**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


**FORM
      10-KSB**


(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, 2007





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: 000-49884





**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:  $571,995





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:  21,442,143
      as of August 14, 2007





**DOCUMENTS
      INCORPORATED BY REFERENCE**


None.





Transitional
      Small Business Disclosure Format (Check one): oYes x No








**PART
      I**





**ITEM
      1.**  **DESCRIPTION
      OF BUSINESS**





**Overview.**





New
      Media
      Lottery Services, Inc. (the “NM-US”), through its direct and indirect
      subsidiaries, New Media Lottery Services plc (“NM-PLC”) and New Media Lottery
      Services (International), Ltd. (“New Media International”)(collectively, “we”,
“us” the “Company” or like terms), designs, builds, implements, manages, hosts
      and supports internet and wireless device based lottery programs operated by
      governments and their licensees, such as charitable organizations, outside
      of
      the United States. We also design and distribute games for use on server based
      video lottery terminals and other electronic kiosks owned and operated by third
      parties. We commenced providing services to clients in August 2003. We currently
      operate lottery systems for two customers and have entered into contracts with
      three additional lotteries. 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. We are pursuing additional contracts for which we will seek
      additional financing to implement.





All
      of
      our operations are conducted through our subsidiary NM-PLC, an Irish corporation
      of which we own 81.47% of the outstanding stock, and through NM-PLC’s wholly
      owned Irish subsidiary, New Media International. Four members of NM-US’s board
      of directors, two of whom are our principal executive officers, constitute
      a
      majority of the managing directors of NM-PLC and a majority of the directors
      of
      New Media International. NM-US is prohibited by agreement with NM-PLC from,
      among other things, engaging in the lottery business, and NM-US has agreed
      to
      forward all future lottery business opportunities to NM-PLC, as more fully
      described under the heading “BUSINESS - The AIM Offering and the Relationship
      Between NM-US and NM-PLC.” The ordinary shares of NM-PLC are traded on the AIM
      operated by the London Stock Exchange plc under the symbol NMLS. NM-US has
      agreed with NM-PLC not to dispose of any such shares other than on an orderly
      market basis.





**Development
      of Our Business.**





The
      Company is a successor in interest to the lottery and gaming operations
      commenced by New Media Lottery Services (International) Ltd., formerly known
      as
      Lottery Network Services Ltd. (LNS), a corporation organized under the laws
      of
      the Republic of Ireland on July 11, 2000. Set forth below is a chronological
      progression of the manner in which the Company came to acquire and develop
      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.





2


In
      August, 2004, the Virginia corporation acquired the remaining outstanding shares
      of the capital stock of 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.





In
      November 2005, NM-US organized NM-PLC and exchanged all of the outstanding
      shares of New Media International it owned for 20,205,129 ordinary shares of
      NM-PLC, representing the only outstanding shares of that corporation as of
      said
      date.





On
      March
      17, 2006, our Irish subsidiary, NM-PLC concluded an offering of
      4,244,850  ordinary
      shares at a price of 50 pence ($.878) per share from which it received gross
      proceeds of $3,750,338 (based upon the exchange rate on March 17, 2006)(the
“AIM
      Offering”). After deducting costs associated with the AIM Offering of
      $1,617,644, NM-PLC received net proceeds of $2,132,694 (based upon the exchange
      rate on March 17, 2006). After giving effect to the issuance of the ordinary
      shares sold in the AIM Offering and the other ordinary shares issued for debt,
      we owned approximately 82.3% of NM-PLC’s outstanding capital stock. Concurrent
      with the closing of the AIM Offering, all of NM-PLC’s ordinary shares were
      admitted to trading on the AIM operated by the London Stock Exchange plc (the
      “Admission Date”). As a condition to the completion of the AIM Offering, we
      undertook an organizational restructuring, the net effect of which is that
      all
      of the Company’s business operations are conducted through NM-PLC and its wholly
      owned subsidiary New Media International, as more fully described below under
      the heading “BUSINESS - The AIM Offering and the Relationship Between NM-US and
      NM-PLC.”





**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.





Lotteries
      are official, government authorized/licensed fundraising organizations that
      in
      many cases subcontract all or part of their lottery operations and new product
      development to professional lottery service providers. These providers supply
      technology, products, operations, marketing and administrative support.





As
      of the
      end of 2005, 122 international jurisdictions have implemented terminal based
      lottery systems. A number of other international jurisdictions, principally
      in
      Europe, Asia-Pacific, and Central America, are currently considering the
      implementation of terminal based lotteries. 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
      or social in nature. Proceeds generated by lotteries may be designated for
      particular public purposes, such as education, sports, humanitarian services
      and
      or economic development. Numerous jurisdictions have become dependent on the
      net
      proceeds generated from the sale of lottery tickets to support some of those
      public purposes.





3


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. In addition, they do not have the technical capability
      to
      offer games utilizing the new media distribution methods available to them.





In
      general, lotteries can be categorized into two principal groups, terminal based
      lotteries and off-line lotteries, each of which includes a variety of game
      types. Terminal based lotteries are conducted through a computerized lottery
      system in which lottery terminals are connected to a central computer system.
      Terminal based lottery systems generally are utilized to conduct games such
      as
      lotto, keno and numbers, and permit a player to make his/her own selection.
      Off-line lotteries feature lottery games which are not computerized, such as
      traditional paper based draw lottery games and instant-ticket games. Generally,
      traditional off-line lottery games, in which players purchase tickets which
      have
      pre-printed numbers for a future drawing, are conducted only in international
      jurisdictions. Instant-ticket games, in which players scratch-off a coating
      from
      a printed ticket to determine if it is a winning ticket, are conducted both
      internationally and in the United States.





Statistics
      show that, typically, terminal based 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, terminal based 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. Terminal based
      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 primarily on lotteries which are not currently serviced
      by
      terminal based lottery service providers, such as small national and state
      lotteries and lotteries operated by CLO’s the lotteries of which are licensed by
      the government. We expect to grow these smaller lotteries by applying our
      technology and expertise and to make the games they offer available through
      new
      media channels such as the internet, cell phones, handheld wireless devices
      such
      as palm top computers, and interactive television. We also offer product
      development services to national lottery programs.




Generally,
      the smaller national and state-operated lotteries and CLO’s, which constitute
      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.
      Not
      surprisingly, governments and charities have a never ending need to raise funds
      for humanitarian purposes.




4


Frequently,
      small state-operated lotteries, 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 range
      of
      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, these 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 national and state-operated lotteries and charitable lottery
      organizations are under-served. 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 the larger national and
      state run lotteries and they do not warrant the significant capital investment
      required to implement and operate a traditional land-based lottery. In addition,
      the smaller state-operated 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 expand into modern lottery and gaming markets,
      giving them the capacity to compete with larger government sponsored lotteries.
      Initially, we develop and implement an on-line lottery presence offering
      traditional on-line game formats supplemented by new and exciting games we
      have
      developed. We target our on-line lotteries to a younger adult audience that
      typically does 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
      Lottery Clients.**





We
      currently manage lotteries for two clients and have contracts to manage
      lotteries for 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 gaming
      laws.





5


In
      September 2001, we entered into an agreement with Rehab Net Games Limited
      (Rehab), an Irish corporation, as amended in January 2004, April 2004 and
      November 2005, 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 of this project to include server based lottery terminals for which
      we
      have developed the software and games. The entity with which we are working
      to
      develop the server based lottery terminals, Inspired Gaming Group (with which
      we
      have entered a contract to provide certain services, as described under the
      heading “BUSINESS-Game Development Service,” below) advises that it has
      completed beta testing and test marketing of the terminals. Rehab expects to
      roll-out server based lottery terminals by the end of 2007.





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 expect this project
      to
      include server based lottery terminals such as those referenced in the
      description of the Rehab Ireland lottery set forth above. Inspired will be
      responsible for situating these terminals at locations throughout the UK where
      it currently operates in excess of 10,000 such terminals. The operating software
      and games we have developed for these terminals will allow Rehab Charities
      UK to
      offer prizes on these terminals significantly larger that those currently
      offered on Inspired’s terminals. We believe that Inspired is prepared to launch
      the terminals in the UK in the spring or summer of 2008. We have provided all
      funding to develop and implement the lottery for Rehab UK. We intend to
      implement commercial marketing of this project during 2008.





In
      June
      2005, we entered into a joint venture agreement with Cybercyte Sistemas e Serviços
      Ltda., of Sao Paulo, Brazil, to launch an internet based lottery sales site
      and
      to explore the possibility of delivering other lottery programs within Brazil.
      Cybercyte 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 provide the lottery systems and expertise for internet lottery projects
      initiated in these states and Cybercyte principally is responsible for marketing
      efforts with respect to the internet lotteries. As of the date hereof, we have
      developed lottery products in Portuguese which we have delivered. The joint
      venture company is now focusing marketing efforts on leveraging Latin America
      Gaming, Inc.’s (Cybercyte’s parent) existing gaming and lottery relationships.
      Over the past year, we have conducted extensive internal testing of our product
      offering but have not engaged in any marketing of the site. During July 2007,
      the national government requested that all Internet gaming sites, including
      validly licensed state operated lottery sites such as our client’s, suspend
      operation. The government currently is reviewing all such Internet sites to
      determine which are currently operating under a valid license and is
      establishing updated guidelines under which validly licensed state lotteries
      can
      operate. Management is confident that our client’s lottery site operates under a
      validly issued government license, is compliant with existing lottery rules
      and
      regulations, is current in the payment of all applicable taxes and will be
      granted permission to re-launch over the coming months. Management believes
      that
      this review process could take as long as three to six months. To date, the
      Company has generated only immaterial revenue from this program and has incurred
      only limited development and marketing expenses.





6


On
      October 4, 2006, Cell Phone Systems SA, a Venezuelan company of which we own
      45%
      of the outstanding capital stock (“CPS”), entered into an agreement with the
      State of Aragua, Venezuela to develop, implement and operate mobile lottery
      games, internet gaming and sports betting. The rights granted under this
      agreement permit CPS to offer games throughout Venezuela. Under the agreement,
      which extends for a period of ten years, CPS earns a fee equal to approximately
      15-20% of gross sales which after prizes and lottery fees will be distributed
      on
      equal basis, after costs and expenses incurred by CPS, to us and our partner
      in
      CPS, Smart Media Technologies. We will provide, implement and operate all
      aspects of the gaming operations of the lottery and Smart Media Technologies
      will provide mobile phone and banking applications for the operations. In
      addition, we anticipate earning additional revenues by providing retailer
      services to other state lottery programs.





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. Management of the Company has elected to defer development of this
      project and focus the Company’s resources and efforts on larger projects on
      which it is further along and which have significantly greater revenue
      generating potential.





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. The Company has
      analyzed its potential opportunity in Guatemala and management has determined
      at
      this time not to pursue the development and implementation of a new media
      lottery system given the current competitive climate and the potential economic
      return from the project.





**Game
      Development Services.**





By
      agreement dated October 12, 2005, Inspired Gaming Group (Inspired), 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 broadband enabled
      terminals, retained the Company to provide it with server based lottery content
      for its terminals. The agreement provides for a territory covering the United
      Kingdom and Republic of Ireland and that the parties will include Italy and
      Spain under the terms of a future agreement. The Company has agreed to provide
      Inspired with a range of services, including providing a minimum of seven
      lottery games per year for use on Inspired’s server based terminals, securely
      facilitating prize payouts; providing and maintaining all systems, software,
      servers and technical support and any upgraded functionality necessary to ensure
      the availability of the lottery games on the Inspired server based terminals;
      designing and implementing a game strategy focused on sales growth; proposing
      and designing co-branding game opportunities; assisting in the design and
      implementation of all advertising, promotional marketing and sales programs
      for
      the lottery games on the Inspired terminals and its Web site; and managing
      the
      process from selection, registration, regulatory reporting, accounting statement
      preparation and charity payment processing. Inspired will have the right to
      nominate charity lottery benefactors.





In
      consideration for its services, the Company is entitled to receive a portion
      of
      the net proceeds derived from the use of the lottery games on Inspired’s server
      based terminals. For purposes of the agreement, net proceeds means gross
      proceeds after deduction of prize payouts, charity proceeds, retailer fees,
      cash
      management costs and value added tax, if applicable.





Inspired’s
      existing server based 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. The operating
      software and lottery games we have developed for use on Inspired’s terminals
      which will allow for more significant prizes. Under the UK’s new gaming
      regulations, virtually any government licensed charity is entitled to offer
      lottery products via server based lottery terminals and management believes
      the
      Company is well positioned to capitalize on this new opportunity.





7


As
      of the
      date hereof, the Company has developed an operating system and delivered digital
      instant lottery games to Inspired which has loaded the first set of games on
      to
      its terminals. In November 2006, Inspired began beta testing the terminals
      at
      field locations within Ireland for release under the auspices of the Rehab
      Ireland project during the fall of 2007.





**Lottery
      Development.**





We
      offer
      our lottery clients an integrated range of products and services to develop,
      build and host lotteries for small national and state-operated lotteries and
      charitable lottery organizations (CLO’s). We have assembled a management team
      and personnel 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;





·
            analyze
                the gaming preferences of the indigenous
                population;





·
            design,
                install, operate, host and maintain lottery systems that support
                games
                played via the internet, wireless devices, such as cellular telephones
                and
                palm top computers, 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 local 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 of our clients have
      operated as second tier lotteries within their host jurisdictions. An
      affiliation with our organization increases the client’s technological
      capabilities to operate a modern lottery program and to participate with proven
      technology that is in use worldwide. The government supports these organizations
      but is unable to financially support all of their needs so it gives them
      extremely valuable and broad gaming licenses. We demonstrate to our clients
      how
      to maximize the revenue generating potential of its government sanctioned gaming
      opportunity.





We
      believe that the services we provide, 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 new forms of
      distribution, offers them access to state-of-the-art technologies and makes
      available to them a wide variety of new entertaining gaming formats. We seek
      to
      build organizations founded on operational and financial integrity that inspires
      public confidence and allows the organization to realize its full lottery
      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 new clients. This process,
      known as "changing the skin", allows us to simultaneously meet the needs of
      numerous clients, while reducing the set-up time and organizational costs
      associated with establishing each client’s internet/wireless presence.





8


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. 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.





**Products
      and Services.**





Once
      a
      client retains us, we analyze the local gaming environment, including the
      client’s existing operations, business practices and the personal gaming
      preferences of the local 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. There is
      some
      degree of trial and error and we constantly interchange games to determine
      what
      is most appealing to a particular audience at a particular time.





Most
      of
      our clients 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 the local gaming commission.
      In such case, we seek to identify and partner with licensed local lottery
      managers who have secured the highest reputation for integrity. These entities
      may provide us with on-site and other services after installation of the lottery
      system. They possess the local knowledge necessary to navigate the differing
      regulatory requirements of each jurisdiction. 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 our client 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
      our clients 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 should become 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.





9


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, Ireland
      and Brazil (as discussed elsewhere herein, by order of the gaming authorities
      in
      Brazil, our servers in Brazil are not operational at this time). Web sites
      are
      designed to ease registration and use and to promote maximum security.





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 lottery. 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 have
      developed a video lottery game platform. 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 could 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 is limited, land-based sales of lottery
      tickets will expand market penetration and can provide significant additional
      revenues.





10


**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
      will 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
      expect to advertise in national and regional newspapers and special interest
      magazines. We 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.





**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
      ourselves, and lottery license holders. We are dependent upon the relationships
      that members of our management have cultivated during the course of their
      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 have many 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 are
      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 and other services after installation of the lottery
      system.





