**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, 2008





oTRANSITION
      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
            
            87-0705063(State or other jurisdiction of incorporation or organization)
            
            (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  ̈ No





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:  $1,320,311





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 13, 2008




**DOCUMENTS
      INCORPORATED BY REFERENCE**


None.





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





**CAUTIONARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**





This
      Annual Report on Form 10-KSB contains certain forward-looking statements
      within the meaning of Section 21E of the Securities Exchange Act of 1934,
      as amended, which we refer to as the Exchange Act, and information relating
      to
      us that are based on beliefs of our management as well as assumptions made
      by us
      and information currently available to us, in particular under the headings
      “Item 1. Business” and “Item 7. Management’s Discussion and Analysis
      of Financial Condition and Results of Operations.” When used in this document,
      words such as “believe,” “intend,” “anticipate,” “estimate,” “project,”
“forecast,” “plan,” “potential,” “will,” “may,” “should,” and “expect” and
      similar expressions are intended to identify forward-looking statements but
      are
      not the exclusive means of identifying such statements. All statements in this
      document that are not statements of historical fact are forward-looking
      statements. Forward-looking statements are subject to a number of risks,
      uncertainties and assumptions and include, but are not limited to, such matters
      as





·
            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;





·
            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.





Such
      statements reflect our current views with respect to future events and are
      subject to certain risks, uncertainties and assumptions. Many factors could
      cause our actual results, performance or achievements to be materially different
      from any future results, performance or achievements that may be expressed
      or
      implied by such forward-looking statements, including, among others, the factors
      described in “Item 1A. Risk Factors” and the factors otherwise referenced
      in this report. Should one or more of these risks or uncertainties materialize,
      or should underlying assumptions prove incorrect, actual results may vary
      materially from those described in the forward-looking statements included
      herein. We do not intend, and do not assume any obligation, to update these
      forward-looking statements.


2


**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 one customer for which we currently operate two
      lottery websites (one of which is a bingo site) and one server based video
      lottery program. 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 80.23% of the outstanding stock, and through NM-PLC’s wholly
      owned Irish subsidiary, 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.


3


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 in the Republic of Ireland under the
      Irish
      Companies Acts as a company limited by shares 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, 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. Industry
      sources estimate that there are in excess of 400 lotteries world-wide.
      Management believes that many more lotteries exist but do not report their
      sales
      to trade organizations and are not included in official tallies. Approximately
      20% of recognized lotteries 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. However, the
      preponderance of existing lotteries, large and small, subcontract all or part
      of
      their lottery operations and new product development to professional lottery
      service providers, such as our Company. These providers supply technology,
      products, operations, marketing and administrative support.


4


Some
      jurisdictions sanction or license multiple lotteries which may include both
      government-sponsored programs and programs promoted by charitable lottery
      organizations (CLOs). 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.





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.
      As
      of the end of 2005, approximately 120 international jurisdictions had
      implemented terminal based lottery systems. Additional jurisdictions,
      principally in Europe, Asia and Central America, currently are considering
      implementing terminal based lotteries. 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 that are not currently serviced
      by
      terminal based lottery service providers, such as small national and state
      lotteries and lotteries operated by CLOs. We seek to transform these smaller
      lotteries from exclusively off-line, paper based operations into comprehensive
      lotteries by applying our technology and expertise and to make the games they
      offer available through new media channels, including the Internet, cell phones,
      handheld wireless devices such as palm top computers, and interactive
      television. We also offer product development services for terminal based
      lotteries to national lottery programs.




Generally,
      the smaller national and state-operated lotteries and CLOs, that 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
      CLOs,
      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.


5





Frequently,
      small state-operated lotteries, CLOs 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 comprehend the full range of gaming
      opportunities available to them. Specifically, neither these organizations
      nor
      their personnel 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 CLOs operate, these lotteries target an
      older generation utilizing paper-based games. It is these entities that 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 have not garnered the attention of lottery service providers
      and
      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 necessary to attract, service and grow small to mid-size
      charitable lottery organizations.





We
      offer
      our clients the potential to expand into modern electronic 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 one client 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.


6





In
      September 2001, we entered into an agreement with Rehab Net Games Limited
      ("Rehab-Ireland"), 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-Ireland 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-Ireland in the event that we fail to pay 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. In December 2007,
      Rehab-Ireland launched approximately 20 server based terminals in Ireland that
      employ systems and offer games we developed. Rehab-Ireland advises us that
      Inspired will launch a significant number of additional terminals in the fourth
      quarter of 2008. We generate revenues based on a percentage of the net proceeds
      generated by these terminals. We currently advertise Rehab-Ireland's lottery
      web
      sites on other Internet sites, including an Irish social networking site we
      launched in 2007, which is the fourth largest referrer to the Rehab-Ireland
      web
      site and which recently began generating nominal revenues on its
      own.




Inspired
      advises us that it will incorporate the games we developed for its server-based
      terminals on machines it expects to place in the UK and other markets for which
      it will pay us of a percentage of the net proceeds generated by these terminals.
      Inspired has advised us that it has delayed a full-scale launch of its server
      based terminals in the UK until it can decipher changing legislation in the
      UK.
      We can not be certain when, if ever, Inspired will undertake a full-scale launch
      of its terminals in the UK. However, we are working closely with Inspired to
      identify additional markets in which to deploy these terminals.





Pursuant
      to an agreement dated December 17, 2001, we agreed to develop, manage and
      operate lottery games for Rehab Charities UK Limited ("Rehab-UK"). We commenced
      operating the Rehab-UK lottery in December 2003 and were undertaking test
      marketing of the site in contemplation of a commercial roll-out of the lottery.
      At this time, we have discontinued operating the Rehab-UK site and we are
      reviewing a number of alternative White Label Marketing programs for our UK
      lottery programs and expect to move forward/launch on one or more between at
      the
      end of 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 explore the possibility of delivering other lottery programs within
      Brazil. Cybercyte had been operating lotteries in the Brazilian market for
      several years and had been granted licenses to offer Internet lottery products
      in the Brazilian States of Para and Santa Catarina. Under the joint venture
      agreement, we agreed to provide the lottery systems and expertise for Internet
      lottery projects initiated in these states and Cybercyte principally was
      responsible for marketing efforts with respect to the Internet lotteries. We
      had
      developed Portuguese-language lottery products which we delivered to our client
      and had conducted extensive internal testing of our product offering but had
      not
      engaged in any marketing of the site. During July 2007, the national government
      of Brazil requested that all Internet gaming sites, including validly licensed
      state operated lottery sites such as our client’s, suspend operations. The
      government currently is reviewing all Internet gaming 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
      believes that our client holds a validly issued government license, is compliant
      with existing lottery rules and regulations and is current in the payment of
      all
      applicable taxes. Management is uncertain as to how long the review process
      will
      take or if it will be granted permission to re-launch over the coming months.
      As
      a result, the we are dissolving the joint venture and have reclassified the
      related investment and notes receivable as an expense. Management believes
      that
      the Brazilian market has great potential and will seek to develop alternative
      business relationships in Brazil beyond Cybercyte. We hope to utilize the
      infrastructure and games we developed for the Cybercyte lottery in any lottery
      in which we may become involved in Brazil in the future, if ever.


7





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 have agreed to 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 may seek to earn additional revenues by providing retailer services
      to other state lottery programs. Currently, the National Government of Venezuela
      has established an oversight group to monitor state lottery programs and we
      are
      awaiting clarification of new lottery operating rules before we commit further
      investment to this project.





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 to focus the Company’s limited resources and efforts on projects which
      it believes have 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 further provides that the parties will
      enter
      into an agreement in the future to cover other jurisdictions. The Company has
      agreed to provide Inspired with a range of services, including providing a
      minimum of seven lottery games per year, facilitating prize payouts; providing
      and maintaining all systems, software, servers and technical support; 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.





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.


8





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, management is advised that virtually any government licensed
      charity is entitled to offer lottery products via server based lottery terminals
      and that the Company is well positioned to capitalize on this new
      opportunity.





In
      December 2007, Rehab-Ireland launched approximately 20 server based terminals
      in
      Ireland that employ systems and offer games we developed. Rehab-Ireland advises
      us that Inspired will launch a significant number of additional terminals in
      the
      fourth quarter of 2008.





**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
      CLOs. 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.




We
      believe that 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.
      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. An affiliation with our organization increases the client’s
      technological capabilities to operate a modern lottery program and to deploy
      proven technologies that are in use worldwide. We demonstrate to our clients
      how
      to maximize the revenue generating potential of its government sanctioned gaming
      opportunity.





9




We
      believe that the services we provide and the end-product we deliver to our
      clients and, ultimately, the public, can 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 affords
      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
      inspire public confidence.





We
      believe that 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 re-brand our product repeatedly 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.





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 and we have the resources, 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 will seek to identify and partner with licensed local lottery
      managers who have secured the highest reputation for integrity. We expect that
      these entities may provide us with on-site and other services after installation
      of the lottery system. They will be required to possess the local knowledge
      necessary to navigate the differing regulatory requirements of each
      jurisdiction. We will 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.


10





We
      work
      with our clients to develop programs that are profitable, 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.





