**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


**FORM
      10-KSB/A**




(Mark
                  One)x
              
              ANNUAL REPORT UNDER SECTION 13 OR
                15(d) OF
                THE SECURITIES EXCHANGE ACT OF 1934For
                  the fiscal year ended April 30,
                  2006o
              
              TRANSITION REPORT UNDER SECTION 13
                OR 15(d)
                OF THE SECURITIES EXCHANGE ACT OF 1934For
                  the transition period from ___________ to
                  _____________




Commission
      file number:





**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 o
      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:  $51,380





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date within the past 60 days. (See definition of affiliate in Rule
      12b-2 of the Exchange Act.): N/A





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date:  21,442,143
      as of August 14, 2006.





**DOCUMENTS
      INCORPORATED BY REFERENCE**


None.





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











EXPLANATORY
      NOTE





Restatement
      of Consolidated Financial Statements





We
      are
      amending our Annual Report on Form 10-KSB (the "Original Filing") for the fiscal
      year ended April 30, 2006 to restate our consolidated financial statements
      for
      the year then ended and the related disclosures. This Form 10-KSB/A also
      includes the restatement of certain of the financial information presented
      in
      the first risk factor included under Part I - Item 1 - Description of Business,
      Part I - Item II Management’s Discussion or Plan of Operation, and Part II -
      Item 12 - Certain Relationships and Related Transactions. See Note 15 to the
      consolidated financial statements for a summary of the restated
      amounts.





We
      are
      also amending the narrative portion of the Original Filing to incorporate
      adjustments made to the gross proceeds and net proceeds received from the
      offering of securities completed by our Irish subsidiary in Europe in March
      2006 (the “Offering”). The Original Filing references dollar amounts received
      from the sale of the securities sold in the Offering based upon the exchange
      rate for British Pounds Sterling to US Dollars on March 17, 2006. This Annual
      Report on Form 10-KSB/A adjusts the amount of gross proceeds and net proceeds
      received from the Offering to reflect the exchange rates from British Pounds
      Sterling to Euros to US Dollars as of April 30, 2006 which comports with the
      exchange rates for such currencies used in the audited consolidated balance
      sheet.





On
      September 14, 2006, we concluded that our consolidated financial statements
      for
      the year ended April 30, 2006 included in the Original Filing (the “Financial
      Statements”) should be restated to correct the following accounting
      matters:




1)
            The
                Financial Statements reflected a $234,551 increase to consolidated
                net
                loss, which represents the Company’s portion of the increased net loss of
                $284,995 incurred by New Media Lottery Services plc, an Irish corporation
                of which we own 82.3% (“NM-PLC”). A wholly-owned subsidiary of the 82.3%
                owned subsidiary of the Company paid $284,995 offering expenses on
                its
                parent’s behalf. During consolidation, the $284,995 was incorrectly
                treated as both a reduction of general and administrative expenses
                anda
                cumulatively equal understatement of $184,994 accounts payable and
                accrued
                expenses and $100,000 payments on notes payable on the statement
                of cash
                flows.





2)
            The
                Statement of Cash Flows understated $208,079 in offering proceeds
                with a
                corresponding $208,079 understatement of the offering costs. This
                is a
                reclassification adjustment and consequently the net effect of this
                change
                is zero as to the net offering
                proceeds.





3)
            The
                Statement of Cash Flows incorrectly reflects a $100,000 payment on
                notes
                payable that was a $100,000 payment on notes payable related parties.
                This
                is a reclassification that has a zero net change to total payments
                on
                notes payable.





4)
            The
                Statement of Cash Flows understated the proceeds from issuance of
                notes
                payable to related parties by $100,000. This is the same $100,000
                discussed in item one above.





T he
      Company ’s
      management identified theses corrections in the course of preparing the Company’s quarterly
      report on Form 10-QSB for the three months ended July 31, 2006. The Financial
      Statements reflecting year end April 30, 2006 results are restated in this
      Annual Report on Form 10-KSB/A.





i




The
        restatement of the Financial Statements has caused changes to the Company's
        consolidated balance sheet and the consolidated statements of operations,
        cash
        flows, and stockholders' deficit for the fiscal year ended April 30, 2006
        but
        these changes are not expected to have an adverse effect on the Company’s
        business outlook for future fiscal periods, nor impact the Company’s cash
        position or future cash flows from operations
 
 Management
        and the Audit Committee of the Company have evaluated the impact of the
        restatement of the previously issued financial statements on the Company’s
        assessments of the effectiveness of its internal control over financial
        reporting as of the applicable period, including whether a material weakness
        existed in the Company’s internal control over financial reporting for such
        period. A material weakness is a control deficiency, or combination of control
        deficiencies, that results in more than a remote likelihood that a material
        misstatement of the annual or interim financial statements will not be prevented
        or detected. Based on the definition of “material weakness” in the Public
        Company Accounting Oversight Board’s Auditing Standard No. 2, An Audit of
        Internal Control Over Financial Reporting Performed in Conjunction With an
        Audit
        of Financial Statements,” restatement of financial statements in prior filings
        with the SEC is a strong indicator of the existence of a “material weakness” in
        the design or operation of internal control over financial reporting. Management
        and the Audit Committee of the Company have determined that the errors in
        the
        Financial Statements included in the 2006 Annual Report were an isolated
        event
        and are unlikely to occur again and that it is unlikely that a material
        misstatement of the Company’s annual or interim financial statements will not be
        prevented or detected in the future. Accordingly, management and the Audit
        Committee of the Company have determined that no material weakness existed
        in
        the Company’s internal control over financial reporting for the period for which
        the Company’s financial statements are being restated and will not recommend any
        changes to such controls and procedures.




The
      financial information that has been previously filed or otherwise reported for
      the year ended April 30, 2006 is superseded by the financial information in
      this
      Annual Report on Form 10-KSB/A. Accordingly, the consolidated financial
      statements and related financial information contained in the Original Filing
      should no longer be relied upon.





All
      of
      the information in this Form 10-KSB/A is as of April 30, 2006 and does not
      reflect any subsequent information or events other than the restatement and
      related matters discussed in Note 15. Only the following items have been amended
      as a result of the restatement:





Part
      I -
      Item 1 - Description of Business;





Part
      II -
      Item 6 - Management’s Discussion or Plan of Operation;





Part
      II -
      Item 7 - Financial Statements; and





Part
      II -
      Item 12 - Certain Relationships and Related Transactions





Other
      than as discussed above, this Form 10-KSB/A does not reflect events occurring
      after the filing of the Original Filing or modify or update disclosures
      (including the exhibits to the Original Filing) affected by subsequent events.
      Accordingly, this Form 10-KSB/A should be read in conjunction with our periodic
      filings made with the Securities and Exchange Commission subsequent to the
      date
      of the Original Filing. In addition, this Form 10-KSB/A includes updated
      certifications from our Chief Executive Officer and Chief Financial Officer
      as
      Exhibits 31.1, 31.2, and 32.1.





ii


**PART
      I**





References
      in this report to “£” or “pence” are to British Pounds Sterling and “$” are to
      US Dollars. The US Dollar amounts reflect the closing exchange rate on March
      17,
      2006 of £1 for $1.7569, as reported by the Wall Street Journal.





**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 video lottery
      terminals and other electronic kiosks. We commenced providing services to
      clients in August 2003. We currently operate lottery systems for three customers
      and have entered into contracts with two additional lotteries to provide
      services in the future. 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 82.3% of the outstanding stock and through NM-PLC’s wholly owned
      Irish subsidiary, New Media International. Four members of NM-US’s board of
      directors, two of whom are our principal executive officers, constitute a
      majority of the managing directors of NM-PLC and all of the directors of New
      Media International. NM-US is prohibited by agreement with NM-PLC from, among
      other things, engaging in the lottery business, and NM-US has agreed to forward
      all future lottery business opportunities to NM-PLC, as more fully described
      under the heading “BUSINESS - The AIM Offering and the Relationship Between
      NM-US and NM-PLC.” The common 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 and the placement agent for the AIM Offering that it will not, except
      under certain limited circumstances stipulated in the AIM Rules, dispose of
      any
      interest in the shares it holds in NM-PLC until March 17, 2007 and, for the
      following period of twelve months, not to dispose of any such shares other
      than
      after consultation with the placement agent for the AIM Offering and 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.






1




In
      August, 2004, the Virginia corporation acquired the remaining outstanding shares
      of the capital stock of the LNS (equal to .2% of LNS’s outstanding shares on the
      date of the acquisition of said shares by the Florida corporation).





In
      February 2005, the Virginia corporation merged with and into New Media Lottery
      Services, Inc., a corporation organized under the laws of the State of Delaware,
      which succeeded to the Virginia corporation’s reporting requirements under the
      Securities Exchange Act of 1934, as amended. Under the terms of the merger
      agreement, each outstanding share of the Virginia corporation automatically
      was
      changed and converted into one share of the common stock of the Delaware
      corporation. All of the officers and directors of the Virginia corporation
      were
      appointed to serve as the officers and directors of the Delaware
      corporation.





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





On
      March
      17, 2006, our Irish subsidiary, NM-PLC concluded an offering of 3,672,572
      ordinary shares at a price of 50 pence ($.878) per share for an aggregate gross
      offering price of approximately £1.84 million ($3,517,908)(the “AIM Offering”).
      NM-PLC received net proceeds of approximately £1.65 million ($3,177,194) (after
      deducting the broker’s placement fees and expenses payable at the closing of the
      offering) .
      After
      giving effect to the issuance of the ordinary shares sold in the offering and
      the other ordinary shares issued for debt, we own approximately 82.3% of
      NM-PLC’s outstanding capital stock. Concurrent with the closing of the 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 business operations are conducted through
      NM-PLC and its wholly owned subsidiary New Media International, as more fully
      described below under the heading “BUSINESS - The AIM Offering and the
      Relationship Between NM-US and NM-PLC.”





**The
      Lottery Industry.**





The
      discussion of and information relating to the lottery industry set forth below
      has been compiled by us or derived from independent sources which we believe
      to
      be reliable. We cannot assure you, however, that such statements are accurate.
      It has been management’s experience that there is less public information
      available concerning the international lottery industry than the lottery
      industry in the United States.





Lotteries
      are official, government authorized/licensed fundraising organizations that
      in
      many cases subcontract all or part of their lottery operations and or products
      to professional lottery service providers. These providers supply technology,
      products, operations, marketing and administrative support. Published reports
      indicate that lotteries operate in over 150 domestic and foreign jurisdictions
      throughout the world and that as of June 2005 there were more than 400 lottery
      licenses issued world-wide. Some jurisdictions sanction or license multiple
      lotteries which may include both government-sponsored programs and programs
      promoted by charitable organizations (CLO’s). Many governments have authorized
      national lottery programs primarily as a means of generating non-tax revenues
      intended to support specific programs, many of which are humanitarian 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.





Of
      the
      400 plus lotteries world-wide, approximately 20% account for 85% of the
      estimated lottery sales volume of $159 billion (as officially reported). Many
      of
      the second tier lotteries do not have the financial wherewithal to develop
      and
      implement the infrastructure necessary to offer games and prizes that are
      attractive to players. In addition, they do not have the technical capability
      to
      offer games utilizing the new media distribution methods available to them





2


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





Statistics
      show that, typically, online lotteries generate greater revenues than both
      traditional off-line lottery games and instant-ticket games. There are several
      other advantages to online lotteries as compared to traditional off-line
      lotteries. Unlike traditional off-line lottery games, online lottery systems
      allow for wagers to be accepted and processed until minutes before a drawing,
      thereby significantly increasing the lottery's revenue in cases in which a
      large
      prize has attracted substantial wagering interest. Online lottery systems also
      provide greater reliability and security, allow a wider variety of games to
      be
      offered and automate accounting and administrative procedures which are
      otherwise manually performed at potentially high cost to the
      sponsor.





**Our
      Opportunity.**





We
      focus
      our marketing efforts on lotteries which are not currently serviced by
      professional lottery service providers, such as small national and state
      lotteries and lotteries operated by CLO’s the lotteries of which are licensed by
      the government. We expect to grow these smaller lotteries by applying our
      technology and expertise and to make the games they offer available through
      new
      media channels such as the internet, cell phones; handheld wireless devices
      such
      as palm top computers; and interactive television.