11


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 are generally 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 shared central computer
      systems based on their geographic location. 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 and AIB in Ireland to handle all financial transactions between us
      and
      our clients and visitors to our clients’ Web sites. All transactions are
      automated to avoid human error.





**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 attract
      the
      interest of potential players and comply with local regulations. 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 personnel 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.**





The
      Company provides technology systems that enable safe hosting of electronic
      lotteries. We have developed software and methods that securely process and
      transact game play and have integrated essential tools to monitor and notify
      administrators of events. These events include real-time reporting of the usage
      and uptime which also serve as audit controls. This allows us to supervise
      all
      aspects of the system maximizing availability and response times.





12


The
      infrastructure utilized for the wide area network consists of servers locally
      placed in regions where systems are implemented. The Company is an international
      company with clients located globally and today has servers in United Kingdom,
      Ireland and Brazil. These servers are redundant systems which automatically
      restore in the event of failure. The data is constantly backed-up and integrity
      of encryption is constantly updated.





The
      Company also has developed a game library which allows us to syndicate content
      for different brands and the game engine can be migrated from client to client.
      This makes possible customization of game content to partners as a means of
      creating rapid delivery times and reducing development costs and expenses from
      client to client. The game content has been pre-developed and tested so that
      colors, logos, even characters and art can be changed specifically for a region,
      including language and currency differences. By design, the games can be
      deployed on devices other than the Internet to expand our product offering
      and
      to accommodate the growing needs of the client.





The
      Company has developed this game content for use on other devices such as server
      based terminals for pubs, race tracks, and point of sale (POS) terminals for
      retailers, and to broadcast this content to mobile telephones and interactive
      television. Our suite of games is specifically designed for easy incorporation
      into our clients’ offerings to create a quick change over of content and game
      management. The Company has strategically aligned itself with a compliant game
      management system which works as the brains to the game content. By integrating
      both the game management system and game content layers, the solution can be
      used for various digital lottery offerings.





The
      Company has an exclusive arrangement with a Las Vegas Gaming Inc. to utilize
      its
      approved and privileged gaming licensed lottery management system for in
      geographic areas outside of the US. This system is a random number generator
      which has satisfied all testing and casino license requirements to work within
      certain governed bodies inside the US. This game management system currently
      has
      been used in several world class casino properties in Las Vegas and has been
      for
      many years. The Company has customized this offering to include the lottery
      management system alongside our game content and proprietary server
      infrastructure and methods to bring an entire solution to the industry which
      can
      be utilized on the internet, mobile phones, server based terminals, POS
      terminals, interactive television and legacy slot machines.





**Competition.**




The
      government-licensed lottery market can be divided into four distinctive
      categories: large government operated lotteries; small national operated
      lotteries; small state-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, we believe that 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 among the first
      companies 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.





13


Of
      important note is that the core business of all major lottery suppliers is
      entrenched in land-based games and dedicated terminal systems. 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.





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 may be 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 internet portals in some of the
      jurisdictions in which we may operate lotteries for clients in the
      future.





14


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.





**The
      AIM Offering and the**  **Relationship
      between NM-US and NM-PLC.**





As
      previously described, on March 17, 2006, our Irish subsidiary, NM-PLC concluded
      an offering of 4,244,850  ordinary
      shares at a price of 50 pence ($.878) per share from which it received gross
      proceeds of $3,750,338 (based upon the exchange rate on March 17, 2006)(the
“AIM
      Offering”). After deducting costs associated with the AIM Offering of
      $1,617,644, NM-PLC received net proceeds of $2,132,694 (based upon the exchange
      rate on March 17, 2006). Prior to the issuance of ordinary shares in the AIM
      Offering and the issuance of 572,278 ordinary shares issued at the UK Offering
      placing price in exchange for an aggregate of $500,000 of debt owed to Milton
      Dresner and Joseph Dresner, two affiliates of our Company, NM-PLC was a wholly
      owned subsidiary of the NM-US. After giving effect to the issuance of the
      ordinary shares sold in the AIM Offering and the other shares described above,
      the NM-US owned approximately 82.3% of NM-PLC’s outstanding capital stock. (As
      of the date hereof, NM-US owns 81.47% of the outstanding ordinary shares of
      NM-PLC.) Concurrent with the closing of the AIM Offering, all of NM-PLC’s
      ordinary shares were admitted to trading on the AIM operated by the London
      Stock
      Exchange plc (the “Admission Date”). Milton Dresner and Joseph Dresner, the
      principal shareholders and directors of the NM-US and directors of NM-PLC,
      each
      purchased 615,786 ordinary shares in the AIM Offering at the placement price
      or
      approximately $540,916.





Zimmerman
      Adams International Limited (“ZAI”), a securities dealer registered with the
      London Stock Exchange plc, among other things, (i) served as the placement
      agent
      for NM-PLC, (ii) sponsored the ordinary shares for admission to trading on
      the
      AIM, (iii) acted as NM-PLC’s financial broker and advisor in connection with the
      offering and (iv) continues to represent NM-PLC as its nomad [the nominated
      adviser that sponsored NM-PLC’s ordinary shares for quotation on the AIM as
      required by AIM rules] and financial advisor. The details of the placement
      arrangement, the other services provided by ZAI and the fees paid to ZAI were
      previously reported in NM-US’s quarterly report on Form 10-QSB for the three
      months ended January 31, 2006.





In
      November 2005, in anticipation of the AIM Offering, NM-US organized NM-PLC
      and
      exchanged all of the outstanding shares of our then wholly owned Irish
      subsidiary, New Media Lottery Services (International) Limited, formerly known
      as Lottery Network Services Ltd. (“New Media International”), for 20,205,129
      ordinary shares of NM-PLC. As of the date of this report, the directors of
      NM-PLC are: John T. Carson, an officer and director of NM-US, Randolph H.
      Brownell, III, an officer and director of NM-US, Joseph Dresner, a non-executive
      director of NM-US, Milton Dresner, a non-executive director of NM-US; The Rt.
      Hon. Lord Benjamin Lloyd Stormont Mancroft, an independent, non-executive
      director and the non-executive chairman; and Paula Horan, an independent,
      non-executive director.





The
      directors of New Media International are: John T. Carson; Randolph H. Brownell,
      III; Paula Horan; Milton Dresner; and Joseph Dresner.





Mr.
      Brownell has resigned from all positions he holds with the Company and its
      constituent corporation effective upon the filing of this annual
      report.





15


In
      satisfaction of its obligations to restructure the group’s operations so that
      all business would be conducted through NM-PLC and its wholly owned subsidiary,
      New Media International, the group consummated the following transactions,
      effective as of the date the NM-PLC’s ordinary shares were admitted to trading
      on AIM:





·
            The
                Company (A) transferred certain significant assets to New Media
                International, including (i) all of its agreements to operate lotteries
                and receive services in connection with operating lotteries, except
                as
                described below, (ii) all of its furniture and equipment and (iii)
                certain
                promissory notes in the original principal amount of $60,000 issued
                in
                favor of the Company by New Media Serviços de internet Ltda., our
                Brazilian joint venture company, and (B) licensed to New Media
                International the right to use and exploit all intellectual property
                owned
                by it as of said date and (C) NM-PLC assumed all of our obligations
                under
                the assigned agreements.





·
            The
                Company entered into an agreement with NM-PLC which, among other
                things,
                restricts NM-US from (i) competing with the business done by NM-PLC,
                (iii)
                voting on any matter that would constitute a conflict of interest
                between
                NM-US and NM-PLC, (iii) voting to merge or enter a similar transaction
                with any affiliate of NM-US. This agreement also provides that NM-US
                is
                required to refer all business relating to new media based gaming
                to
                NM-PLC and requires that NM-US and certain persons who are affiliates
                of
                NM-US and/or NM-PLC, give two days notice with respect to the sale
                or
                disposition of any shares of NM-PLC which they may then own or acquire
                in
                the future.





·
            NM-US
                transferred all of its employees to New Media International, except
                that
                each of the NM-US’s officers and directors prior to the Admission Date
                were permitted to remain with NM-US in an administrative
                capacity.





·
            New
                Media International executed a promissory note in favor of NM-US
                in the
                amount of $1,500,529.86 representing the amount due for monies loaned
                and
                services rendered by NM-US to New Media International over during
                the
                period October 2005 through March
                2006.





·
            NM-US
                issued an aggregate of 10 million shares of common stock to Milton
                Dresner
                and Joseph Dresner upon the conversion of all debt owed to them by
                the US
                company as of the Admission Date.





Accordingly,
      as of the Admission Date, NM-US’s only asset is the ordinary shares it owns in
      NM-PLC.





NM-PLC
      was incorporated in the Republic of Ireland with company number 410845 on
      November 14, 2005 under the Irish Companies Acts as a company limited by shares.
      NM-PLC operates under the Irish Companies Acts and the regulations made
      thereunder. The registered office of the Company is at 51/52 Fitzwilliam Square,
      Dublin 2, Ireland. The principal places of business of NM-PLC is at 22/23 Upper
      Pembroke Street - Suite 402, Dublin 2, Ireland.





As
      of the
      date hereof, NM-PLC is authorized to issue 150,000,000 ordinary shares with
      a
      total capitalization of £1,000,000, of which 24,800,000 are outstanding, of
      which NM-US owns 20,205,129 shares (81.47%). NM-US has agreed with NM-PLC that
      it will not, except under certain limited circumstances stipulated in the AIM
      Rules, dispose of any such shares other than on an orderly market
      basis.





NM-PLC
      is
      governed by among other laws, rules and regulations, the Companies Acts
      1963-2005 (as amended) of the Republic of Ireland, the Companies (Amendment)
      Act
      1983 of the Republic of Ireland and by the rules published by London Stock
      Exchange governing admission to and the operation of AIM. NM-PLC intends to
      comply so far as is practicable with Combined Code on Corporate Governance
      (the
“Combined Code”) published by the UK’s Financial Reporting Council from time to
      time to the extent prescribed by Quoted Companies Alliance corporate governance
      guidelines for AIM companies. Accordingly, NM-PLC has established an audit
      committee and a remuneration committee. NM-PLC has not established a nomination
      committee.





16


The
      audit
      committee consists of Lord Mancroft and Ms. Horan and is to meet at least twice
      each year and will be responsible for ensuring that the financial performance
      of
      NM-PLC is properly monitored and reported on. It meets with the external
      auditors and reviews findings of the audit with them. It meets with the auditors
      once a year without any members of NM-PLC’s management being present. The audit
      committee has appointed Anne-Marie Reddy as an advisor to the committee. Ms.
      Reddy’s firm, Grant-Reddy, prepares the NM-PLC financial statements for AIM
      filing and is intensely aware of the financial aspects of the company. Her
      guidance is expected to be very beneficial.





The
      remuneration committee consists of Lord Mancroft and Ms. Horan and reviews
      the
      performance of the NM-PLC’s chairman, executive directors, company secretary and
      such other members of the executive management as it is designated to consider,
      determine the framework for their remuneration and, within the terms of the
      agreed policy and in consultation with the Chairman as appropriate, determine
      the total individual remuneration packages of each executive director including
      bonuses, incentive payments and share options or other share awards. It also,
      subject to NM-PLC’s existing contractual obligations, reviews the design of all
      share incentive plans for approval by the board and shareholders of NM-PLC
      and
      for each such plan, determines whether awards will be made and, if so, the
      overall amount of such awards, the individual awards to executive directors
      and
      the performance targets to be used. No director will be involved in decisions
      concerning his own remuneration.





The
      Directors of NM-PLC intend to comply with all corporate governance regulations
      that will apply to it under Irish law.





Holders
      of ordinary shares in NM-PLC have rights similar to holders of common stock
      in
      US corporations, including, for example, the right to one vote per share and
      the
      right to receive pro rata dividends if and when declares by the directors.
      Holders of ordinary shares in NM-PLC have preemptive rights, i.e., the right
      of
      current shareholders to
      maintain their fractional ownership of a company by buying a proportional number
      of shares of any
      future issue of common
      stock .
      This
      will limit the flexibility of NM-PLC to issue shares for cash because the
      approval of the shareholders at a general meeting will be required.





**Employees.**





As
      of
      August 14, 2007, our group had 16 full-time employees, including three persons
      in the US corporate office, twelve persons in Canada who engage in product
      development and one marketing specialist in Ireland. All of the employees are
      compensated by New Media International. The officers and directors of NM-US
      perform administrative functions necessary to maintain the company’s obligations
      in the United States, including its obligations to file reports under the
      Securities Exchange Act of 1934, as amended and as required under Delaware
      law.
      Our employees are not represented by any labor union. We believe that our
      relationship with our employees is satisfactory.





**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.





17


**Loans
      in the amount of $3.25 million become due over the next seven months and we
      do
      not expect to have the funds to repay these obligations on their respective
      due
      dates. To the extent we are unable to negotiate an extension of the payment
      date
      or otherwise refinance the amounts due, we will be in default on our obligations
      under the instruments governing the loans.**





Over
      the
      last eighteen months, we have borrowed an aggregate of $3.25 from Comerica
      Bank
      in three tranches. The promissory note evidencing the first loan in the
      principal amount of $1.5 million becomes due on October 7, 2007, the promissory
      note evidencing the second loan in the principal amount of $600,000 is due
      on
      December 5, 2007 and the promissory note evidencing a line of credit that
      permits us to borrow the principal amount up to $1.9 million, of which $1.15
      million is outstanding as of the date hereof, is due on February 20, 2008.
      Accrued interest for the last month (or portion thereof prior to the payment
      date) will also fall due on the maturity date. The entire amount payable under
      these notes has been jointly and severally guaranteed by Joseph Dresner and
      Milton Dresner, members of our board of directors and the principal stockholders
      of the Company. As of the date hereof, we do not have the funds to repay the
      amounts due under the promissory notes and we do not expect to have the cash
      required to satisfy these obligations on the dates they become due. We will
      seek
      to negotiate an extension of the maturity dates of the notes or otherwise
      refinance the amounts due thereunder. If we cannot pay these notes as they
      become due or we are not successful in obtaining an extension of the notes
      due
      date or otherwise refinancing them, and collection proceedings are initiated
      against us, we may have to seek protection under federal bankruptcy laws and
      curtail or discontinue operations, in which case you could lose the entire
      amount of your investment in the Company.





**We
      are a young company with a limited operating history with significant losses
      and
      have generated only limited revenues from operations.**





To
      date,
      our operations have consisted primarily of conducting an analysis of our
      industry, development of proprietary lottery systems 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 only limited
      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, 2007, we incurred net losses of $3,208,755.





We
      cannot
      assure you that we will be able to execute our business model on an extensive
      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 substantial additional financing both to sustain our current
      operations and to take advantage of business opportunities in the future.
      Financing may not be available to us on acceptable terms, if at all. If we
      are
      unable to obtain financing as needed, our business, financial condition and
      reputation could be negatively impacted.**




Implementing
      and developing new media based lotteries is capital intensive. We require funds
      both to develop the infrastructure of new opportunities and to implement the
      marketing programs required to build the player bases from which we generate
      revenues. To date, we have funded our operations through loans made or
      guaranteed by affiliates and the sale of equity in our Irish subsidiary. During
      the last fiscal year we began generating revenues from our Irish lottery client
      but such revenues currently are insufficient to sustain or grow our operations.
      Our cash position is depleted and we do not have any funds available to us
      under
      lines of credit. We cannot be certain that our current and near-term operations
      will yield sufficient revenues to sustain our operations or permit us to pursue
      new projects or that our past sources of financing will be available to us
      in
      the future or, that if such financing is available, that it will be on
      acceptable terms.





