shares of common
                  stock.
 (5)
              Consists
                  solely of options to purchase shares of common
                  stock.
 (6)
              Includes
                    options to purchase an aggregate of 425,000 shares of common
                    stock.
 (7)
              Includes 354,715 shares over which Mr. Miller
                exercises
                beneficial control which are registered in the names of entities
                in which
                Mr. Miller is a part owner along with Nancy Bowman, a former officer
                and
                director of the Company.
 
 -28-
 **Item
        12. Certain Relationships and Related Transactions**
 
 Since
        March 19, 2004, Milton Dresner and Joseph Dresner, directors of the Company,
        have been lending us the funds required for our operations and will continue
        to
        extend loans to us as necessary. Since March 19, 2004 we have borrowed an
        aggregate of $1,472,768 from these individuals. These loans are payable on
        demand at an interest rate of the prime rate of interest as reported by Citibank
        plus 2% per annum and which shall be accompanied by an as yet undetermined
        number of warrants to purchase shares of our common stock. We expect to execute
        promissory notes in favor of each of these individuals evidencing our
        obligations to them.
 
 During
        March 2004, Nathan Miller, then an officer and director of the Company,
        converted an aggregate of $539,315 of debt of Lottery Network Services Ltd.
        into
        9,000 ordinary shares of that company. The debt was converted at premiums
        above
        the par value per Lottery Network Services ordinary share at $59.92 per share.
        Pursuant to the Share Exchange Agreement, Mr. Miller converted all of his
        shares
        of Lottery Network Services into 3,000,000 shares of our Common Stock. At
        April
        30, 2005, Lottery Network Services was indebted to Mr. Miller in the amount
        of
        $183,177, plus $10,991 in accrued interest, which is repayable on terms to
        be
        determined.
  During
        March 2004, Joseph Dresner, a director of the Company and the brother of
        Milton
        Dresner, converted an aggregate of $300,000 of debt of Lottery Network Services
        Ltd. into 7,000 ordinary shares of that company. The debt was converted at
        a
        premium of $42.86 per share above the par value thereof. At April 30, 2005,
        Lottery Network Services was indebted to Mr. Dresner in the amount of $969,261,
        plus $62,118 in accrued interest, which is repayable on terms to be
        determined.
 
 During
        March 2004, Milton Dresner, a director of the Company and the brother of
        Joseph
        Dresner, converted an aggregate of $350,000 of debt of Lottery Network Services
        Ltd. into 7,000 ordinary shares of that company. The debt was converted at
        a
        premium of $50 per share above the par value thereof. At April 30, 2005,
        Lottery
        Network Services was indebted to Mr. Dresner in the amount of $989,259, plus
        $66,665 in accrued interest, which is repayable on terms to be
        determined.
 
 Until
        December 31, 2004, we leased our offices in Harrisonburg, Virginia from the
        Virginia Technology Incubator, LLC, a company owned, in part, by Randolph
        Brownell, a current officer and director, and Nathan Miller and Nancy Bowman,
        former officers and/or directors of the Company. We leased these offices
        through
        December 2004 at a cost of $3,000 per month. For a portion of this period,
        we
        also paid $1,000 a month for office and administrative services. During the
        fiscal year ended April 30, 2005, we paid aggregate rent to Virginia Technology
        Incubator for said year in the amount of $28,000. The lease agreement was
        negotiated on terms no better than we could have obtained from an unaffiliated
        third party.
 
 One
        of
        our former directors and officers, Nathan Miller, is a partner of the law
        firm
        of Miller & Earle, PLLC. This firm has provided certain legal services to us
        during the last two years. During fiscal 2005 and 2004, Miller & Earle, PLLC
        billed us $43,808 and $202,465, respectively for services rendered, all of
        which
        is outstanding. During fiscal 2003 and fiscal 2002, we paid Miller & Earle
        and aggregate of $0 and $7,500, respectively, for legal services rendered.
  -29-
 **Item
        13. Exhibits**
 
 Exhibit
                  No.
              
              Exhibit
                  Title
              
              Location
                  Reference2.1
              
              Share
                  Exchange Agreement dated March 19, 2004 by andamong
                  the Registrant, Lottery Network Services Ltd. andthe
                  holders of all of the outstanding shares of capital stockof
                  Lottery Network Services Ltd.
              
              22.2
              
              Agreement
                  and Plan of Merger dated June 14, 2004 by andbetween
                  New Media Lottery Services, Inc. and ResidentialResales,
                  Inc.
              
              32.2
              
              Agreement
                  and Plan of Merger dated January 25, 2005 byand
                  between New Media Lottery Services, Inc., a Virginiacorporation,
                  and New Media Lottery Services, Inc., aDelaware
                  corporation.
              
              63(i)(a)
              
              Articles
                  of Incorporation of Media Acquisitions Group,Inc.
              
              13(i)(b)
              
              Certification
                  of Reinstatement
              
              13(i)(c)
              
              Articles
                  of Amendment to Articles of Incorporation tochange
                  the corporate name to Residential Resales, Inc.
              
              13(i)(d)
              
              Certification
                  of status of Residential Resales, Inc.
              
              13(ii)
              
              Bylaws
                  of Residential Resales, Inc.
              
              13(i)(e)*
              
              Articles
                  of Association of Lottery Network Services Ltd.
              
              23(i)(f)*
              
              Memorandum
                  of Association of Lottery Network Services Ltd.
              
              23(i)(g)
              
              Articles
                  of Incorporation of New Media Lottery Services, Inc.(Virginia).
              
              33(i)(h)
              
              Certificate
                  of Incorporation of New Media Lottery Services, Inc.(Delaware).
              
              63(i)(j)
              
              By-Laws
                  of New Media Lottery Services, Inc. (Delaware).
              
              610.1
              
              Agreement
                  dated September 13, 2001, as amended as of January26,
                  2004 by and between Lottery Network Services Ltd. andRehab
                  Net Games Limited.
              
              210.2
              
              Agreement
                  dated December 12, 2001 by and between LotteryNetwork
                  Services Ltd. and Rehab Charities UK Limited.
              
              210.3
              
              Agreement
                  dated November 27, 2001 by and between Lottery
                Network
                  Services Ltd. and Tropical Gaming Ltd., Belize.
              
              210.4
              
              Agreement
                  dated February 12, 2002 by and between LotteryNetwork
                  Services Ltd. and Guatemalan Pediatric Foundation.
              
              210.5
              
              Agreement
                  dated December 7, 2001 by and between LotteryNetwork
                  Services Ltd. and Intellect Foundation
              
              210.6
              
              Agreement
                  dated February 3, 2004 by and between LotteryNetwork
                  Services Ltd. and Carnegie Cooke & Company Inc.
              
              210.7
              
              Joint
                  Venture Agreement dated October 28, 2004 by and between New New
                  Media
                  Lottery Services, Inc. and Cybercyte Sistemas eServiços
                  Ltda.
              