We
      construct robust Web sites for our clients capable of handling a high volume
      of
      traffic. We host the Web sites for our current operating client on servers
      located in Ireland. 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 team have extensive
      experience developing new lottery game formats. 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, and thus have lottery compliant
      methodologies. 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 electronic 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 seek to expand distribution of various games to include access
      by way of wireless devices and mobile telephones, as our resources permit.
      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.


11





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 in 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. 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.





**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 our president has cultivated during the course of his career. 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 president has many years of experience in the industry
      and has fostered and maintains 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 his 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 may agree to provide the funds required to implement a client’s
      lottery, if they are available, that are repaid from lottery proceeds on terms
      specified in our contract with a lottery.


12





In
      those
      jurisdictions that have regulations which require that lottery managers are
      licensed with the local gaming commission, we will retain or enter into
      partnerships with duly licensed local entities and consultants. These entities
      will have to be familiar with local gaming regulations and will assist us in
      developing and implementing lottery programs and systems that comply with all
      local laws. These licensees and consultants may agree to provide on-site and
      other services after installation of the lottery system.





We
      seek
      to enter into long-term agreements with our clients that extend for a period
      of
      at least five years. Our agreements usually are subject to automatic extensions
      for additional 5-year periods in the event we achieve certain negotiated
      benchmarks relating to the proceeds generated by a lottery and paid to the
      client.





Revenues
      under our client agreements are generally based upon a percentage of net lottery
      ticket sales. Net revenues is defined as gross revenues derived from ticket
      sales less 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. 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 Allied Irish Bank in Ireland
      to
      handle all financial transactions between us and our client 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. We design our games to attract the
      interest of potential players and comply with local regulations. We work closely
      with 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. We also monitor games being designed and deployed
      by
      other lottery service providers. 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 have 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 continually have 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.


13





**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.





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
      and Ireland. These servers are redundant systems which automatically restore
      data 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 an exclusive arrangement with a Las Vegas Gaming Inc. to utilize
      its
      approved and privileged gaming licensed lottery management system 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 charitable
      lotteries. We believe that present lottery service suppliers concentrate their
      marketing efforts on the large government operated lotteries. Government
      operated 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 charitable lottery market
      place nor the Internet/wireless lottery marketplace has been significantly
      penetrated and that these markets currently are under-serviced. We believe
      that
      by being the among the first companies dedicated to serving this market we
      can
      develop a competitive advantage over future industry
      participants.


14





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 required 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. Any larger lottery
      service provider entering this market and encouraging clients to explore this
      technology would do so at the peril of substantial capital loss, as it would
      decrease 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
      the jurisdictions in which we operate and will seek to operate are evolving
      and
      are subject to change, and the effect of such changes on our ongoing and
      potential operations cannot be predicted with certainty. In many jurisdictions
      existing regulations have not kept pace with current electronic gaming
      technology and governments are taking a closer look at their laws pertaining
      to
      electronic gaming. Evolving regulations in the UK and Venezuela have delayed
      the
      launch of products and lotteries we have developed for these markets. Regulatory
      actions taken by the Brazilian government have prompted us to abandon our
      efforts to develop lotteries in several Brazilian states, at a significant
      financial loss to us, until the regulatory environment settles.





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.


15





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.





We
      believe we are currently in 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 80.23% 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 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, and (iii) acted as NM-PLC’s financial broker and advisor in connection with
      the offering.





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.,for 20,205,129 ordinary shares of NM-PLC.





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:


16





·
            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,
                (ii)
                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.





Currently,
      NM-US’s only asset is the ordinary shares it owns in NM-PLC.





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 25,184,350 are outstanding, of
      which NM-US owns 20,205,129 shares (80.23%). 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.


17





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.





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 declared 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 13, 2008, our group had 17 full-time employees, including three persons
      in the US corporate office, twelve persons in Canada who engage in product
      development and two marketing specialists 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.


18





**We
      have significant debt.**





Over
      the
      last three years, we have borrowed an aggregate of $4 million from Comerica
      Bank
      and €1.3 million from Trafalgar Capital Specialized Investment Fund-FIS. The
      amounts borrowed from Comerica are evidenced by three promissory notes,
      including one in the principal amount of $1.5 million due on June 1, 2009,
      one
      in the principal amount of $600,000 due on June 1, 2009 and one in the principal
      amount of $1.9 million is due on February 20, 2009. The entire amount payable
      to
      Comerica has been jointly and severally guaranteed by Milton Dresner and Joseph
      Dresner, affiliates of the Company. Under the debenture we issued in favor
      of
      Trafalgar, that is secured by an interest in all of the assets of NM PLC, we
      must make twenty four equal monthly payments ranging from €62,000 to €72,000.
      Our debt may negatively impact our ability to obtain additional
      capital.




At
      April
      30, 2008, we had gross assets of $796,541. During the last fiscal year, we
      recorded revenues of $1,320,311 on net losses of approximately $2,599,557.
      If we
      are unable to repay the amounts due under the Comerica notes as 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 do not satisfy our
      obligations under the Trafalgar debenture, Trafalgar may exercise its rights
      to
      foreclose on our assets. Our failure to satisfy our financial obligations under
      the various instruments outstanding would have a material adverse affect on
      our
      Company and may cause us 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.**





As
      of the
      date hereof, we are operating lottery websites for only one client which
      commenced operations in 2005. 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, 2008, we incurred net
      losses of $2,599,557.





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
      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. We may also require funds to satisfy our obligations for amounts
      borrowed. To date, we have funded our operations through loans made or
      guaranteed by affiliates and the sale of equity in our Irish subsidiary. Our
      current revenue is insufficient to sustain or grow our operations. At April
      30,
      2008, we had cash and cash equivalents of $215,746 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. Our significant debt may impair our ability to
      obtain additional capital.


19





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.





**Affiliates
      of our Company previously have guaranteed our financial obligations under loans
      the proceeds of which were used to fund our operations. If these affiliates
      determine not to guarantee loans in the future, we may not have access to cash,
      which could severely impact our operations.**





Milton
      Dresner and Joseph Dresner, affiliates of the Company, have jointly and
      severally guaranteed all amounts due under loans aggregating of $4 million
      from
      Comerica Bank. If these persons do not continue to agree to guarantee our
      obligations under loans that we may require to fund our business in the future,
      cash may not be available to us in the future and we may not be able to sustain
      our operations, which could negatively impact our operations and jeopardize
      your
      investment in our Company.





**All
      of our operations are conducted through NM-PLC and it is the most likely entity
      in our group to receive equity financing. The Articles of Association of NM-PLC
      provide preemptive rights to existing shareholders, which 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 an agreement between NM-US and NM-PLC, all of the Company’s
      gaming operations are conducted through NM-PLC, making NM-PLC the most likely
      candidate to receive equity financing. 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 80.23% 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.





**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.


20





In
      some
      cases, the evolution of the Internet and electronic media in developing
      countries has outpaced existing gaming and lottery regulations. For example,
      as
      a result of the proliferation of unauthorized gaming web sites in Brazil, its
      government suspended all Internet based gaming until it develops and implements
      new regulations and determines what sites operate under valid licenses.
      Likewise, Venezuela has adopted new rules that have imperiled the continued
      operation of existing electronic lotteries. These new policies and rules have
      either prevented us from or caused us to rethink proceeding with the development
      of lotteries for our clients in these countries. In the case of our Brazilian
      operations, we recorded a $135,000 write-off for the last fiscal year. We may
      never develop lotteries for our existing clients in developing countries and
      may
      encounter hurdles in other developing countries in which we may seek to operate
      in the future that may prevent us from implementing lotteries in these
      jurisdictions, even after we have invested significant cash in these operations.





The
      operations of ongoing lotteries and lottery operators are typically subject
      to
      extensive and evolving regulation. While we expect to 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.





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.





**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 a significant portion of 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 devices 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.


21





**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.





**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.





**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 investors.


22





**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.





**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.


23





**Limitations
      on liability and indemnification matters.**





As
      permitted by the corporate laws of the State of Delaware, we have included
      in
      our Certificate of Incorporation a provision to eliminate the personal liability
      of its directors for monetary damages for breach or alleged breach of their
      fiduciary duties as directors, subject to certain exceptions. In addition,
      our
      By-Laws provide that we are required to indemnify our officers and directors
      under certain circumstances, including those circumstances in which
      indemnification would otherwise be discretionary, and we will be required to
      advance expenses to our officers and directors as incurred in connection with
      proceedings against them for which they may be indemnified.





**Because
      we will not pay dividends, stockholders will only benefit from owning common
      stock if it appreciates.**





We
      have
      never paid dividends on our common stock and we do not intend to do so in the
      foreseeable future. We intend to retain any future earnings to finance our
      growth. Accordingly, any potential investor who anticipates the need for current
      dividends from his investment should not purchase our common stock.





**You
      may not be able to sell your shares of common stock due to the absence of a
      trading market and thus you may never realize any monies from holding these
      securities.**





While
      our
      stock has been admitted to quotation on the Over-the-Counter Bulletin Board,
      there has been little trading to date. Since the commencement of trading, we
      believe that no more than 50,000 shares have been traded but that such activity
      represents cross trading. Consequently, we do not consider there to an
      established trading market for our common stock. 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.





**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 alternative 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, 2008 at a monthly rent of $7,871 (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 1,100
      Euros.