Generally,
      the smaller national and state-operated lotteries and CLO’s, which constitute
      our target market, are limited to offering traditional paper and instant ticket
      games. These games offer only small prizes and do not attract large audiences.
      Their operations have been constrained by personnel who lack operational
      experience, technological limitations and adequate funding. In the case of
      CLO’s, the causes they support, such as health care, environmental conservation
      and nationally sponsored athletic activities, generally enjoy wide public appeal
      that to some degree have been, and continue to be, funded by governments.
      However, financial pressure attributable to rising costs for social programs
      and
      poor global economic performance over the last several years have eroded the
      ability of national and local governments to fund these important social and
      public projects from revenues generated from taxes. Many national and local
      governments have sought to supplement funding for these essential programs
      through alternative means such as issue-specific lotteries. In many
      jurisdictions, governments have granted broad licenses to charitable
      organizations to operate lotteries to fund these important social programs.




Frequently,
      small state-operated lotteries, CLO’s and the people who run them, do not have
      the capacity to fully develop the lottery opportunity granted to them and
      consequently never realize the full extent of the revenue generating potential
      of their mandate. In many cases, they do not even understand the full range
      of
      gaming opportunities available to them. Specifically, these operations do not
      possess the experience, know-how or technology to develop new games or implement
      online and wireless games nor do they possess the marketing resources and
      expertise necessary to build prizes that will attract new players. These small
      organizations tend not to be competitive with larger state operated lotteries
      because the games and prizes they offer are not exciting to the average lottery
      participant. Moreover, in many of the geographic locations in which small
      government lotteries and CLO’s operate, lotteries target an older generation
      utilizing paper-based games. These entities require the assistance of a
      professional organization to design, implement, manage and fund the development
      of their opportunity to maximize net proceeds generated from ticket sales and,
      in many cases, to lend credibility to the organization’s lottery.





3


We
      believe that small national and state-operated lotteries and charitable lottery
      organizations are under-served. Large providers of lottery services and products
      have selectively overlooked this market because these clients do not yield
      the
      financial return which can be derived from servicing the larger national and
      state run lotteries and they do not warrant the significant capital investment
      required to implement and operate a traditional land-based lottery. In addition,
      the smaller state-operated lotteries and CLOs do not have the funding to
      implement the infrastructure necessary to build a competitive operation. We
      believe that our staff has the lottery experience, gaming know-how and
      technological expertise and presence necessary to attract, service and grow
      small to mid-size charitable lottery organizations.





We
      offer
      our clients the potential to expand into modern lottery and gaming markets,
      giving them the capacity to compete with larger government sponsored lotteries.
      Initially, we develop and implement an on-line lottery presence offering
      traditional on-line game formats supplemented by new and exciting games we
      have
      developed. We target our on-line lotteries to a younger adult audience that
      typically does not relate to the traditional paper-based games their parents
      play and who incorporate computers and new media devices such as cellular
      telephones and other wireless apparatus into their daily lives. We can implement
      the systems necessary to commence on-line lottery operations relatively quickly
      and inexpensively. Thereafter, we expect to initiate lotteries and other game
      formats delivered through new media devices. Finally, we expect to implement
      traditional paper lotteries to encompass the preferences and tastes of the
      entire population.





**Existing
      Clients.**





We
      currently manage lotteries for three clients and have contracts to manage
      lotteries for two other organizations. Unless otherwise noted, the discussion
      below relating to each agreement under which we have been retained to establish
      and operate a lottery, assumes that the party with which we have contracted
      is a
      duly authorized licensee of the government to operate a lottery. The discussion
      below also assumes that we will be responsible generally for all manner of
      implementation and operation of the particular lottery, including that we will:
      (i) provide a variety of games for the lottery; (ii) undertake all accounting
      functions; (iii) undertake all administrative aspects of the operation of the
      lottery; (iv) undertake all marketing, advertising and promotion of the lottery;
      (v) provide cash management systems; (vi) distribute lottery proceeds to the
      lottery licensee; and (vii) ensure compliance with all applicable
      laws.





In
      September 2001, we entered into an agreement with Rehab Net Games Limited
      (Rehab), an Irish corporation, as amended in January 2004, April 2004 and
      further amended in November 2005, to develop, manage and operate lottery games
      for the internet and wireless telephones within the Republic of Ireland for
      a
      period of 10 years. This agreement is subject to automatic extensions for
      five-year periods in the event that Rehab earns certain agreed upon minimum
      proceeds during the fifth through tenth years of the term of the agreement
      and
      the eleventh through fifteenth years of the term of the agreement. The agreement
      may be terminated by Rehab in the event that we fail to pay Rehab the fees
      provided for in the agreement or, after the ninth year of the agreement upon
      twelve months notice of a party’s intention to terminate. We completed
      implementation of the internet portion of the lottery program in August 2003
      and
      currently are managing and operating the lottery. Over the last year, we have
      expanded the product offerings, run test marketing and are prepared to roll-out
      the lottery on a full scale basis, including a marketing campaign by the end
      of
      fiscal 2007.





Pursuant
      to an agreement dated December 17, 2001, we have established and currently
      operate and maintain lottery programs utilizing internet technologies for Rehab
      Charities UK Limited. We commenced operation of the Rehab UK lottery in December
      2003. We are responsible for all manner of operations of the Rehab UK lottery.
      We have concentrated on augmenting product offerings, running test marketing
      in
      contemplation of a commercial roll-out of the lottery. We have provided all
      funding to develop and implement the lottery for Rehab UK. Our agreement is
      for
      a term of five years. We intend to implement commercial marketing by the end
      of
      fiscal 2007.





4


We
      are
      party to an agreement with Tropical Gaming, Belize which has the right to
      conduct a lottery using the internet and wireless modalities in the Country
      of
      Belize. The agreement, dated November 27, 2001, provides for an initial term
      of
      10 years subject to two 5-year extensions in our sole discretion. The agreement
      may be terminated by either party upon any default in the performance of the
      agreement. This lottery is not currently operating; we are analyzing our options
      with respect to a launch date for this lottery.





Under
      an
      agreement dated February 12, 2002, the Guatemalan Pediatric Foundation retained
      us to establish and operate lottery games in Guatemala through the internet
      and
      wireless communications systems. The term of the agreement is for seven years
      and is automatically renewable for a second seven-year term. We have not begun
      to implement this lottery as of the date hereof and have not determined when
      we
      will commence developing the system.





On
      February 3, 2004, we entered into an agreement with Carnegie Cooke & Company
      Inc., an owner and operator of off-track betting sites and race tracks in
      Brazil, to provide consulting services with respect to the implementation of
      video lottery games at horse racing tracks in Brazil. Under the contract, we
      are
      obligated to (i) provide consulting services as to the types of games to be
      installed at these facilities; (ii) assist our client in obtaining government
      support with respect to the gaming program; (iii) prepare presentations and
      support documents which evidence the efficacy and success of similar programs
      within the US and the impact on horse racing, state lotteries and economic
      benefits; (iv) make presentations to government officials as required; and
      (v)
      otherwise assist our client in preparing business plans to develop and support
      their opportunity. In addition to consulting, we are discussing the possibility
      of introducing other gaming products in Brazil. In consideration for the
      services we will render, Carnegie Cooke & Company has agreed to issue to us
      an aggregate of 600,000 shares of its common stock issuable in four installments
      of 150,000 shares. As a result of a JV in Brazil, NMLS management has chosen
      to
      end our relationship with Carnegie Cooke and has received 300,000 shares for
      the
      consulting services provided.





On
      October 28, 2004, we entered into a Joint Venture Agreement with Latin America
      Gaming, Inc (LAG), of Sao Paulo, Brazil to launch an internet based lottery
      sales site and to explore the possibility of delivering lottery product for
      sale
      on terminals in bingo halls throughout Brazil. LAG has been operating lotteries
      in the Brazilian market for several years and has been granted licenses to
      offer
      internet lottery products in the Brazilian States of Para and Santa Catarina.
      Under the Joint Venture Agreement, we provide the lottery systems and expertise
      for internet lottery projects initiated in these states and LAG principally
      is
      responsible for marketing efforts with respect to the internet lotteries. As
      of
      the date hereof, we have developed lottery products in Portuguese which we
      have
      delivered. The joint venture company is now focusing marketing efforts on
      leveraging LAG’s existing gaming and lottery relationships. We will provide
      additional marketing support for the Brazilian operations in September 2006.
      We
      anticipate this venture will require additional financing to fund marketing
      efforts.





On
      December 7, 2004, we entered into an agreement with ROK Entertainment, a UK
      based provider of video content for mobile telephones, including proprietary
      wireless lottery and gaming content. Management believes that the companies’
technologies and product offerings are complimentary and that joint marketing
      efforts of these technologies and products will be beneficial to each party
      and
      attractive to clients. Under the agreement, the parties will utilize their
      respective relationships worldwide to promote and sell each others wireless
      lottery products for use on mobile phones and to support each other on specific
      projects in which each may become engaged individually or jointly. The companies
      have agreed to focus initially on a project being developed by ROK and its
      Chinese joint venture partner, the Beijing Municipal Government, to develop
      a
      wireless lottery on behalf of the China Welfare Lottery. The parties may have
      an
      opportunity to pursue additional wireless based lottery programs in China,
      and,
      at this time, are jointly presenting concepts for a lottery game internet site
      to the National Sports Lottery Group. Management cannot predict when, if ever,
      the companies will launch an internet lottery program in China.





5


On
      March
      14, 2005, we entered into a three-year agreement to design and produce wireless
      gaming content for Inspired Broadcast Networks (“Inspired”). In connection with
      our corporate restructuring, Inspired executed a new agreement in favor or
      New
      Media International on October 12, 2005 identical to the March 14 agreement.
      Inspired is Europe's leader in pay-to-play entertainment and broadband services
      in retail and public spaces, with an installed base of more than 15,000
      networked kiosk terminals. Inspired’s existing terminals are located in retail
      shops, such as convenience stores and pubs, and offer a variety of entertainment
      products, including amusement games that allow small prizes of up to 25 pounds.
      We will supply lottery games for use on the terminals which will allow for
      more
      significant prizes up to 150,000 pounds. Management expects that Inspired will
      commence offering our games on its kiosk terminals on a test market basis in
      Ireland by September 2006.





**What
      We Do.**





We
      offer
      an integrated range of products and services to develop, build and host
      lotteries for small national and state-operated lotteries and charitable lottery
      organizations (CLO’s). We have assembled a management team and personnel that
      combines a strong lottery operations background, extensive game development
      experience and the technological expertise required to create and operate these
      lottery systems. We:





·
            analyze
                our client’s operations;





·
            analyze
                the gaming preferences of the indigenous
                population;





·
            design,
                install, operate, host and maintain lottery systems that support
                games
                played via the internet, wireless devices, such as cellular telephones
                and
                palm top computers, and interactive TV games;





·
            design
                and implement marketing programs to enhance ticket sales and increase
                the
                net proceeds an organization generates from its lottery;
                and





·
            design
                innovative games to attract new players and increase prize money.




A
      significant aspect of the value we add to our client’s operations derives from
      the credibility we contribute to the organization. Many CLO’s have operated as
      second tier lotteries within their host jurisdictions. An affiliation with
      our
      organization increases the CLO’s technological capabilities to operate a modern
      lottery program and to participate with proven technology that is in use
      worldwide. The government supports these organizations but is unable to
      financially support all of their needs so it gives them extremely valuable
      and
      broad gaming licenses. We show a CLO how to maximize the revenue generating
      potential of its government sanctioned gaming opportunity.





We
      believe that the services we provide, the end-product we deliver to our clients
      and, ultimately, the public, can help transform these lotteries into first-class
      operations with the capacity to achieve their revenue goals. Our clients benefit
      from access to a professional lottery organization that grants them access
      to
      our lottery know-how and expertise, allows them to offer larger prizes, offers
      them access to state-of-the-art technologies and makes available to them a
      wide
      variety of new gaming formats. We seek to build organizations founded on
      operational and financial integrity that inspire public confidence and allow
      the
      organization to realize its full potential.





Our
      business model can be replicated on varying scales in discrete geographical
      areas. The fundamental elements of the lottery infrastructure, including the
      Web
      site and game concepts we have developed, can be migrated from client to client,
      allowing us to repeatedly re-brand our product for other CLO’s. This process,
      known as "changing the skin", allows us to simultaneously meet the needs of
      numerous charities, while reducing the set-up time and organizational costs
      associated with establishing each charity’s internet/wireless presence.