              710.8
              
              Agreement
                  dated May 6, 2005 by and between New MediaLottery
                  Services, Inc. and Alladdin Lotteries Limited
              
              710.9
              
              Quota
                  Holders Agreement dated June 22, 2005 by and betweenNew
                  Media Lottery Services, Inc. and Cybercyte Sistemas eServiços
                  Ltda.
              
              710.10
              
              Agreement
                  dated May ___, 2005 by and between New MediaLottery
                  Services, Inc. and Parlay Entertainment Limited
              
              814
              
              Code
                  of Ethics
              
              516
              
              Letter
                  of Earl M. Cohen, CPA, PA, on change in certifyingaccountant.
              
              431.1
              
              Certification
                  of Chief Executive Officer pursuant to Section 302of
                  the Sarbanes-Oxley Act of 2002.
              
              731.2
              
              Certification
                  of Chief Financial Officer pursuant to Section 302of
                  the Sarbanes-Oxley Act of 2002.
              
              732.1
              
              Certification
                  of Chief Executive Officer of Periodic FinancialReports
                  pursuant to Section 906 of the Sarbanes-Oxley Act of2002,
                  18 U.S.C. Section 1350
              
              732.2
              
              Certification
                  of Chief Financial Officer of Periodic FinancialReports
                  pursuant to Section 906 of the Sarbanes-Oxley Act of2002,
                  18 U.S.C. Section 1350
              
              7
 
 1.  
                  Previously filed
                  with Annual Report on Form 10-KSB as filed with the Securities
                  and Exchange
                  Commission on April 24, 2002.
 2. Previously
            filed with Current Report on Form 8-K dated March 31, 2004 as filed with
            the
            Securities and Exchange Commission on April 2, 2004.
 3. Previously
            filed with Information Statement pursuant to Rule 14C of the Securities
            Exchange
            Act of 1934 dated June 9, 2004.
 4. Previously
            filed with Current Report on Amendment No. 1 to Form 8-K dated March
            31, 2004 as
            filed with the Securities and Exchange Commission on April 8,
            2004.
 5. Previously
            filed with Annual Report on Form 10-KSB as filed with the Securities
            and
            Exchange Commission on August 10, 2004.
 6. Previously
            filed with Information Statement pursuant to Rule 14C of the Securities
            Exchange
            Act of 1934 dated January 5, 2004.
 7. Filed
            herewith.
 8. To
            be
            filed by amendment.
 
 -30-
 **Item
        14. Principle Accountant Fees and Services**
 
 AUDIT
        FEES. The aggregate fees billed for professional services rendered by Bouwhuis,
        Morrill & Company for the
        audits of the Company's annual consolidated financial statements for the
        2005
        fiscal year ending on April 30, 2005 and the reviews of the financial statements
        included in the Company’s Quarterly Reports on Form 10-QSB for the fiscal year
        were $22,600. The aggregate fees billed for professional services rendered
        by Bouwhuis,
        Morrill & Company for the
        audits of the Company’s annual consolidated financial statements for the 2004
        fiscal year and the reviews of the financial statements included in the
        Company’s Quarterly Reports on Form 10-QSB for the fiscal year were $13,000
        (including direct engagement expenses).
 
 AUDIT-RELATED
        FEES. The aggregate fees billed by Bouwhuis,
        Morrill & Company for
        audit-related
 services
        rendered for the Company for the 2005 fiscal year were $2,029. The aggregate
        fees billed Bouwhuis,
        Morrill & Company for
        audit-related services rendered for the Company and its subsidiaries for
        the
        2004 fiscal year were $2,132. Audit-related fees generally include fees in
        support of the Company's filing of registration statements with the SEC and
        similar matters.
 
 TAX
        FEES.
        The aggregate fees billed by Bouwhuis,
        Morrill & Company for
        tax-related services rendered for the Company for the 2005 fiscal year were
        $0.
        The aggregate fees billed by Bouwhuis,
        Morrill & Company for
        tax-related services rendered for the Company and its subsidiaries for the
        2004
        fiscal year were $0. The tax-related services were all in the nature of tax
        compliance and tax planning.
 
 ALL
        OTHER
        FEES. The aggregate fees billed for services rendered to the Company by Bouwhuis,
        Morrill & Company ,
        other
        than the audit services, audit-related services, and tax services, were $0
        for
        the 2005 fiscal year and $0 for the 2004 fiscal year.
 
 PRE-APPROVAL
        POLICY. The Audit Committee is required to pre-approve all auditing services
        and
        permitted non-audit services (including the fees and terms thereof) to be
        performed for the Company by its independent auditor or other registered
        public
        accounting firm, subject to the de minimis exceptions for non-audit services
        described in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934
        that
        are approved by the Audit Committee prior to completion of the audit.
 
  -31-
 **SIGNATURES**
 
 In
        accordance with the Exchange Act, the registrant caused this report to be
        signed
        on its behalf by the undersigned, thereunto duly authorized.
  Dated:
        September 22, 2005
 By: /s/
        John
        T. Carson
 
 Name:
        John T. Carson
 Title:
        President
  In
        accordance with the Exchange Act, this report has been signed below by the
        following person on behalf of the registrant and in the capacities and on
        the
        dates indicated.
 
 Person
              
              Capacity
              
              Date/s/
                  John T. Carson
              
              President
                  and Director
              
              September
                  22, 2005John
                T. Carson/s/
                  Randolph H. Brownell, III
              
              Chief
                  Operating Officer, Chief FinancialOfficer
                  and Director
              
              September
                    22, 2005Randolph
                H. Brownell, III/s/
                  Sterling Herbst
              
              Secretary
              
              September
                    22, 2005Sterling
                Herbst/s/ 
                  Joseph Dresner
              
              Director
              
              September
                    22, 2005Joseph
                Dresner/s/
                  Milton Dresner
              
              Director
              
              September
                    22, 2005Milton
                Dresner/s/
                  Frederick Winters
              
              Director
              
              September
                    22, 2005Frederick
                Winters
 
 
 -32-
 **ITEM
        7. FINANCIAL STATEMENTS**






-33-
 
 
 
 
 
 
 
 **NEW
        MEDIA LOTTERY SERVICES, INC.**
 **&
        SUBSIDIARIES**
 (Formerly
        Residential Resales, Inc.)
 
 Financial
        Statements for the Years
 Ended
        April 30, 2005 and 2004
 and
        Report of Independent Registered
 Public
        Accounting Firm
     
 -34-
 **CONTENTS**
 Report
                    of Independent Registered Public Accounting Firm
                35Consolidated
                    Balance Sheets
                36Consolidated
                    Statements of Operations
                37Consolidated
                    Statements of Stockholders’ Deficit
                38Consolidated
                    Statements of Cash Flows
                39-40Notes
                    to the Consolidated Financial Statements
                41
 
 
 