18


Generally,
      the ability to obtain or 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 or may be available only on unfavorable terms. If the Company is
      unable to obtain or raise additional funds when needed, the Company may have
      to
      curtail operations and may lose valuable business opportunities which could
      harm
      our reputation and negatively impact our financial condition and results of
      operations.





**All
      future financing is required to come through NM-PLC, the Articles of Association
      of which provide for preemptive rights to existing shareholders, which
      requirement may constrain or delay its ability to obtain equity financing
      through the sale of securities. If we are unable to obtain financing when
      needed, our business and financial condition could be negatively
      impacted.**





In
      accordance with its agreement with NM-PLC, all of the Company’s gaming
      operations are conducted through NM-PLC. Accordingly, any financing to develop
      our gaming operations will be through NM-PLC. The Articles of Association of
      NM-PLC provide that its existing shareholders have preemptive rights which
      entitle them to buy a proportional number of shares of any
      future issue of common
      stock .
      A
      waiver of preemptive rights may be made only at a general meeting of
      shareholders. The additional time required to obtain a waiver of preemptive
      rights or make a rights offering may result in our losing a business
      opportunity.





**To
      the extent NM-PLC sells additional securities to raise capital, NM-US’s
      ownership position in NM-PLC will be diluted.**





Our
      sole
      asset is our ownership of ordinary shares of NM-PLC. As of the date hereof,
      NM-US owns 81.47% of the outstanding shares of capital stock of NM-PLC. To
      the
      extent that NM-PLC issues stock to raise funds for operations, our ownership
      in
      that company will be diluted, which could negatively impact our financial
      statements if financing is not arranged on favorable terms.





**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, change existing laws or take others action
      adverse to our business, 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 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.





19


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 renewed 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.





20


**We
      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 exposure arises 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 are exposed to currency exchange
      rate fluctuations because all of our revenues are 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.





21


**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.





**None
      of our intellectual property is protected by patents. To the extent that others
      are able to obtain access to our proprietary information, our business may
      be
      materially harmed.**





We
      have
      not received 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.





22


**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.**





While
      our
      stock has been admitted to quotation on the Over-the-Counter Bulletin Board,
      there has been no trading to date. 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.





**The
      Company has a potential income tax liability related to positions taken on
      the
      2005 tax return for which it has not set aside a reserve and may be unable
      to
      pay.**





In
      connection with the reorganization of the Company prior to the AIM Offering,
      NM-US transferred all of the stock it owned in New Media International (our
      indirect operating subsidiary) to NM-PLC in consideration of the issuance of
      stock of NM-PLC, and licensed all of its technology and other intellectual
      property to New Media International, both of which were taxable transactions
      under the Internal Revenue Code of 1986, as amended. In filing its federal
      tax
      return for 2005, management ascribed what it believed to be reasonable values
      to
      such assets, but several tax positions taken on such tax return could be subject
      to challenge by the Internal Revenue Service (IRS). If the IRS ultimately
      determines that NM-US should have ascribed a higher value to these assets than
      it did on the 2005 tax return, it may incur an additional tax thereon and
      penalties and interest on the unpaid amount. Moreover, the IRS could challenge
      the method used to determine the tax basis associated with the New Media
      International stock transferred to NM-PLC. The amount of any additional taxation
      (and penalties and interest thereon) presently can not be determined. The
      Company has not set aside a reserve to pay any additional tax which the IRS
      might impose based upon the value it ascribes to the assets transferred, but
      if
      such amount is significant, the Company may not be able to make such payment.
      Accordingly, the Company could be subject to litigation by the IRS and
      assessment. To the extent these assessments remained unpaid the Company could
      expect the IRS to levy all Company assets and pursue collection upon these
      assets.








**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;





·
            our
                ability to take advantage of new business opportunities as they
                arise;





·
            general
                economic and business conditions, both nationally and in our
                markets;





·
            the
                effect of government regulation on our industry in each country in
                which
                we conduct business;




23




·
            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 are leasing this space on a month-to-month basis at a monthly rent
      of
      $1,392. We believe that suitable space is available at competitive prices should
      our company vacate this space.





We
      also
      lease approximately 2,964 square feet of office space at Hillsboro Tower, 1800
      -
      4th Street S.W., Calgary, Alberta, Canada. We lease this space through December
      31, 2007 at a monthly rent of $7,560 (Canadian) and we will seek to renegotiate
      a new lease. Due to market conditions in Calgary, we expect an increase in
      the
      monthly rent. We believe that suitable space is available should our company
      vacate this space. Our software and game developers operate from this
      facility.




NM-PLC
      maintains an office at 22/23 Upper Pembroke Street - Suite 402, Dublin 2,
      Ireland, where it leases space from John R. McGuire at monthly rent of 1,028
      Euros.





NM-PLC
      and New Media International maintain their registered offices in Ireland at
      51/52 Fitzwilliam Square, Dublin 2, Ireland.





We
      have
      not determined our future requirements for office space but expect that adequate
      space will be available on commercially reasonable 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.**





No
      matter
      was submitted to a vote of security holders during the 2007 fiscal
      year.








24


**PART
      II**





**ITEM
      5.**  **MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**





**Market
      Information.**





The
      Company’s common stock was admitted for quotation on the OTC Bulletin Board in
      July 2005 under the symbol NWMD but has not traded and, consequently, there
      is
      no established trading market for our common stock.





**Holders.**





At
      August
      14, 2007, 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.





**Securities
      Authorized for Issuance under Equity Compensation Plans.**





The
      following table sets forth information as of April 30, 2007, 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.




**Plan
                Category**
            **(a)**
              **Number
                of**
              **Securities
                to be**
              **Issued
                Upon**
              **Exercise
                of**
              **Outstanding**
              **Options**
            **(b)**
              **Weighted-**
              **Average**
              **Exercise
                Price of**
              **Outstanding**
              **Options**
            **(c)**
              **Number
                of**
              **Securities**
              **Remaining**
              **Available
                for**
              **Future
                Issuance**
              **Under
                Equity**
              **Compensation**
              **Plans
                (excluding**
              **securities
                reflected**
              **in
                column (a))**Equity
                compensation plans
              approved
                by security holders
            975,000
            $0.31
            1,025,000Equity
                compensation plans
              not
                approved by security holders
            1,900,000
            $0.35
            -Total
            2,875,000
            $0.34
            1,025,000





25


**Repurchases
      of Equity Securities.**





None.





**Recent
      Sales of Unregistered Securities.**





During
      the year ended April 30, 2007, we did not issue any shares of capital
      stock.





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





This
      Management’s Discussion or Plan of Operation section contains a number of
      forward-looking statements, all of which are based on current expectations.
      Actual results may differ materially from the anticipated results discussed
      herein. Our financial performance is highly dependent on our ability to continue
      to generate income and cash flow from our clients’ electronic lottery and bingo
      operations and our ability to obtain capital as necessary to expand existing
      operations and implement new projects. We cannot assure you that we will achieve
      profitability, that our clients’ operations will generate the revenues we expect
      or that we will have the capital to complete any or all of our existing or
      future projects.





**Overview
      of Operating Results.**





During
      the year ended April 30, 2007, we recorded revenues of $571,995 on net losses
      of
      approximately $3,208,755. For the three months ended April 30, 2007, we recorded
      revenues in excess of $260,000 on net losses of approximately $907,000. We
      continue to intensify marketing efforts in connection with our Irish client’s
      internet bingo operations which have yielded positive results that have exceeded
      our expectations. As a result of our marketing efforts our Bingo site continues
      to grow. We continue to develop the electronic lottery and bingo platforms
      that
      we can easily migrate among our clients. Though our cash position is
      diminishing, we expect that (i) revenues generated from our client’s bingo
      website in Ireland will continue to increase, (ii) we will begin to recognize
      revenues from electronic lottery kiosks to be distributed throughout Ireland
      starting in September 2007 and (iii) we will begin to recognize revenues upon
      the launch (October 2007) of our mobile lottery services in Venezuela. We
      anticipate that revenues generated from these activities will replenish
      available cash and provide us with the financial resources to grow our business.
      In addition, we are actively seeking financing and expect that our existing
      majority shareholders can provide funding required to meet any shortfalls.





**Background.**





New
      Media
      Lottery Services, Inc. (the “NM-US”), through its direct and indirect
      subsidiaries, New Media Lottery Services plc (“NM-PLC”) and New Media Lottery
      (International) Services Ltd. (“NMLS-LTD” and collectively, with NM-US and
      NM-PLC, “we”, “us” the “Company” or like terms), designs, builds, implements,
      manages, hosts and supports web based and wireless device based lottery programs
      operated by governments and charitable organizations outside of the United
      States. We commenced providing services to clients in August 2003 and began
      generating revenues from the long-term agreements with our clients during the
      last fiscal year. Currently, we generate revenues in the form of commissions
      based solely from net sales of lottery tickets by our client’s lotteries. For
      purposes of our agreements with clients, “net sales” is defined as gross lottery
      ticket sales minus prizes discounts, refunds, and adjustments. We expect to
      begin generating revenues derived from the use of the lottery games we developed
      for Inspired Gaming Group Network which are played on its server based
      terminals.





26


We
      offer
      an integrated range of products and services to develop, build and host lottery
      programs for state-operated lotteries and other government licensees, such
      as
      charitable lottery organizations (CLO’s). Our lottery infrastructure includes
      (i) proprietary software platforms that support internet websites, server based
      kiosks and mobile phone lottery operations and (ii) innovative game concepts.
      We
      have partnered with other organizations which provide us access to the mobile
      phone carriers and banking applications required for our new media gaming
      options. Our gaming platform and business model can be replicated and
      implemented on varying scales in discrete geographical areas in the future.
      Our
      ability to re-brand our product for other lottery organizations reduces
      implementation time and the operational and capital costs associated with
      establishing each client’s internet/wireless presence.





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.





Our
      market primarily comprises small and mid-sized state-operated and charity
      operated lotteries. The lottery programs we develop and implement target
      existing lottery players plus the young-adult generation of potential lottery
      players who may 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.





To
      date,
      our most significant achievements have consisted of:




·
            obtaining
                long-term contracts with non-U.S. based licensed lottery organizations
                to
                operate specific new media game
                programs;





·
            developing
                proprietary software platforms that support internet website delivered,
                server based kiosks and mobile phone lottery
                operations;





·
            developing
                a library of digital lottery game designs;





·
            developing
                and testing a lottery system for delivery of lottery games to a server
                based game terminal network;





·
            implementing
                the technical, operational, design and marketing facets of our business
                in
                preparation for multiple, full-scale roll-out of
                programs;





·
            completing
                a full launch of an internet based bingo site for our Irish client
                Rehab
                Lotteries; and





·
            consummating
                an offering of the securities by our Irish subsidiary, New Media
                Lottery
                Services plc (“NM-PLC”), in March
                2006.





The
      Company currently generates revenues solely from gross sales of lottery tickets
      by its client’s lotteries. From said revenues, in accordance with its contracts
      with its clients, all discounts, refunds, and adjustments are settled inclusive
      in the commission. The balance is distributed between our client and us in
      accordance with the provisions of our contracts with our clients, which may
      vary
      from client to client, and our net revenues may be deemed to be a ‘commission.’
Our lottery service contracts are typically five years or more in duration
      for
      the base contract term with five-year extension options resulting in potential
      total contract lives in excess of ten years. We also anticipate deriving
      revenues from the delivery of lottery products and content to a variety of
      internet-based kiosks.





27


During
      the latter part of 2007, we expect to begin recognizing revenues from the
      systems and games we have developed for use on Inspired’s server based
      terminals. We are advised that these server based terminals will be launched
      in
      Ireland on behalf of Rehab Ireland during the fall of 2007 and in the UK on
      behalf of Rehab UK during the spring or summer of 2008.





All
      of
      our clients are outside the United States. In addition, substantially all of
      our
      assets, primarily consisting of equipment we use to operate online lottery
      systems for our customers, are held outside of the United States. Accordingly,
      we will be subject to all of the risks of international operations, including
      increased governmental regulation of the online lottery industry in the markets
      where we operate; exchange controls or other currency restrictions; and
      political instability.





Our
      business is highly regulated, the competition to secure new contracts is often
      intense and we are subject to all of the risks of doing business in foreign
      countries, including currency exchange rate risks.





**Notable
      fiscal 2007 Activities.**





On
      October 4, 2006, Cell Phone Systems SA (“CPS”), a Venezuelan company of which we
      own 45% of the outstanding capital stock, entered into an agreement with the
      State of Aragua, Venezuela to develop, implement and operate mobile lottery
      games, internet gaming and sports betting. The rights granted under this
      agreement permit CPS to offer games in Venezuela. Under the agreement,
      which extends for a period of ten years, CPS earns a fee equal to approximately
      15-20% of gross sales which after prizes and lottery fees will be distributed
      on
      equal basis, after costs and expenses incurred by CPS, to us and our partner
      in
      CPS, Smart Media Technologies. We will provide, implement and operate all
      aspects of the gaming operations of the lottery and Smart Media Technologies
      will provide mobile phone and banking applications for the operations. In
      addition, we anticipate that we will earn additional revenues by providing
      retailer services to other state lottery programs.





In
      October 2006, we acquired an exclusive license from Las Vegas Gaming, Inc.
      (“LVGI”) to utilize its numbers generating engine for lottery applications. The
      exclusive territories covered by the license include Europe, Eastern Europe
      and
      South America and both companies will work closely together in pursuit of
      additional markets. We are also analyzing various other applications of LVGI’s
      gaming software platform for deployment in South America, Europe and Asia.
      By
      acquiring the right to utilize this software, we are able to offer an end-to-end
      solution for platforms such as mobile gaming, video lottery machines and
      web-based applications and, when bundled with our product offerings, provides
      a
      complete turnkey lottery system. The LVGI system has been used for more than
      20
      years in Nevada and the intellectual property is protected by several gaming
      licenses and patents. We expect to offer an integrated system combining our
      platform and the LVGI software beginning in the first calendar quarter of 2007.
      The combined systems can be migrated among our various clients. The LVGI license
      extends for an initial three year term and is subject to three yearly
      incremental extensions thereafter. We will pay commissions to LVGI on a monthly
      basis calculated on various net win programs.





**Plan
      of Operation.**





Our
      business can be divided into three discrete components, as follows:





o
            identifying
                and contracting with new clients;


o
            developing,
                implementing and hosting lotteries;
                and


o
            gaming
                software development for our clients’ lotteries and third
                parties.





28


During
      fiscal 2008, we expect to continue to advance each of the elements of our
      business in varying degrees. Given our limited financial resources, as more
      fully discussed in this section under the sub-heading “Liquidity and Capital
      Resources,” we will focus our efforts on projects that present the greatest
      opportunity to generate revenues in the near-term. We believe that both
      developing our existing clients’ lottery programs and gaming software
      development represent the most effective and efficient use of our capital.
      We
      intend to re-invest profits generated from these operations to grow our business
      and provide funds to expand existing clients’ programs and develop programs for
      new clients.





By
      completing the implementation of lottery systems for our Irish and English
      clients and developing an affiliate tracking system which allows us both to
      offer incentives to advertisers for directing paying customers to our site
      and
      to build player loyalty, we stand prepared to implement full-scale marketing
      campaigns from which we expect to build meaningful player bases and generate
      material revenues. The electronic internet bingo operations of our Irish client,
      Rehab Lotteries, represent our most mature client with the greatest potential
      to
      generate meaningful revenues in the near-term. Accordingly, we expect to devote
      significant financial resources to the continued development of this program
      during the current year using both internet advertising programs and marketing
      programs that take advantage of that entity’s charitable affiliation by
      partnering with recognizable local brands. During the last few fiscal quarters,
      we have marketed Rehab’s internet bingo operations on an expanded basis and
      management believes that the results have been promising as both the player
      base
      and the amount wagered per player per session has increased beyond
      expectations.