6


We
      expect
      the preponderance of our revenues to be derived from a percentage of the net
      lottery proceeds received by our clients. In order to maximize net lottery
      proceeds received by our clients, the lotteries we develop and implement for
      our
      clients must attract large numbers of players who make purchases. We believe
      that as prize amounts escalate, interest in a lottery increases which creates
      a
      cycle of growing prizes and more players. We expect that we can leverage the
      charity lottery concept to obtain discounts on advertising packages and
      merchandise prize awards. We anticipate offering co-op games that are
“sponsored” by various corporations in return for advertisements on the lottery
      site. These programs can reduce operational and promotional costs.





**Products
      and Services.**





Once
      a
      client retains us, we analyze the local gaming environment, including the
      client’s existing operations, business practices and the personal gaming
      preferences of the local population. We consider many factors in developing
      a
      new technology presence for our client, including the demographic composition
      and sociological character of the geographic locality in which the lottery
      will
      operate, to ascertain the types of games that will appeal to the local
      population and the nature of the marketing strategy which we will employ. We
      may
      compare one client’s circumstances with successful lotteries operating in other
      jurisdictions to determine the most appropriate games to offer and the most
      effective marketing techniques as they relate to that population. There is
      some
      degree of trial and error and we constantly interchange games to determine
      what
      is most appealing to a particular audience at a particular time.





Most
      of
      our clients do not possess the capital to implement a sophisticated lottery
      program. If, after careful analysis, we determine that a lottery warrants our
      financial assistance, we will provide the services and products required to
      implement, on account, and retain from the lottery’s profits all costs and
      expenses incurred.





In
      a few
      jurisdictions in which we currently are seeking clients, gaming regulations
      require that the lottery managers be licensed with the local gaming commission.
      In such case, we seek to identify and partner with licensed local lottery
      managers who have secured the highest reputation for integrity. These entities
      may provide us with on-site and other services after installation of the lottery
      system. They possess the local knowledge necessary to navigate the differing
      regulatory requirements of each jurisdiction. We work closely with our local
      partners and the regulatory authorities in each of the jurisdictions in which
      our clients operate to design and operate Web sites and wireless programs that
      conform to all local laws. These laws may pertain to the features of a lottery,
      such as the percentage of gross revenues that must be paid back to players
      in
      prize money, the determination of the types of games played, the price of each
      game and the manner in which the lottery is marketed. In addition, the Web
      sites
      we design for clients conspicuously post all required applicable gaming laws
      of
      that jurisdiction, such as any legal disclaimers.





We
      work
      with the client to develop a program that is profitable to the client, efficient
      to manage and operate and cost effective to both our client and us. Our
      objective is to create a comprehensive program that offers games which appeal
      to
      the user, broaden the base of players and increase prizes. It is our experience
      that as prize amounts escalate, interest in a lottery increases. This benefits
      our clients in that it draws additional attention to the charitable cause
      underlying the lottery and results in greater ticket sales and more proceeds
      to
      distribute to the cause. Growth becomes self-actuating in that as more people
      play a lottery to win a larger prize, lottery proceeds increase and allow for
      even larger prizes, drawing more players.





7


We
      construct robust Web sites for our clients capable of handling a high volume
      of
      traffic. We host the Web sites on servers located in the United Kingdom, Ireland
      and Brazil. Web sites are designed to ease registration and use and to promote
      maximum security.





Visitors
      register to play games on our clients’ Web sites in confidence, securely deposit
      funds and begin playing games shortly after acknowledgement of registration
      by
      the lottery. Financial transactions are executed behind firewalls using
      encryption software and all deposits and disbursements are confirmed by
      independent, internationally reputable banks.





Initially,
      our client lottery Web sites offer a variety of video lottery games. We
      continually analyze each client’s operations to devise and implement appropriate
      marketing strategies and introduce new games which we believe will be appealing
      to and attract local players. The introduction of new games retains loyal
      visitors to the site and attracts new ones. Members of our management team
      have
      extensive experience developing new lottery game formats. In addition, we also
      purchase and license lottery game formats from third parties. We also have
      developed a video lottery game platform. Video lottery is defined as casino
      slot/video machines which are managed and licensed by a lottery. We expect
      that
      this product line will compete directly with the casino marketplace and may
      be a
      substitute for casino gaming in markets where casinos are not legislated.
      Management believes that these video lottery programs will become prominent
      on a
      number of devices currently existing in many countries.





An
      important feature of our clients’ Web sites is the ability to include
      advertising banners on appropriate screens. In many instances, the charity
      underlying the lottery will enjoy strong public support, such as a national
      Olympic organization. These Web sites may draw a wide range of visitors,
      including those who do not normally play lottery games, who seek to support
      the
      host organization. This ability will allow us to creatively support
      co-promotions with local companies. It is our intent to market extensively
      with
      large, well-known local companies whose name could be attached to the specific
      game.





With
      each
      client, we will expand distribution of various games to include access by way
      of
      wireless devices and mobile telephones. At such time as a client’s lottery is
      operating within our expected parameters, we will commence the process of
      identifying and obtaining the services of local telephone/wireless companies
      and
      establish working protocols to provide private and secure access to our client’s
      lottery games via mobile telephones and other wireless devices. Given the
      increasing pervasiveness of these apparatus, extension of our operations to
      include these modalities will allow us to tap into an as yet to be fully
      exploited revenue stream. Players will have access to a wide range of games
      developed specifically for these devices and will be able to play anywhere
      within their service coverage area. We believe that these games will be of
      particular appeal to young adult players who have integrated these technologies
      into their every-day lives.





The
      final
      implementation phase encompasses expansion into land-based operations. We will
      assist the lottery organization in expanding an existing network of land-based
      retailers or creating a new retailer network, as required. In many countries,
      banks, post offices and independent kiosks act as ticket retailers and receive
      a
      per ticket fee for their services. Given the nature of the underlying charitable
      causes of our clients, these entities normally are disposed to serve as
      retailers of tickets. Moreover, our business model assumes significant margins
      on sales of land-based lottery tickets and we will be able to provide a real
      financial inducement to these entities to participate in ticket sales. In those
      countries where access to the internet is limited, land-based sales of lottery
      tickets will expand market penetration and can provide significant additional
      revenues.





**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.





8


**Contract
      Procurement.**





To
      a
      large degree, lottery contracts are secured on the basis of pre-existing
      relationships between personnel of lottery management companies, such as
      ourselves, and lottery license holders. We are dependent upon the relationships
      that members of our management have cultivated during the course of their
      careers. Industry knowledge, personal integrity and credibility within the
      world-wide lottery community are valuable resources which are gained after
      years
      of operational and marketing experience. Our lottery personnel average over
      twenty years of experience in the industry and have fostered and maintain the
      types of relationships that allow us to present our programs to existing and
      newly organized lotteries. Performance is also an important factor and our
      management has been successful in demonstrating the positive results experienced
      by their previous clients.





We
      market
      our services to potential clients on the basis that we can provide them with
      (i)
      lottery operations expertise, (ii) state-of-the-art technologies and Web site
      design; (iii) the ability to grow and offer prizes far larger than they have
      as
      off-line lotteries; (iv) a wide variety of new gaming formats; (v) secure
      transaction processing and accurate accounting; and, perhaps most importantly,
      (vi) greater credibility within their host jurisdiction resulting from an
      affiliation with a professional lottery organization.





**Contracts
      with Clients.**





Under
      a
      typical client agreement, we are required to develop, install, operate and
      maintain an internet lottery system for a client, while retaining ownership
      of
      the lottery system. In addition, we are responsible for: implementing all manner
      of accounting and auditing systems and maintaining financial records; the
      collection of lottery monies; the selection of winners; and the financial
      responsibility for the payment of prizes. Most importantly, we are required
      to
      maintain conformity with all local gaming laws and other applicable regulations
      pertaining to our operation of lotteries on behalf of our clients. In some
      cases, we agree to provide the funds required to implement a client’s lottery
      and are repaid from lottery proceeds on terms specified in our contract with
      a
      lottery.





Because
      some jurisdictions have regulations which require that lottery managers are
      licensed with the local gaming commission, we retain or enter into partnerships
      with duly licensed local entities and consultants with whom we contract for
      representation in specific market areas. These entities are familiar with local
      gaming regulations and assist developing and implementing lottery programs
      and
      systems that comply with all local laws. These licensees and consultants often
      agree to provide on-site and other services after installation of the lottery
      system.





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





Revenues
      under our client agreements are generally based upon a percentage of net lottery
      ticket sales. The level of lottery ticket sales within a given jurisdiction
      is
      determined by many factors, including population density, the types of games
      played and the games' design, the size and frequency of prizes, the nature
      of
      the lottery's marketing efforts and the length of time the lottery system has
      been in operation.





We
      operate lottery systems for all of our clients through shared central computer
      systems based on their geographic location. We assign members of our staff
      to
      interface with lottery personnel with respect to all matters of our operations,
      including specialists dedicated to Web site operation, marketing, and product
      offerings and customer service representatives who service and maintain the
      system.





9


**Our
      Business Partners.**





A
      key to
      our success and the success of our clients is the underlying integrity of our
      organization and the product we develop for them. We market our services and
      products to clients on the basis that their affiliation with us will lend needed
      credibility to develop and support a thriving organization with the potential
      to
      increase lottery revenues. Toward that end, we have been highly selective with
      respect to our industry partners. We work with Barclay’s Bank in the United
      Kingdom and AIB in Ireland to handle all financial transactions between us
      and
      our clients and visitors to our clients’ Web sites. All transactions and
      accounting procedures are automated to avoid human error.





**Games.**





We
      believe that an important factor in maintaining and increasing public interest
      in lotteries is innovation in game design. Our games are designed to attract
      the
      interest of potential players and comply with local regulations. We work closely
      with lottery regulators and our clients to design customized lottery games
      which
      are intended to appeal to the populations in which our clients are located.
      We
      employ principles of demographics, sociology, psychology, mathematics and
      computer technology in the development of our games. The principal
      characteristics of game design include frequency of drawing, size of pool,
      cost
      per play and setting of appropriate odds. We believe that our management has
      extensive expertise in game design that will enhance the marketing of our
      lottery systems.





We
      currently have a substantial number of variations of lottery games in our
      software library and new games under development. We believe that our game
      library and the "know how" and experience accumulated by our professionals
      make
      it possible for us to meet the requirements of our customers for specifically
      tailored games on a timely and comprehensive basis. In addition, we have engaged
      third parties to provide us with specific games that we believe will attract
      players to our clients’ sites.





**Technology.**





We
      host
      our clients’ lotteries on our servers located in the United Kingdom, Ireland and
      Brazil. The servers are operated by third parties that we have retained to
      undertake some of our operational obligations for our clients. Our servers
      are
      designed to provide continuous availability, a high throughput rate and maximum
      security. Central computer installations include redundant computers, various
      peripheral devices (such as magnetic storage devices), and various safety,
      environmental control and security subsystems (including a redundant power
      supply systems). The software we utilize is designed to provide rapid
      processing, a high degree of security and redundancy to guard against
      unauthorized access and tampering and to ensure continued operations without
      data loss.





Another
      critical ingredient to our success is the technological support we offer our
      clients. Avoiding Web site downtime is essential both to our reputation and
      to
      our clients’ ability to maximize their revenues. We (or our partners) monitor
      and maintain the Web sites and servers on a 24/7 basis to minimize the
      possibility of downtime or loss of service.




10




**Competition.**




The
      Government licensed lottery market is divided into four distinctive categories:
      large government operated lotteries; small national operated lotteries; small
      state-operated lotteries; and independently operated charity lotteries. Present
      lottery suppliers concentrate their marketing efforts on the large government
      operated lotteries. As government operated lotteries, these lotteries have
      the
      financial wherewithal to install substantial dedicated lottery systems and
      equipment. Competition for this clientele is competitive; however, this segment
      of the market is supported by only a few known companies. Competition for small
      and mid-sized government- and charity- operated lotteries has become more
      competitive as service providers explore new revenue streams. To date, neither
      the charity lottery market place nor the internet/wireless lottery marketplace
      has been significantly penetrated. We have conducted an internal investigation
      as to those entities specifically engaged in servicing charitable lottery
      organizations and have determined that this market currently is under-serviced.
      We believe that by being the first company dedicated to serving this market
      and
      given the experience and aptitude of our management, we will be able to
      establish ourselves as the premier provider of services and products to
      charitable lottery organizations.