 
 -35-
 
 Bouwhuis,
                Morrill & Company, LLC
              12
                  South Main, Suite 208Certified Public Accountants
              Layton,
                  Utah 84041801-546-1357
                  Tel801-546-1348
                  Fax
 REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 Board
        of
        Directors
 New
        Media
        Lottery Services, Inc. & Subsidiaries
 (A
        Development Stage Company)
 Harrisonburg,
        Virginia
 
 We
        have
        audited the accompanying consolidated balance sheets of New Media Lottery
        Services, Inc. & Subsidiaries (a development stage company) as of April 30,
        2005 and 2004 and the related consolidated statements of operations,
        stockholders’ deficit and cash flows for the years ended April 30, 2005 and 2004
        and for the period from inception on July 11, 2000 through April 30, 2005.
        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 the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audits 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
        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 consolidated financial position of New Media
        Lottery Services, Inc. & Subsidiaries (a development stage company) as of
        April 30, 2005 and 2004 and the consolidated results of their operations
        and
        their cash flows for the years ended April 30, 2005 and 2004 and for the
        period
        from inception on July 11, 2000 through April 30, 2005 in conformity with
        accounting principles generally accepted in the United States of
        America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. As discussed in Note 11 to
        the
        consolidated financial statements, the Company has negative working capital,
        negative cash flows from operations and recurring operating losses which
        raises
        substantial doubt about its ability to continue as a going concern. Management’s
        plans in regard to these matters are also described in Note 11. These
        consolidated financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.
 
 
 /s/
        Bouwhuis, Morrill & Company, LLC
 Bouwhuis,
        Morrill & Company, LLC
 July
        20,
        2005
  -36-
 **NEW
                      MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**(A
                      Development Stage Company)Consolidated
                      Balance Sheets
  ASSETSApril
                      30,2005
                  
                  2004CURRENT
                      ASSETSCash
                      and cash equivalents
                  
                  $
                  92,000
                  
                  $
                  171,052Other
                      receivables
                  
                  
                  2,304
                  
                  
                  --Marketable
                      securities (Note 3)
                  
                  
                  30,000
                  
                  
                  --Prepaid
                      assets
                  
                  
                  8,571
                  
                  
                  --Total
                      Current Assets
                  
                  
                  132,875
                  
                  
                  171,052PROPERTY
                      AND EQUIPMENT, NET (Note 2)
                  
                  
                  57,794
                  
                  
                  20,383TOTAL
                      ASSETS
                  
                  $
                  190,669
                  
                  $
                  191,435LIABILITIES
                      AND STOCKHOLDERS' DEFICITCURRENT
                      LIABILITIESBank
                      overdraft (Note 2)
                  
                  $
                  --
                  
                  $
                  49Accounts
                      payable and accrued expenses
                  
                  
                  324,230
                  
                  
                  85,903Deferred
                      compensation (Note 8)
                  
                  
                  206,500
                  
                  
                  110,500Due
                      to related parties (Note 4)
                  
                  
                  204,465
                  
                  
                  204,465Loans
                      payable - related parties (Note 5)
                  
                  
                  2,141,697
                  
                  
                  831,792Notes
                      payable - current portion (Note 6)
                  
                  
                  3,522
                  
                  
                  --Total
                      Current Liabilities
                  
                  
                  2,880,414
                  
                  
                  1,232,709NOTES
                      PAYABLE - LONG-TERM PORTION
                  
                  
                  2,407
                  
                  
                  --TOTAL
                      LIABILITIES
                  
                  
                  2,882,821
                  
                  
                  1,232,709STOCKHOLDERS'
                      DEFICITCommon
                      stock, $0.001 par value; 50,000,000 sharesauthorized,
                      11,167,143 shares issued and outstanding
                  
                  
                  11,167
                  
                  
                  11,167Additional
                      paid-in capital
                  
                  
                  2,055,757
                  
                  
                  2,055,757Accumulated
                      deficit
                  
                  
                  (4,791,323
                  )
                  
                  (3,108,198
                  )Accumulated
                      other comprehensive incomeForeign
                      currency translation adjustment
                  
                  
                  2,247
                  
                  
                  --Unrealized
                      gain on marketable securities
                  
                  
                  30,000
                  
                  
                  --Total
                      Stockholders' Deficit
                  
                  
                  (2,692,152
                  )
                  
                  (1,041,274
                  )TOTAL
                      LIABILITIES AND STOCKHOLDERS' DEFICIT
                  
                  $
                  190,669
                  
                  $
                  191,435
   -37-
 **NEW
                      MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**(A
                      Development Stage Company)Consolidated
                      Statements of Operations
  From
                      InceptionFor
                      the Years Ended
                  
                  on
                      July 11, 2000
                    throughApril
                      30,
                  
                  April
                      30,2005
                  
                  2004
                  
                  2005NET
                      REVENUES
                  
                  $
                  --
                  
                  $
                  --
                  
                  $
                  --OPERATING
                      EXPENSESDepreciation
                      expense
                  
                  
                  13,506
                  
                  
                  1,642
                  
                  
                  18,596General
                      and administrative
                  
                  
                  211,309
                  
                  
                  286,602
                  
                  
                  599,543Management
                      fees
                  
                  
                  294,000
                  
                  
                  257,988
                  
                  
                  825,688Professional
                      fees
                  
                  
                  454,082
                  
                  
                  382,694
                  
                  
                  1,536,875Programming
                      fees
                  
                  
                  420,482
                  
                  
                  441,078
                  
                  
                  1,294,786Rent
                      expense
                  
                  
                  60,945
                  
                  
                  75,149
                  
                  
                  148,240Website
                      expense
                  
                  
                  91,943
                  
                  
                  66,533
                  
                  
                  207,124Total
                      Operating Expenses
                  
                  
                  1,546,267
                  
                  
                  1,511,686
                  
                  
                  4,630,852LOSS
                      FROM OPERATIONS
                  
                  
                  (1,546,267
                  )
                  
                  (1,511,686
                  )
                  
                  (4,630,852
                  )OTHER
                      INCOME (EXPENSES)Gain
                      on settlement of debt
                  
                  
                  3,170
                  
                  
                  --
                  
                  
                  3,170Gain
                      on sale of property and equipment
                  
                  
                  --
                  
                  
                  2,153
                  
                  
                  2,153Interest
                      expense
                  
                  
                  (140,028
                  )
                  
                  (24,500
                  )
                  
                  (165,794
                  )Total
                      Other Income (Expenses)
                  
                  
                  (136,858
                  )
                  
                  (22,347
                  )
                  
                  (160,471
                  )NET
                      LOSS BEFORE INCOME TAXES
                  
                  
                  (1,683,125
                  )
                  
                  (1,534,033
                  )
                  
                  (4,791,323
                  )PROVISION
                      FOR INCOME TAXES
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --NET
                      LOSS
                  