During
      the second fiscal quarter of 2007, our clients Rehab Lotteries and Inspired
      Gaming Group completed beta testing of the gaming software we have been
      developing for the kiosk lottery terminals that Inspired will operate on behalf
      of Rehab. In November 2006, Inspired began beta testing the terminals at field
      locations in Ireland. We are apprised by Inspired that beta testing has been
      completed and that it expects to launch the terminals on a commercial basis
      in
      the fall of 2007. Management expects that Inspired will commence offering our
      games on up to 10,000 UK based terminals early in 2008 after the roll out of
      the
      Irish Program. We will receive a portion of the net revenues generated by the
      kiosks.





Our
      near-term business priorities continue to be concentrated on the marketing
      and
      promotion of the Rehab Lottery’s bingo site to both increase the player base and
      the amount wagered per player, to support our server based terminal project
      and
      to commence the development of a lottery in Venezuela. In addition to
      distributing our own games in Venezuela we have been approached by other
      lotteries to act as a reseller of their games on mobile phones. In our
      estimation, Venezuela represents a vibrant lottery market which has strong
      potential for new products and new distribution channels for existing lottery
      products. Venezuela has a high penetration of mobile phones and we expect to
      be
      the first to launch mobile lottery products into the market.





We
      expect
      to proceed with the development of gaming opportunities in Venezuela to the
      extent our current cash allows and based on additional funding that can be
      obtained. We believe that our gaming delivery platforms are sufficiently
      developed to permit us to migrate the operations we have established elsewhere
      to our Venezuelan operations. At this juncture, we believe that our primary
      impediment is available cash. We believe that with sufficient capital, we could
      complete the development of a gaming system in Venezuela in two to three months
      and commence marketing this system almost immediately.





We
      will
      continue our efforts to procure new lottery contracts. While we expect that
      the
      cost to develop and implement lottery systems for new clients will decrease
      for
      each new client during the next several years as we become more efficient in
      our
      ability to migrate our existing lottery programs to new clients, marketing
      a
      lottery is highly capital intensive. Currently, we do not possess the financial
      resources to devote to the marketing and advertising phases of any new programs
      in which we may become involved that are required for the program to achieve
      profitability. Accordingly, we expect to enter into contracts only with entities
      for which we believe we could obtain financing to support such
      operations.





29


We
      continue to be optimistic regarding our opportunity to fill a market niche
      that
      is not fully serviced by the large, multinational lottery service corporations
      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 and new competitors enter
      the
      market, we consider this segment of the market to be supported by only a few
      internationally 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 personnel have 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
      among
      the first companies, 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.





**Analysis
      of Financial Statements.**





As
      reported in our financial statements to this Annual Report on Form 10-KSB for
      the year ended April 30, 2007, the Company reported a $3,208,755 net loss after
      minority interest on $571,995 in net revenues. The Company used $2,046,626
      in
      cash, leaving $196,257 in cash at April 30, 2007. For fiscal year 2007,
      operations used $3,722,825 in cash.





The
      Company’s cash and accounts receivable equal $420,688 in available resources to
      fund $476,312 in accounts payable and accrued expenses. While Rehab Bingo should
      continue to generate cash to partially fund operations, expenses will exceed
      revenues for the foreseeable future. Additional sources of cash will be
      necessary in fiscal year 2008 to fund the cash shortfall. The Company must
      also
      refinance their $3,250,000 third party debt in fiscal year 2008. As of April
      30,
      2007, current liabilities exceeded current assets by $3,692,803.





Net
      revenues increased by $520,615 to $571,995, or about 1,000% over the last fiscal
      year. Revenues have now become a significant item in the financial statements
      and will contribute to funding the Company’s operating expense
      deficit.





General
      and administrative expense increased by $630,000 to approximately $1.4 million,
      representing an 81% increase from the last fiscal year. While G&A expense
      increased in several areas, the most significant increases occurred in the
      following:





·
            AIM
                marketing expenses increased by 2,656% to $155,000 during the last
                fiscal
                year representing expenses necessarily incurred in connection with
                NM-PLC’s ordinary shares being listed on the AIM market including brokers
                fees, advisor fees, and the London Stock Exchange fees. These expenses
                did
                not materially exist in the prior year since the AIM Offering occurred
                on
                March 17, 2006.





·
            $57,119
                in marketing and media expense represents a new expenditure and relates
                to
                fees incurred in connection with corporate public relations as an
                adjunct
                of NM-PLC’s AIM listing.





·
            Payroll
                increased by $242,042 to $605,566, or 67%. A significant portion
                of the
                increase can be attributed to the engagement of a marketing director
                to
                promote and manage the Irish Rehab Bingo operation. Moreover, in
                fiscal
                year 2006, several people who were paid as consultants, have now
                been
                retained as employees in 2007.




30




·
            Payroll
                tax expense increased by $58,938 to approximately $93,000, or 173%,
                which
                is a direct result of the Company’s higher payroll; additionally, hiring
                Irish employees requires significantly higher mandatory payroll tax
                contribution.





For
      2007
      professional fees increased $424,879 to $928,211, or 84%. Approximately $123,000
      in new fees was paid to Irish Directors required for the AIM market.
      Accounting fees increased approximately $232,000. These accounting fees were
      substantially related to the Irish accountants both for private services and
      for
      the public audit. The Company anticipates that this level of accounting expense
      will not recur. Consulting fees increased approximately $80,000. Most of this
      increase is the Bingo operations personnel that are required to operate the
      Bingo system.





Website
      expense increased by $499,100 to $772,702, or 182%. Rehab Bingo advertising
      and
      marketing expenses increased by approximately $335,000 to $470,790, or 346%.
      This increase was justified for successful marketing of Rehab Bingo and has
      returned significant revenue to us. The bingo software supplier’s contract
      requires a royalty based upon site sales and $134,000 of the website expense
      increase during fiscal 2007 was paid as additional royalties reflecting
      additional lottery sales.





**Liquidity
      and Capital Resources.**





Implementing
      and developing new media based lotteries is capital intensive. We require funds
      both to develop the infrastructure of new opportunities and to implement the
      marketing programs required to build the player bases from which we generate
      revenues. To date, we have funded our operations through loans made or
      guaranteed by affiliates and the sale of equity in our Irish subsidiary and,
      during the last fiscal year, from revenues generated from
      operations.




At
      April 30, 2007, our available cash, receivables and liquid assets totaled
      approximately $439,000. We had a $750,000 borrowing capacity under a line of
      credit. We had outstanding loans of $3.25 million to unrelated parties and
      outstanding loans of $333,177 (not including accrued interest) to related
      parties. During fiscal 2007, we generated $571,995 net revenues from operations
      with net losses of $3,208,755.





We
      expect
      our principal sources of liquidity to be existing cash on hand, funds available
      under our line of credit and revenues generated from operations. We anticipate
      generating more meaningful revenues from operations as fiscal 2008 progresses.
      We have not been able to take full advantage of our revenue generating potential
      because we have not had the cash to market our existing client’s operations as
      comprehensively as we would like nor to develop the new lottery projects for
      which we have contracts. We had anticipated that we would be generating revenues
      from three additional sources during fiscal 2007, including revenues derived
      from server based terminals, and from lotteries to be located in Brazil and
      Venezuela, for which we have signed contracts. We have expended considerable
      sums in furtherance of these projects but the ventures have been delayed as
      described below and we have not realized any return on our investments in these
      businesses to date. Inspired has delayed a full-scale launch of its internet
      based terminals to deal with changing legislation in the UK and now advises
      us
      that it expects to launch its server based terminals after September 2007,
      when
      new gaming regulations take effect that permit the offering of lottery products
      on server based vending devices. We can not be certain this will come to
      fruition. As to our clients in Brazil, we are encountering political obstacles
      that have prevented us from taking further action, as described elsewhere
      herein. We had planned to launch the Venezuela project by May 2007; however,
      we
      became aware of increased government oversight of the industry and revisions
      to
      the fee schedule to operate lotteries and determined to delay the project launch
      until these issues were made known to the public. We have analyzed the specifics
      of the new regulations and believe the potential lottery opportunity has
      improved. Accordingly, we expect to launch our project in October 2007. We
      believe that had these projects become operational within the time frame we
      had
      anticipated, that we would be generating materially more revenues to support
      our
      business. Any failure to realize a return on our investments in these operations
      would be damaging to our financial condition and reputation.





31


In
      addition to requiring cash to develop and market our client’s lotteries, amounts
      due under outstanding promissory notes become due during the second, third
      and
      fourth quarters of fiscal 2008, as follows:





Principal
                Amount Due
            Due
                Date$1.5
                million
            October
                7, 2007$600,000
            December
                5, 2007$1.15
                million
            February
                20, 2008





These
      promissory notes are all guaranteed by our principal shareholders. While we
      will
      seek to extend or refinance these notes, we can offer no assurance of success.
      If we are unable to negotiate extensions of the notes or refinance into new
      notes, we may have to take radical action which could negatively impact the
      Company.





We
      do not
      expect that our principal existing sources of liquidity will be adequate to
      support our existing operations or fully develop the new projects we have
      undertaken. We will require significant additional cash both to continue
      marketing our existing client’s lottery and to develop and implement lotteries
      for new clients. Without sufficient funding, we are hesitant to accept new
      clients. As of the date hereof, we have not identified any sources to satisfy
      our capital requirements. Management hopes that once we have proven our business
      model, we will be able to secure project financing for each new lottery client.
      We will seek to obtain such financing from local sources within the country
      where our clients are located. Alternatively, we will seek to access the capital
      markets in Europe and the United States, though we can not be certain that
      the
      capital we require will be available to us from any source or that if it is
      available that it will be on favorable terms. We will be selective as to
      contracts we enter into in the hopes that the returns we can generate from
      new
      contracts will be appealing to any new investors. Management is confident that
      its major shareholders will continue to support the Company’s cash requirements
      until additional investment is sought. With the success of the Irish lottery
      site and the anticipated roll out of Rehab’s server based digital vending
      devices, management expects that the Company will operate at a break even level
      and potentially realize a profit within the coming fiscal year. The availability
      and cost of capital in the future may inhibit our ability to grow our
      Company.





If
      we are
      unable to obtain financing to sustain our current operations or develop new
      opportunities, we anticipate that we will scale back our existing operations
      and
      postpone developing new opportunities.





We
      anticipate that the additional funding from outside sources we will require
      to
      implement lotteries for new clients will decrease in the next several periods
      for several reasons. First, we expect to generate revenues from existing
      operations sufficient to allow us to implement new client lotteries from
      internal funds. Second, as we conclude full-scale marketing launches of our
      clients’ lotteries and player bases grow, we expect to realize a critical mass
      and economies of scale as we gain more practical experience implementing and
      operating lotteries which should reduce the cost to implement the infrastructure
      of such lotteries. Once the shakeout period ends, in which we learn what
      marketing techniques are effective and games players find enticing, we will
      be
      able to use our resources more efficiently and effectively. For example, we
      will
      be able to migrate the fundamental elements of the lottery infrastructure,
      as
      described above, from one lottery to another which will reduce the set-up time
      and organizational and capital costs, and also reduce the cost of acquiring
      customers and maximizing gross revenues generated per customer, thereby lowering
      our capital requirements to start-up and maintain new lottery clients.
      Theoretically, if our business model is accepted, we can concentrate on
      marketing to new media device users who we believe we can reach inexpensively
      because (i) we will require a relatively small organizational infrastructure,
      even when fully operational, (ii) we will have a significant existing library
      of
      games to offer and (iii) the manner in which our games are delivered and played
      (cell phones, PDA’s, internet kiosks and other wireless devices) is inherently
      inexpensive and the costs are decreasing each year.





32


**Financing
      Activities During Fiscal 2007.**





During
      fiscal 2007, we borrowed an aggregate of $1.75 million against credit lines
      of
      $2.5 million, of which $750,000 remains available to draw down. The promissory
      notes that evidence these loans have terms similar to the promissory notes
      we
      executed in favor of Comerica Bank during October and December 2005. The $1.9
      million note (under which we have drawn $1.15 million to date) becomes due
      on
      February 20, 2008 and the $600,000 note, which is fully drawn, becomes due
      on
      December 5, 2007. All of the Company’s repayment and other obligations under
      this note are guaranteed by each Milton Dresner and Joseph Dresner, directors
      and principal stockholders of the Company.





**Contractual
      Obligations.**





The
      following table presents our contractual obligations and commercial commitments
      as of April 30, 2007:





Payments
                Due By Period
              (all
                amounts in $)Contractual
              Cash
                Obligations
            Total
            Less
                than
              One
                Year
            1-3
              Years
            3-5
              Years
            After
                5
              YearsCapital
                LeasesOperating
                Leases
            125,889
            125,889Loans
                Payable
            3,250,000
            3,250,000Total
                Contractual Cash Obligations
            3,375,889
            3,375,889








**Recent
      Accounting Developments.**





None





**Critical
      Accounting Policies.**





None





33


**Foreign
      Currency Translation.**





The
      Company’s foreign currency translation policy is that for all significant
      non-U.S. operations, the functional currency is the local currency. Assets
      and
      liabilities of those operations are translated into U.S. dollars using year-end
      or historical exchange rates; income and expenses are translated using the
      average exchange rates for the reporting period. Translation adjustments are
      reported in accumulated other comprehensive loss, a separate component of
      stockholders' deficit.





**Revenue
      Recognition.**





As
      of the
      date hereof, the Company generates revenues solely from gross sales of lottery
      tickets by its client’s lotteries. From said revenues, in accordance with its
      contracts with its clients, all discounts, refunds, and adjustments are settled
      inclusive in the commission. The balance is distributed between our client
      and
      us in accordance with the provisions of our contracts with our clients, which
      may vary from client to client, and our net revenues may be deemed to be a
      ‘commission’.





Additionally,
      the Company will, in certain contracts, advance marketing costs and prize
      seeding funds to a lottery. To the extent the Company reasonably anticipates
      repayment, these advanced funds are recorded as an asset. Where repayment is
      not
      ascertainable, these advanced funds are expensed. For lotteries where marketing
      funds and prize seeding are expensed, any repayment of those funds will be
      recognized as revenue upon receipt.




**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 55 following
      this report's signature page.





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





We
      did
      not have any disagreements with accountants relating to financial disclosures
      for the years ended April 30, 2007 and 2006.




**ITEM
      8A. CONTROLS AND PROCEDURES**





**Effectiveness
      of Disclosure**





Our
      management, with the participation of our chief executive officer and chief
      financial officer, evaluated the effectiveness of our disclosure controls and
      procedures as of April 30, 2007, as defined in Rules 13a-15(e) and
      15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange
      Act. Our management recognizes that any controls and procedures, no matter
      how
      well designed and operated, can provide only reasonable assurance of achieving
      their objectives and management necessarily applies its judgment in evaluating
      the cost-benefit relationship of possible controls and procedures. Based on
      the
      evaluation of our disclosure controls and procedures as of April 30, 2007,
      our
      chief executive officer and chief financial officer concluded that, as of such
      date, our disclosure controls and procedures were effective to assure that
      information required to be declared by us in reports that we file or submit
      under the Exchange Act is (1) recorded, processed, summarized, and reported
      within the periods specified in the SEC’s rules and forms and (2) accumulated
      and communicated to our management, including our chief executive officer and
      chief financial officer, as appropriate, to allow timely decisions regarding
      required disclosure.