Of
      important note is that the core business of all major lottery suppliers is
      entrenched in land-based games and dedicated terminal systems. Substantial
      capital is invested in these systems, including print facilities to produce
      instant “scratch” tickets, sales terminals to sell on-line lottery games, or
      video lottery terminals. It is this substantial capital investment that drives
      these companies to compete for the large lottery projects. Small lottery
      operations do not generate the volume required to justify the capital
      expenditure on their part. Their products and solutions are too expensive to
      be
      competitive in the smaller lottery market.





The
      internet-based solutions we offer do not rely on the products or services that
      the large lottery service organizations currently market. Entering this market
      and encouraging clients to explore this technology would have to be done at
      a
      substantial capital loss as it decreases the industry’s reliance on its current
      products. Additionally, internet technology creates a client conflict for these
      companies. Currently, most of their clients protect their sales boarders by
      offering land-based games only. The development of internet/wireless gaming
      formats may adversely affect the technology hold they have on their existing
      client base.





We
      are
      not reliant on these large government lotteries for success. We do not have
      to
      make the large capital investment in equipment that would otherwise deter us
      from this approach.





**Government
      Regulation.**





Lotteries
      may be lawfully conducted only in jurisdictions in which they are expressly
      permitted by law and are subject to extensive government regulation. Regulation
      typically includes some form of licensing of applicants and their subsidiaries.
      Applicants for, or holders of, a license are subject to a broad examination
      including, among other items, financial stability, integrity and business
      experience. Although certain of the features of a lottery, such as the
      percentage of gross revenues that must be paid back to players in prize money,
      are sometimes fixed by legislation, lottery regulatory authorities generally
      exercise significant discretion, including the determination of the types of
      games played, the price of each wager, the manner in which the lottery is
      marketed, the selection of the vendors of equipment and services and the
      retailers of lottery products. Laws and regulations applicable to lotteries
      in
      foreign jurisdictions evolve and are subject to change, and the effect of such
      changes on our ongoing and potential operations cannot be predicted with
      certainty.




11




Many
      jurisdictions require detailed background disclosure on a continuous basis
      from,
      and conduct background investigations of, the provider, its subsidiaries and
      affiliates and its principal shareholders. Regulators generally conduct
      background investigations of the provider’s employees who will be directly
      responsible for the operation of the system, and most jurisdictions reserve
      the
      right to require the removal of employees whom they deem to be unsuitable or
      whose presence they believe may adversely affect the operational security or
      integrity of the lottery. Certain jurisdictions also require extensive personal
      and financial disclosure and background checks from persons and entities
      beneficially owning a specified percentage (typically five percent or more)
      of a
      provider's securities. The failure of beneficial owners of our securities to
      submit to background checks and provide such disclosure could jeopardize the
      award of a lottery contract to us or provide grounds for termination of an
      existing lottery contract.





The
      award
      of lottery contracts and ongoing operations of lotteries in international
      jurisdictions also are extensively regulated. Restrictions may be imposed on
      foreign corporations seeking to do business in such jurisdictions and, as a
      consequence, we may have to partner with local companies when seeking foreign
      lottery contracts.




Government
      regulation may impact the operations of our Gelotto internet portal in some
      of
      the jurisdictions in which we may operate lotteries for clients in the
      future.





We
      believe we are currently in substantial compliance with all regulatory
      requirements in the jurisdictions where we operate. Any failure to receive
      a
      material license or the loss of a material license that we currently hold or
      our
      failure to remain in compliance with local laws could have a material adverse
      effect on our overall operations and financial condition.





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





As
      previously described, on March 17, 2006, our Irish subsidiary NM-PLC completed
      an offering of 3,672,572 ordinary shares at a price of 50 pence ($.878) per
      share for an aggregate gross offering price of approximately £1.84 million
      ($3,517,908)(the “AIM Offering”). NM-PLC received net proceeds of approximately
£1.65 million ($3,177,194), after deducting the broker’s placement fees and
      expenses payable at the closing of the AIM Offering. 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 US company owns 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”). Milton Dresner and Joseph
      Dresner, the principal shareholders and directors of the US company and
      directors of NM-PLC, each purchased 615,786 ordinary shares in the AIM Offering
      at the placement price or approximately $540,916.





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




12




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





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





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




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





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





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





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





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





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





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




13




As
      of the
      date hereof, NM-PLC is authorized to issue 150,000,000 ordinary shares with
      a
      total capitalization of £1,000,000, of which 24,550,000 are outstanding, of
      which NM-US owns 20,205,129 shares. NM-US has agreed with NM-PLC and ZAI that
      it
      will not, except under certain limited circumstances stipulated in the AIM
      Rules, dispose of any interest in the shares it holds in NM-PLC for a period
      of
      twelve months from the Admission Date and, for the following period of twelve
      months, not to dispose of any such shares other than after consultation with
      ZAI
      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.




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 will meet with the external auditors and review
      findings of the audit with them. It will meet with the auditors once a year
      without any members of NM-PLC’s management being present. The audit committee
      will add a third independent member during the course of the current fiscal
      year.





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 will
      also, subject to NM-PLC’s existing contractual obligations, review the design of
      all share incentive plans for approval by the board and shareholders of NM-PLC
      and for each such plan, determine 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 remuneration committee will add a third
      independent member during the course of the current fiscal year.





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





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





**Employees.**





As
      of
      August 14, 2006, our group had 16 full-time employees, including four persons
      in
      the US corporate office, eleven persons in Canada who engage in product
      development and one marketing specialist in Ireland. All of the employees are
      compensated by NM-PLC and 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.




14




**Risk
      Factors.**





An
      investment in our securities is speculative and involves a high degree of risk.
      Potential investors should carefully consider the risks described below and
      elsewhere herein, including the financial statements and related notes before
      purchasing our securities. The risks set forth below are not the only ones
      our
      Company will face. Additional risks and uncertainties may also adversely impair
      our business operations. If any of these risks actually occur, our business,
      financial condition, and/or results of operations would likely suffer
      significantly.





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





To
      date,
      our operations have consisted primarily of conducting an analysis of our
      industry, development of proprietary lottery systems and developing our business
      model. In addition, we have entered into agreements to implement and manage
      lotteries for five clients, three of which are currently operating. Accordingly,
      we have only a limited operating history on which you can base an investment
      decision in our securities. Since our inception, we have generated only limited
      revenues from operations and have not achieved profitability and expect to
      continue to incur operating losses for the foreseeable future. For the year
      ended April 30, 2006, we incurred net losses of $2,323,461.




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
      may require additional financing to sustain our operations. We will require
      substantial additional financing to take advantage of business opportunities
      in
      the future. In accordance with our agreement with NM-PLC, any future financing
      will be through NM-PLC, the Articles of Association of which provide for
      preemptive rights, which requirement may constrain that company’s ability to
      obtain equity financing through the sale of securities. If we are unable to
      obtain financing as needed, our business and financial condition could be
      negatively impacted.**




Even
      after giving effect to the proceeds derived by NM-PLC from the AIM Offering,
      we
      have limited cash available to sustain our operations, $2,242,883 at April
      30,
      2006. We expect, though we cannot be certain, that by the end of this 2007
      fiscal year, we will be generating sufficient revenues to support our current
      operations. If revenues are insufficient to support our operations and/or if
      we
      desire to expand our operations by developing and implementing lotteries for
      existing clients and by taking advantage of other business opportunities as
      they
      arise, we will require substantial additional financing. New projects require
      funding to develop the lottery infrastructure and to market the lottery to
      grow
      a player base, both of which require significant funds.





In
      accordance with our agreement with NM-PLC, NM-US is not permitted to engage
      in
      lottery business operations, all of which we have agreed to forward to NM-PLC.
      Accordingly, any financing for lottery operations would be through NM-PLC.
      The
      Articles of Association of NM-PLC provide that 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.




15




Generally,
      the ability to raise additional financing depends on many factors beyond our
      control, including the state of capital markets, the status of our business
      and
      the development or prospects for development of competitive business operations
      by others. The necessary additional financing may not be available or may be
      available only on unfavorable terms. If NM-PLC is unable to raise additional
      funds when needed, the Company may have to curtail our operations and may lose
      valuable business opportunities which could harm our reputation and negatively
      impact our financial condition and results of operations.





**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. To the extent that NM-PLC
      issues stock to raise funds for operations, our ownership in that company will
      be diluted, which could negatively impact our financial statements if financing
      is not arranged on favorable terms.





**Government
      regulations and other actions affecting the lottery industry could have a
      negative effect on our business.**





In
      many
      of the jurisdictions where we currently operate or seek to do business,
      lotteries are not permitted unless expressly authorized by law. The successful
      implementation of our growth strategy and our business could be materially
      adversely affected if jurisdictions that currently authorize lotteries do not
      continue to permit such activities or otherwise change existing laws which
      negatively impact our operations and growth plans.




The
      operations of ongoing lotteries and lottery operators are typically subject
      to
      extensive and evolving regulation. While we generally work with local partners
      who are specifically licensed and authorized to provide services by the lottery
      commission in each of the jurisdictions in which we service clients, regulatory
      authorities that oversee lotteries may desire to conduct an intensive
      investigation of us and our employees prior to and after the award of a lottery
      contract. Lottery authorities may require the removal of any of our employees
      deemed to be unsuitable and are generally empowered to disqualify us from
      receiving a lottery contract or operating a lottery system as a result of any
      such investigation. Some jurisdictions may seek to conduct extensive personal
      and financial disclosure and background checks on persons and entities
      beneficially owning a specified percentage (typically five percent or more)
      of
      our securities. The failure of these beneficial owners to submit to such
      background checks and provide required disclosure could jeopardize the award
      of
      a lottery contract to us or provide grounds for termination of an existing
      lottery contract.





Because
      our reputation for integrity is an important factor in our business dealings
      with lottery and other governmental agencies, a governmental allegation or
      a
      finding of improper conduct on our part or attributable to us in any manner
      could have a material adverse effect on our business, including our ability
      to
      retain existing contracts or to obtain new or renewed contracts. In addition,
      continuing adverse publicity resulting from these investigations and related
      matters could have a material adverse effect on our reputation and
      business.





Moreover,
      proceeds generated by lotteries are dependent upon decisions made by lottery
      authorities over which we have no control with respect to the operation of
      these
      games, such as matters relating to the marketing and prize payout features
      of
      these lottery games. Because we are typically compensated in whole or in part
      based on a gross lottery sales, lower than anticipated sales due to these
      factors could have a material adverse effect on our revenues.





Government
      regulations promulgated by the jurisdictions in which our clients operate may
      prevent or limit us from including links on our internet portal to all or some
      of our other clients’ lotteries websites. In such event our business will be
      materially and adversely affected and our results of operations will
      suffer.




16




**We
      expect that our profitability will be dependent on our ability to retain and
      extend our existing contracts and win new contracts.**





We
      expect
      to derive our revenues and generate cash flow from contracts to operate
      lotteries. Upon the expiration of a contract, lottery authorities may award
      new
      contracts through a competitive procurement process. In addition, our lottery
      contracts typically permit a lottery authority to terminate the contract at
      any
      time for failure to perform and for other specified reasons, and future
      contracts may permit the lottery authority to terminate the contract at will
      with limited notice and may not specify the compensation, if any, to which
      we
      would be entitled were such termination to occur.





The
      termination of or failure to renew or extend one or more lottery contracts,
      the
      renewal or extension of one or more lottery contracts on materially altered
      terms or the loss of our assets without compensation could, depending upon
      the
      circumstances, have a material adverse effect on our business, financial
      condition, results and prospects.





**Slow
      growth or declines in sales of internet/wireless lottery goods and services
      could adversely affect our future revenues and
      profitability.**





Our
      success will be predicated, in part, on the success of the lottery industry,
      as
      a whole, in attracting and retaining players in the face of increased
      competition for the consumers' entertainment dollar (which competition may
      well
      increase further in the future), as well as our own success in developing
      innovative products and systems to achieve this goal. Our failure to achieve
      these goals could have a material adverse effect on our business, financial
      condition and results and prospects.




**We
      expect to have significant foreign currency exposure.**





All
      of
      our clients are based outside the United States and our results of operations
      could be significantly affected by foreign currency exchange rate fluctuations.
      Foreign currency exchange rate 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 expect to be exposed to currency
      exchange rate fluctuations because all of our revenues will be denominated
      in
      currencies other than the United States dollar. Exchange rate fluctuations
      may
      adversely affect our operating results and our results of
      operations.