NM-PLC
      and New Media International maintain their registered offices in Ireland at
      20
      On Hatch, Lower Hatch Street, Dublin 2, Ireland and 4 Percy Place, Dublin 4,
      Ireland, respectively.


24





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 2008 fiscal
      year.





**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. Since the commencement of trading, we believe
      that no more than 50,000 shares have been traded and that such activity
      represents cross trading of stock among existing investors or their affiliates.
      Consequently, we do not consider there to be an established trading market
      for
      our common stock.





**Holders.**





At
      August
      11, 2008, there were 47 record holders of the Company's common stock. The
      number of holders of record does not include beneficial owners of our common
      stock whose shares are held in the names of various security holders, brokers
      and clearing agencies.





**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.





25




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





The
      following table sets forth information as of April 30, 2008, 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
            
            
            625,000
            
            $
            0.32
            
            
            1,375,000Equity
                compensation plans not approved by security holders
            
            
            1,000,000
            
            $
            0.35
            
            
            -Total
            
            
            1,625,000
            
            $
            0.34
            
            
            1,375,000





**Repurchases
      of Equity Securities.**





None.





**Recent
      Sales of Unregistered Securities.**





During
      the year ended April 30, 2008, we did not issue any securities.





**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.


26





**Overview
      of Operating Results and the 2008 Fiscal Year.**





During
      the fiscal year ended April 30, 2008, we recorded revenues of $1,320,311 on
      net
      losses of $2,599,557. For the three months ended April 30, 2008, we recorded
      revenues in excess of $428,000 on net losses of approximately $653,529. We
      continue to intensify marketing efforts in connection with our Irish client’s
      Internet bingo operations (which represents one of the websites we operate
      for
      this client) which have yielded positive results. 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. In
      June 2008, we borrowed the sum of €1.3 million for working capital. We expect
      that cash on hand, revenues generated from our client’s bingo website in Ireland
      and revenues we expect to recognize from electronic lottery kiosks that we
      expect will be distributed throughout Ireland starting in August 2008 will
      satisfy our immediate cash requirements for the coming fiscal year and provide
      us with the financial resources to grow our business. In addition, we are
      actively seeking additional financing.





During
      fiscal 2008, we encountered difficulties in our Brazilian and Venezuelan
      operations and do not expect to operate these lotteries during 2009, if ever.
      Our failure to develop lotteries in these jurisdictions has created a void
      for
      our Company both because we were expecting to commence revenue generating
      operations in both countries during the 2009 fiscal year and we do not have
      alternative projects standing by from which we could expect to generate revenues
      during the 2009 fiscal year.





**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
      2005-06 fiscal year.





We
      offer
      an integrated range of products and services to develop, build and host lottery
      programs for small and mid-sized state-operated and CLOs. 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.





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.





The
      Company currently generates in excess of 99% of revenues 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.’


27





We
      also
      anticipate deriving revenues from the delivery of lottery products and content
      to a variety of Internet-based kiosks. During the third quarter of calendar
      2008, we expect to begin recognizing revenues from the systems and games we
      have
      developed for use on Inspired’s server based terminals (Internet-based kiosks).
      We are advised that these server based terminals will be launched in Ireland
      on
      behalf of Rehab Ireland during the fall of 2008 and in the UK on behalf of
      Rehab
      UK potentially during 2009.





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.





**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
            developing
                gaming software for our clients’ lotteries and third
                parties.





During
      fiscal 2009, 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.





By
      completing the implementation of lottery systems for our Irish client 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,
      subject to the availability of financial resources to do so. As we have marketed
      Rehab-Ireland’s Internet bingo operations on an expanded basis over the last few
      fiscal quarters, the results have been promising as both the player base and
      the
      amount wagered per player has increased beyond expectations and we expect to
      see
      further growth in the coming year. Accordingly, we expect to devote significant
      financial resources to the continued development of this program employing
      both
      Internet advertising programs and marketing programs that seek to take advantage
      of that entity’s charitable affiliation by partnering with recognizable local
      brands.





During
      the second fiscal quarter of 2007, our clients Rehab-Ireland 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-Ireland. 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 full commercial
      basis in the summer of 2008, though we cannot be certain this time line will
      be
      met. Management expects that Inspired will potentially commence offering our
      games on up to 10,000 UK based terminals early in 2009 after the roll out of
      the
      Irish program. We will receive a portion of the net revenues generated by the
      kiosks.


28





Our
      near-term business priorities continue to be concentrated on the marketing
      and
      promotion of the Rehab-Ireland’s bingo and games sites to both increase the
      player base and the amount wagered per player and to support our server based
      terminal project. We will continue to monitor the status of government
      regulations in Venezuela to determine when, if ever, the opportunity arises
      to
      proceed with the completion of this project. 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.





The
      development of our operations in Venezuela will be dependent on a favorable
      outcome of current political uncertainties and available cash to fully develop
      the opportunity. 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. 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.





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, 2008, the Company reported a $2,599,557 net loss after
      minority interest on $1,320,311 in net revenues. The Company increased cash
      $19,489, leaving $215,746 in cash at April 30, 2008. For fiscal year 2008,
      operations used $2,518,887 in cash.





The
      Company’s cash and accounts receivable equal $549,523 in available resources to
      fund $826,260 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 2009 to fund the cash shortfall. The Company must
      also
      refinance their $1,900,000 third party debt in fiscal year 2009. As of April
      30,
      2008, current liabilities exceeded current assets by
      $6,731,796.


29





Net
      revenues increased by $748,316 to $1,320,311, or about 131% 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 decreased by $284,607 to approximately $1.1 million,
      representing a 20% decrease from the last fiscal year. While G&A expense
      decreased in several areas, the most significant decrease resulted from
      decreased travel expenses which decreased $100,850 to $101,862 or nearly
      50%.





For
      2008,
      professional fees decreased $287,968 to $640,243, or 31%. This decrease resulted
      from management’s ability to handle more professional functions internally that
      were previously contracted to outside professionals. Additionally, the Company
      has not engaged in any major restructurings or financing actions as previously
      conducted.





Website
      expenses increased by $513,669 to $1,286,371, or 66%. Rehab Bingo advertising
      and marketing expenses increased by approximately $263,000 to $733,459, or
      54%.
      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 $113,331 of the website expense
      increase during fiscal 2008 was paid as additional royalties reflecting
      additional 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, 2008, our available cash, receivables and liquid assets totaled
      approximately $549,523. We had outstanding loans of $4 million to unrelated
      parties and outstanding loans of $2,183,177 (not including accrued interest)
      to
      related parties. During fiscal 2008, we generated $1,320,311 net revenues from
      operations with net losses of $2,599,557.





In
      June
      2008, after the close of the period covered by this report, NM PLC borrowed
      the
      sum of €1,300,000 from Trafalgar Capital Specialized Investment Fund-FIS (the
      "Loan"). NM PLC received net proceeds from the loan of €1,116,889.90 after
      deducting all fees and expenses associated with the transaction and after the
      payment of two months of interest on the Loan (€17,333.33) and a finder's fee of
€65,000. The Loan bears interest at the rate of 8% per year and is evidenced
      by
      a debenture which also provides for the grant of a security interest in all
      of
      NM PLC's property, assets and receivables. The Loan matures on May 30, 2010
      (twenty four months from the date of disbursement) and is convertible at the
      option of the lender into ordinary shares of NM PLC, provided that such shares
      are eligible to trade on the AIM market. We are using the proceeds of the Loan
      for working capital.





We
      expect
      our principal sources of liquidity to be existing cash on hand and revenues
      generated from operations. We anticipate generating more meaningful revenues
      from operations as fiscal 2009 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.


30





We
      had
      anticipated that we would be generating revenues from three additional sources
      beyond Rehab-Ireland during fiscal 2008, including revenues derived from server
      based terminals being placed by Inspired and from lotteries to have been 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 or abandoned, as described below, and we have not realized any return
      on
      our investments in these businesses to date.





Inspired
      delayed a full-scale launch of its Internet based terminals until new
      legislation in the UK came into effect and now advises us that it expects to
      launch its server based terminals after August 2008, 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 within the anticipated
      time frame. The failure to recognize material revenue from our contract with
      Inspired during fiscal 2009 will impair our liquidity and capital resource
      position.





As
      to our
      client in Brazil, we have encountered political obstacles that have prevented
      us
      from taking further action. As a result we have elected to dissolve our joint
      venture in Brazil and have reclassified the related investment and promissory
      notes receivable as an expense. Management believes that the Brazilian market
      has great potential and has chosen to seek alternative business relationships
      in
      Brazil beyond Cybercyte. We hope to utilize the infrastructure and games we
      developed for Cybercyte lottery in any lottery in which we may become involved
      in Brazil in the future, if ever.





We
      had
      planned to launch the Venezuela lottery by May 2007; however, increased
      government oversight of the industry and revisions to the fee schedule to
      operate lotteries and other regulatory actions caused us to delay the project
      launch until these issues have been resolved. Accordingly, we expect to launch
      our project whenever we believe the market has absorbed the new rules and we
      possess the cash to implement the marketing aspects required for the project
      to
      succeed.





We
      believe that had the Brazilian and Venezuelan projects become operational within
      the time frame we had anticipated, that we would be generating material revenue
      from them to support our business. The failure to realize a return on our
      investments has negatively impacted our financial condition.