                  $
                  (1,683,125
                  )
                  $
                  (1,534,033
                  )
                  $
                  (4,791,323
                  )BASIC
                      AND DILUTED NET LOSS PER SHARE
                  
                  $
                  (0.15
                  )
                  $
                  (0.27
                  )WEIGHTED
                      AVERAGE NUMBER OFSHARES
                      OUTSTANDING
                  
                  
                  11,167,143
                  
                  
                  5,669,702OTHER
                      COMPREHENSIVE INCOMENET
                      LOSS
                  
                  $
                  (1,683,125
                  )
                  $
                  (1,534,033
                  )
                  $
                  (4,791,323
                  )Foreign
                      currency translation adjustment
                  
                  
                  2,247
                  
                  
                  --
                  
                  
                  2,247Unrealized
                      gain on marketable securities
                  
                  
                  30,000
                  
                  
                  --
                  
                  
                  30,000COMPREHENSIVE
                      LOSS
                  
                  $
                  (1,650,878
                  )
                  $
                  (1,534,033
                  )
                  $
                  (4,759,076
                  )
 -38-
 **NEW
                        MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**(A
                        Development Stage Company)Consolidated
                        Statements of Stockholders' Deficit
  AccumulatedAdditional
                    
                    
                    
                    OtherCommon
                        Stock
                    
                    Paid-in
                    
                    Accumulated
                    
                    ComprehensiveShares
                    
                    Amount
                    
                    Capital
                    
                    Deficit
                    
                    IncomeBalance
                        at inception, July 11, 2000
                    
                    
                    --
                    
                    $
                    --
                    
                    $
                    --
                    
                    $
                    --
                    
                    $
                    --Common
                          stock issued to theincorporators of the Company onJuly 12,
                          2000
                    
                    
                    28,571
                    
                    
                    29
                    
                    
                    (28
                    )
                    
                    --
                    
                    
                    --Net
                          loss for the period from inceptionto April 30, 2001
                    
                    
                    --
                    
                    
                    --
                    
                    
                    --
                    
                    
                    --
                    
                    
                    --Balance,
                        April 30, 2001
                    
                    
                    28,571
                    
                    
                    29
                    
                    
                    (28
                    )
                    
                    --
                    
                    
                    --Common
                          stock issued for cash at$3.50 per share, March 2002
                    
                    
                    28,571
                    
                    
                    29
                    
                    
                    99,971
                    
                    
                    --
                    
                    
                    --Net
                          loss for the year endedApril 30, 2002
                    
                    
                    --
                    
                    
                    --
                    
                    
                    --
                    
                    
                    (342,545
                    )
                    
                    --Balance,
                        April 30, 2002
                    
                    
                    57,142
                    
                    
                    57
                    
                    
                    99,944
                    
                    
                    (342,545
                    )
                    
                    --Common
                          stock issued for cash at$3.50 per share, May 2002
                    
                    
                    42,857
                    
                    
                    43
                    
                    
                    149,957
                    
                    
                    --
                    
                    
                    --Common
                          stock issued for services at$0.18 per share, May
                          2002
                    
                    
                    3,154,286
                    
                    
                    3,154
                    
                    
                    548,846
                    
                    
                    --
                    
                    
                    --Common
                          stock issued for relatedparty loans at $0.22 per share, May
                          2002
                    
                    
                    174,286
                    
                    
                    175
                    
                    
                    37,425
                    
                    
                    --
                    
                    
                    --Capital
                        contributed by shareholders
                    
                    
                    --
                    
                    
                    --
                    
                    
                    67,600
                    
                    
                    --
                    
                    
                    --Net
                          loss for the year endedApril 30, 2003
                    
                    
                    --
                    
                    
                    --
                    
                    
                    --
                    
                    
                    (1,231,620
                    )
                    
                    --Balance,
                        April 30, 2003
                    
                    
                    3,428,571
                    
                    
                    3,429
                    
                    
                    903,772
                    
                    
                    (1,574,165
                    )
                    
                    --Common
                          stock issued in conversion ofdebt at values ranging from $0.15 to
                          $0.21 per share, March 2004
                    
                    
                    6,571,429
                    
                    
                    6,571
                    
                    
                    1,182,744
                    
                    
                    --
                    
                    
                    --Recapitalization
                          of Lottery NetworkServices Limited through reverse merger with
                          Residential Resales, Inc.
                    
                    
                    1,000,000
                    
                    
                    1,000
                    
                    
                    (55,663
                    )
                    
                    --
                    
                    
                    --Common
                          stock issued for services at$0.15 per share,
                        March
                          2004
                    
                    
                    167,143
                    
                    
                    167
                    
                    
                    24,904
                    
                    
                    --
                    
                    
                    --Net
                          loss for the year endedApril 30, 2004
                    
                    
                    --
                    
                    
                    --
                    
                    
                    --
                    
                    
                    (1,534,033
                    )
                    
                    --Balance,
                        April 30, 2004
                    
                    
                    11,167,143
                    
                    
                    11,167
                    
                    
                    2,055,757
                    
                    
                    (3,108,198
                    )
                    
                    --Foreign
                        currency translation
                    
                    
                    --
                    
                    
                    --
                    
                    
                    --
                    
                    
                    --
                    
                    
                    2,247Unrealized
                        gain on marketable securities
                    
                    
                    --
                    
                    
                    --
                    
                    
                    --
                    
                    
                    --
                    
                    
                    30,000Net
                          loss for the year endedApril 30, 2005
                    
                    
                    --
                    
                    
                    --
                    
                    
                    --
                    
                    
                    (1,683,125
                    )
                    
                    --Balance,
                        April 30, 2005
                    
                    
                    11,167,143
                    
                    $
                    11,167
                    
                    $
                    2,055,757
                    
                    $
                    (4,791,323
                    )
                    $
                    32,247
  -39-
 **NEW
                      MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**(A
                      Development Stage Company)Consolidated
                      Statements of Cash Flows
  From
                      InceptionFor
                      the Years Ended
                  
                  on
                      July 11, 2000
                    throughApril
                      30,
                  
                  April
                      30,2005
                  
                  2004
                  
                  2005CASH
                      FLOWS FROM OPERATING ACTIVITIESNet
                      loss
                  
                  $
                  (1,683,125
                  )
                  $
                  (1,534,033
                  )
                  $
                  (4,791,323
                  )Adjustments
                        to reconcile net loss to net cash used by operating
                        activities:Depreciation
                      expense
                  
                  
                  13,506
                  
                  
                  1,642
                  
                  
                  18,596Gain
                      on sale of property and equipment
                  
                  
                  --
                  
                  
                  (2,153
                  )
                  
                  (2,153
                  )Gain
                      on settlement of debt
                  
                  
                  (3,170
                  )
                  
                  --
                  
                  
                  (3,170
                  )Common
                      stock issued for services
                  
                  
                  --
                  
                  
                  25,071
                  
                  
                  577,071Change
                      in operating assets and liabilities:Other
                      receivable
                  