**We
      are subject to the economic, political and social instability risks of doing
      business in foreign jurisdictions.**





We
      expect
      to derive all of our revenues from operations outside the United States.
      Accordingly, we are exposed to all of the risks of international operations,
      including increased governmental regulation of the lottery industry in the
      markets where we operate; exchange controls or other currency restrictions;
      and
      significant political instability. The occurrence of any of these events in
      the
      markets where we operate could jeopardize or limit our ability to transact
      business in those markets in the manner we expect and could have a material
      adverse effect on our business, financial condition, results and
      prospects.





**Our
      quarterly operating results may fluctuate significantly.**





We
      expect
      to experience significant fluctuations in our operating results from quarter
      to
      quarter due to such factors as the amount and timing of product sales, the
      occurrence of large jackpots in lotteries (which increase the amount wagered
      and
      our revenue) and expenses incurred in connection with lottery start-ups.
      Fluctuations in our operating results from quarter to quarter may cause our
      operating results to be below the expectations of securities analysts and
      investors.




17




**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.





**Our
      intellectual property is not protected by patents and we do not intend to seek
      patent protection for such property. To the extent that others are able to
      obtain access to our proprietary information, our business may be materially
      harmed.**





We
      have
      not sought patent protection for any of our proprietary property. We rely on
      trade secrets, proprietary know-how and technology which we seek to protect,
      in
      part, by confidentiality agreements with our prospective working partners and
      collaborators, employees and consultants. We can not assure you that these
      agreements will not be breached, that we would have adequate remedies for any
      breach of these agreements, or that the trade secrets and proprietary know-how
      embodied in the technologies in which we have an interest will not otherwise
      become known or be independently discovered by others.




18




**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 no trading to date. If no active trading market develops for
      our
      common stock, holders of our common stock will have to rely on the appreciation
      thereof to realize any monies from holding these securities.




**CAUTIONARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**





This
      report contains forward-looking statements within the meaning of Section 27A
      of
      the Securities Act and Section 21E of the Exchange Act. We have based these
      forward-looking statements largely on our current expectations and projections
      about future events and financial trends affecting the financial condition
      of
      our business. These forward-looking statements are subject to a number of risks,
      uncertainties and assumptions, including, among other things:





·
            our
                ability to obtain capital;





·
            our
                ability to fully implement our business
                plan;





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





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





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





·
            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.




19




In
      addition, in this report, we use words such as "anticipates," "believes,"
      "plans," "expects," "future," "intends," and similar expressions to identify
      forward-looking statements.





We
      undertake no obligation to update publicly or revise any forward-looking
      statements, whether as a result of new information, future events or otherwise
      after the date of this report. In light of these risks and uncertainties, the
      forward-looking events and circumstances discussed in this report may not occur
      and actual results could differ materially from those anticipated or implied
      in
      the forward-looking statements.





**ITEM
      2.**  **DESCRIPTION
      OF PROPERTY**





Our
      principal executive offices are located at 370 Neff Avenue - Suite L,
      Harrisonburg, Virginia, where we lease approximately 1,511 square feet of office
      space. We are leasing this space on a month-to-month basis at a monthly rent
      of
      $1,392. We believe that suitable space is available at competitive prices should
      our company vacate this space.





We
      also
      lease approximately 2,200 square feet of office space at Hillsboro Tower, 1800
      -
      4th Street S.W., Calgary, Alberta, Canada. We lease this space through December
      31, 2006 at a monthly rent of $4556 (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.




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.





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





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





**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 during the fourth quarter of the 2006 fiscal year to a vote of
      security holders.








**PART
      II**





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





**Market
      Information.**





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





**Holders.**





At
      August
      14, 2006, there were 64 record holders of the Company's common stock.




20




**Dividends.**





We
      have
      not paid any dividends on our common stock and do not anticipate paying cash
      dividends in the foreseeable future. We intend to retain any earnings to finance
      the growth of our business. We cannot assure you that we will ever pay cash
      dividends. Whether we pay cash dividends in the future will be at the discretion
      of our Board of Directors and will depend upon our financial condition, results
      of operations, capital requirements and any other factors that the Board of
      Directors decides are relevant.





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





The
      following table sets forth information as of April 30, 2006, concerning shares
      of our common stock that may be issued upon the exercise of options and other
      rights under our existing equity compensation plans and arrangements, divided
      between plans approved by our stockholders and plans or arrangements not
      submitted to our stockholders for approval. The information includes the number
      of shares covered by and the weighted average exercise price of, outstanding
      options and other rights and the number of shares remaining available for future
      grants excluding the shares to be issued upon exercise of outstanding options,
      warrants, and other rights.




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





**Repurchases
      of Equity Securities.**





None.





**Recent
      Sales of Unregistered Securities.**





During
      the three months ended April 30, 2006, we issued an aggregate of 10,000,000
      shares of our common stock pursuant to the exemption from the registration
      requirements of the Securities Act of 1933 as amended afforded by Section 4(2)
      thereof. We issued 5,000,000 shares to Joseph Dresner upon the conversion of
      $1,547,137 of debt and accrued interest, or a price of $0.309427 per share
      and
      issued 5,000,000 shares to Milton Dresner upon the conversion of $1,539,561
      of
      debt and accrued interest, or a price of $0.307912 per share.




21




All
      other
      issuances of securities during the fiscal year ended April 30, 2006 have been
      reported in the Forms 10-QSB for the respective quarters the securities were
      issued.





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





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., formerly Lottery Network Services 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 charitable
      organizations outside of the United States. We commenced providing services
      to
      clients in August 2003. We have begun generating limited revenues from the
      long-term agreements with our clients pursuant to which we provide our services
      in return for a percentage of the lottery’s net sales, which is typically
      defined as sales less prizes.





We
      offer
      an integrated range of products and services to develop, build and host
      lotteries for state-operated lotteries and their licensees, such as charitable
      lottery organizations (CLO’s). We have assembled a management team that combines
      a strong lottery operations background, extensive game development experience
      and the technological expertise required to create and operate these lottery
      systems.




Our
      market comprises small and mid-sized state-operated and charity operated
      lotteries. The lotteries we develop and implement target the young-adult
      generation of potential lottery players who do not relate to the traditional
      paper-based games their parents play and who incorporate new media devices
      such
      as cellular telephones, internet and other wireless apparatus into their daily
      lives.





To
      date,
      our most significant activities have consisted of:





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





·
            developing
                a proprietary software platform that supports internet website, internet
                kiosk delivered and mobile phone lottery
                operations;





·
            developing
                a library of digital lottery game designs;





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





·
            completing
                a soft launch of our game software on behalf of three clients;
                and





·
            consummating
                an offering of the securities by our Irish subsidiary, New Media
                Lottery
                Services plc (“NM-PLC”) from which we realized net proceeds of
                $2,876,271.





We
      expect
      to derive revenues primarily from lottery service contracts, which are typically
      five years in duration for the base contract term with five-year extension
      options resulting in total contract lives of in excess of ten years. Our
      contracts generally provide compensation to us based upon a percentage of a
      lottery’s gross sales. We also anticipate deriving revenues from the delivery of
      lottery products to a variety of internet-based kiosks.




22




All
      of
      our clients are outside the United States. In addition, 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, and the competition to secure new contracts is
      often intense.





During
      fiscal 2006, as a condition to completing the AIM Offering, we restructured
      our
      corporate organization so that all of the assets and contracts held by the
      US
      parent were transferred to New Media International, all as described elsewhere
      herein. All of the Company’s operations are conducted through NM-PLC and its
      wholly owned subsidiary New Media International, both of which are managed,
      in
      part, by the directors and officers of NM-US. After giving effect to the sale
      of
      4,344,871 ordinary shares of NM-PLC in the AIM Offering, we own 82.3% of the
      outstanding shares of that company. NM-US conducts no business operations other
      than administrative functions necessary to satisfy its various obligations
      under
      US corporate and securities laws.





Analysis
      of Fiscal 2006 Operations.





During
      the year ended April 30, 2006, we believe that we made significant progress
      toward becoming a self-sustaining, profitable company. Specifically,
      we:




·
              launched
                  an internet bingo site on behalf of Rehab Lotteries in Ireland
                  and
                  instituted a promotional program under which we offered approximately
                  $125,000 in prize money to develop interest in the site and enrolled
                  over
                  7,000 players on the Rehab Lotteries bingo site by fiscal year
                  end;


·
            completed
                the implementation of lottery systems for our lottery partners located
                in
                Ireland, England and Brazil, which we have been operating on a beta
                test
                basis;





·
            developed
                an affiliate tracking system which can track paying customers and
                the
                source that directed them to us, which will allow us to offer incentives
                to advertisers for directing paying customers to our site, which
                we
                believe will build player loyalty;
                and





·
            developed
                several new games targeted at the Brazilian market which we expect
                will
                have application to our other clients’ lotteries.





In
      order
      to undertake and complete these activities, NM-US borrowed an aggregate of
      $2,577,460 during the last fiscal year, including an aggregate of $599,704
      from
      Milton Dresner and $477,756 from Joseph Dresner and $1.5 million from Comerica
      Bank. Except for $150,000 owed by New Media International to Milton Dresner,
      all
      of the funds borrowed from the Dresners, including accrued interest, were
      converted into a total of 10 million shares of NM-US’s common stock in March
      2006. The Comerica loan remains outstanding and is guaranteed by the Dresners.
      The Dresner loans bore interest at the rate of the
      prime
      rate of interest charged by Citibank, N.A. plus 2%
      per
      annum. The Comerica loan bears interest at a floating rate, at April 30, 2006,
      the Company had paid an aggregate of $45,222.09 in interest payments to Comerica
      Bank.





On
      March
      17, 2006, NM-PLC concluded the AIM Offering wherein it sold an aggregate of
      3,672,572 ordinary shares at a price of 50 pence ($.878) per share for an
      aggregate gross offering price of approximately £1.84 million ($3,517,908)(the
“AIM Offering”). NM-PLC received net proceeds of approximately £1.65 million
      ($3,177,194) (after deducting the broker’s placement fees and expenses payable
      at the closing of the offering). We pursued the AIM Offering because, among
      other reasons, we believe the European market has a more sophisticated
      understanding of new media gaming opportunities and will be more receptive
      to
      our business model and plan of operation. In addition, we hope our corporate
      visibility and exposure in the European market will provide us with increased
      access to capital markets there and augment our ability to attract new clients.
      Moreover, we were unable to identify third party financing for our business
      in
      the United States.




23




Generally,
      our ability to realize our full revenue-generating potential has been
      constrained by our lack of funding. Given the timing of the AIM Offering, we
      were unable to apply the proceeds in a manner that would have had a significant
      impact on our business and results of operations for the fiscal year ended
      April
      30, 2006.





We
      are
      looking at 2006 as a transition year that will be the impetus for our Company
      to
      become self-sustaining based upon revenues we expect to generate from current
      projects on which we laid the groundwork in fiscal 2006. Despite our shortage
      of
      working capital during fiscal 2006, the activities we did accomplish will serve
      as the basis to generate revenues in the coming fiscal year. By completing
      the
      implementation of lottery systems for our Irish, English and Brazilian clients
      and developing an affiliate tracking system which will allow 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. These activities have allowed us to develop a business model
      that can be replicated and implemented on varying scales in discrete
      geographical areas in the future. The fundamental elements of the lottery
      infrastructure we have put in place, including the web site and game concepts
      we
      have developed, will reduce the set-up time and organizational and capital
      costs
      associated with establishing each client’s internet/wireless presence and can be
      migrated from client to client, allowing us to repeatedly re-brand our product
      for other organizations.





To
      some
      degree we did not meet all of our business objectives in fiscal 2006 because
      a
      significant portion of our management’s business time and effort was consumed
      and diverted by the AIM Offering. We began the offering process in late
      September 2005 and realized the proceeds in March 2006 We expect to concentrate
      predominantly on our core business this year which will allow us to accomplish
      even more during fiscal 2007.




We
      expect
      that fiscal 2007 will see the continued development of our core operations
      with
      the cash we derived from the AIM Offering and elevate our business to revenue
      generating heights. We expect that we will use the proceeds from the AIM
      Offering substantially as follows:





·
            $0.5
                million for full marketing launch for our lottery clients in Ireland,
                England and Brazil;





·
            $0.5
                million to procure and launch additional lottery contracts;
                and





·
            $1.2
                million for general working
                capital.