In
      addition to requiring cash to develop and market our client’s lotteries, amounts
      due under outstanding promissory notes become due during the fourth quarter
      of
      fiscal 2009 and beyond, as follows:





Principal
                Amount Due
            
            Due
                Date$1.5
                million
            
            
            June 1, 2009$600,000
            
            
            June 1, 2009$1.90 million
            
            
            February 20, 2009





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 the amounts
      payable into new notes, we may have to take radical action which could
      negatively impact the Company.


31




In
      addition, under the loan we received from Trafalgar in June 2008, we are
      required to make payments ranging from €62,000 to €72.000 per month through May
      2010. The loan is secured by an interest in all of our assets and any default
      under the loan could result in the loss of the assets comprising our
      business.





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. Our ability to secure new
      sources of capital may be impaired by our significant debt. 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 cost required to implement lotteries for new clients will
      decrease in the next several periods. As we are learn to more efficiently
      migrate the fundamental elements of the lottery infrastructure from one lottery
      to another, the time and cost to set-up and organize will decrease. We also
      expect that additional experience gained from our current operations will reduce
      the cost of acquiring customers and allow us to maximize gross revenues
      generated per customer. Moreover, 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.
      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.





**Financing
      Activities During Fiscal 2008.**





During
      fiscal 2008, we borrowed an aggregate of $750,000 against credit lines of $4
      million, none of which 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,
      which is fully drawn, becomes due on February 20, 2009 and the $1.5 million
      and
      $600,000 notes, which are fully drawn, become due on June 1, 2009. All of the
      Company’s repayment and other obligations under this note are guaranteed by each
      of Milton Dresner (a director of NM-US and NM-PLC) and Joseph Dresner, who
      are
      principal stockholders of NM-US.





32




**Contractual
        Obligations.**


The
      following table presents our contractual obligations and commercial commitments
      as of April 30, 2008:





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
            
            
            193,076
            
            
            154,813
            
            
            38,263Loans
                Payable
            
            
            4,000,000
            
            
            1,900,000
            
            
            2,100,000Total
                Contractual Cash Obligations
            
            
            4,193,076
            
            
            2,054,813
            
            
            2,138,263


The
      foregoing table does not reflect amounts to be repaid over the next two years
      on
      the €1.3 million loan made to NM PLC that call for monthly payments of principal
      and interest for the ensuing twenty four months.





**Recent
      Accounting Developments.**





None





**Critical
      Accounting Policies.**





None





**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’.


33





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 53.





**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, 2008 and 2007.




**Item
      8A. Controls and Procedures**





**Effectiveness
      of Disclosure**





Our
      management, with the participation of our chief executive officer, who is also
      our chief financial officer, evaluated the effectiveness of our disclosure
      controls and procedures as of April 30, 2008, 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, 2008, our chief executive 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, as
      appropriate, to allow timely decisions regarding required
      disclosure.





**Changes
      in Internal Control over Financial Reporting**




Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting, as such term is defined in Exchange Act Rules
      13a-15(f). Under the supervision and with the participation of management,
      including our principal executive officer, who is our principal financial
      officer, we conducted an evaluation of the effectiveness of our internal control
      over financial reporting. Based on our evaluation, our management concluded
      that
      our internal control over financial reporting was effective as of April 30,
      2008





There
      was
      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, 2008 that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial reporting.


34





**Item
      8B. Other Information.**





On
      June
      6, 2008, NM PLC borrowed the sum of €1,300,000 from Trafalgar Capital
      Specialized Investment Fund-FIS (the "Loan"). The Loan bears interest at the
      rate of 8% per year and is evidenced by a Debenture which also provides for
      the
      grant of a security interest in all of NM PLC's property, assets and receivables
      (the "Debenture"). The Loan matures on May 30, 2010 (twenty four months from
      the
      date of disbursement) and is convertible at the option of the lender into
      ordinary shares of NM PLC, provided that such shares are eligible to trade
      on
      the AIM market. The Loan is convertible at a conversion price (the "Conversion
      Price") equal to the lower of (i) the 120% of the VWAP (as defined below) on
      May
      29, 2008 or if no VWAP is available on such date, the closing bid price on
      such
      date and (ii) 85% of the lowest daily closing VWAP for the five consecutive
      trading days prior to the date on which lender gives notice of its intention
      to
      convert. For purposes of the Loan Agreement, the term "VWAP" means the volume
      weighted average price (as reported by Bloomberg) of the ordinary shares on
      AIM
      for that trading day.





The
      Company is required to repay the Loan in twenty four monthly installments
      ranging from between €62,000 to €72,000 per month through May 2010. Each such
      mandatory repayment is subject to a redemption premium of 12.5%. In the event
      that any such mandatory repayment is not made in full within 5 days of its
      due
      date, the lender shall have the option to receive ordinary shares in lieu of
      the
      cash payment at the Conversion Price. The Company may redeem any and all
      outstanding amounts of the Loan in its discretion at a premium of 12.5% at
      any
      time provided that its ordinary shares are trading at a price equal to 120%
      of
      the VWAP on May 29, 2008.





As
      additional consideration for the Loan, NM PLC issued to the lender warrants
      to
      purchase up to 1,500,000 ordinary shares at a price 5 pence per share through
      May 30, 2010. If the warrants are not exercised, NM PLC is required to pay
      the
      lender £60,000 (British Pounds Sterling).





NM
      PLC
      received net proceeds from the loan of €1,116,889.90 after deducting all fees
      and expenses associated with the transaction and after the payment of two months
      of interest on the Loan (€17,333.33) and a finder's fee of €65,000. NM PLC also
      issued to the finder, 249,935 ordinary shares for its services.





In
      connection with a certain loan made by Trafalgar Capital Specialized Investment
      Fund-FIS to NM PLC in the an aggregate of €1,300,000, as described elsewhere in
      the report, certain existing lenders to the Company, including Milton Dresner
      and Joseph Dresner, agreed to subordinate outstanding amounts due to them under
      other evidences of indebtedness to the Trafalgar loan. In addition, Milton
      and
      Joseph Dresner agreed to guarantee all amounts due to Comerica Bank under
      various promissory notes in the aggregate principal amount of $4
      million.


35





**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 13, 2008, (i) the officers and directors of
      the
      Company and (ii) the managing directors of NM-PLC, our 80.23% Irish subsidiary.





Name
            
            Age
            
            Title
            
            Period
                during
              which
                person has
              served
                as a director
              of
                NM-US
            
            Association
              with
                SubsidiariesJohn
                Carson
            
            53
            
            President,
                Chief Executive Officer and Director
            
            2004
            
            Chief
                Executive Officer, Director of NM-PLC since 2006 and a director of
                New
                Media International since 2001Sterling
                Herbst
            
            41
            
            Secretary,
                Director
            
            2008
                (June)Milton
                Dresner
            
            83
            
            Director
                and Chairman
            
            2004
            
            Non-executive
                director and secretary of NM-PLC since 2006 and non-executive director
                of
                New Media International since 2001The
                Rt. Hon. Lord Benjamin Lloyd Stormont Mancroft
            
            51
            
            
            
            
            
            Non-executive
                director and the non-executive chairman of NM-PLC since
                2006Nigel
                Blythe-Tinker
            
            57
            
            
            
            
            
            Non-executive
                director of NM-PLC since 2008Paula
                Horan
            
            40
            
            
            
            
            
            Non-executive
                director and Secretary of NM-PLC since 2006 and non-executive director
                and
                Secretary of New Media International since
                2003





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.


36





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.





Sterling
      Herbst has been a director of our company since June 2008, has served as our
      corporate secretary 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.





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 41 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
      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 former director of the
      Company.





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.


37





Nigel
      Blythe-Tinker Ll.B., FCIS, was appointed to serve as a director of NM-PLC in
      March 2008. Nigel has extensive experience both in the UK and internationally
      across the recruitment and gaming sectors, having held senior executive and
      non
      executive positions in FTSE 100 and AIM listed companies. He is a lawyer and
      chartered company secretary by training, his City experience spans over 30
      years
      - having specialized in Main Market and AIM flotations, mergers and
      acquisitions, corporate finance/restructuring and corporate governance. Nigel
      is
      currently a Non Executive Director of Gaming VC SA (having previously been
      Chairman), a Non Executive Director of Sports Media Group Plc and Executive
      Chairman of Pentasia Ltd.





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, 2008, 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 were
      all
      filed on a timely basis, except that the Form 5 to report the resignation of
      Mr.
      Winters was filed late.





**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;





·
            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


38





·
            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 the 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, as described under the heading
      "Business - The AIM Offering and the Relationship between NM-US and
      NM-PLC."


.


*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 five percent of the outstanding shares
      of
      our capital stock, shall not be considered independent. As of the date hereof,
      none of our directors qualifies as an "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.





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, 2008, the Board of Directors held one meeting held by teleconference. All
      directors attended the sole board meeting except for Mr. Winters. 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.