                  
                  (2,304
                  )
                  
                  --
                  
                  
                  (2,304
                  )Prepaid
                      assets
                  
                  
                  (8,571
                  )
                  
                  --
                  
                  
                  (8,571
                  )Accounts
                      payable and accrued expenses
                  
                  
                  243,744
                  
                  
                  48,368
                  
                  
                  325,955Deferred
                      Compansation
                  
                  
                  96,000
                  
                  
                  110,500
                  
                  
                  206,500Due
                      to related parties
                  
                  
                  --
                  
                  
                  75,393
                  
                  
                  153,495Net
                      Cash Used by Operating Activities
                  
                  
                  (1,343,920
                  )
                  
                  (1,275,212
                  )
                  
                  (3,525,904
                  )CASH
                      FLOWS FROM INVESTING ACTIVITIESPurchases
                      of property and equipment
                  
                  
                  (44,238
                  )
                  
                  (22,025
                  )
                  
                  (84,213
                  )Proceeds
                      from sale of property and equipment
                  
                  
                  -
                  
                  
                  16,655
                  
                  
                  16,655Net
                      Cash Used by Investing Activities
                  
                  
                  (44,238
                  )
                  
                  (5,370
                  )
                  
                  (67,558
                  )CASH
                      FLOWS FROM FINANCING ACTIVITIESBank
                      overdraft
                  
                  
                  (49
                  )
                  
                  49
                  
                  
                  --Proceeds
                      from issuance of common stock
                  
                  
                  --
                  
                  
                  --
                  
                  
                  250,000Capital
                      contributed by shareholders
                  
                  
                  --
                  
                  
                  --
                  
                  
                  67,600Proceeds
                      from issuance of notes payable
                  
                  
                  --
                  
                  
                  --
                  
                  
                  17,950Proceeds
                        from issuance of loans payable, related
                        parties
                  
                  
                  1,309,905
                  
                  
                  1,448,607
                  
                  
                  3,368,612Payments
                      on notes payable
                  
                  
                  (750
                  )
                  
                  (14,787
                  )
                  
                  (18,700
                  )Net
                      Cash Provided by Financing Activities
                  
                  
                  1,309,106
                  
                  
                  1,433,869
                  
                  
                  3,685,462EFFECT
                        OF FOREIGN CURRENCYTRANSLATION ADJUSTMENT
                  
                  
                  2,247
                  
                  
                  --
                  
                  
                  2,247NET
                        INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS
                  
                  
                  (79,052
                  )
                  
                  153,287
                  
                  
                  92,000CASH
                        AND CASH EQUIVALENTS,BEGINNING OF PERIOD
                  
                  
                  171,052
                  
                  
                  17,765
                  
                  
                  --CASH
                        AND CASH EQUIVALENTS,END OF PERIOD
                  
                  $
                  92,000
                  
                  $
                  171,052
                  
                  $
                  92,000
  -40-
 **NEW
                      MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**(A
                      Development Stage Company)Consolidated
                      Statements of Cash Flows
                      (continued)
  From
                      InceptionFor
                      the Years Ended
                  
                  on
                      July 11, 2000
                    throughApril
                      30,
                  
                  April
                      30,2005
                  
                  2004
                  
                  2005SUPPLEMENTAL
                      DISCLOSURES:Cash
                      paid for interest
                  
                  $
                  194
                  
                  $
                  2,035
                  
                  $
                  2,801Cash
                      paid for income taxes
                  
                  $
                  --
                  
                  $
                  --
                  
                  $
                  --NON-CASH
                      INVESTING AND FINANCING ACTIVITIES:Common
                      stock issued for services
                  
                  $
                  --
                  
                  $
                  25,071
                  
                  $
                  577,071Common
                      stock issued for note payable
                  
                  $
                  --
                  
                  $
                  1,189,315
                  
                  $
                  1,226,915Note
                      payable issued to purchase equipment
                  
                  $
                  6,679
                  
                  $
                  --
                  
                  $
                  6,679Increase
                    in fair value of marketable securities
                  
                  $
                  30,000
                  
                  $
                  --
                  
                  $
                  30,000
  -41-
 **NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 (A
        Development Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2005 and 2004
 
 
 NOTE
            1 - ORGANIZATION
            AND DESCRIPTION OF BUSINESS
 
 New
        Media
        Lottery Services, Inc. the (“Company” or “NMLS”) was organized under the laws of
        the State of Florida on June 29, 1998. The Company was originally organized
        to
        provide media consulting services. The Company has no revenues to date and
        as a
        result is considered a development stage company. The Company’s headquarters is
        currently located in Harrisonburg, Virginia.
  On
        June
        17, 2004, the Company changed its State of Incorporation from Florida to
        Virginia with authorized common stock of 50,000,000 shares with par value
        of
        $0.001 per share. All references to shares issued and outstanding in the
        consolidated financial statements have been retroactively restated to reflect
        the effects of this change in capital structure.
  On
        March
        18, 2004, the Company reorganized by entering into a stock purchase agreement
        with Lottery Network Services Limited (“LNS”) whereby the Company issued
        10,000,000 shares of its common stock in exchange for all of the outstanding
        common stock of LNS. Immediately prior to executing the stock purchase agreement
        the Company had 1,000,000 shares of common stock issued and outstanding.
        The
        reorganization was accounted for as a recapitalization of LNS because the
        shareholders of LNS controlled the Company immediately after the acquisition.
        Therefore, LNS is treated as the acquiring entity. Accordingly there was
        no
        adjustment to the carrying value of the assets or liabilities of LNS. The
        Company is the acquiring entity for legal purposes and LNS is the surviving
        entity for accounting purposes.
  Lottery
        Network Services Limited was organized under the laws of the Republic of
        Ireland
        on July 11, 2000 for the purpose of designing, building, implementing, managing,
        hosting and supporting internet and wireless based lottery
        programs.
  New
        Media
        Lottery Services, Inc. (“NMLS-C”) was organized as an extra-provincial
        corporation in Alberta, Canada on July 27, 2004. NMLS-C is a wholly owned
        foreign subsidiary of NMLS. NMLS-C provides software development and technical
        expertise for NMLS.
 
 NOTE
            2 - SIGNIFICANT
            ACCOUNTING POLICIES
 
 This
        summary of significant accounting policies of the Company is presented to
        assist
        in understanding the Company’s consolidated financial statements. The
        consolidated financial statements and notes are representations of the Company’s
        management who are responsible for their integrity and objectivity. These
        accounting policies conform to accounting principles generally accepted in
        the
        United States of America and have been consistently applied in the preparation
        of the consolidated financial statements. The following policies are considered
        to be significant:
 
 a.
                Accounting
                    Method
 
 The
        Company recognizes income and expenses based on the accrual method of
        accounting. The Company has elected an April 30 year-end.
 