34


**Changes
      in Internal Control over Financial Reporting**




No
      change
      in our internal control over financial reporting (as defined in
      Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the
      fiscal year ended April 30, 2007 that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial reporting.





**ITEM
      8B. OTHER INFORMATION**





Effective
      upon the filing of this Annual Report on Form 10-KSB, Randolph Brownell, III,
      a
      member of the Board of Directors and the chief financial officer of NM-US,
      resigned from each such position to pursue other business opportunities. Mr.
      Brownell also resigned from each position he held with our subsidiaries. There
      were no disagreements between the Company and Mr. Brownell relating to any
      of
      our operations, policies or practices.








**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
      table
      below sets forth, as of August 14, 2007, (i) the officers and directors of
      the
      Company and (ii) the managing directors of NM-PLC, our 81.47% Irish subsidiary.





Name
            Age
            Title
            Period
                during
              which
                person has
              served
                as a director
              of
                NM-US
            Association
              with
                SubsidiariesJohn
                Carson
            52
            President,
                Chief Executive
              Officer
                and Director
            2004
            Chief
                Executive Officer,
              Director
                of NM-PLC since 2006 and a director of New Media International since
                2001Randolph
                Brownell, III (1)
            39
            Chief
                Operating Officer, Chief Financial Officer and Director
            2004
            Chief
                Operating Officer, Chief Financial Officer and Director of NM-PLC
                since
                2006 and director of New Media International since 2001Sterling
                Herbst
            40
            SecretaryJoseph
                Dresner
            82
            Director
            2004
            Non-executive
                director of NM-PLC since 2006 and non-executive director of New Media
                International since 2001Milton
                Dresner
            82
            Director
                and Chairman
            2004
            Non-executive
                director and secretary of NM-PLC since 2006 and non-executive director
                of
                New Media International since 2001Frederick
                Winters (2)
            51
            Director
            2004The
                Rt. Hon. Lord
              Benjamin
                Lloyd
              Stormont
                Mancroft
            50
            
            
            Non-executive
                director and the non-executive chairman of NM-PLC since
                2006Paula
                Horan
            39
            
            
            Non-executive
                director and Secretary of NM-PLC since 2006 and non-executive director
                and
                Secretary of New Media International since
                2003





35


( 1)
      Mr.
      Brownell will resign from all capacities with the Company as of the date of
      the
      filing of this report with the SEC.





(2)
      Mr.
      Winters was appointed to the board of directors of NM-US as representative of Residential
      Resales, Inc. pursuant to its Share Exchange Agreement with New Media
      International 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 the Chief Executive Officer, President and a director of NM-US
      since July 1, 2004, has been the Chief Executive Officer and a Director of
      NM-PLC since 2006 and a director of New Media International since 2001. He
      also
      currently serves as the Chief Executive Officer, Director of NM-PLC and as
      a
      director of New Media International. Mr. Carson has been an innovator in the
      lottery industry, having introduced new lottery program delivery models and
      game
      formats. During his twenty plus 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.





36


Randolph
      H. Brownell, III has been the Chief Operating Officer, Chief Financial Officer
      and a member of the board of directors of NM-US since 2004, the Chief Operating
      Officer, Chief Financial Officer and a director of NM-PLC since 2006 and a
      director of New Media International since 2001. 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.





Sterling
      Herbst has been company secretary of NMLS Delaware since July 2004 and has
      been
      employed by the Company since 2001 as the US Operations Manager. Mr. Herbst
      is
      responsible for all aspects of the day-to-day operations of the Company’s
      corporate office in Harrisonburg, Virginia, and has acted as the financial
      controller of the Company throughout its sphere of international operations.
      He
      has assisted senior management with its strategic planning and business plan
      development. From November 2000 through July 2004, Mr. Herbst was a manager
      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. During that same period, he served as the
      Vice President of US Operations of TreasureTrivia.com, Inc., 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.





Joseph
      Dresner has been a director of our company since March 18, 2004. He also
      currently serves as a Director of NM-PLC and as a director of New Media
      International, positions he has held since 2006 and 2001, respectively. 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 was appointed to serve as a director of NM-PLC on November 23, 2005.
      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. He also
      currently serves as a Director of NM-PLC and as a director of New Media
      International, positions he has held since 2006 and 2001, respectively. 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 was appointed to serve as a director of NM-PLC on November
      23, 2005. Mr. Dresner is the brother of Joseph Dresner, a director of the
      Company.





37


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.





The
      following persons serve as non-executive directors of NM-PLC:





The
      Rt.
      Hon. Lord Benjamin Lloyd Stormont Mancroft, an English citizen, was appointed
      to
      serve as the non-executive Chairman and as a director of NM-PLC effective as
      of
      the Admission Date. He also serves as a member of NM-PLC’s Audit Committee and
      Remuneration Committee. Entering the House of Lords as a hereditary peer in
      1987
      and elected following its reform in 1997, the Lord Mancroft has served on
      numerous political committees including the House of Lords Select Committee
      on
      Broadcasting from 1993-1996 and the Joint Scrutiny Committee on the draft Gaming
      Bill (2003-2004). Since 1997 he has been a member of the Executive Committee
      of
      the Lotteries Council, the trade organization for all lottery promoters and
      managers in the UK (other than the National Lottery), making representations
      to
      the Gambling Commission and Government via the Department of Culture, Media
      and
      Sport. He is Chairman of Inter Lotto (UK) Limited and a non-executive director
      and deputy chairman of ROK Corporation Limited. He has numerous charitable
      interests and is or has in the past been associated as trustee or chairman
      with
      the Mentor Foundations (both UK and International), The Hepatitis C
      Trust


and
      the
      Drug & Alcohol Foundation, amongst others. He is also a patron to the
      Osteopathic Centre for Children, the Dentists Health Support Trust, Exbourne
      School Trust and the European Association for the Treatment of
      Addiction.





Paula
      Horan, an Irish citizen, was appointed to serve as a director and secretary
      of
      NM-PLC on 14 November 2005. She also serves as a member of NM-PLC’s Audit
      Committee and Remuneration Committee. She was appointed a commissioner for
      oaths
      by the Supreme Court in Dublin and is a director of several Irish companies
      including Ansett Worldwide Aviation Ireland Limited. She also serves as a
      director of New Media International.





**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, during the fiscal
      year ended April 30, 2007, all reports required to be filed in connection with
      the issuance of securities (there were no dispositions of securities by any
      of
      the persons for which disclosure is required) were filed with the SEC but none
      were filed on a timely basis.





Code
      of
      Ethics.





Our
      Board
      of Directors has adopted a code of ethics, as contemplated by Section 406 of
      the
      Sarbanes-Oxley Act of 2002. 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;




38




·
            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 the Code and any such
      relevant information on our internet website at such time as we establish a
      presence on the World Wide Web.





Corporate
      Governance.





*General.*





We
      believe that good corporate governance is important to ensure that we are
      managed for the long-term benefit of our stockholders. This section describes
      key corporate governance practices. In addition, our majority owned Irish
      subsidiary, NM-PLC, has adopted corporate governance mechanisms in accordance
      with requirements of the AIM Market on which its ordinary shares trade, to
      ensure effective and open management of that company, including establishing
      an
      Audit Committee and a Remuneration Committee.





*Board
      Determination of Independence.*





As
      of the
      date hereof, the Company has no policy with respect to independence requirements
      for its Board members or that a majority of its board be comprised of
      "independent directors." In determining whether a Board member is "independent,"
      the Company applies the standards of "independence" prescribed by rules set
      forth by the American Stock Exchange ("AMEX"). Accordingly, a director will
      only
      qualify as an "independent director" if, in the opinion of our Board of
      Directors, that person does not have a relationship with our company which
      would
      interfere with the exercise of independent judgment in carrying out the
      responsibilities of a director. A director who is, or at any time during the
      past three years, was employed by the Company or by any parent or subsidiary
      of
      the Company, or who owns in excess of fiver percent of the outstanding shares
      of
      our capital stock, shall not be considered independent. Accordingly, as of
      the
      date hereof, only Frederick Winters meets the definition of "independent
      director" under Section 121 of the American Stock Exchange Company
      Guide.





*Board
      of Directors Meetings and Attendance.*





The
      Board
      of Directors has responsibility for establishing broad corporate policies and
      reviewing our overall performance rather than day-to-day operations. The primary
      responsibility of our Board of Directors is to oversee the management of our
      company and, in doing so, serve the best interests of the Company and our
      stockholders. The Board of Directors selects, evaluates and provides for the
      succession of executive officers and, subject to stockholder election,
      directors. It reviews and approves corporate objectives and strategies, and
      evaluates significant policies and proposed major commitments of corporate
      resources. Our Board of Directors also participates in decisions that have
      a
      potential major economic impact on our Company. Management keeps the directors
      informed of Company activity through regular communication.





39


We
      have
      no formal policy regarding director attendance at the annual meeting of
      stockholders, although all directors are expected to attend the annual meeting
      of stockholders if they are able to do so. During the fiscal year ended April
      30, 2007, the Board of Directors did not meet or otherwise take action by
      written consent. Our business is conducted exclusively through our majority
      owned Irish subsidiary, NM-PLC, and all corporate actions were taken by the
      Board of that entity, a majority of the board of directors of which are members
      of our board of directors.





Committees
      of Board of Directors.





The
      board
      has not established a nominating or a compensation committee, given that NM-US
      retains only such staff as is necessary to manage the Company’s reporting
      obligations under federal securities laws, and the board does not believe that
      such committees are necessary at this time. 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.





40


Shareholder
      Communications





The
      Company does not presently provide a process for security holders to send
      communications to the Board of Directors. The Company has not held a
      stockholders meeting at which directors were elected since 2005, given that
      all
      business of the Company is conducted exclusively through our majority owned
      subsidiary, NM-PLC, and all corporate actions were taken by the Board of that
      entity, a majority of the board of directors of which are members of our board
      of directors. The Board of Directors has not determined whether to call a
      meeting for the 2008 fiscal year as the Company is seeking to save the costs
      associated with such meeting including preparing and filing a proxy statement
      with the SEC and mailing same to all security holders.





**ITEM
      10. EXECUTIVE COMPENSATION**





**Compensation
      of Directors.**





NM-US
      does 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 (collectively, the
      “Named Executives”).





**SUMMARY
      COMPENSATION TABLE**





During
      the fiscal year ended April 30, 2007, all of our employees were remunerated
      by
      New Media Lottery (International) Limited, an Irish corporation, all of the
      shares of which are owed by NM-PLC NM-PLC, our 81.47% Irish subsidiary, for
      all
      services rendered to our group. NM-US did not pay or otherwise remunerate
      directly any employee during the last fiscal year.





**Name
                and Principal Position**
            **Year**
            **Salary**
              **($)**
            **Bonus
                ($)**
            **Stock**
              **Awards**
              **($)**
            **Option**
              **Awards**
              **($)**
            **Non-Equity
                Incentive**
              **Plan
                Compensation**
              **($)**
            **Non-Qualified
                Deferred Compen-sation Earnings**
              **($)**
            **All**
              **Other**
              **Compensation**
              **($)**
            **Total**John
                T. Carson,
              Chief
                Executive
              Officer
            2007
              
              2006
            $192,000
              
              $163,000
            
            
            -0-
              
              1,100,000
            
            
            14,400(1)
              
              63,086
            206,400
              
              226,086Randolph
              Brownell,
                III,
              Chief
                FinancialOfficer
            2007
              
              2006
            $168,000
              
              $139,000
            
            
            -0-
              
              1,000,000
            
            
            64,400(2)
              
              55,300
            232,400
              
              194,300





All
      compensation was paid in US Dollars





(1)
      Represents car allowance.





(2)
      Represents car allowance and $50,000 in deferred compensation accrued during
      the
      years 2003 through 2005 which was paid during the most recent fiscal
      year.





41





**Employment
      Agreements.**





NM-US
      has
      not entered into written employment agreements with any member of our
      management. NM-PLC and New Media International compensates all of the Company’s
      employees. Disclosure relating to all management employment contracts issued
      by
      NM-PLC is set forth below.





*Other
      Arrangements and Payment of Deferred Salary*





During
      the fiscal years ended April 30, 2006 and 2007, the Company has paid John T.
      Carson deferred compensation of $60,000 and $0, respectively, and Randolph
      Brownell, III $50,000 and $50,000, respectively. The deferred compensation
      paid
      to these individuals accumulated during the period 2003 to 2005.





In
      addition, until November 30, 2005, Mr. Brownell was reimbursed in the amount
      of
      $3,500 per year to pay the cost of his health insurance premiums, which amount
      is incorporated into the Summary Compensation Table, above.





In
      addition, pursuant to their respective employment contracts, Messrs. Carson
      and
      Brownell each received $14,400 in car allowance during the fiscal year ended
      April 30, 2007.





*NM-PLC
      Employment Agreements*





Pursuant
      to an employment agreement dated March 13, 2006, NM-PLC has engaged John Carson
      to serve as the chief executive officer of NM-PLC at a salary of $192,000 per
      annum (excluding bonuses and benefits including a payment equal to 10% of his
      total annual emoluments by way of pension contribution). The initial term of
      the
      agreement is for a period of twelve months and thereafter the agreement is
      terminable by either party on the giving of two month’s written notice. John
      Carson was appointed a director of the Company on 14 November 2005.





Pursuant
      to an employment agreement dated March 13, 2006, NM-PLC has engaged Randolph
      H.
      Brownell III to serve as the chief operating officer and chief financial officer
      of NM-PLC at a salary of $168,000 per annum (excluding bonuses and benefits
      including a payment equal to 10% of his total annual emoluments by way of
      pension contribution). The initial term of the agreement is for a period of
      twelve months and thereafter the agreement is terminable by either party on
      the
      giving of two month’s written notice.





Joseph
      Dresner has been engaged to serve as a non-executive director of NM-PLC under
      the terms of a letter of appointment dated March 13, 2006. Mr. Dresner has
      waived the payment of any fees which may be due him under this agreement. The
      initial term of the agreement is for a period of three years and may be
      terminated by either party giving one month’s written notice.





42


Milton
      Dresner has been engaged to serve as a non-executive director of NM-PLC under
      the terms of a letter of appointment dated March 13, 2006. Mr. Dresner has
      waived the payment of any fees which may be due him under this agreement. The
      initial term of the agreement is for a period of three years and may be
      terminated by either party giving one month’s written notice.





Paula
      Horan has been engaged as a non-executive director and secretary of NM-PLC
      under
      the terms of a letter of appointment dated March 13, 2006 for a fee of €30,000
      per annum (excluding bonuses and benefits). The initial term of the agreement
      is
      for a period of three years and may be terminated by either party giving one
      month’s written notice.





The
      Rt.
      Hon. Lord Mancroft has been appointed a non-executive director of NM-PLC,
      effective as of the Admission Date, under the terms of a letter of appointment
      dated March 1, 2006 for a fee of £50,000 per annum subject to annual review. The
      amount paid to Lord Mancroft decreased to £36,000 for the period ended April 30,
      2007. NM-PLC sold 100,000 of its Ordinary Shares, having a total value of
£50,000 at the placing price in the AIM Offering, to Lord Mancroft on Admission
      for a subscription price equal to the nominal value per Ordinary
      Share.





**Option
      Grants in the Last Fiscal Year.**





Neither
      NM-US nor NM-PLC granted any options to purchase securities during the fiscal
      year ended April 30, 2007.