39





**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*





During
      a
      portion of the last fiscal year, we maintained an audit committee comprised
      of
      Messrs. Joseph Dresner, Milton Dresner and Frederick Winters. Mr. Winters,
      who
      resigned on February 1, 2008, qualified as an independent director. Under the
      provisions of its charter, the audit committee is required to meet 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. However, in light of Mr. Dresner's health, which
      caused him to resign from all positions held with the Company in June 2008,
      and
      Mr. Winters extended periods outside the country, the audit committee did not
      meet with either management or the Company's auditor at all during fiscal 2008.
      The Audit Committee was dissolved in February 2008. In accordance with SEC
      regulations, our entire board of directors now serves as our audit committee.
      None of the members of our board of directors is independent nor does any of
      them qualify as a "financial expert." The board does not believe that at this
      time our Company requires a separate audit committee given that all of our
      business is conducted through our subsidiaries. Our direct subsidiary, NM-PLC,
      the ordinary shares of which are traded on AIM, maintains an audit committee
      in
      accordance with AIM rules





**Shareholder
      Communications.**





The
      Company does not presently provide a process for security holders to send
      communications to the board of directors. The board of directors has not adopted
      procedures by which security holders may recommend nominees to the Company's
      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.





**Item
      10. Executive Compensation.**





During
      the fiscal year ended April 30, 2008, all of our employees were remunerated
      by
      our indirect subsidiary, New Media Lottery International for all services
      rendered to our group. NM-US did not pay or otherwise remunerate directly any
      employee during the last fiscal year.





**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.


40





**Executive
      Compensation.**





The
      table
      below provides information about compensation paid to our principal executive
      officer and principal financial officer (the "named executive officers"), who
      were the only persons to receive compensation in excess of $100,000 during
      the
      periods covered.





**SUMMARY
      COMPENSATION TABLE**




**Name
                and**
              **Principal
                Position**
            
            **Year**
            
            **Salary($)**
            
            **Bonus
                ($)**
            
            **Stock**
              **Awards**
              **($)**
            
            **Option**
              **Awards**
              **($)**
            
            **Non-Equity
                IncentivePlan Compensation($)**
            
            **Non-**
              **Qualified
                Deferred**
              **Compen-**
              **sation**
              **Earnings**
              **($)**
            
            **All**
              **Other**
              **Compen****-**
              **sation($)**
            
            **Total**John
                T. Carson, Chief Executive Officer (principal executive
                officer)
            
            
            2008
              2007
            
            $
              $
            136,000
              192,000
            
            
            
            
            
            
            
            
            -0-
              -0-
            
            
            
            
            
            
            
            
            14,400
              14,400
            (1)
              (1)
            
            150,400206,400Randolph
                Brownell, III, Chief Financial Officer (principal financial
                officer)
            
            
            2008
              2007
            
            $
              $
            35,000
              168,000
            
            
            
            
            
            
            
            
            -0-
              -0-
            
            
            
            
            
            
            
            
            3,600
              64,400
            (1)
              (2)
            
            38,600232,400


Certain
      columnar information required by Item 402(c)(2) of Regulation S-K has been
      omitted for categories where there has been no compensation awarded to, or
      paid
      to, the named executive officers required to be reported in the table during
      fiscal years ended April 30, 2008 and April 30, 2007.





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 fiscal year ended
      2007.





**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, 2007 and 2008, the Company paid Randolph
      Brownell, III, our former chief financial officer, $50,000 and $0, respectively.
      The deferred compensation paid to this individual accumulated during the period
      2003 to 2005.





In
      addition, pursuant to their respective employment contracts, Messrs. Carson
      and
      Brownell (our former chief financial officer) received $14,400 and $3,600
      respectively in car allowance during the fiscal year ended April 30,
      2008.


41




*NM-PLC
      Employment Agreements*





Pursuant
      to an employment agreement dated March 13, 2008, 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 term of the
      agreement is for a period of twenty-four 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 NM-PLC on November 14, 2005.





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 served as a non-executive director and the secretary of NM-PLC since
      March 2006 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 served as a non-executive director of NM-PLC since March
      2006 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, 2008. 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.**





NM-US
      did
      not grant any options to purchase securities during the fiscal year ended April
      30, 2008.





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





The
      following table sets forth additional information as of April 30, 2008,
      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/$0




42





**Outstanding
      Equity Awards at Fiscal Year End**





Below
      is
      information relating to unexercised options held by John T. Carson, our Chief
      Executive Officer, as of April 30, 2008. No other named executive officer held
      any unexercised options or unvested stock as of such date.





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, 2015








**Item
      11. Security Ownership of Certain Beneficial Owners and
      Management**





The
      following table sets forth, as of August 13, 2008, certain information regarding
      beneficial ownership of our common stock by each person who is known by us
      to
      beneficially own more than 5% of our common stock. The table also identifies
      the
      stock ownership of each of our directors, each of our named executive officers,
      and all directors and officers as a group. Except as otherwise indicated, the
      stockholders listed in the table have sole voting and investment powers with
      respect to the shares indicated.




Shares
      of
      common stock which an individual or group has a right to acquire within 60
      days
      pursuant to the exercise or conversion of options, warrants or other similar
      convertible or derivative securities are deemed to be outstanding for the
      purpose of computing the percentage ownership of such individual or group,
      but
      are not deemed to be outstanding for the purpose of computing the percentage
      ownership of any other person shown in the table.


43





The
      applicable percentage of ownership is based on 21,442,143 shares outstanding
      as
      of August 13, 2008.





Name of
              Beneficial Owner (1)
            
            Amount of
              Beneficial
              Ownership
              NM-US
              Common Stock
            
            Percent of
              Outstanding
              Class of
              NM-US
              Common Stock
              Owned
            
            Amount of
              Beneficial
              Ownership
              NM-PLC
              Ordinary Shares
            
            Percent of
              Outstanding
              Class of
              NM-PLC
              Ordinary Shares
              Owned (2)John
                Carson (3)
            
            2,187,714
            
            9.62
            %Sterling
                Herbst (4)
            
            
            96,429
            
            
            *Milton
                Dresner
            
            
            7,000,000
            
            
            32.65
            %
            
            901,925
            
            
            3.58
            %Joseph
                Dresner
            
            
            7,000,000
            
            
            32.65
            %
            
            901,925
            
            
            3.58
            %The
                Rt. Hon. Lord Benjamin Lloyd Stormont Mancroft (5)
            
            
            -0-
            
            
            -0-
            
            
            100,000
            
            
            *Paula
                Horan (6)
            
            
            -0-
            
            
            -0-
            
            
            3
            
            
            *Nathan
                Miller (7)
            
            
            3,345,715
            
            
            15.60
            %
            
            -0-
            
            
            -0-All
                officers and directors as a group (3 persons) (8)
            
            
            8,684,143
            
            
            40.69
            %
            
            901,925
            
            
            3.58
            %


*
      Less
      than 1%.





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


(2)
            Based
                on 25,184,350 ordinary shares of NM-PLC
                outstanding.


(3)
            Includes
                600,000 shares of common Stock held by The John C. Carson Revocable
                Trust
                for which Mr. Carson is the trustee and options to purchase 1,300,000
                shares of common stock.


(4)
            Includes
                21,429 shares of common stock and options to purchase 75,000 shares
                of
                common stock.


(5)
            The
                Rt. Hon. Lord Benjamin Lloyd Stormont Mancroft is a director of
                NM-PLC.


(6)
            Ms.
                Horan is a director of NM-PLC.


(7)
            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.


(8)
            Includes
                options to purchase an aggregate of 1,375,000 shares of common
                stock.





**Compensation
      Plans.**





We
      have
      not adopted any compensation plans for the benefit of our employees,
      representatives or consultants. The Company does not have outstanding any
      options, warrants or other rights outstanding that entitle anyone to acquire
      shares of capital stock.


44





**Item
      12. Certain Relationships and Related Transactions.**





On
      April
      30, 2006, the Company executed a promissory note in favor of Milton Dresner
      that
      entitled it to borrow up to an aggregate of $2 million, subject to cancellation
      by Mr. Dresner at any time. Amounts borrowed under this note are payable on
      demand and bear interest at the prime rate of interest plus 2%. During the
      period March 2, 2006 through October 31, 2007, the Company borrowed an aggregate
      of $525,000 under this note and has accrued interest of $52,569 on such
      borrowings. The proceeds of the loans made under this note were used for general
      working capital purposes. The entire amount of principle and accrued interest
      remain outstanding. Loans extended by Mr. Dresner to the Company after October
      31, 2007 are described in the ensuing paragraph. Milton Dresner is a director
      of
      each of NM-US, NM-PLC and New Media International and is a principal stockholder
      of NM-US





On
      November 1, 2007, the Company executed a promissory note in favor of Milton
      Dresner that entitles it Company to borrow up to an aggregate of $2 million,
      subject to cancellation by Mr. Dresner at any time. Amounts borrowed under
      this
      note are payable on demand and bear interest at the prime rate of interest
      plus
      3%. During the period November 1, 2007 through April 30, 2008, the Company
      borrowed an aggregate of $392,500 under this note and has accrued interest
      of
      $8,292 on such borrowings. The proceeds of the loans made under this note were
      used for general working capital purposes. The entire amount of principle and
      accrued interest remain outstanding. Mr. Dresner no longer loans money to the
      Company under the terms of the note described in the foregoing paragraph and
      all
      such loans after October 31, 2007 are made under this note.





During
      April 2008, Milton Dresner loaned the Company $200,000 which it paid with
      interest of $116 or 5.25% in April 2008.