We
      believe that devoting the time and financial resources to market our clients’
lotteries will yield the most productive results and greatest financial return.
      As we market our clients’ lotteries and build player bases, prizes will grow and
      we expect that players will increase their volume of play, increasing prizes
      further and attracting more players, all of which should yield increased
      revenues.





Simultaneously,
      we will continue to seek to procure new lottery contracts; however, we expect
      that we will require additional capital to implement lotteries for any new
      clients, as further described below. We believe that the practical experience
      we
      are gaining and expect to acquire in the coming year with our existing clients
      will have positive results with respect to new clients. We will have a lottery
      infrastructure and substantial marketing experience which will accelerate
      lottery implementation and allow us to focus our marketing efforts to maximum
      affect.





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 join
      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 staff has the lottery experience,
      gaming know-how and technological expertise necessary to attract, service and
      grow small to mid-size lottery organizations and that by being 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.




24




Analysis
      of Financial Statements





As
      reported in our financial statements to this Annual Report on Form 10-KSB/A,
      for
      the year ended April 30, 2006 we recognized revenues of approximately $51,000
      on
      net losses of approximately $2,550,000 before minority interest. Our operating
      expenses during 2006 were unusually high because a significant portion of the
      our general and administrative expenses were expended in connection with the
      AIM
      Offering and we expect these components of our operating expenses to be reduced
      in the 2007 fiscal year to levels more in line with prior years. The proceeds
      derived from the AIM Offering had a positive influence on several balance sheet
      line items, including:





·
            our
                cash position, which increased by $2,150,887, from $92,000 on April
                30,
                2005 to $2,242,883 on April 30, 2006;
                and





·
            our
                total current assets which increased by $2,373,463, from $132,875
                on April
                30, 2005 to $2,506,338 on April 30,
                2006.





In
      addition, while the Company had a working capital deficit of $2,747,539 at
      April
      30, 2005, we had positive working capital of $1,492,039 at April 30, 2006.





Though
      we
      borrowed an aggregate of $2,577,460 during the last fiscal year, including
      an
      aggregate of $1,077,460 from the Dresners and $1.5 million from Comerica Bank,
      we were able to reduce our total current liabilities by approximately $1.8
      million by virtue of having converted the entire amounts, including accrued
      interest, due to Milton Dresner ($1,539,561) and Joseph Dresner ($1,547,137)
      into 10 million shares of our common stock (an average conversion price of
      $0.308669 per share), except for $150,000 owed by New Media International to
      Milton Dresner. The issuance of the 10 million shares also diluted the holdings
      of other shareholders.




Liquidity
      and Capital Resources





At
      April 30, 2006, our available cash totaled approximately $2,240,000. We had
      no borrowing capacity and outstanding loans of $1.833 million (not including
      accrued interest). During fiscal 2006, we generated only minimal revenues from
      operations amounting to $51,000.





Our
      business is capital-intensive in that we require cash to implement lotteries
      for
      our clients. We require funds primarily to pay for our highly skilled personnel,
      including our computer programmers, operations specialists and game developers,
      and to initiate marketing campaigns to promote lotteries and build player bases.
      We expect our principal sources of liquidity to be existing cash on hand and
      revenues generated from operations, as we anticipate that we will be generating
      more meaningful revenues from operations as fiscal 2007 progresses. We expect
      cash on hand and revenues to support our existing operations and projects for
      at
      least the next fiscal year.





We
      will
      require significant additional cash to develop and implement lotteries for
      new
      clients and without such funds 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 proved our business model,
      we
      will be able to locate 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. The cost of capital in the future may inhibit
      our ability to grow our Company.




25




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





Financing
      Activities During Fiscal 2006





All
      references below to “£” or “pence” are to British Pounds Sterling and “$” are to
      US Dollars. The US Dollar amounts reflect the closing exchange rate on March
      17,
      2006, of £1 for $1.7569, as reported by the Wall Street Journal.





As
      noted
      elsewhere herein, on March 17, 2006, NM-PLC concluded the AIM Offering wherein
      it sold 3,672,572 of its ordinary shares at a price of 50 pence ($.878) per
      share for an aggregate gross offering price of approximately £1.84 million
      ($3,517,908). NM-PLC received net proceeds of approximately £1.65 million
      ($3,177,194) (after deducting broker’s placement fees and expenses payable at
      the closing of the offering).




**Contractual
      Obligations.**





The
      following table presents our contractual obligations and commercial commitments
      as of April 30, 2006:





Payments
                Due By PeriodContractual
              Cash
                Obligations
            Total
            Less
                than
              One
                Year
            1-3
              Years
            3-5
              Years
            After
                5
              YearsCapital
                LeasesOperating
                Leases
            321,356
            294,722
            26,634Loans
                Payable
            1,500,000
            
            1,500,000Total
                Contractual Cash Obligations
            1,821,356
            294,722
            1,526,634




**Recent
      Accounting Developments.**





NM-PLC,
      an 82.3% owned subsidiary, has engaged Ernst & Young - Ireland as its public
      auditors for matters relating to its AIM listing.




26




**Critical
      Accounting Policies.**





None





**ITEM
      7.**  **FINANCIAL
      STATEMENTS**





The
      Company submits with this report the financial statements and related
      information listed in the Index to Financial Statements on page F-1 following
      this report's signature page.





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





None.




**ITEM
      8A. CONTROLS AND PROCEDURES**





We
      maintain disclosure controls and procedures designed to ensure that information
      required to be disclosed in our reports filed or submitted under the Securities
      Exchange Act of 1934 is recorded, processed, summarized and reported within
      the
      time periods specified in the Securities and Exchange Commission's rules and
      forms. As of the end of the period covered by this Annual Report on Form
      10-KSB/A, we carried out an evaluation, under the supervision and with the
      participation of management, including our Chief Executive Officer and Chief
      Financial Officer, of the effectiveness of the design and operation of our
      disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based
      upon that evaluation, management and our Chief Executive Officer and Chief
      Financial Officer concluded that our disclosure controls and procedures are
      effective. During the period covered by this Annual Report on Form 10-KSB/A,
      there was no change in our internal control over financial reporting (as defined
      in Rule 13a-15(f) under the Exchange Act) that materially effected, or is
      reasonably likely to materially effect, our internal control over financial
      reporting.




**ITEM
      8B. OTHER INFORMATION**





None




**PART
      III**







**ITEM
      9.**  **DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE WITH SECTION 16(A)**


**OF THE EXCHANGE ACT**





**Directors
      and Executive Officers, Promoters and Control Persons.**





The
      following table sets forth our officers and directors as of August 14,
      2006:





Name
            Age
            Title
            Association
              with
                SubsidiariesJohn
                Carson
            51
            President,
                Chief Executive
              Officer
                and Director
            Chief
                Executive Officer,
              Director
                of NM-PLC and
              director
                of New Media International




27




Randolph
                H. Brownell, III
            38
            Chief
                Operating Officer, Chief Financial Officer and Director
            Chief
                Operating Officer, Chief Financial Officer and Director
              of
                NM-PLC and director of
              New
                Media InternationalSterling
                Herbst
            39
            SecretaryJoseph
                Dresner
            81
            Director
            Non-executive
                director of
              NM-PLC
                and non-executive director of New Media InternationalMilton
                Dresner
            81
            Director
                and Chairman
            Non-executive
                director and secretary of NM-PLC and non-executive director of New
                Media
                InternationalFrederick
                Winters(1)
            50
            DirectorThe
                Rt. Hon. Lord
              Benjamin
                Lloyd
              Stormont
                Mancroft
            49
            
            Non-executive
                director and the non-executive chairman of NM-PLCPaula
                Horan
            38
            
            Non-executive
                director and Secretary of NM-PLC and non-executive director and Secretary
                of New Media International





(1) Mr.
      Winters was appointed to the Board as representative of Residential Resales,
      Inc. pursuant to its Share Exchange Agreement with New Media International
      dated
      March 19, 2004. There are no agreements to retain Mr. Winters on the
      board.




All
      directors hold office until the next annual meeting of stockholders and until
      their successors have been elected and qualified. The Board of Directors elects
      the officers annually.





John
      Carson has been our Chief Executive Officer, President and a director of the
      company since July 1, 2004 and has been a director of Lottery Network Services
      Ltd. since 2001. He 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 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.




28




Randolph
      H. Brownell, III has been our Chief Operating Officer, Chief Financial Officer
      and a director since July 1, 2004. He had served as our Vice President of
      Development and Acquisitions from March 2004 to June 30, 2004. He also currently
      serves as the Chief Operating Officer, Chief Financial Officer and Director
      of
      NM-PLC and as a director of New Media International. Since 1996, Mr. Brownell
      served as president of Virginia Business Planning and Investments LLC. Until
      2002, he was active in the operational management of Virginia Business Planning
      and Investments LLC and conducted all day to day operating activities, created
      business and marketing plans for various clients, structured and closed
      financings of up to $5 million, provided business oversight for clients, helped
      to liquidate companies, evaluated business opportunities and handled
      international travel and management for numerous clients. Since 2002, Mr.
      Brownell has served as a director of Lottery Network Services Ltd. and was
      responsible for overseeing all company employees, co-developing business and
      strategic planning and preparing and managing that company’s budgets and
      investment activities. In addition, Mr. Brownell made presentations to potential
      investors and worked to develop joint ventures, managed and made presentations
      to other companies in a lead business development role and managed the filings
      and all corporate documents in Ireland and served as the chair on all board
      meetings. Mr. Brownell was a director of TreasureTrivia, an entity from which
      we
      purchased certain assets and utilized programming services.





Sterling
      Herbst has been our secretary since July 1, 2004 and had otherwise been engaged
      by the Company and it subsidiary since 2001. Mr. Herbst is active in all aspects
      of our day-to-day operations and is responsible for the Company’s computer
      technology management at its offices in Harrisonburg, Virginia. He also assisted
      senior management with our strategic planning and business plan development.
      From November 2000 through July 1, 2004, he was a manger at the Virginia
      Technology Incubator, LLC, an affiliate of the Company by virtue of common
      ownership, where he oversaw construction of a technology incubator and
      facilitated all company purchases, including four computer network
      installations. During that same period, he served as the Vice President of
      US
      Operations of TreasureTrivia.com, Inc., also an affiliate of the Company, where
      he coordinated startup of the U.S. office and managed administrative and support
      staff; developed and implemented the website prize structure and schedule;
      and
      created a prize fulfillment system. From November 1999 through November 2000,
      he
      was a sales representative for Clayton Homes, Inc., where he negotiated home
      sales, arranged financing of homes and real estate with multiple lending
      institutions, and supervised computer installation and all technology related
      issues in office.




Joseph
      Dresner has been a director of our company since March 18, 2004. He also
      currently serves as a Director of NM-PLC and as a director of New Media
      International. He is Chairman of the Highland Companies, a Detroit-area-based
      developer and manager of commercial, industrial and residential properties.
      Mr. Dresner is a member of the Audit Committee of the Board of Directors of
      the Company. Mr. Dresner has been a director of Meadowbrook Insurance Group
      Inc.
      since 1985. Mr. Dresner was appointed to serve as a director of NM-PLC on
      November 23, 2005. Mr. Dresner is the brother of Milton Dresner, a director
      of
      the Company.





Milton
      Dresner has been a director of our company since March 18, 2004. He also
      currently serves as a Director of NM-PLC and as a director of New Media
      International. For the past 40 years, Mr. Dresner has been co-owner of Highland
      Management, Highland Construction, Highland Industrial Development, Highland
      Manufactured Home Properties, and Highland Motel Properties.  Together,
      these five interacting organizations were involved in every facet of land
      development, construction, management and leasing.  The Highland Companies
      have developed, constructed and managed industrial complexes, multi-family
      units, manufactured home communities, motels and residential subdivisions. 
He is also a partner in several investment banking firms in New York.  Mr.
      Dresner is a life-long entrepreneur and respected businessman, Mr. Dresner
      has
      nearly 50 years of experience in a variety of industries including real estate,
      equities and retail.  Additionally, Mr. Dresner holds dozens of corporate
      positions ranging from director, partner and co-owner, to stockholder and
      investor. Mr. Dresner was appointed to serve as a director of NM-PLC on November
      23, 2005. Mr. Dresner is the brother of Joseph Dresner, a director of the
      Company.