**Fiscal
      Year-End Option Numbers and Values.**





The
      following table sets forth additional information as of April 30, 2006,
      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
                on
              Exercise
                (#)
            Value
              Realized
                ($)
            Number
                of Securities Underlying
              Unexercised
                Options/SARs at
              FY-End
                (#)
              Exercisable/Unexercisable
            Value
                of Unexercised
              In-the
                Money Options/SARs
              at
                FY-End ($)
              Exercisable/UnexercisableJohn
                T. Carson
            -0-
            -0-
            1,300,000/0
            $0/$0Randolph
                Brownell, III
            -0-
            -0-
            1,200,000/0
            $0/$0





**Outstanding
      Equity Awards at Fiscal Year End**





Below
      is
      information relating to unexercised options held by John T. Carson, our Chief
      Executive Officer, and Randolph Brownell, our Chief Financial Officer as of
      April 30, 2007. No other named executive officer held any unexercised options
      or
      unvested stock as of such date.




43





OPTION
                AWARDSName
              (a)
            Number
                of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Exercisable
              (b)
            Number
                of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Unexercisable
              (c)
            Equity
                Incentive Plan
              Awards:
                Number of
              Securities
                Underlying
              Unexercised
                Unearned
              Options
              (#)
              (d)
            Option
              Exercise
              Price
              ($)
              (e)
            Option
              Expiration
              Date
              (f)John
                Carson
            200,000
              1,100,000
            --
            --
            $.25
              $.35
            Mar.
                21, 2015
              Nov.
                2, 2015Randolph
                Brownell, III
            200,000
              1,000,000
            --
            --
            $.25
              $.35
            Mar.
                21, 2015
              Nov.
                2, 2015








**ITEM
      11.**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**





At
      August
      14, 2007, there were 21,442,143 shares of our Common Stock outstanding. The
      following table sets forth information as of August 14, 2007, 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 14, 2007.





Name
                of
              Beneficial
                Owner (1)
            Amount
                of
              Beneficial
              Ownership
              NM-US
              Common
                Stock
            Percent
                of
              Outstanding
              Class
                of NM-US
              Common
                Stock
              Owned
                (2)
            Amount
                of
              Beneficial
              Ownership
              NM-PLC
              Ordinary
                Shares
            Percent
                of
              Outstanding
              Class
                of NM-PLC
              Ordinary
                Shares
              Owned
                (3)John
                Carson (4)
            2,187,714
            9.62%Randolph
                H. Brownell, III (5)
            1,474,286
            6.51%Sterling
                Herbst (6)
            96,429
            *Joseph
                Dresner
            7,000,000
            32.65%
            901,925
            3.64%Milton
                Dresner
            7,000,000
            32.65%
            901,925
            3.64%Frederick
                Winters (7)
            50,000
            *The
                Rt. Hon. Lord
              Benjamin
                Lloyd
              Stormont
                Mancroft (8)
            -0-
            -0-
            100,000
            *Paula
                Horan (9)
            -0-
            -0-
            3
            *Nathan
                Miller (10)
            3,345,715
            15.60%
            -0-
            -0-All
                officers and directors
              as
                a group (6 persons) (11)
            17,808,429
            82.10%
            1,903,853
            7.68%


*
      Less
      than 1%.




44




(1)
            The
                address for each of the persons identified in the foregoing table
                is care
                of the Company.


(2)
            Based
                on 21,442,143 shares outstanding.


(3)
            Based
                on 24,800,000 ordinary shares of NM-PLC
                outstanding.


(4)
            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 1,300,000
                shares of common stock.


(5)
            Includes
                274,286 shares of common stock and options to purchase 1,200,000
                shares of
                common stock.


(6)
            Includes
                21,429 shares of common stock and options to purchase 75,000 shares
                of
                common stock.


(7)
            Consists
                solely of options to purchase shares of common
                stock.


(8)
            The
                Rt. Hon. Lord Benjamin Lloyd Stormont Mancroft is a director of
                NM-PLC.


(9)
            Ms.
                Horan is a director of NM-PLC.


(10)
            Includes
                345,715 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.


(11)
            Includes
                options to purchase an aggregate of 2,625,000 shares of common
                stock.








**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





During
      the period November 21, 2006 through January 30, 2007, Milton Dresner, a
      director of NM-US, NM-PLC and New Media International, loaned New Media
      International the sum of $225,000. New Media International executed a demand
      note in favor of Mr. Dresner with respect to such amount that bears interest
      at
      the prime rate of interest plus 2%. This was a short term loan and has since
      been repaid.





On
      February 13, 2007, Joseph Dresner, a director of NM-US, NM-PLC and New Media
      International, loaned New Media International the sum of $75,000. New Media
      International accrued interest at the prime rate of interest plus 2%. This
      was a
      short term loan and was repaid on March 15, 2007.





During
      the period October 2005 through April 2007, the Company borrowed the sum of
      $3.25 million from Comerica Bank (and has available an additional $750,000
      under
      a line of credit), the payment of all of which is guaranteed by Joseph Dresner
      and Milton Dresner.





During
      the period March 19, 2004 through March 17, 2006, Milton Dresner and Joseph
      Dresner, directors of NM-US, NM-PLC and New Media International, have been
      lending funds to the companies required for operations. On March 17, 2006,
      the
      closing date of the AIM Offering, all amounts owed to each of Milton Dresner
      and
      Joseph Dresner then outstanding were repaid by each company, excluding $150,000
      owed to Milton Dresner by New Media International which is payable on demand.
      As
      of March 17, 2006, $1,539,561 of debt, including interest, owed by NM-US to
      Milton Dresner was converted into 5,000,000 shares of our common stock at a
      price of $0.307912 per share. As of March 17, 2006, NM-US owed Joseph Dresner
      the sum of $1,547,137, including interest, which was converted into 5,000,000
      shares of our common stock at a price of $0.309427 per share. As of March 17,
      2006, NM-PLC owed Milton Dresner the sum of $250,000, which was converted into
      286,139 ordinary shares of NM-PLC at a price of $0.875 per share, the offering
      price of the ordinary shares in the AIM Offering. As of March 17, 2006, NM-PLC
      owed Joseph Dresner the sum of $250,000, which was converted into 286,139
      ordinary shares of NM-PLC at a price of $0.875 per share, the offering price
      of
      the ordinary shares in the AIM Offering.





45


Milton
      Dresner and Joseph Dresner, the principal shareholders and directors of the
      NM-US and directors of NM-PLC, each purchased 615,786 ordinary shares in the
      UK
      Offering at the placement price or approximately $540,916.





During
      December 2005, each of Milton Dresner and Joseph Dresner loaned NM-US $50,000
      which it repaid to them without interest eight days later upon the receipt
      of
      funding from Comerica Bank on an additional $500,000 loan discussed elsewhere
      herein.





As
      referenced above, in the three months prior to the closing of the AIM Offering,
      Milton Dresner, a principal shareholder and director of the NM-US and directors
      of NM-PLC, loaned New Media International the sum of $150,000. New Media
      International has executed a demand note in favor of Mr. Dresner with respect
      to
      such amount that bears interest at the prime rate of interest plus
      2%.





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, 2006, NM-US was indebted to Mr. Miller in the amount of $183,177, plus
      $24,917 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 New Media International,
      formerly 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.





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 New Media International,
      formerly 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.





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 provided certain legal services to us
      until July 2005. During fiscal 2005 and 2004, Miller & Earle, PLLC billed us
      $43,808 and $202,465, respectively for services rendered. The Company believes
      that the billings from 2005 were incorrect. Due to uncertainties in the
      settlement process with Miller & Earle, no provision has been made in the
      accompanying financial statements to reflect the additional $43,808 in fees.
      During fiscal 2003 and fiscal 2002, we paid Miller & Earle and aggregate of
      $0 and $7,500, respectively, for legal services rendered.





46


**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).
            63(i)(k)
            Articles
                of Association of New Media Lottery Services plc
            93(i)(l)
            Memorandum
                of Association of New Media Lottery Services plc
            910.1
            Agreement
                dated September 13, 2001, as amended as of January26,
                2004 by and between Lottery Network Services Ltd. andRehab
                Net Games Limited.
            2




47




10.2
            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 LotteryNetwork
                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 andbetween
                New Media Lottery Services, Inc. andCybercyte
                Sistemas e Serviços 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 June 7, 2005 by and between New MediaLottery
                Services, Inc. and Parlay Entertainment Limited.
            810.11
            Floating
                Eurodollar Note dated October 7, 2005 in the principalamount
                of $1,000,000 made by New Media Lottery Services, Inc.in
                favor of Comerica Bank.
            910.12
            Services
                Agreement dated November 25, 2005 by and among Lottery Network Services
                Ltd., and Friends of Rehab Society and Rehab Net Games
                Limited.
            910.13
            Letter
                agreement dated December 15, 2005, between MiltonDresner
                and the Company with respect to conversion of debt into 5,000,000
                shares
                of common stock.
            910.14
            Letter
                agreement dated December 15, 2005, between JosephDresner
                and the Company with respect to conversion of debt into 5,000,000
                shares
                of common stock.
            910.15
            Amended
                and Restated Floating Eurodollar Note (amending the Floating Eurodollar
                Note dated October 7, 2005) in the principal amount of $1,500,000,
                dated
                December 14, 2005 made by New Media Lottery Services, Inc. in favor
                of
                Comerica Bank.
            9






48




10.16
            Placing
                Agreement dated March 13, 2006 by and among, New Media Lottery Services
                plc, New Media Lottery Services, Inc., certain directors of the foregoing
                companies and Zimmerman Adams International Limited
            910.17
            Asset
                Purchase and Assumption of Liabilities Agreement datedMarch
                13, 2006 between New Media Lottery Services, Inc. andNew
                Media Lottery Services (International) Limited.
            910.18
            Technology
                License Agreement dated March 13, 2006 betweenNew
                Media Lottery Services, Inc. and New Media LotteryServices
                (International) Limited.
            910.19
            Sublicense
                Agreement dated March 13, 2006 betweenNew
                Media Lottery Services, Inc. and New Media LotteryServices
                (International) Limited.
            910.20
            Employment
                Agreement, dated March 13, 2006 between NewMedia
                Lottery Services plc and John T. Carson.
            910.21
            Employment
                Agreement, dated March 13, 2006 between NewMedia
                Lottery Services plc and Randolph H. Brownell, III.
            910.22
            Supplemental
                Letter to Employment Agreement, dated March13,
                2006 between New Media Lottery Services plc and John T.Carson.
            910.23
            Relationship
                Deed dated March 13, 2006 between New MediaLottery
                Services, Inc. and New Media Lottery Services plc.
            910.24
            Financial
                Services Agreement dated March 13, 2006 by and among, New Media Lottery
                Services plc, New Media Lottery Services, Inc., certain directors
                of the
                foregoing companies and Zimmerman Adams International Limited
            910.25
            Broker’s
                Agreement dated March 13, 2006 by and among, New Media Lottery Services
                plc, New Media Lottery Services, Inc., certain directors of the foregoing
                companies and Zimmerman Adams International Limited
            910.26
            Promissory
                note dated March 17, 2006 in the principal amount of $1,500,529.86
                made by
                New Media Lottery Services(International)
                Limited in favor of New Media Lottery Services,Inc.
            910.27
            Agreement
                dated October 12, 2005 by and between New MediaLottery
                Services International, Ltd. and Inspired BroadcastNetworks
            1010.28
            Floating
                Eurodollar Note in the principal amount of $600,000, dated December
                5,
                2006 made by New Media Lottery Services (International) Limited in
                favor
                of Comerica Bank.
            11




49




10.29
            Floating
                Eurodollar Note in the principal amount of $1,900,000, dated February
                20,
                2007 made by New Media Lottery Services (International) Limited in
                favor
                of Comerica Bank.
            1114
            Code
                of Ethics
            516
            Letter
                of Earl M. Cohen, CPA, PA, on change in certifyingaccountant.
            431.1
            Rule
                13a-14(a)/15d-14(a) Certification of John T. Carson
            1131.2
            Rule
                13a-14(a)/15d-14(a) Certification of Randolph Brownell,
                III
            1132.1
            Section
                1350 Certification
            11





1.
            Previously
                filed with the Annual Report on Form 10-KSB as filed with the Securities
                and Exchange Commission on April 24,
                2002.


2.
            Previously
                filed with the 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 the Information Statement pursuant to Rule 14C of the
                Securities Exchange Act of 1934 dated June 9,
                2004.


4.
            Previously
                filed with the 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 the Annual Report on Form 10-KSB for the fiscal year ended
                April 30, 2004 as filed with the Securities and Exchange Commission
                on
                August 10, 2004.


6.
            Previously
                filed with the Information Statement pursuant to Rule 14C of the
                Securities Exchange Act of 1934 dated January 5,
                2004.


7.
            Previously
                filed with the Annual Report on Form 10-KSB for the fiscal year ended
                April 30, 2005 as filed with the Securities and Exchange Commission
                on
                July 29, 2005.


8.
            To
                be filed by amendment.


9.
            Previously
                filed with the Quarterly Report on Form 10-QSB for the fiscal quarter
                ended January 31, 2006 as filed with the Securities and Exchange
                Commission on March 23, 2006.


10.
            Previously
                filed with the Annual Report on Form 10-KSB for the fiscal year ended
                April 30, 2006 as filed with the Securities and Exchange Commission
                on
                August 15, 2006.


11.
            Filed
                herewith.








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 2007 fiscal year ending on April 30, 2007 and
      the
      reviews of the financial statements included in the Company's Quarterly Reports
      on Form 10-QSB for the fiscal year were $33,000. 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 2006 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 $33,750 (including
      direct engagement expenses).





50


AUDIT-RELATED
      FEES. The aggregate fees billed by Bouwhuis, Morrill & Company for
      audit-related services rendered for the Company for the 2007 fiscal year were
      $0. The aggregate fees billed Bouwhuis, Morrill & Company for audit-related
      services rendered for the Company and its subsidiaries for the 2006 fiscal
      year
      were $0. 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 2007 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 2006 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 2007 fiscal year and $0 for the
      2006
      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.