On
      October 31, 2007, the Company executed a promissory note in favor of Joseph
      Dresner that entitled it to borrow up to an aggregate of $2 million, subject
      to
      cancellation by Mr. Dresner at any time. Amounts borrowed under this note are
      payable on demand and bear interest at the prime rate of interest plus 2%.
      During the period August 27, 2007 through October 31, 2007, the Company borrowed
      an aggregate of $260,000 an amount under this note and has accrued interest
      of
      $14,858 on such borrowings. The proceeds of the loans made under this note
      were
      used for general working capital purposes. The entire amount of principle and
      accrued interest remain outstanding. Joseph Dresner is a principal stockholder
      of NM-US and a former director of NM-US, NM-PLC and New Media
      International.





On
      January 31, 2008, the Company executed a promissory note in favor of Joseph
      Dresner that entitles it Company to borrow up to an aggregate of $2 million,
      subject to cancellation by Mr. Dresner at any time. Amounts borrowed under
      this
      note are payable on demand and bear interest at the prime rate of interest
      plus
      3%. During the period November 14, 2007 through April 30, 2008, the Company
      borrowed an aggregate of $622,500 under this note and has accrued interest
      of
      $15,233 on such borrowings. The proceeds of the loans made under this note
      were
      used for general working capital purposes. The entire amount of principle and
      accrued interest remain outstanding. Mr. Dresner no longer loans money to the
      Company under the terms of the note described in the foregoing paragraph and
      all
      such loans after October 31, 2007 are made under this note.





During
      the period November 21, 2006 through January 30, 2007, Milton Dresner 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.


45





On
      February 13, 2007, Joseph Dresner, 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 July 2007, the Company borrowed the sum of
      $4.0
      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 had been lending funds to the Company 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.





Milton
      Dresner and Joseph Dresner 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.




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, 2008, NM-US was indebted to Mr. Miller in the amount of $183,177, plus
      $60,698 in accrued interest, which is repayable on terms to be
      determined.





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.**





The
      following are filed as exhibits to this report:





Exhibit No.
            
            Exhibit Title
            
            Location Reference2.1
            
            Share
                Exchange Agreement dated March 19, 2004 by and among the Registrant,
                Lottery Network Services Ltd. and the holders of all of the outstanding
                shares of capital stock of 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 by and between New Media
                Lottery
                Services, Inc., a Virginia corporation, and New Media Lottery Services,
                Inc., a Delaware 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 to change 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
            
            9




47




10.1
            
            Agreement
                dated September 13, 2001, as amended as of January 26, 2004 by and
                between
                Lottery Network Services Ltd. and Rehab Net Games Limited.
            
            210.2
            
            Agreement
                dated December 12, 2001 by and between Lottery Network Services Ltd.
                and
                Rehab Charities UK Limited.
            
            210.3
            
            Agreement
                dated November 27, 2001 by and between Lottery Network Services Ltd.
                and
                Tropical Gaming Ltd., Belize.
            
            210.4
            
            Agreement
                dated February 12, 2002 by and between Lottery Network Services Ltd.
                and
                Guatemalan Pediatric Foundation.
            
            210.5
            
            Agreement
                dated December 7, 2001 by and between Lottery Network Services Ltd.
                and
                Intellect Foundation.
            
            210.6
            
            Agreement
                dated February 3, 2004 by and between Lottery Network Services Ltd.
                and
                Carnegie Cooke & Company Inc.
            
            210.7
            
            Joint
                Venture Agreement dated October 28, 2004 by and between New Media
                Lottery
                Services, Inc. and Cybercyte Sistemas e Serviços Ltda.
            
            710.8
            
            Agreement
                dated May 6, 2005 by and between New Media Lottery Services, Inc.
                and
                Alladdin Lotteries Limited.
            
            710.9
            
            Quota
                Holders Agreement dated June 22, 2005 by and between New Media Lottery
                Services, Inc. and Cybercyte Sistemas e Serviços Ltda.
            
            710.10
            
            Agreement
                dated June 7, 2005 by and between New Media Lottery 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 Milton Dresner 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 Joseph Dresner 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. and New Media Lottery Services
                (International) Limited.
            
            910.18
            
            Technology
                License Agreement dated March 13, 2006 between New Media Lottery
                Services,
                Inc. and New Media Lottery Services (International)
                Limited.
            
            910.19
            
            Sublicense
                Agreement dated March 13, 2006 between New Media Lottery Services,
                Inc.
                and New Media Lottery Services (International) Limited.
            
            910.20
            
            Employment
                Agreement, dated March 13, 2006 between New Media Lottery Services
                plc and
                John T. Carson.
            
            910.21
            
            Employment
                Agreement, dated March 13, 2006 between New Media Lottery Services
                plc and
                Randolph H. Brownell, III.
            
            910.22
            
            Supplemental
                Letter to Employment Agreement, dated March 13, 2006 between New
                Media
                Lottery Services plc and John T. Carson.
            
            910.23
            
            Relationship
                Deed dated March 13, 2006 between New Media Lottery 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 Media Lottery Services
                International, Ltd. and Inspired Broadcast Networks
            
            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.
            
            1110.30
            
            Convertible
                Loan Agreement dated June 6, 2008 between Trafalgar Capital Specialized
                Investment Fund-FIS and New Media Lottery Services, plc
            
            1110.31
            
            Debenture
                made by New Media Lottery Services, plc in favor of Trafalgar Capital
                Specialized Investment Fund-FIS
            
            1114
            
            Code
                of Ethics
            
            516
            
            Letter
                of Earl M. Cohen, CPA, PA, on change in certifying
                accountant.
            
            431.1
            
            Certification
                of the Company’s Principal Executive Officer and Principal Financial
                Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.
            
            1231.2
            
            Certification
                of the Company’s Principal Executive Officer and Principal Financial
                Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                Section
                906 of the Sarbanes Oxley Act of 2002.
            
            1232.1
            
            Section
                1350 Certification
            
            12





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.
            Previously
                filed with the Current Report on Form 8-K as filed with the Securities
                and
                Exchange Commission on June 9,
                2008.


12.
            Filed
                herewith.


50





**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 2008 fiscal year ending on April 30, 2008 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 2007 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 $33,000 (including
      direct engagement expenses).





AUDIT-RELATED
      FEES. The aggregate fees billed by Bouwhuis, Morrill & Company for
      audit-related services rendered for the Company for the 2008 fiscal year were
      $0. The aggregate fees billed Bouwhuis, Morrill & Company for audit-related
      services rendered for the Company and its subsidiaries for the 2007 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 2008 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 2007 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 2008 fiscal year and $0 for the
      2007
      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.


51


**ITEM
      7. FINANCIAL STATEMENTS**





**NEW
      MEDIA LOTTERY SERVICES, INC.**


**&
      SUBSIDIARIES**





Financial
      Statements for the Years


Ended
      April 30, 2008 and 2007


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
              58Notes
                  to the Consolidated Financial Statements
              59-68
  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, 2008 and the related
        consolidated statements of operations, stockholders’ deficit and cash flows for
        the years ended April 30, 2008 and 2007. 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, 2008 and the
        consolidated results of their operations and their cash flows for the years
        ended April 30, 2008 and 2007 in conformity with accounting principles generally
        accepted in the United States of America.
 
 We
        were
        not engaged to examine management’s assertion about the effectiveness of the
        Company’s internal control over financial reporting as of April 30, 2008
        included in the accompanying Management’s Report on Internal Control over
        Financial Reporting and, accordingly, we do not express an opinion
        thereon.
 
 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
        1,
        2008
  54




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


Consolidated
      Balance Sheet


As
      at
      April 30, 2008





ASSETSCURRENT
                ASSETSCash
                and cash equivalents
            
            $
            215,746Accounts
                receivable, net
            
            
            333,777Marketable
                securities (Note 3)
            
            
            3,000Prepaid
                assets
            
            
            82,508Total
                Current Assets
            
            
            635,031PROPERTY
                AND EQUIPMENT, NET
            
            
            161,510TOTAL
                ASSETS
            
            $
            796,541LIABILITIES
                AND STOCKHOLDERS' DEFICITCURRENT
                LIABILITIESAccounts
                payable and accrued expenses
            
            $
            826,260Other
                payable
            
            
            92,425Deferred
                compensation
            
            
            62,500Due
                to related parties (Note 4)
            
            
            202,465Notes
                payable
            
            
            4,000,000Loans
                payable - related parties
            
            
            2,183,177Total
                Current Liabilities
            
            
            7,366,827TOTAL
                LIABILITIES
            
            
            7,366,827MINORITY
                INTEREST
            
            
            2,887,722STOCKHOLDERS'
                DEFICITCommon
                stock, $0.001 par value; 50,000,000 shares authorized, 21,442,143
                shares
                issued and outstanding
            
            
            21,442Additional
                paid-in capital
            
            
            3,335,688Accumulated
                deficit
            
            
            (12,923,096
            )Accumulated
                other comprehensive incomeForeign
                currency translation adjustment
            