 
 
 -42-
 **NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 (A
        Development Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2005 and 2004
 
 NOTE
        2
        -  SIGNIFICANT
        ACCOUNTING POLICIES (Continued)
 
 b.
                Cash
                    and Cash Equivalents
 
 Cash
        equivalents are generally comprised of certain highly liquid investments
        with
        original maturities of less than three months.
 
 c.
              Use
                  of Estimates in the Preparation of Consolidated Financial
                  Statements
 
 The
        preparation of consolidated 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 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.
 
 d.
              Property
                  and Equipment
 
 Property
        and equipment are stated at cost and depreciated using the straight-line
        method
        over their estimated useful lives. When assets are disposed of, the cost
        and
        accumulated depreciation (net book value of the assets) are eliminated and
        any
        resultant gain or loss reflected accordingly. Betterments and improvements
        are
        capitalized over their estimated useful lives whereas repairs and maintenance
        expenditures on the assets are charged to expense as incurred.
  Asset
                    Class
                
                Life
                
                2005
                
                2004Computer
                    Equipment
                
                
                3
                    Years
                
                $
                56,851
                
                $
                22,025Furniture
                    & Equipment
                
                
                7
                    Years
                
                
                15,818
                
                
                --Computer
                    Software
                
                
                3
                    Years
                
                
                273
                
                
                --Less
                    - Accumulated Depreciation
                
                
                
                
                
                (15,148
                )
                
                (1,642
                )Net
                    Property and Equipment
                
                
                
                
                $
                57,794
                
                $
                20,383
 Depreciation
        expense for the years ended April 30, 2005 and 2004 was $13,506 and $1,642,
        respectively.
 
 e.
              Basic
                  Net Loss per Share of Common Stock
 
 In
        accordance with Financial Accounting Standards No. 128, “Earnings per Share,”
        basic net loss per common share is based on the weighted average number of
        shares outstanding during the periods presented. Diluted earnings per share
        is
        computed using weighted average number of common shares plus dilutive common
        share equivalents outstanding during the period as follows:


April
                    30,
                
                April
                    30,2005
                
                2004Net
                    loss (numerator)
                
                $
                (1,683,125
                )
                $
                (1,534,033
                )Weighted
                    average shares outstanding (denominator)
                
                
                11,167,143
                
                
                5,669,702Loss
                    per share amount
                
                $
                (0.15
                )
                $
                (0.27
                )
 Stock
        options have not been included as their effect is antidilutive.
 
 
 
 -43-
 **NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 (A
        Development Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2005 and 2004
 
 
 NOTE
        2
        -  SIGNIFICANT
        ACCOUNTING POLICIES (Continued)
  f.
                Recent
                    Accounting Pronouncements
 In
        April
        2002, the Financial Accounting Standards Board issued Statement No. 145 (“SFAS
        145”), “Rescission of FASB Statements Nos. 4, 44, and 64 and Amendment of FASB
        Statement No. 13.” SFAS 145 addresses the presentation for losses on early
        retirements of debt in the statement of operations. The Company has adopted
        SFAS
        145 and will not present losses on early retirements of debt as an extraordinary
        item.
  In
        June
        2002, the Financial Accounting Standards Board issued Statement No. 146 (“SFAS
        146”), “Accounting for Costs Associated with Exit or Disposal Activities.” The
        provisions of SFAS 146 become effective for exit or disposal activities
        commenced subsequent to December 31, 2002. The adoption of SFAS 146 had no
        impact on the Company’s financial position, results of operations or cash flows.
  In
        November 2002, the Financial Accounting Standards Board issued FASB
        Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure
        Requirements for Guarantees, Including
        Indirect Guarantees of Indebtedness of Others.” This interpretation elaborates
        on the disclosures to be made by a guarantor in its interim and annual financial
        statements about its obligations under certain guarantees that it has issued.
        It
        also clarifies (for guarantees issued after January 1, 2003) that a guarantor
        is
        required to recognize, at the inception of a guarantee, a liability for the
        fair
        value of the obligations undertaken in issuing the guarantee. At April 30,
        2005
        and 2004, the Company does not have any outstanding guarantees and accordingly
        does not expect the adoption of FIN 45 to have any impact on their financial
        position, results of operations or cash flows.
  g.
                Income
                    Taxes
 The
        Company accounts for income taxes in accordance with Statement of Financial
        Accounting Standards Board (SFAS) No. 109, “Accounting for Income Taxes.” Under
        this method, deferred income taxes are determined based on the difference
        between the financial statement and tax bases of assets and liabilities using
        enacted tax rates in effect for the year in which differences are expected
        to
        reverse. In accordance with the provisions of SFAS No. 109, a valuation
        allowance would be established to reduce deferred tax assets if it were more
        likely than not that all or some portion, of such deferred tax assets would
        not
        be realized. A full allowance against deferred tax assets was provided as
        of
        April 30, 2005.
  At
        April
        30, 2005, the Company has capitalized approximately $1,387,000 (for tax
        purposes) as Internal Revenue Code Section 195 start up costs. The Company’s LNS
        subsidiary has capitalized approximately $3,500,000 as Code Section 195 start
        up
        expenditures. These start-up expenditures represent substantially all company
        and subsidiary expenditures from inception to date. When the business begins
        operations, as defined by Section 195, these cumulative startup costs will
        be
        amortized over sixty months for income tax accounting purposes separately
        on
        each company’s tax return. The Company and its LNS subsidiary will not file a
        consolidated income tax return
 
 Due
        to
        the change in ownership provisions of the Tax Reform Act of 1986, net operating
        loss carryforwards for Federal income tax reporting purposes are subject
        to
        annual limitations. Should a change in ownership occur, net operating loss
        carryforwards may be limited as to future use.
 
 
 -44-
 **NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 (A
        Development Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2005 and 2004
 
 NOTE
        2
        -  SIGNIFICANT
        ACCOUNTING POLICIES (Continued)
  h.
                Reclassifications
 Certain
        amounts in the accompanying consolidated financial statements have been
        reclassified to conform to the current year presentation. These
        reclassifications had no material effect on our consolidated financial
        statements.
  i.
                Checks
                    Written in Excess of Cash in
                    Bank
 Under
        the
        Company’s cash management system, checks issued but not presented to banks
        frequently result in overdraft balances for accounting purposes. Additionally,
        at times banks may temporarily lend funds to the Company by paying out more
        funds than are in the Company’s account. These overdrafts are included as a
        current liability in the balance sheets.
  j.
                Principles
                    of Consolidation
 The
        consolidated financial statements include the accounts of New Media Lottery
        Services, Inc., and its wholly-owned subsidiaries New Media Lottery Services,
        Inc. (Canada) and Lottery Network Services Limited. All significant intercompany
        accounts and transactions have been eliminated in the
        consolidation.
  k.
                Different
                    Fiscal Periods
 For
        year
        end April 30, 2004, the Company’s subsidiary, Lottery Network Services Limited,
        recognized its income and expenses based on the accrual method of accounting
        and
        had elected a March 31 year-end whereas New Media Lottery Services, Inc.
        (parent) has elected and reports on an April 30 year-end. The consolidated
        financial statements are prepared using each entities fiscal
        period.
  During
        the year end April 30, 2005, the Company’s subsidiary Lottery Network Services,
        Limited changed its fiscal year end to be consistent with its parent company
        and
        reported using an April 30 year end for the fiscal year ended 2005.
 