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:
              August 14, 2007
            By:
            /s/
              John
              T. CarsonName:
              John T. CarsonTitle:
              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
              John
                T. Carson
            President
                and Director
            August
                14, 2007/s/
                Randolph H. Brownell, III
              Randolph
                H. Brownell, III
            Chief
                Operating Officer, Chief Financial
              Officer
                and Director
            August
                14, 2007/s/
                Sterling Herbst
              Sterling
                Herbst
            Secretary
            August
                14, 2007/s/
                Joseph Dresner
              Joseph
                Dresner
            Director
            August
                14, 2007/s/
                Milton Dresner
              Milton
                Dresner
            Director
            August
                14, 2007/s/
                Frederick Winters
              Frederick
                Winters
            Director
            August
                14, 2007





51





**ITEM
      7. FINANCIAL STATEMENTS**







**NEW
      MEDIA LOTTERY SERVICES, INC.**


**&
      SUBSIDIARIES**





Financial
      Statements for the Years


Ended
      April 30, 2007 and 2006


and
      Report of Independent Registered


Public
      Accounting Firm











52




**CONTENTS**











Report
                of Independent Registered Public Accounting Firm
            54Consolidated
                Balance Sheet
            55Consolidated
                Statements of Operations
            56Consolidated
                Statements of Stockholders’ Deficit
            57Consolidated
                Statements of Cash Flows
            58-59Notes
                to the Consolidated Financial Statements
            60




53




Bouwhuis,
                Morrill & Company, LLC
            12
                South Main, Suite 208Certified
                Public Accountants
            Layton,
                Utah 84041801-546-9068
                Tel801-546-8211
                Fax





REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM











Board
      of
      Directors


New
      Media
      Lottery Services, Inc. and Subsidiaries


Harrisonburg,
      Virginia








We
      have
      audited the accompanying consolidated balance sheet of New Media Lottery
      Services, Inc. and Subsidiaries as of April 30, 2007 and the related
      consolidated statements of operations, stockholders’ deficit and cash flows for
      the years ended April 30, 2007 and 2006. 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. and Subsidiaries as of April 30, 2007 and the
      consolidated results of their operations and their cash flows for the years
      ended April 30, 2007 and 2006 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 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




Bouwhuis,
      Morrill & Company


August
      10, 2007




54


**NEW
        MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**


Consolidated
        Balance Sheet
 As
        at
        April 30, 2007
  ASSETSCURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              196,257Accounts
                  receivable, net
              
              
              224,431Other
                  receivable
              
              
              88,129Marketable
                  securities (Note 3)
              
              
              18,000Prepaid
                  assets
              
              
              104,834Total
                  Current Assets
              
              
              631,651PROPERTY
                  AND EQUIPMENT, NET (Note 2)
              
              
              299,301TOTAL
                  ASSETS
              
              $
              930,952LIABILITIES
                  AND STOCKHOLDERS' DEFICITCURRENT
                  LIABILITIESAccounts
                  payable and accrued expenses
              
              $
              476,312Deferred
                  compensation
              
              
              62,500Due
                  to related parties (Note 4)
              
              
              202,465Notes
                  payable
              
              
              3,250,000Loans
                  payable - related parties (Note 5)
              
              
              333,177Total
                  Current Liabilities
              
              
              4,324,454TOTAL
                  LIABILITIES
              
              
              4,324,454MINORITY
                  INTEREST
              
              
              3,442,660STOCKHOLDERS'
                  DEFICITCommon
                  stock, $0.001 par value; 50,000,000 sharesauthorized,
                  21,442,143 shares issue and outstanding
              
              
              21,442Additional
                  paid-in capital
              
              
              3,335,688Accumulated
                  deficit
              
              
              (10,323,539
              )Accumulated
                  other comprehensive incomeForeign
                  currency translation adjustment
              
              
              112,247Unrealized
                  gain on marketable securities
              
              
              18,000Total
                  Stockholders' Deficit
              
              
              (6,836,162
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              930,952






55


**NEW
        MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**


Consolidated
        Statements of Operations
  For
                  the Years EndedApril
                  30,2007
              
              2006NET
                  REVENUES
              
              $
              571,995
              
              $
              51,380OPERATING
                  EXPENSESDepreciation
                  and amortization expense
              
              
              153,786
              
              
              115,046General
                  and administrative
              
              
              1,408,515
              
              
              778,515Management
                  fees
              
              
              140,682
              
              
              101,000Professional
                  fees
              
              
              928,211
              
              
              503,332Programming
                  fees
              
              
              672,145
              
              
              526,489Rent
                  expense
              
              
              98,609
              
              
              60,822Contract
                  Development
              
              
              92,500
              
              
              -Website
                  expense
              
              
              772,702
              
              
              273,602Total
                  Operating Expenses
              
              
              4,267,150
              
              
              2,358,806LOSS
                  FROM OPERATIONS
              
              
              (3,695,155
              )
              
              (2,307,426
              )OTHER
                  INCOME (EXPENSES)Gain
                  (loss) on sale of property and equipment
              
              
              (85,353
              )
              
              -Cancellation
                  of debt
              
              
              50,000
              
              
              -Interest
                  income
              
              
              7,428
              
              
              14Interest
                  expense
              
              
              (166,222
              )
              
              (242,623
              )Total
                  Other Income (Expenses)
              
              
              (194,147
              )
              
              (242,609
              )NET
                  LOSS BEFORE INCOME TAXES ANDMINORITY
                  INTEREST
              
              
              (3,889,302
              )
              
              (2,550,035
              )PROVISION
                  FOR INCOME TAXES
              
              
              -
              
              
              -MINORITY
                  INTEREST IN SUBSIDIARIES LOSSES
              
              
              680,547
              
              
              226,574NET
                  LOSS
              
              $
              (3,208,755
              )
              $
              (2,323,461
              )BASIC
                  AND DILUTED NET LOSS PER SHARE
              
              $
              (0.15
              )
              $
              (0.18
              )WEIGHTED
                  AVERAGE NUMBER OFSHARES
                  OUTSTANDING
              
              
              21,442,143
              
              
              13,108,810OTHER
                  COMPREHENSIVE INCOMENET
                  LOSS
              
              $
              (3,208,755
              )
              $
              (2,323,461
              )Foreign
                  currency translation adjustment
              
              
              312,238
              
              
              51,343Unrealized loss
                  on marketable securities
              
              
              -
              
              
              (12,000
              )COMPREHENSIVE
                  LOSS
              
              $
              (2,896,517
              )
              $
              (2,284,118
              )




56


**NEW
        MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**
 Consolidated
        Statements of Stockholders' Deficit
  AccumulatedAdditional
              
              
              
              OtherCommon
                  Stock
              
              Paid-in
              
              Accumulated
              
              Comprehensive
              
              MinorityShares
              
              Amount
              
              Capital
              
              Deficit
              
              Income
              
              InterestBalance,
                  April 30, 2005
              
              
              11,167,143
              
              $
              11,167
              
              $
              2,055,757
              
              $
              (4,791,323
              )
              $
              32,247
              
              $
              -Common
                  stock issued for software at$0.91
                  per share, May 2005
              
              
              275,000
              
              
              275
              
              
              224,725
              
              
              -
              
              
              -
              
              
              -Common
                  stock issued in conversion ofdebt
                  at $0.31 per share, March 2006
              
              
              10,000,000
              
              
              10,000
              
              
              3,076,699
              
              
              -
              
              
              -
              
              
              -Consolidation
                  of subsidiaries
              
              
              -
              
              
              -
              
              
              (2,021,493
              )
              
              -
              
              
              -
              
              
              3,927,612Unrealized
                  loss on marketable securities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (12,000
              )
              
              -Foreign
                  currency translation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              51,343
              
              
              -Net
                  loss for the year endedApril
                  30, 2006
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,323,461
              )
              
              -
              
              
              -Balance,
                  April 30, 2006
              
              
              21,442,143
              
              $
              21,442
              
              $
              3,335,688
              
              $
              (7,114,784
              )
              $
              71,590
              
              $
              3,927,612Consolidation
                  of subsidiaries
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (484,952
              )Foreign
                  currency translation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              40,657
              
              
              -Net
                  loss for the year endedApril
                  30, 2007
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,208,755
              )
              
              -
              
              
              -Balance,
                  April 30, 2007
              
              
              21,442,143
              
              $
              21,442
              
              $
              3,335,688
              
              $
              (10,323,539
              )
              $
              112,247
              
              $
              3,442,660




57


**NEW
        MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**
 Consolidated
        Statements of Cash Flows
  For
                  the Years EndedApril
                  30,2007
              
              2006CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (3,208,755
              )
              $
              (2,323,461
              )Adjustments
                  to reconcile net loss tonet
                  cash used by operating activities:Depreciation
                  and amortization expense
              
              
              153,786
              
              
              115,046Loss
                  on disposition of assets
              
              
              85,353
              
              
              -Subsidiary
                  stock issued for non cash expense
              
              
              39,118
              
              
              -Minority
                  interest in subsidiaries losses
              
              
              (680,547
              )
              
              (226,574
              )Change
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (169,547
              )
              
              (54,884
              )VAT
                  receivable
              
              
              (3,904
              )
              
              (74,506
              )Accounts
                  payable and accrued expenses
              
              
              110,161
              
              
              332,921Deferred
                  compensation
              
              
              (50,000
              )
              
              (94,000
              )Prepaid
                  assets
              
              
              1,510
              
              
              (97,773
              )Other
                  receivables
              
              
              -
              
              
              2,304Due
                  to related parties
              
              
              -
              
              
              (2,000
              )Net
                  Cash Used by Operating Activities
              
              
              (3,722,825
              )
              
              (2,422,927
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPurchases
                  of property and equipment
              
              
              (122,247
              )
              
              (81,764
              )Net
                  Cash Used by Investing Activities
              
              
              (122,247
              )
              
              (81,764
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESProceeds
                  from issuance of common stock
              
              
              -
              
              
              3,750,338Common
                  stock offering costs
              
              
              -
              
              
              (1,617,644
              )Capital
                  contributed by shareholders
              
              
              -
              
              
              -Proceeds
                  from issuance of notes payable
              
              
              1,750,000
              
              
              1,500,000Proceeds
                  from issuance of notespayable,
                  related parties
              
              
              300,000
              
              
              1,077,460Payments
                  on notes payable, related parties
              
              
              (300,000
              )
              
              (100,000
              )Payments
                  on notes payable
              
              
              -
              
              
              (5,929
              )Net
                  Cash Provided by Financing Activities
              
              
              1,750,000
              
              
              4,604,225EFFECT
                  OF FOREIGN CURRENCYTRANSLATION
                  ADJUSTMENT
              
              
              48,446
              
              
              51,349NET
                  INCREASE (DECREASE) IN CASHAND
                  CASH EQUIVALENTS
              
              
              (2,046,626
              )
              
              2,150,883CASH
                  AND CASH EQUIVALENTS,BEGINNING
                  OF PERIOD
              
              
              2,242,883
              
              
              92,000CASH
                  AND CASH EQUIVALENTS,END
                  OF PERIOD
              
              $
              196,257
              
              $
              2,242,883




58


**NEW
        MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**
 Consolidated
        Statements of Cash Flows (continued)
  For
                  the Years EndedApril
                  30,2007
              
              2006SUPPLEMENTAL
                  DISCLOSURES:Cash
                  paid for interest
              
              $
              152,672
              
              $
              57,180Cash
                  paid for income taxes
              
              $
              -
              
              $
              -NON-CASH
                  INVESTING AND FINANCING ACTIVITIES:Common
                  stock issued for note payable
              
              $
              -
              
              $
              3,086,699Increase
                  (decrease) in fair valueof
                  marketable securities
              
              $
              -
              
              $
              (12,000
              )








59


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2007 and 2006





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’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.





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





In
                November 2005, New Media Lottery Services, Inc. organized New Media
                Lottery Services, Plc. and exchanged all of the outstanding shares
                of New
                Media Lottery Services (International), Ltd. it owned for 20,205,129
                common shares of New Media Lottery Services, Plc., representing the
                only
                outstanding shares of that corporation as of said
                date.





During
      March 2006, our Irish subsidiary, NM-PLC concluded an Offering of 4,244,850
      ordinary shares (the “AIM Offering”) wherein it raised an aggregate $3,750,338
      using the March 17, 2006 exchange rate. The AIM Offering associated costs were
      $1,617,644 using a March 17, 2006 exchange rate. This yielded $2,132,694 to
      the
      Company. After giving effect to the issuance of the ordinary shares sold in
      the
      Offering and the other ordinary shares issued for debt, we own approximately
      82.3% of New Media Lottery Services, Plc’s outstanding capital
      stock.








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.  Nature
      of
      Operations





New
                Media Lottery Services, Inc., through its direct and indirect
                subsidiaries, designs, builds, implements, manages, hosts and supports
                internet and wireless device 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 terminals
                and
                other electronic kiosks.




60


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2007 and 2006




NOTE
      2
      -  SIGNIFICANT
      ACCOUNTING POLICIES (Continued)





b.  Accounting
      Method





The
                Company recognizes income and expenses based on the accrual method
                of
                accounting. The Company has elected an April 30
                year-end.





c.  Cash
      and
      Cash Equivalents





Cash
                equivalents are generally comprised of certain highly liquid investments
                with original maturities of less than three
                months.





d.  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.





e.  Property
      and Equipment





Property
                and equipment are stated at cost and depreciated using the straight-line
                method over their estimated useful lives. Computer software acquired
                for
                internal use is capitalized and amortized using the straight-line
                method
                over the software’s expected useful life. 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
            
            2007Computer
                Equipment
            
            
            3
                Years
            
            $
            102,567Furniture
                & Equipment
            
            
            7
                Years
            
            
            7,805Computer
                Software
            
            
            3
                Years
            
            
            319,007Less
                - Accumulated Depreciation & Amortization
            
            
            
            
            
            (130,078
            )Net
                Property and Equipment
            
            
            
            
            $
            299,301





Depreciation
                and amortization expense for the years ended April 30, 2007 and 2006
                was
                $153,786 and $115,046,
                respectively.





f.  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
                30,2007
            
            2006Net
                loss (numerator)
            
            $
            3,208,755
            
            $
            2,323,461Weighted
                average shares outstanding (denominator)
            
            
            21,442,143
            
            
            13,108,810Loss
                per share amount
            
            $
            0.15
            
            $
            0.18





The
      Company has issued the following securities that could potentially dilute basic
      earnings per share in the future that are not included in the computation of
      diluted earnings per share because to do so would have been anti-dilutive for
      the period ended April 30, 2007.





Options
            
            
            2,875,000
                sharesWarrants
            
            
            200,000
                shares





61


**NEW
      MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**


Notes
      to
      the Consolidated Financial Statements


April
      30,
      2007 and 2006








NOTE
                2 -
            SIGNIFICANT
                ACCOUNTING POLICIES (Continued)








g.  Recent
      Accounting Pronouncements





In
      February, 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
      No. 155, Accounting for Certain Hybrid Financial Instruments. SFAS No. 155
      eliminates the temporary exemption of bifurcation requirements to securitized
      financial assets, contained in SFAS No. 133, Accounting for Derivative
      Instruments and Hedging Activities. As a result, similar financial instruments
      are accounted for similarly regardless of the form of the instruments. In
      addition, in instances where a derivative would otherwise have to bifurcated,
      SFAS No. 155 allows a preparer on an instrument-by-instrument basis to elect
      fair value measurement at acquisition, at issuance, or when a previously
      recognized financial instrument is subject to remeasurement. The adoption of
      SFAS No. 155 has not materially affected the Company’s reported loss, financial
      condition or cash flows.





In
      March,
      2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial
      Assets, an amendment of FASB Statement No. 140, Accounting for Transfers and
      Servicing of Financial Assets and Extinguishments of Liabilities. The
      pronouncement establishes standards whereby servicing assets and servicing
      liabilities are initially measured at fair value, where applicable. In addition,
      SFAS No. 156 allows subsequent measurement of servicing assets and liabilities
      at fair value, and where applicable, derivative instruments used to mitigate
      risks inherent with servicing assets and liabilities are likewise measured
      at
      fair value. The adoption of SFAS No. 156 has not materially affected the
      Company’s reported loss, financial condition, or cash flows.





In
      September, 2006, the FASB issued SFAS No. 157, Fair Value Measurements. The
      statement defines fair value, determines appropriate measurement methods, and
      expands disclosure requirements about those measurements. The adoption of SFAS
      No. 157 has not materially affected the Company’s reported loss, financial
      condition, or cash flows.





In
      September, 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans. This statement requires an
      employer to recognize the overfunded or underfunded status of a defined benefit
      postretirement plan as an asset or liability in its statement of financial
      position and to recognize changes in that funded status in the year of change
      through comprehensive income. In addition, SFAS No. 158 requires an employer
      to
      measure the funded status of a plan as of the date of its year-end statement
      of
      financial position. The adoption of SFAS No. 158 has not materially affected
      the
      Company’s reported loss, financial condition, or cash flows.








h.  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, 2007 and 2006.





At
      April
      30, 2007, the Company has an approximately $260,000 net operating loss
      carryforward. The Company’s subsidiary New Media Lottery Services
      (International), Ltd. has capitalized $4,952,923 as Code Section 195 start
      up
      expenditures. With the January 2006 inception of operating revenues by the
      Company’s foreign subsidiary, the Company has deemed that operations have begun,
      as defined by Section 195. These cumulative startup costs will be amortized
      over
      sixty months for income tax accounting purposes .. The Company and its
      subsidiaries will not file a consolidated income tax return. Neither the
      domestic parent or the foreign subsidiaries expect any income tax expense for
      the year ended April 30, 2007.