            
            104,958Unrealized
                gain on marketable securities
            
            
            3,000Total
                Stockholders' Deficit
            
            
            (9,458,008
            )TOTAL
                LIABILITIES AND STOCKHOLDERS' DEFICIT
            
            $
            796,541


55





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


Consolidated
      Statements of Operations





For the Years EndedApril 30,2008
            
            2007NET
                REVENUES
            
            $
            1,320,311
            
            $
            571,995OPERATING
                EXPENSESDepreciation
                and amortization expense
            
            
            138,447
            
            
            153,786General
                and administrative
            
            
            1,123,908
            
            
            1,408,515Loss
                on sale of property and equipment
            
            
            53,680
            
            
            85,353Management
                fees
            
            
            90,039
            
            
            140,682Professional
                fees
            
            
            640,243
            
            
            928,211Programming
                fees
            
            
            719,097
            
            
            672,145Rent
                expense
            
            
            121,996
            
            
            98,609Contract
                Development
            
            
            3,000
            
            
            92,500Website
                expense
            
            
            1,286,371
            
            
            772,702Total
                Operating Expenses
            
            
            4,176,781
            
            
            4,352,503LOSS
                FROM OPERATIONS
            
            
            (2,856,470
            )
            
            (3,780,508
            )OTHER
                INCOME (EXPENSES)Cancellation
                of debt
            
            
            -
            
            
            50,000Interest
                income
            
            
            148
            
            
            7,428Interest
                expense
            
            
            (352,477
            )
            
            (166,222
            )Total
                Other Income (Expenses)
            
            
            (352,329
            )
            
            (108,794
            )NET
                LOSS BEFORE INCOME TAXES ANDMINORITY
                INTEREST
            
            
            (3,208,799
            )
            
            (3,889,302
            )PROVISION
                FOR INCOME TAXES
            
            
            -
            
            
            -MINORITY
                INTEREST IN SUBSIDIARIES LOSSES
            
            
            609,242
            
            
            680,547NET
                LOSS
            
            $
            (2,599,557
            )
            $
            (3,208,755
            )BASIC
                AND DILUTED NET LOSS PER SHARE
            
            $
            (0.12
            )
            $
            (0.15
            )WEIGHTED
                AVERAGE NUMBER OFSHARES
                OUTSTANDING
            
            
            21,442,143
            
            
            21,442,143OTHER
                COMPREHENSIVE INCOMENET
                LOSS
            
            $
            (2,599,557
            )
            $
            (3,208,755
            )Foreign
                currency translation adjustment
            
            
            (7,289
            )
            
            312,238Unrealized
                gain (loss) on marketable securities
            
            
            (15,000
            )
            
            -COMPREHENSIVE
                LOSS
            
            $
            (2,621,846
            )
            $
            (2,896,517
            )




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, 2006
            
            
            21,442,143
            
            $
            21,442
            
            $
            3,335,688
            
            $
            (7,114,784
            )
            $
            71,590
            
            $
            3,927,612Consolidation
                of subsidiaries
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (484,952
            )Foreign
                currency translation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            58,657
            
            
            -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
            
            
            130,247
            
            
            3,442,660Consolidation
                of subsidiaries
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (554,938
            )Unrealized
                loss on marketable securities
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (15,000
            )
            
            -Foreign
                currency translation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (7,289
            )
            
            -Net
                loss for the year endedApril
                30, 2008
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,599,557
            )
            
            -
            
            
            -Balance,
                April 30, 2008
            
            
            21,442,143
            
            $
            21,442
            
            $
            3,335,688
            
            $
            (12,923,096
            )
            $
            107,958
            
            $
            2,887,722


57





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


Consolidated
      Statements of Cash Flows





For the Years EndedApril 30,2008
            
            2007CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                loss
            
            $
            (2,599,557
            )
            $
            (3,208,755
            )Adjustments
                to reconcile net loss to net cash used by operating
                activities:Depreciation
                expense
            
            
            138,447
            
            
            153,786Loss
                on disposition of assets
            
            
            53,679
            
            
            85,353Subsidiary
                stock issued for non cash expense
            
            
            54,305
            
            
            39,118Minority
                interest in subsidiaries losses
            
            
            (609,243
            )
            
            (680,547
            )Change
                in operating assets and liabilities:Accounts
                receivable
            
            
            (109,346
            )
            
            (169,547
            )VAT
                receivable
            
            
            180,554
            
            
            (3,904
            )Accounts
                payable and accrued expenses
            
            
            349,948
            
            
            110,161Deferred
                compensation
            
            
            -
            
            
            (50,000
            )Prepaid
                assets
            
            
            22,326
            
            
            1,510Net
                Cash Used by Operating Activities
            
            
            (2,518,887
            )
            
            (3,722,825
            )CASH
                FLOWS FROM INVESTING ACTIVITIESPurchases
                of property and equipment
            
            
            (39,917
            )
            
            (122,247
            )Net
                Cash Used by Investing Activities
            
            
            (39,917
            )
            
            (122,247
            )CASH
                FLOWS FROM FINANCING ACTIVITIESProceeds
                from issuance of notes payable
            
            
            750,000
            
            
            1,750,000Proceeds
                from issuance of notes payable, related parties
            
            
            1,850,000
            
            
            300,000Payments
                on notes payable, related parties
            
            
            -
            
            
            (300,000
            )Net
                Cash Provided by Financing Activities
            
            
            2,600,000
            
            
            1,750,000EFFECT
                OF FOREIGN CURRENCYTRANSLATION
                ADJUSTMENT
            
            
            (21,707
            )
            
            48,446NET
                INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            19,489
            
            
            (2,046,626
            )CASH
                AND CASH EQUIVALENTS, BEGINNING OF PERIOD
            
            
            196,257
            
            
            2,242,883CASH
                AND CASH EQUIVALENTS, END OF PERIOD
            
            $
            215,746
            
            $
            196,257SUPPLEMENTAL
                DISCLOSURES:Cash
                paid for interest
            
            $
            283,240
            
            $
            152,672Cash
                paid for income taxes
            
            $
            -
            
            $
            -




58




**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2008 and 2007




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 owned 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.


59


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2008 and 2007


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
            
            $
            110,053Furniture
                & Equipment
            
            
            7
                Years
            
            
            7,805Computer
                Software
            
            
            3
                Years
            
            
            286,916Less
                - Accumulated Depreciation & Amortization
            
            
            
            
            
            (234,264
            )Net
                Property and Equipment
            
            
            
            
            $
            161,510





Depreciation
                and amortization expense for the years ended April 30, 2008 and 2007
                was
                $138,447 and $153,786,
                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 30,2008
            
            2007Net loss
                (numerator)
            
            $
            2,599,557
            
            $
            3,208,755Weighted
                average shares outstanding (denominator)
            
            
            21,442,143
            
            
            21,442,143Loss
                per share amount
            
            $
            0.12
            
            $
            0.15





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, 2008.





Options
            
            
            1,625,000
            
            
            sharesWarrants
            
            
            200,000
            
            
            shares


60


**NEW
          MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
          to
          the Consolidated Financial Statements
 April
          30,
          2008 and 2007
  NOTE
                    2 -
                SIGNIFICANT
                    ACCOUNTING POLICIES (Continued)  g.  Recent
              Accounting Pronouncements


In
        February 2007, the Financial Accounting Standards Board (“FASB”) issued FASB
        Statement No. 159, “The Fair Value Option for Financial Assets and Financial
        Liabilities — Including an Amendment of FASB Statement No. 115, Accounting for
        Certain Investments in Debt and Equity Securities” (“SFAS No. 159”). SFAS No.
        159 permits an entity to choose to measure many financial instruments and
        certain items at fair value. The objective of this standard is to improve
        financial reporting by providing entities with the opportunity to mitigate
        volatility in reporting earnings caused by measuring related assets and
        liabilities differently without having to apply complex hedge accounting
        provisions. SFAS No. 159 permits all entities to choose to measure eligible
        items at fair value at specified election dates. Entities will report unrealized
        gains and losses on items for which the fair value option has been elected
        in
        earnings at each subsequent reporting date. The fair value option: (a) may
        be
        applied instrument by instrument, with a few exceptions, such as investments
        accounted for by the equity method; (b) is irrevocable (unless a new election
        date occurs); and (c) is applied only to entire instruments and not to portions
        of instruments. SFAS No. 159 is effective as of the beginning of an entity’s
        first fiscal year that begins after November 15, 2007. Early adoption is
        permitted. We are currently evaluating the impact that the adoption of SFAS
        No.
        159 will have on our consolidated financial statements.
 
 In
        December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS
        141(R)”). SFAS 141(R) replaces SFAS No. 141, “Business Combinations”, but
        retains the requirement that the purchase method of accounting for acquisitions
        be used for all business combinations. SFAS 141(R) expands on the disclosures
        previously required by SFAS 141, better defines the acquirer and the acquisition
        date in a business combination, and establishes principles for recognizing
        and
        measuring the assets acquired (including goodwill), the liabilities assumed
        and
        any non-controlling interests in the acquired business. SFAS 141(R) also
        requires an acquirer to record an adjustment to income tax expense for changes
        in valuation allowances or uncertain tax positions related to acquired
        businesses. SFAS 141(R) is effective for all business combinations with an
        acquisition date in the first annual period following December 15, 2008;
        early
        adoption is not permitted. The impact of SFAS 141(R) will have on our
        consolidated financial statements will depend on the nature and size of
        acquisitions we complete after we adopt SFAS 141(R).
 