 NOTE
        3
        -  MARKETABLE
        SECURITIES
 
 Marketable
        securities at April 30, 2005 are classified and disclosed as available-for-sale
        under the requirements of SFAS No. 115. Under such statement, the Company’s
        securities are required to be reflected at their fair value as
        follows:
 April
                    30,
                
                April
                    30,2005
                
                2004Fair
                    value of marketable securities at beginning of year
                
                $
                --
                
                $
                --Realized
                    gain (loss) on marketable securities
                
                
                --
                
                
                --Proceeds
                    from the sale of marketable securities
                
                
                --
                
                
                --Unrealized
                    gain (loss) on marketable securities
                
                
                30,000
                
                
                --Fair
                    value of marketable securities at end of year
                
                $
                30,000
                
                $
                --
 Unrealized
        holding gains and losses are reported in other comprehensive
        income.
 
 
 -45-
 
 **NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 (A
        Development Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2005 and 2004
 
 NOTE
        4
        -  RELATED
        PARTY TRANSACTIONS
  The
        Company has been dependent upon certain individuals, officers, stockholders
        and
        other related parties to provide capital, management services, assistance
        in
        finding new sources for debt and equity financing, and guidance in the
        development of the Company’s business. The related parties have generally
        provided services and incurred expenses on behalf of the Company in exchange
        for
        shares of the Company’s common stock or have provided the necessary operating
        capital to continue pursuing its business.
  In
        addition to operating capital, the Company engages in business with companies
        which are under common ownership and/or management as follows:
  Virginia
        Technology Incubator
 The
        Company leased office space and rented, IT facilities from Virginia Technology
        Incubator (VTI). Some of the Company’s major shareholders are the majority
        owners of VTI. The Company paid VTI in the amount of $28,000 and $45,000
        during
        the years ended April 30, 2005 and 2004, respectively. The Company does not
        owe
        VTI any monies at April 30, 2005 or 2004.
  Pixel
        Furnace Studios
 The
        Company contracted with Pixel Furnace Studios (PFS) for computer programming
        services. Some of the Company’s major shareholders are the majority owners of
        PFS. The Company paid PFS $65,647 and $297,159 during the years ended April
        30,
        2005 and 2004, respectively. The Company does not owe PFS any monies at April
        30, 2005 or 2004.
  TreasureTrivia.com
 The
        Company contracted with TreasureTrivia.com (TTC) for computer programming
        services. Some of the Company’s major shareholders are the majority owners of
        TTC. The Company paid TTC $15,700 and $137,695 during the years ended April
        30,
        2005 and 2004, respectively. The Company does not owe TTC any monies at April
        30, 2005 or 2004.
  Miller
        & Earle, PLLC
 The
        Company has utilized the services of a law firm named Miller & Earle, PLLC
        (ME) where one of the partners is a major shareholder and former director
        of the
        Company. The Company paid ME $1,531 and $5,085 during the years ending April
        30,
        2005 and 2004. The Company owed ME $202,465 at April 30, 2005 and 2004 (see
        Note
        9).
  Virginia
        Business Planning and Investments
 The
        Company has used the services of Virginia Business Planning and Investments
        (VBP) for consulting services or operating capital. Some of the Company’s major
        shareholders are the majority owners of VBP. The Company owed VBP $2,000
        at
        April 30, 2005 and 2004.
 
 
 -46-
 **NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 (A
        Development Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2005 and 2004
 
 
 NOTE
            5 - LOANS
            PAYABLE - RELATED
            PARTIES
 
 The
        Company has been relying to a great extent on certain related parties for
        operating capital. Due to these transactions the Company has considerable loans payable
        due to related parties consisting of
        the
        following:
 April
                    30,2005
                
                2004Loan
                      payable to an individual, interest at primeplus 2%, due on demand,
                      unsecured
                
                $
                183,177
                
                $
                146,040Loan
                      payable to an individual, interest at primeplus 2%, due on demand,
                      unsecured
                
                
                989,259
                
                
                337,026Loan
                      payable to an individual, interest at primeplus 2%, due on demand,
                      unsecured
                
                
                969,261
                
                
                348,726Total
                    Loans Payable
                
                
                2,141,697
                
                
                831,792Less:
                    Current Portion
                
                
                (2,141,697
                )
                
                (831,792
                )Long-Term
                    Loans Payable
                
                $
                --
                
                $
                --
 NOTE
        6 -  NOTES
        PAYABLE
 
 Notes
        payable consisted of the following:
 April
                    30,2005
                
                2004Capital
                      lease payable to a finance companywith imputed interest of
                      12.097%, due December 31, 2006, secured by equipment
                
                $
                5,929
                
                $
                --Total
                    Notes Payable
                
                
                5,929
                
                
                --Less:
                    Current Portion
                
                
                (3,522
                )
                
                --Long-Term
                    Notes Payable
                
                $
                2,407
                
                $
                --
 FiscalYear
                    EndingApril
                    30
                
                Amount2006
                
                $
                3,5222007
                
                
                2,407Thereafter
                
                
                --$
                5,929
 -47-
 **NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 (A
        Development Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2005 and 2004
 
 
 NOTE
        7
        -  EQUITY
        TRANSACTIONS
  Effective
        July 2000, the Company issued 28,571 shares of common stock to the incorporators
        of the Company for $1.
  Effective
        March 2002, the Company sold 28,571 shares of its common stock to a company
        for
        cash of $100,000. Shortly thereafter in May 2002, the Company sold an additional
        42,857 shares of its common stock to the same company for cash of
        $150,000.
  Effective
        May 2002, the Company issued 3,154,286 shares of its common stock for various
        services rendered valued at $0.18 per share.
  Effective
        May 2002, the Company issued 174,286 shares of its common stock to convert
        a
        related party loan in the amount of $37,600.
  Effective
        March 2004, the Company issued 6,571,429 shares of its common stock to convert
        loans payable - related party in the amount of $1,189,315.
  Effective
        March 2004, the Company issued 167,143 shares of its common stock for services
        rendered in the amount of $25,071.
 