29




Frederick
      Winters has been a member of our Board of directors since March 18, 2004, the
      date on which we closed the Share Exchange Agreement. Since 2002, Mr. Winters
      has served as the chief executive officer, vice president-business development
      and a director of NuPOW’R LLC, a company engaged in the development of electric
      power systems. During 2001 and 2002, he served as the vice president of Brighton
      Exchange Group, a business development company. From 2000 to 2001, he was the
      chief executive officer of Televend, Inc., a telephony based mobile commerce
      company. From 1978 to 2001 Mr. Winters served in the United States Marine Corp.,
      achieving the rank of Lieutenant Colonel. Mr. Winters was appointed to the
      Board
      as representative of Residential Resales, Inc. pursuant to the Share Exchange
      Agreement. There are no agreements to retain Mr. Winters on the board after
      the
      next annual meeting at which directors are elected.





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





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




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





**Committees
      of Board of Directors.**





The
      board
      does not have a nominating or a compensation committee. The selection of
      nominees for the Board of Directors is made by the entire Board of Directors.
      Compensation of management is determined by the entire Board of
      Directors.





*Audit
      Committee*





The
      audit
      committee consists of Messrs. Joseph Dresner, Milton Dresner and Frederick
      Winters. Mr. Winters is an independent director. The audit committee meets
      at
      least quarterly with our management and our independent registered public
      accounting firm to review and help ensure the adequacy of our internal controls
      and to review the results and scope of the auditors' engagement and other
      financial reporting and control matters. Joseph Dresner is financially literate
      and is a financial expert, as such term is defined under the Sarbanes-Oxley
      Act
      of 2002.




30




The
      audit
      committee has adopted a formal written charter specifying: (i) the scope of
      the
      audit committee's responsibilities and how it is to carry out those
      responsibilities, including structure, processes and membership requirements;
      (ii) the audit committee's responsibility for ensuring its receipt from the
      outside auditor of a formal written statement delineating all relationships
      between the auditor and the company, consistent with Independence Standards
      Board Standard 1, adopted in January 1999 by the Independence Standards Board
      (the private sector standard-setting body governing the independence of auditors
      from their public company clients) and the committee's responsibility for
      actively engaging in communications with the auditor with respect to any
      relationships or services that may impact the objectivity and independence
      of
      the auditor and for taking, or recommending that the entire board of directors
      take, appropriate action to oversee the independence of the outside auditor;
      and
      (iii) the outside auditor's ultimate accountability to the board of directors
      and the audit committee, as representatives of our company's stockholders,
      and
      these stockholder representatives' ultimate authority and responsibility to
      select, evaluate and, where appropriate, replace the outside auditor (or to
      nominate the outside auditor for stockholder approval). Our audit committee
      will
      review and reassess the adequacy of our written charter on an annual
      basis.





The
      audit
      committee has adopted guidelines and procedures: (i) making it directly
      responsible for the appointment, compensation and oversight of the work of
      any
      public accounting firm engaged by it (including resolution of any disagreements
      between management and the firm regarding financial reporting) for the purpose
      of preparing or issuing an audit report or related work, and each such public
      accounting firm will report directly to the audit committee; (ii) providing
      for
      the (a) receipt, retention and treatment of complaints received by our Company
      regarding accounting, internal accounting controls or auditing matters and
      (b)
      confidential, anonymous submission by Company employees of concerns regarding
      questionable accounting or auditing matters; (iii) affording it the authority
      to
      engage independent counsel and other advisers, as it may determine to be
      necessary to carry out its duties; and (iv) providing for appropriate funding
      for payment of: (a) the public accounting firm engaged by our Company for the
      purpose of rendering or issuing an audit report and (b) any advisers engaged
      by
      the audit committee as described under clause (iii) above.





*Code
      of Ethics.*





We
      have
      adopted a code of ethics, as contemplated by Section 406 of the Sarbanes-Oxley
      Act of 2002. We will post the code of ethics on our website when we establish
      an
      on-line presence. Our Code of Ethics is designed to deter wrongdoing and to
      promote:




·
            Honest
                and ethical conduct, including the ethical handling of actual or
                apparent
                conflicts of interest between personal and professional relationships;





·
            Full,
                fair, accurate, timely, and understandable disclosure in reports
                and
                documents that we file with, or submit to, the Commission and in
                other
                public communications we make;





·
            Compliance
                with applicable governmental laws, rules and regulations;





·
            The
                prompt internal reporting of violations of the Code of Ethics to
                an
                appropriate person or persons identified in the Code of Ethics; and





·
            Accountability
                for adherence to the Code of
                Ethics.





We
      will
      post our Code of Ethics and disclose any amendment to, or waiver of, a provision
      thereof on a Form 8-K filed with the SEC and post such information and intention
      on our internet website at such time as we create a website.





**ITEM
      10. EXECUTIVE COMPENSATION**





**Compensation
      of Directors.**





NM-US
      does not compensate our directors for serving in such capacity. We reimburse
      outside directors for all costs and expenses incurred in connection with
      attending or participating in any board meeting.




31




**Executive
      Compensation.**





The
      following table sets forth the information regarding compensation paid to the
      Chief Executive Officer and any other person who received in excess of $100,000
      in annual compensation during the last three fiscal years (collectively, the
      “Named Executives”).





**SUMMARY
                COMPENSATION TABLE**Long
                Term CompensationAnnual
                Compensation
            Awards
            Payouts(a)
              Name
                and Principle
              Position
            (b)
              Year
            (c)
              Salary
                ($)
            (d)
              Bonus
                ($)
            (e)
              Other
              Annual
                Compensation ($)
            (f)
              Restricted
              Stock
                Award(s) ($)
            (g)
              Securities
                Underlying Options/SARs (#)
            (h)
              LTIP
                Payouts ($)
            (i)
              All
              Other
                Compensation ($)John
                Carson, CEO and President (1)
            2006
              
              2005
            $163,000
              
              $115,000
            
            $1,800
            
            1,100,000
              
              200,000
            
            $61,286Nathan
                Miller,
              President
                (2)
            2004
            $1Randolph
                Brownell, III, Vice President, COO and CFO (3)
            2006
              
              2005
            $139,000
              
              $102,000
            
            $1,800
            
            1,000,000
              
              200,000
            
            $53,500




(1)
            Mr.
                Carson commenced his tenure as the President of our Company on July
                1,
                2004. During the fiscal year ended April 30, 2006, Mr. Carson was
                compensated in his capacity as Chief Executive Officer of both NM-US
                (through March 17, 2006) and NM-PLC (March 17, 2006 through April
                30,
                2006). The amount paid to Mr. Carson for the 2006 fiscal year (A)
                under
                column (e) represents a car allowance and (B) under column (i) represents
                the payment during the fiscal year of (x) deferred salary in the
                amount of
                $60,000 and (y) an insurance allowance of
                $1,286.


(2)
            Mr. Miller served as our President from March
                19, 2004
                through June 30, 2004. (3)
            During
                the fiscal year ended April 30, 2006, Mr. Brownell was compensated
                in his
                capacity as Chief Operating Officer, Chief Financial Officer of both
                NM-US
                (through March 17, 2006) and NM-PLC (March 17, 2006 through April
                30,
                2006). The amount paid to Mr. Brownell for the 2006 fiscal year (A)
                under
                column (e) represents a car allowance and (B) under column (i) represents
                the payment during the fiscal year of (x) deferred salary in the
                amount of
                $50,000 and (y) an insurance allowance of
                $3,500.





**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.




32




*Other
      Arrangements and Payment of Deferred Salary*





Since
      the
      closing of the AIM Offering, NM-PLC has remitted to John T. Carson the sum of
      $60,000 in payment of deferred salary, leaving $62,500 of deferred salary
      outstanding as of the date hereof, and remitted to Randolph Brownell, III the
      sum of $50,000 in payment of deferred salary leaving $50,000 of deferred salary
      outstanding as of the date hereof.





In
      addition, until November 30, 2005, Mr. Brownell was reimbursed in the amount
      of
      $3,500 per year to pay the cost of his health insurance premiums.





*NM-PLC
      Employment Agreements*





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





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





Joseph
      Dresner has been engaged to serve as a non-executive director of NM-PLC under
      the terms of a letter of appointment dated March 13, 2006 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.




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 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.





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





The
      Rt.
      Hon. Lord Mancroft has been appointed a non-executive director of NM-PLC,
      effective as of the Admission Date, under the terms of a letter of appointment
      dated March 1, 2006 for a fee
      of
£50,000 per annum subject to annual review. 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.




33




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





The
      following table presents certain information concerning stock options granted
      to
      the Named Executives under our various stock option plans during the fiscal
      year
      ended April 30, 2006.





**Option/SAR
                Grants in Last Fiscal Year**Individual
                GrantsName
            Number
                of Securities Underlying Options/SARsGranted
                (#)
            %
                of Total Options/SARs Granted to Employees inFiscal
                Year
            Exercise
                or Base Price($/Sh)
            Expiration
                DateJohn
                T. Carson
            1,100,000
            44.9%
            $0.35
            11/2/2015Randolph
                Brownell, III
            1,000,000
            40.8%
            $0.35
            11/2/2015








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





The
      following table sets forth additional information as of April 30, 2006,
      concerning shares of our common stock that may be issued upon the exercise
      of
      options under our existing equity compensation plans, divided between plans
      approved by our stockholders and plans or arrangements not submitted to our
      stockholders for approval. The information includes the number of shares covered
      by, and the weighted average exercise price of, outstanding options and the
      number of shares remaining available for future grants excluding the shares
      to
      be issued upon exercise of outstanding options, warrants, and other
      rights.




Aggregate
                Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
                ValuesName
            Shares
                Acquired onExercise
                (#)
            Value
              Realized
                ($)
            Number
                of Securities Underlying Unexercised Options/SARs at FY-End
                (#)
              Exercisable/Unexercisable
            Value
                of Unexercised In-the Money Options/SARs at FY-End ($)
              Exercisable/UnexercisableJohn
                T. Carson
            -0-
            -0-
            1,300,000/0
            $0/$0Randolph
                Brownell, III
            -0-
            -0-
            1,200,000/0
            $0/$0




**Section
      16(a) Beneficial Ownership Reporting Compliance.**





Section
      16(a) of the Securities Act of 1934 requires the Company's officers and
      directors, and greater than 10% stockholders, to file reports of ownership
      and
      changes in ownership of its securities with the Securities and Exchange
      Commission. Copies of the reports are required by SEC regulation to be furnished
      to the Company. Based on management's review of these reports and written
      representations from reporting persons, during the fiscal year ended April
      30,
      2006, all reports required to be filed in connection with the grant of options
      to each of John Carson, Randolph Brownell, III, Sterling Herbst and Frederick
      Winters were filed late. All reports required to be filed under Section 16(a)
      will be filed with the Securities and Exchange Commission within four weeks
      of
      the filing of this Report.





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





At
      August
      14, 2006, there were 21,442,143 shares of our Common Stock outstanding. The
      following table sets forth information as of August 14, 2006, regarding the
      beneficial ownership of our common stock by (1) each director and officer,
      (2)
      each person or group known by us to beneficially own 5% or more of the
      outstanding shares of Common Stock and (3) all executive officers and directors
      as a group. Unless otherwise noted, the persons named below have sole voting
      and
      investment power with respect to the shares shown as beneficially owned by
      them.
      Securities attributed to the individuals named below include securities
      convertible into common stock within 60 days of August 6, 2004.




34




Name
                of
              Beneficial
                Owner (1)
            Amount
                of
              Beneficial
                Ownership
            Percent
                of Outstanding
              Shares
                of Class Owned (2)John
                Carson (3)
            1,92,187,714
            9.62%Randolph
                H. Brownell, III (4)
            1,474,286
            6.51%Sterling
                Herbst (5)
            96,429
            *Joseph
                Dresner
            7,000,000
            32.65%Milton
                Dresner
            7,000,000
            32.65%Frederick
                Winters (6)
            50,000
            *Nathan
                Miller (7)
            3,345,715
            15.60%All
                officers and directors
              as
                a group (6 persons) (8)
            17,808,429
            82.10%


*
      Less
      than 1%.





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


(2)
            Based on 21,442,143 shares
              outstanding. (3)
            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
                274,286 shares of common stock and options to purchase 1,200,000
                shares of
                common stock.


(5)
            Includes
                21,429 shares of common stock and options to purchase 75,000 shares
                of
                common stock.


(6)
            Consists
                solely of options to purchase shares of common
                stock.