62


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2007 and 2006







NOTE
                2 -
            SIGNIFICANT
                ACCOUNTING POLICIES (Continued)








The
      Company was informed by letter from their tax accountants on January 12, 2007
      along with their 2005 US tax return that several tax positions taken on the
      2005
      return could potentially be challenged by the Internal Revenue Service (IRS).
      The two most significant tax positions in question were disclosed on a form
      8275, Disclosure Statement, within the 2005 tax return. One, the technology
      licensed to New Media Lottery Services (International), Ltd was valued at
      $100,000 based on management’s assessment of value. Two, the Company’s transfer
      of its stock in New Media Lottery Services (International), Ltd for stock in
      New
      Media Lottery Services, Plc was a taxable transaction. Management determined
      the
      transferred stock value to be $1,900,000. Both valuations could be challenged
      by
      the IRS and if ultimately determined to be significantly higher result in US
      taxation. Additionally, the IRS could challenge the method used to determine
      the
      tax basis associated with the New Media Lottery Services (International), Ltd
      stock. The extent of this taxation can not be determined.





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, any net operating loss
      carry forward may be limited as to future use.





i.  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.




j.  Principles
      of Consolidation





The
                consolidated financial statements include the accounts of New Media
                Lottery Services, Inc., and its subsidiaries New Media Lottery Services,
                Inc. (Canada), New Media Lottery Services, Plc, New Media Lottery
                Services
                (International) Limited, and New Media Lottery Services (International)
                Limited (Canada). All significant intercompany accounts and transactions
                have been eliminated in the
                consolidation.





Using
      the
      guidance of FIN 46(R), the Company has consolidated its fifty percent interest
      in the Brazilian joint venture. (See Note 15)





k.  Trade
      Accounts Receivable





Trade
                accounts receivable is recorded net of an allowance for expected
                losses.
                The allowance is estimated from historical performance and projections
                of
                trends and $-0- at April 30, 2007.





l.  Concentrations
      of Credit Risk (Cash balances at a single financial institution)





The
                Company maintains its cash balances in secured financial institutions.
                Two
                of these institutions are in the United States and are insured by
                the
                Federal Deposit Insurance Corporation up to $100,000. As of April
                30, 2007
                the Company had no uninsured cash balances in the United States.
                The
                remainder of the Company’s cash reserves are held in Ireland with Allied
                Irish Bank or Canada with Scotia
                Bank.





m.  Advertising





The
                Company expenses advertising costs as they are incurred. Advertising
                expenses for the years ended April 30, 2007 and 2006 were $470,791
                and
                $135,977, respectively.





63


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2007 and 2006





NOTE
                2 -
            SIGNIFICANT
                ACCOUNTING POLICIES (Continued)





n.  Revenue
      Recognition





The
      Company recognizes a contracted monthly commission based on each lottery’s
      financial performance. All discounts, refunds, adjustments are settled inclusive
      in the commission.





o.  Foreign
      Currency Translation





For
      all
      significant non-U.S. operations, the functional currency is the local currency.
      Assets and liabilities of those operations are translated into U.S. dollars
      using year-end or historical exchange rates; income and expenses are translated
      using the average exchange rates for the reporting period. Translation
      adjustments are reported in accumulated other comprehensive loss, a separate
      component of stockholders' deficit.






NOTE
                3 -
              MARKETABLE
                  SECURITIES





Marketable
      securities at April 30, 2007 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
                30,2007Fair
                value of marketable securities at beginning of year
            
            $
            30,000Realized
                gain (loss) on marketable securities
            
            
            -Proceeds
                from the sale of marketable securities
            
            
            -Unrealized
                gain (loss) on marketable securities
            
            
            (12,000
            )Fair
                value of marketable securities at end of year
            
            $
            18,000





Unrealized
      holding gains and losses are reported in other comprehensive income








NOTE
                4 -
            RELATED
                PARTY TRANSACTIONS





The
                Company has been dependent upon certain individuals, 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:





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 of the
                Company.
                The Company paid ME $0 and $0 during the years ending April 30, 2007
                and
                2006. The Company owed ME $202,465 at April 30, 2007 and 2006 (see
                Note
                9).




64


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2007 and 2006





NOTE
                4 -
            RELATED
                PARTY TRANSACTIONS (Continued)





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 $0 and $0 at April 30, 2007 and 2006. The company
                paid
                Virginia Business Planning $0 and $2,000 during the years ended April
                30,
                2007 and 2006, respectively.





Nathan
                Miller


As
                April 30, 2007, New Media Lottery Services, Inc. was indebted to
                Nathan
                Miller, a former officer and director of the company and current
                major
                shareholder, in the amount of $183,177, plus $43,616 in accrued interest,
                which is repayable on terms to be
                determined.


Milton
      Dresner


During
                fiscal year 2006, Milton Dresner, a principal shareholder and director
                of
                the New Media Lottery Services, Inc., loaned New Media Lottery Services
                International $150,000. New Media Lottery Services International
                has
                executed a demand note in favor of Mr. Dresner with respect to such
                amount
                that bears interest at the prime rate of interest plus
                2%.








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
                30,2007Loan
                payable to an individual, interest at prime plus 2%, due on demand,
                unsecured
            
            $
            183,177Loan
                payable to an individual, interest at prime plus 2%, due on demand,
                unsecured
            
            
            150,000Total
                Loans Payable
            
            
            333,177Less:
                Current Portion
            
            
            (333,177
            )Long-Term
                Loans Payable
            
            $
            -








NOTE
                6 -
            NOTES
                PAYABLE





Notes
      payable consisted of the following:




April
                30,2007Comerica
                Bank note with interest approximately equal to the Euro dollar prime
                ratePlus
                2.5%, due October 10, 2007
            
            
            1,500,000Comerica
                Bank note with interest approximately equal to the Euro dollar prime
                ratePlus
                2.5%, due December 5, 2007
            
            
            600,000Comerica
                Bank note with interest approximately equal to the Euro dollar prime
                ratePlus
                2.5%, due February 20, 2008
            
            
            1,150,000Total
                Notes Payable
            
            
            3,250,000Less:
                Current Portion
            
            
            3,250,000Long-Term
                Notes Payable
            
            $
            -





FiscalYear
                EndingApril
                30
            
            Amount2008
            
            $
            3,250,0002009
            
            
            -Thereafter
            
            
            -Total
            
            $
            3,250,000




65


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2007 and 2006





NOTE
              7 -
            EQUITY
                TRANSACTIONS





Effective
                March 2006, the Company issued 10,000,000 shares of its common stock
                to
                convert loans payable - related party in the amount of
                $3,086,698.





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, accounts receivable and accounts
                payable approximate fair value due to their short-term nature.





NOTE
                9 -
            COMMITMENTS
                AND CONTINGENCIES





Compensation
                Agreements


The
                Company has compensation agreements with two key management personnel
                in
                the amounts of $192,000 and $168,000 per year. These agreements,
                dated
                March 13, 2006, are through New Media Lottery Services, PLC for an
                initial
                term of twelve months.





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 -
            STOCK
                OPTIONS AND WARRANTS




The
      Company has adopted FASB Statement 123(R), "Share-Based Payments" ("SFAS No.
      123R") to account for its stock options and warrants. The Company estimates
      the
      fair value of each stock award at the grant date by using the Black-Scholes
      option pricing model. The assumptions used to calculate the fair value of
      options and warrants granted are evaluated and revised, as necessary, to reflect
      market conditions and our experience. Compensation expense is recognized only
      for those options expected to vest, with forfeitures estimated at the date
      of
      grant based on our historical experience and future expectations. No stock
      options or warrants were granted during the fiscal year ended 2007.




EMPLOYEE
      STOCK OPTIONS





The
      following tables summarize the information regarding employee stock options
      at
      April 30, 2007:




Outstanding,
                April 30, 2006
            
            
            2,875,000Granted
            
            
            -Canceled
            
            
            -Exercised
            
            
            -Outstanding,
                April 30, 2007
            
            
            2,875,000Weighted
                average exercise price of options outstanding at April 30,
                2007
            
            $
            0.34





66


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2007 and 2006





NOTE
                  10 -
              STOCK
                  OPTIONS AND WARRANTS (Continued)


Outstanding
            
            ExercisableWeightedAverage
            
            Weighted
            
            WeightedNumber
            
            Remaining
            
            Average
            
            Number
            
            AverageOutstanding
            
            Contractual
            
            Exercise
            
            Exercisable
            
            ExerciseExercise
                Prices
            
            at
                4/30/07
            
            Life
                (years)
            
            Price
            
            at
                4/30/07
            
            Price$
                0.25
            
            
            425,000
            
            
            7.90
            
            $
            0.25
            
            
            425,000
            
            $
            0.25$0.35
            
            
            2,450,000
            
            
            8.50
            
            $
            0.35
            
            
            2,450,000
            
            $
            0.35








WARRANTS





The
      following tables summarize the information regarding warrants at April 30,
      2007:




Outstanding,
                April 30, 2006
            
            
            200,000Granted
            
            
            -Canceled
            
            
            -Exercised
            
            
            -Outstanding,
                April 30, 2007
            
            
            200,000Weighted
                average exercise price of warrants outstanding at April 30,
                2007
            
            $
            0.25





Outstanding
            
            ExercisableWeightedAverage
            
            Weighted
            
            WeightedNumber
            
            Remaining
            
            Average
            
            Number
            
            AverageOutstanding
            
            Contractual
            
            Exercise
            
            Exercisable
            
            ExerciseExercise
                Price
            
            at
                4/30/07
            
            Life
                (years)
            
            Price
            
            at
                4/30/07
            
            Price$
                0.25
            
            
            200,000
            
            
            8.00
            
            $
            0.25
            
            
            200,000
            
            $
            0.25





NOTE
              11 -
            GOING
                CONCERN CONSIDERATIONS





As
      reported in the consolidated financial statements, the Company has incurred
      $10,323,539 losses from inception of the Company through April 30, 2007. The
      Company’s stockholders’ deficit at April 30, 2007 was $6,836,162.





Management
      is continually striving to overcome our operating losses by expanding the player
      base of its various projects and thereby increasing its operating income. The
      ability to expand the player base is principally contingent on raising
      additional capital for marketing and new project developments. As of March
      17,
      2006 our future is directly tied to NMLS Plc., which raised $3.7 million from
      its public Offering. Management is confident that both entities are in a better
      position to raise future potential funds subject to new project needs and
      existing project performance. In addition to our on-going efforts to achieving
      break-even cash flow, we also have the support of two key current shareholders
      who can meet operating shortfalls.





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.





67


**NEW
          MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
          to
          the Consolidated Financial Statements
 April
          30,
          2007 and 2006








NOTE
      12
      -  SUBSIDIARY
      CAPITAL STOCK OFFERING





On
      March
      17, 2006, the Company’s subsidiary, New Media Lottery Services, Plc, sold and
      issued 4,244,850 ordinary shares in a public Offering on the Alternative
      Investment Market on the London Stock Exchange. The subsidiary derived gross
      proceeds of $3,750,338 from the sale of the securities. Proceeds to the
      subsidiary after giving effect to the payment of sales commissions of $331,190
      and other Offering costs and expenses of $1,286,454, were
      $2,132,694.





NOTE
      13 -
      LEASING ARRANGEMENTS AND COMMITMENTS





The
      Company conducts its operations from facilities that are leased under three
      non-cancelable operating leases.





The
      Company leases an office at 370 Neff Avenue, Suite L, Harrisonburg, Virginia.
      The office is approximately 1,511 square feet. This lease is on a month-to-month
      basis at $1,392.





The
      Company leases approximately 2,964 square feet of office space at Hillsboro
      Tower, 1800-4 th Street,
      SW, Calgary, Alberta, Canada. This lease terminates December 31, 2007 and has
      a
      monthly rent of $7,560 (Canadian).





New
      Media
      Lottery Services, PLC, leases an office at 22/23 Upper Pembroke Street, Suite
      402, Dublin 2, Ireland, from John R. McGuire at a 1,028 euros monthly rent.
      This
      lease ends March 30, 2008





The
      Company has contracts with Hosting 365, LTD in Ireland to provide on-line
      website hosting and to lease computer hardware. These agreements require a
      $5,500 total monthly fee and all expire by January 18, 2008.





The
      Company also has a contract with Parlay Entertainment Limited. The financial
      terms of this contract are confidential, however, the minimum fee requirements
      have been included in the following table.





The
      following is a schedule of future minimum rental payments and commitments
      required under the above agreements as of April 30, 2006:





Year
                EndingApril
                30,
            
            Amount2008
            
            $
            125,8892009
            
            
            -thereafter
            
            
            -




Rental
      expense was $98,609 in 2007, and $60,822 in 2006.





68


**NEW
          MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
          to
          the Consolidated Financial Statements
 April
          30,
          2007 and 2006





NOTE
      14
      -  MAJOR
      CUSTOMER AND FOREIGN OPERATIONS





The
      Company received virtually all of its revenue from Rehab Net Games Limited,
      an
      Irish corporation.





Foreign
      Operations and Exchange Risk


The
      Company intends to conduct activities in multiple foreign markets including
      countries with developing economies. Some of these countries may have
      experienced recently, or are experiencing currently, economic or political
      instability. Hyperinflation, volatile exchange rates and rapid political and
      legal change, often accompanied by military insurrection, have been common
      in
      these and certain other emerging markets in which the Company may conduct
      business. The Company may be materially adversely affected by possible political
      or economic instability in these countries. The risks include, but are not
      limited to terrorism, military repression, expropriation, changing fiscal
      regimes, extreme fluctuations in currency exchange rates, high rates of
      inflation and the absence of industrial and economic infrastructure. Changes
      in
      investment policies or shifts in the prevailing political climates in which
      the
      Company conducts business activities could adversely affect the Company's
      business. Operations may be affected in varying degrees by government
      regulations with respect to production restrictions, price controls, export
      controls, income and other taxes, expropriation of property, maintenance of
      claims, environmental legislation, labor, welfare benefit policies, land use,
      land claims of local residents, water use and mine safety. The effect of these
      factors cannot be accurately predicted and, therefore, no adjustments have
      been
      made to the accompanying financial statements.







NOTE
      15
      -  CONSOLIDATION
      OF VARIABLE INTEREST ENTITY





Effective
      April 5, 2006, the Company adopted FIN 46(R), resulting in the consolidation
      of
      its fifty percent interest in it’s Brazilian joint venture (“JV”). In accordance
      with the pronouncement, JV is considered a variable interest entity and the
      Company its primary beneficiary. Accordingly, the Company has consolidated
      JV
      and eliminated all intercompany transactions. JV was founded on June 22, 2005
      by
      the Company and its joint venture partners to develop and maintain a lottery
      in
      Brazil (the “Project”).





In
      exchange for agreeing to contribute funds, software and lottery expertise to
      the
      JV, the Company was issued a fifty percent equity interest in JV. The Company
      also has provided the majority of JV’s financial support through loans. Members
      of the Company’s management team effectively control the JV by exercising
      control over all funds loaned to the JV. The Company also participates in
      decisions pertaining to the JV.





The
      total
      equity investment at risk in JV will be insufficient to accomplish, in its
      entirety, the scope of the Project and, therefore, will require additional
      subordinated support in the foreseeable future. In addition, the Company is
      anticipated to absorb a majority of JV’s expected losses.




69