 In
        December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
        Consolidated Financial Statements-an amendment of ARB No. 51” (SFAS 160). SFAS
        160 requires that non-controlling (or minority) interests in subsidiaries
        be
        reported in the equity section of the company’s balance sheet, rather than in a
        mezzanine section of the balance sheet between liabilities and equity. SFAS
        160
        also changes the manner in which the net income of the subsidiary is reported
        and disclosed in the controlling company’s income statement. SFAS 160 also
        establishes guidelines for accounting for changes in ownership percentages
        and
        for deconsolidation. SFAS 160 is effective for financial statements for fiscal
        years beginning on or after December 1, 2008 and interim periods within those
        years; early adoption is not permitted. The adoption of SFAS 160 is not expected
        to have a material impact on our financial position, results of operations
        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, 2008 and 2007.
 
 At
        April
        30, 2008, the Company has an approximately $270,000 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 nor the foreign subsidiaries expect any income tax expense
        for
        the year ended April 30, 2008.


61


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2008 and 2007


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,
                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, 2008.





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, 2008
                the Company had uninsured cash balances of $2,247 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, 2008 and 2007 were $825,148
                and
                $470,791, respectively.


62


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2008 and 2007


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, 2008 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
                30,2008Fair
                value of marketable securities at beginning of year
            
            $
            18,000Realized
                gain (loss) on marketable securities
            
            
            -Proceeds
                from the sale of marketable securities
            
            
            -Unrealized
                gain (loss) on marketable securities
            
            
            (15,000
            )Fair
                value of marketable securities at end of year
            
            $
            3,000





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, 2008 and 2007 (see
                Note
                9).


63


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2008 and 2007


NOTE
                4 -
            RELATED
                PARTY TRANSACTIONS (Continued)





Nathan
                Miller


As
                April 30, 2008, 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 $60,698 in accrued interest,
                which is repayable on terms to be
                determined.


Milton
      Dresner


During
                fiscal years 2008 and 2006, Milton Dresner, a principal shareholder
                and
                director of the New Media Lottery Services, Inc., loaned New Media
                Lottery
                Services International $967,500 and $150,000, respectively. New Media
                Lottery Services International has executed a demand note in favor
                of Mr.
                Dresner with respect to such amount that bears interest at variable
                interest rates.





Joseph
      Dresner


During
                fiscal year 2008, Joseph Dresner, a principal shareholder and director
                of
                the New Media Lottery Services, Inc., loaned New Media Lottery Services
                International $882,500. New Media Lottery Services International
                has
                executed a demand note in favor of Mr. Dresner with respect to such
                amount
                that bears interest at variable interest
                rates.





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 30,2008Loan
                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
            
            
            525,000Loan
                payable to an individual, interest at prime plus 2%, due on demand,
                unsecured
            
            
            260,000Loan
                payable to an individual, interest at prime plus 3%, due on demand,
                unsecured
            
            
            392,500Loan
                payable to an individual, interest at prime plus 3%, due on demand,
                unsecured
            
            
            622,500Loan
                payable to an individual, interest at 5.25%, due on demand,
                unsecured
            
            
            200,000Total
                Loans Payable
            
            
            2,183,177Less:
                Current Portion
            
            
            (2,183,177
            )Long-Term
                Loans Payable
            
            $
            -





NOTE
                6 -
            NOTES
                PAYABLE





Notes
      payable consisted of the following:




April 30,2008Comerica
                Bank note with interest approximately equal to the Euro dollar prime
                ratePlus
                2.5%, due June 1, 2008
            
            
            1,500,000Comerica
                Bank note with interest approximately equal to the Euro dollar prime
                ratePlus
                2.5%, due June 1, 2008
            
            
            600,000Comerica
                Bank note with interest approximately equal to the Euro dollar prime
                ratePlus
                2.5%, due February 20, 2009
            
            
            1,900,000Total
                Notes Payable
            
            
            4,000,000Less:
                Current Portion
            
            
            4,000,000Long-Term
                Notes Payable
            
            $
            -


64


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2008 and 2007




NOTE
      7
      -  EQUITY
      TRANSACTIONS





There
                were no equity transactions.





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 one key management person
                in the
                amount of $192,000 per year. This agreement, dated March 13, 2008
                is
                through New Media Lottery Services, PLC for an initial term of twenty-four
                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
      2008.


65


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2008 and 2007


NOTE
                10 -
            STOCK
                OPTIONS AND WARRANTS (Continued)





EMPLOYEE
      STOCK OPTIONS





The
      following tables summarize the information regarding employee stock options
      at
      April 30, 2008:




Outstanding,
                April 30, 2007
            
            
            2,875,000Granted
            
            
            -Canceled
            
            
            1,250,000Exercised
            
            
            -Outstanding,
                April 30, 2008
            
            
            1,625,000Weighted
                average exercise price of options outstanding at April 30,
                2008
            
            $
            0.34





Outstanding
            
            ExercisableWeightedAverage
            
            Weighted
            
            
            
            WeightedNumber
            
            Remaining
            
            Average
            
            Number
            
            AverageOutstanding
            
            Contractual
            
            Exercise
            
            Exercisable
            
            ExerciseExercise Prices
            
            at 4/30/08
            
            Life (years)
            
            Price
            
            at 4/30/08
            
            Price$
                0.25
            
            
            200,000
            
            
            6.90
            
            $
            0.25
            
            
            200,000
            
            $
            0.25$
                0.35
            
            
            1,425,000
            
            
            7.50
            
            $
            0.35
            
            
            1,425,000
            
            $
            0.35





WARRANTS





The
      following tables summarize the information regarding warrants at April 30,
      2008:




Outstanding,
                April 30, 2007
            
            
            200,000Granted
            
            
            -Canceled
            
            
            -Exercised
            
            
            -Outstanding,
                April 30, 2008
            
            
            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 4/30/08
            
            Life
                (years)
            
            Price
            
            at
                4/30/08
            
            Price$
                0.25
            
            
            200,000
            
            
            7.00
            
            $
            0.25
            
            
            200,000
            
            $
            0.25


66


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2008 and 2007


NOTE
      11
      -  GOING
      CONCERN CONSIDERATIONS





As
      reported in the consolidated financial statements, the Company has incurred
      $12,923,096 losses from inception of the Company through April 30, 2008. The
      Company’s stockholders’ deficit at April 30, 2008 was $9,458,008.





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.





The
      ability of the Company to continue as a going concern is dependent upon its
      ability to successfully accomplish the plans described in the preceding
      paragraph and eventually attain profitable operations. The accompanying
      financial statements do not include any adjustments that might be necessary
      if
      the Company is unable to continue as a going concern.





NOTE
      12
      -  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, 2008 and has
      a
      monthly rent of $7,871 (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 1,100 euros monthly rent.
      This
      lease ends March 30, 2010





The
      Company has a contract with Telecity Redbus in the UK to provide on-line website
      hosting. This agreement requires a 2,790 BPS monthly fee and expires in March
      2009.





The
      Company also rents a car in Ireland which is used for marketing purposes. This
      commitment runs until February 2011 and has monthly fees of 596
      Euros.




The
      following is a schedule of future minimum rental payments and commitments
      required under the above agreements as of April 30, 2008:





Year EndingApril 30,
            
            Amount2009
            
            $
            154,8132010
            
            
            29,923thereafter
            
            
            8,340




Rental
        expense was $121,996 in 2008, and $98,609 in 2007.


67


**NEW
          MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
          to
          the Consolidated Financial Statements
 April
          30,
          2008 and 2007


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.





NOTE
      16 -
      SUBSEQUENT EVENTS





On
      June
      1, 2008, the Company refinanced their $2.5 million Comerica bank loans. The
      loans now mature on June 1, 2009 and bear the same terms as the original
      loans.





On
      June
      6, 2008, New Media Lottery Services, PLC, an Irish corporation ("New Media
      PLC"), 80.23% of the common shares of which are owned by New Media Lottery
      Services, Inc. (the "Registrant"), executed a Convertible Loan Agreement with
      Trafalgar Capital Specialized Investment Fund-FIS under which it will borrow
      an
      aggregate of €1,300,000 (the "Loan"). The Loan bears interest at the rate of 8%
      per year and is evidenced by a Debenture which also provides for the grant
      of a
      security interest in all of New Media PLC's property, assets and receivables
      (the "Debenture"). The Loan matures on May 30, 2010 (twenty four months from
      the
      date of disbursement) and is convertible at the option of the lender into
      ordinary shares of New Media PLC, provided that such shares are eligible to
      trade on the AIM market operated by London Stock Exchange plc.





As
      additional consideration for the Loan, New Media PLC issued to the lender
      warrants to purchase up to 1,500,000 ordinary shares at a price 5 pence per
      share through May 30, 2010. If the warrants are not exercised, New Media PLC
      is
      required to pay the lender £60,000 (British Pounds Sterling).




68


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 13, 2008
              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
              
              President
                  and Director
              
              August
                  13, 2008John
                T. Carson/s/
                  Sterling Herbst
              
              Director
                  and Secretary
              
              August
                  13, 2008Sterling
                Herbst/s/
                  Milton Dresner
              
              Director
              
              August
                  13, 2008Milton
                Dresner
  69