 NOTE
        8
        -  FINANCIAL
        INSTRUMENTS
 
 Statement
        of Financial Accounting Standards No. 107 (SFAS 107), “Disclosures about Fair
        Value of Financial Instruments” requires disclosure of the fair value of
        financial instruments held by the Company. SFAS 107 defines the fair value
        of a
        financial instrument as the amount at which the instrument could be exchanged
        in
        a current transaction between willing parties. The following methods and
        assumptions were used to estimate fair value:
  The
        carrying amount of cash equivalents and accounts payable approximate fair
        value
        due to their short-term nature.
 
 NOTE
        9
        -  COMMITMENTS
        AND CONTINGENCIES
 
 Operating
        Leases
 At
        April
        30, 2004, the Company was obligated under an agreement with a related party
        (see
        Note 4) for the lease of its office space for a monthly payment of $3,000.
        Subsequent to the year ended April 30, 2004, the Company renegotiated the
        terms
        of the agreement to rent the space on a month-to-month basis through December
        2004. In connection with this agreement, the Company also rented IT facilities
        from this company for $1,000 per month.
  At
        April
        30, 2005, the Company was obligated under an agreement to lease office space
        for
        the development of its gaming software in Alberta, Canada. This lease payment
        averages $2,785 per month and expires December 31, 2005.
  At
        April
        30, 2005, the Company was obligated under an agreement to lease office space
        for
        the Company corporate offices in Harrisonburg, Virginia. The lease payment
        is
        $1,392 per month and expires December 31, 2005.
   -48-
 **NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 (A
        Development Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2005 and 2004
 
 NOTE
        9
        -  COMMITMENTS
        AND CONTINGENCIES (Continued)
 
 Capital
        Leases
 At
        April
        30, 2005, the Company was obligated under an agreement to lease a telephone
        system for its Harrisonburg, Virginia office. The lease payment is $315 per
        month and expires December 31, 2006. The Company may purchase the telephone
        system at the end of the lease for $1.
  Compensation
        Agreements
 The
        company has verbal compensation agreements with two key management personnel
        in
        the amounts of $144,000 and $168,000 per year. The Company has deferred a
        total
        of $206,500 and $110,500 of this compensation for the years ended April 30,
        2005
        and 2004, respectively. The terms of these agreements are open and are subject
        to change or revocation.
  Legal
        Fee Dispute
 The
        Company is engaged in a fee dispute with one of its former law firms. The
        Company has accrued $202,465 in legal fees billed by a law firm named Miller
        & Earle, PLLC (ME) where one of the law firm partners is a major shareholder
        and former director of the Company. In addition to the $202,465, ME has billed
        an additional $43,808 during fiscal year 2005. The Company believes that
        these
        additional billings were incorrect. Due to uncertainties in the settlement
        process with ME, no provision has been made in the accompanying financial
        statements to reflect the additional $43,808 in 2005 fees.
 
 NOTE
        10
        -  EMPLOYEE
        STOCK OPTIONS
  The
        following tables summarize the information regarding employee stock options
        at
        April 30, 2005:
 Outstanding,
                    April 30, 2004
                
                
                --Granted
                
                
                425,000Canceled
                
                
                --Exercised
                
                
                --
  Outstanding,
                    April 30, 2005
                
                
                425,000Weighted
                    average exercise price of options outstanding at April 30,
                    2005
                
                $
                0.25
  Outstanding
                
                
                
                ExercisableWeightedAverage
                
                Weighted
                
                
                
                WeightedNumber
                
                Remaining
                
                Average
                
                Number
                
                AverageOutstanding
                
                Contractual
                
                Exercise
                
                Exercisable
                
                ExerciseExercise
                    Prices
                
                at
                    4/30/05
                
                Life
                    (years)
                
                Price
                
                at
                    4/30/05
                
                Price$
                    0.25
                
                
                425,000
                
                
                9.90
                
                $
                0.25
                
                
                425,000
                
                $
                0.25
 The
        Company applies Accounting Principles Board (“APB”) Opinion 25, “Accounting for
        Stock Issued to Employees,” and related Interpretations in accounting for all
        stock options issued to employees at the time of issuance under the stock
        option
        plan. Under APB Opinion 25, compensation
        cost is recognized for stock options granted to employees when the option
        price
        is less than the market price of the underlying common stock on the date
        of
        grant.
  
 -49-
 **NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 (A
        Development Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2005 and 2004
 
 NOTE
        10
        -  EMPLOYEE
        STOCK OPTIONS (Continued)
 
 FASB
        Statement 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”),
        requires the Company to provide proforma information regarding net income
        and
        net income per share as if compensation costs for the Company’s stock option
        plans and other stock awards had been determined in accordance with the fair
        value based method prescribed in SFAS No. 123. The Company estimates the
        fair
        value of each stock award at the grant date by using the Black-Scholes option
        pricing model with the following assumptions; dividend yield of zero percent
        for
        all years; expected volatility of 172%; risk-free interest rate of 4.59 percent
        and expected life of 10.0 years.
  Under
        the
        accounting provisions of SFAS No. 123, the Company’s net loss would have been
        changed by the pro forma amounts indicated below:


April
                  30,2005
              
              2004Net
                  loss:As
                  reported
              
              $
              (1,683,125
              )
              $
              (1,534,033
              )Pro
                  forma
              
              $
              (1,689,040
              )
              $
              (1,534,033
              )Basic
                  loss per share:As
                  reported
              
              $
              (0.15
              )
              $
              (0.27
              )Pro
                  forma
              
              $
              (0.15
              )
              $
              (0.27
              )


NOTE
        11
        -  GOING
        CONCERN CONSIDERATIONS
 
 As
        reported in the consolidated financial statements, the Company has incurred
        losses of approximately $4,791,000 from inception of the Company through
        April
        30, 2005. The Company’s stockholders’ deficit at April 30, 2005 was $2,692,152
        and its current liabilities exceeded its current assets by $2,747,539.
        Management’s plans to address and alleviate these concerns are as
        follows:
  The
        Company’s management has developed a strategy of exploring all options available
        to it so that it can develop successful operations. As a part of this plan,
        management is currently striving to expand its player base. In addition,
        management is working with an investment banking firm in order to raise
        additional operating capital. In the meantime, key shareholders of the Company
        have committed to the continued funding of the Company via loans, equity
        and
        contributed capital.
  The
        ability of the Company to continue as a going concern is dependent upon its
        ability to successfully accomplish the plans described in the preceding
        paragraph and eventually attain profitable operations. The accompanying
        financial statements do not include any adjustments that might be necessary
        if
        the Company is unable to continue as a going concern.
 
 NOTE
          12
          -  SUBSEQUENT
          EVENTS
 
 Website
        Hosting
 The
        Company contracted on May 1, 2005 with Globix, Ltd. to provide on-line website
        hosting. The agreement requires a 2,400 pounds sterling monthly fee and is
        cancelable with thirty days notice.
  The
        Company contracted on July 7, 2005 with Hosting 365, Limited, to provide
        on-line
        website hosting and to lease computer hardware. The agreement requires a
        $3,300
        monthly fee and expires June 30, 2006.
 
 
 -49-