(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 2,625,000 shares of common
                stock.




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




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




35




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




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


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





During
      March 2004, Nathan Miller, then an officer and director of the Company,
      converted an aggregate of $539,315 of debt of Lottery Network Services Ltd.
      into
      9,000 ordinary shares of that company. The debt was converted at premiums above
      the par value per Lottery Network Services ordinary share at $59.92 per share.
      Pursuant to the Share Exchange Agreement, Mr. Miller converted all of his shares
      of Lottery Network Services into 3,000,000 shares of our Common Stock. At April
      30, 2006, NM-US was indebted to Mr. Miller in the amount of $183,177, plus
      $24,917 in accrued interest, which is repayable on terms to be
      determined.





During
      March 2004, Joseph Dresner, a director of the Company and the brother of Milton
      Dresner, converted an aggregate of $300,000 of debt of New Media International,
      formerly Lottery Network Services Ltd., into 7,000 ordinary shares of that
      company. The debt was converted at a premium of $42.86 per share above the
      par
      value thereof.





During
      March 2004, Milton Dresner, a director of the Company and the brother of Joseph
      Dresner, converted an aggregate of $350,000 of debt of New Media International,
      formerly Lottery Network Services Ltd.; into 7,000 ordinary shares of that
      company. The debt was converted at a premium of $50 per share above the par
      value thereof.





Until
      December 31, 2004, we leased our offices in Harrisonburg, Virginia from the
      Virginia Technology Incubator, LLC, a company owned, in part, by Randolph
      Brownell, a current officer and director, and Nathan Miller and Nancy Bowman,
      former officers and/or directors of the Company. We leased these offices through
      December 2004 at a cost of $3,000 per month. For a portion of this period,
      we
      also paid $1,000 a month for office and administrative services. During the
      fiscal year ended April 30, 2005, we paid aggregate rent to Virginia Technology
      Incubator for said year in the amount of $28,000. The lease agreement was
      negotiated on terms no better than we could have obtained from an unaffiliated
      third party.




One
      of
      our former directors and officers, Nathan Miller, is a partner of the law firm
      of Miller & Earle, PLLC. This firm has provided certain legal services to us
      during the last two years. During fiscal 2005 and 2004, Miller & Earle, PLLC
      billed us $43,808 and $202,465, respectively for services rendered, all of
      which
      is outstanding. During fiscal 2003 and fiscal 2002, we paid Miller & Earle
      and aggregate of $0 and $7,500, respectively, for legal services rendered.





**ITEM
      13. EXHIBITS**





Exhibit
                No.
            Exhibit
                Title
            Location
                Reference2.1
            Share
                Exchange Agreement dated March 19, 2004 by andamong
                the Registrant, Lottery Network Services Ltd. andthe
                holders of all of the outstanding shares of capital stockof
                Lottery Network Services Ltd.
            2




36




2.2
            Agreement
                and Plan of Merger dated June 14, 2004 by andbetween
                New Media Lottery Services, Inc. and ResidentialResales,
                Inc.
            32.2
            Agreement
                and Plan of Merger dated January 25, 2005 byand
                between New Media Lottery Services, Inc., a Virginiacorporation,
                and New Media Lottery Services, Inc., aDelaware
                corporation.
            63(i)(a)
            Articles
                of Incorporation of Media Acquisitions Group, Inc.
            13(i)(b)
            Certification
                of Reinstatement
            13(i)(c)
            Articles
                of Amendment to Articles of Incorporation tochange
                the corporate name to Residential Resales, Inc.
            13(i)(d)
            Certification
                of status of Residential Resales, Inc.
            13(ii)
            Bylaws
                of Residential Resales, Inc.
            13(i)(e)*
            Articles
                of Association of Lottery Network Services Ltd.
            23(i)(f)*
            Memorandum
                of Association of Lottery Network Services Ltd.
            23(i)(g)
            Articles
                of Incorporation of New Media Lottery Services, Inc.(Virginia).
            33(i)(h)
            Certificate
                of Incorporation of New Media Lottery Services, Inc.(Delaware).
            63(i)(j)
            By-Laws
                of New Media Lottery Services, Inc. (Delaware).
            63(i)(k)
            Articles
                of Association of New Media Lottery Services plc
            93(i)(l)
            Memorandum
                of Association of New Media Lottery Services plc
            9


10.1
            Agreement
                dated September 13, 2001, as amended as of January26,
                2004 by and between Lottery Network Services Ltd. andRehab
                Net Games Limited.
            210.2
            Agreement
                dated December 12, 2001 by and between LotteryNetwork
                Services Ltd. and Rehab Charities UK Limited.
            210.3
            Agreement
                dated November 27, 2001 by and between LotteryNetwork
                Services Ltd. and Tropical Gaming Ltd., Belize.
            2




37




10.4
            Agreement
                dated February 12, 2002 by and between LotteryNetwork
                Services Ltd. and Guatemalan Pediatric Foundation.
            210.5
            Agreement
                dated December 7, 2001 by and between LotteryNetwork
                Services Ltd. and Intellect Foundation.
            210.6
            Agreement
                dated February 3, 2004 by and between LotteryNetwork
                Services Ltd. and Carnegie Cooke & Company Inc.
            210.7
            Joint
                Venture Agreement dated October 28, 2004 by andbetween
                New Media Lottery Services, Inc. andCybercyte
                Sistemas e Serviços Ltda.
            710.8
            Agreement
                dated May 6, 2005 by and between New MediaLottery
                Services, Inc. and Alladdin Lotteries Limited.
            710.9
            Quota
                Holders Agreement dated June 22, 2005 by and betweenNew
                Media Lottery Services, Inc. and Cybercyte Sistemas eServiços
                Ltda.
            710.10
            Agreement
                dated June 7, 2005 by and between New MediaLottery
                Services, Inc. and Parlay Entertainment Limited.
            810.11
            Floating
                Eurodollar Note dated October 7, 2005 in the principalamount
                of $1,000,000 made by New Media Lottery Services, Inc.in
                favor of Comerica Bank.
            910.12
            Services
                Agreement dated November 25, 2005 by and among Lottery Network Services
                Ltd., and Friends of Rehab Society and Rehab Net Games
                Limited.
            910.13
            Letter
                agreement dated December 15, 2005, between MiltonDresner
                and the Company with respect to conversion of debt into 5,000,000
                shares
                of common stock.
            910.14
            Letter
                agreement dated December 15, 2005, between JosephDresner
                and the Company with respect to conversion of debt into 5,000,000
                shares
                of common stock.
            910.15
            Amended
                and Restated Floating Eurodollar Note (amending the Floating Eurodollar
                Note dated October 7, 2005) in the principal amount of $1,500,000,
                dated
                December 14, 2005 made by New Media Lottery Services, Inc. in favor
                of
                Comerica Bank.
            910.16
            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
            9


10.17
            Asset
                Purchase and Assumption of Liabilities Agreement datedMarch
                13, 2006 between New Media Lottery Services, Inc. andNew
                Media Lottery Services (International) Limited.
            910.18
            Technology
                License Agreement dated March 13, 2006 betweenNew
                Media Lottery Services, Inc. and New Media LotteryServices
                (International) Limited.
            9




38




10.19
            Sublicense
                Agreement dated March 13, 2006 betweenNew
                Media Lottery Services, Inc. and New Media LotteryServices
                (International) Limited.
            910.20
            Employment
                Agreement, dated March 13, 2006 between NewMedia
                Lottery Services plc and John T. Carson.
            910.21
            Employment
                Agreement, dated March 13, 2006 between NewMedia
                Lottery Services plc and Randolph H. Brownell, III.
            910.22
            Supplemental
                Letter to Employment Agreement, dated March13,
                2006 between New Media Lottery Services plc and John T.Carson.
            910.23
            Relationship
                Deed dated March 13, 2006 between New MediaLottery
                Services, Inc. and New Media Lottery Services plc.
            910.24
            Financial
                Services Agreement dated March 13, 2006 by and among, New Media Lottery
                Services plc, New Media Lottery Services, Inc., certain directors
                of the
                foregoing companies and Zimmerman Adams International Limited
            910.25
            Broker’s
                Agreement dated March 13, 2006 by and among, New Media Lottery Services
                plc, New Media Lottery Services, Inc., certain directors of the foregoing
                companies and Zimmerman Adams International Limited
            910.26
            Promissory
                note dated March 17, 2006 in the principal amount of $1,500,529.86
                made by
                New Media Lottery Services(International)
                Limited in favor of New Media Lottery Services,Inc.
            910.27
            Agreement
                dated October 12, 2005 by and between New MediaLottery
                Services International, Ltd. and Inspired BroadcastNetworks
            1014
            Code
                of Ethics
            516
            Letter
                of Earl M. Cohen, CPA, PA, on change in certifyingaccountant.
            431.1
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.
            1131.2
            Certification
                of Chief Financial Officer pursuant to Section 302of
                the Sarbanes-Oxley Act of 2002.
            11


32.1
            Certification
                of Chief Executive Officer of Periodic FinancialReports
                pursuant to Section 906 of the Sarbanes-Oxley Act of2002,
                18 U.S.C. Section 1350
            1132.2
            Certification
                of Chief Financial Officer of Periodic FinancialReports
                pursuant to Section 906 of the Sarbanes-Oxley Act of2002,
                18 U.S.C. Section 1350
            11




39




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


2.
            Previously
                filed with the Current Report on Form 8-K dated March 31, 2004 as
                filed
                with the Securities and Exchange Commission on April 2,
                2004.


3.
            Previously
                filed with the Information Statement pursuant to Rule 14C of the
                Securities Exchange Act of 1934 dated June 9,
                2004.


4.
            Previously
                filed with the Current Report on Amendment No. 1 to Form 8-K dated
                March
                31, 2004 as filed with the Securities and Exchange Commission on
                April 8,
                2004.


5.
            Previously
                filed with the Annual Report on Form 10-KSB for the fiscal year ended
                April 30, 2004 as filed with the Securities and Exchange Commission
                on
                August 10, 2004.


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


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


8.
            To be filed by amendment. 9.
            Previously
                filed with the Quarterly Report on Form 10-QSB for the fiscal quarter
                ended January 31, 2006 as filed with the Securities and Exchange
                Commission on March 23, 2006. 10.
            Previously
                  filed with the Annual Report on Form 10-KSB for the fiscal year
                  ended
                  April 30, 2006 as filed with the Securities and Exchange Commission
                  on
                  August 15, 2006. 11.
            Filed
                herewith.





Item
      14.
      Principle Accountant Fees and Services





AUDIT
      FEES. The aggregate fees billed for professional services rendered by Bouwhuis,
      Morrill & Company for the audits of the Company's annual consolidated
      financial statements for the 2006 fiscal year ending on April 30, 2006 and
      the
      reviews of the financial statements included in the Company's Quarterly Reports
      on Form 10-QSB for the fiscal year were $33,750. The aggregate fees billed
      for
      professional services rendered by Bouwhuis, Morrill & Company for the audits
      of the Company's annual consolidated financial statements for the 2004 fiscal
      year and the reviews of the financial statements included in the Company's
      Quarterly Reports on Form 10-QSB for the fiscal year were $22,600 (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 2006 fiscal year were
      $-0-. The aggregate fees billed Bouwhuis, Morrill & Company for
      audit-related services rendered for the Company and its subsidiaries for the
      2005 fiscal year were $2,029. 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 2006 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 2005 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 2006 fiscal year and $0 for the
      2005
      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.





40





SIGNATURES





In
      accordance with the Exchange Act, the registrant caused this report to be signed
      on its behalf by the undersigned, thereunto duly authorized.





Dated: September
              26, 2006
            By:
            /s/ John
              T.
              CarsonName:
                John T. Carson
              Title:
                President





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





Person
            Capacity
            Date/s/
                John T. Carson
              John
                T. Carson
            President
                and Director
            September
                26, 2006/s/
                Randolph H. Brownell, III
              Randolph
                H. Brownell, III
            Chief
                Operating Officer, Chief FinancialOfficer
                and Director
            September
                26, 2006/s/
                Sterling Herbst
              Sterling
                Herbst
            Secretary
            September
                26, 2006/s/
                Joseph Dresner
              Joseph
                Dresner
            Director
            September
                26, 2006/s/
                Milton Dresner
              Milton
                Dresner
            Director
            September
                26, 2006/s/
                Frederick Winters
              Frederick
                Winters
            Director
            September
                26, 2006








41







**ITEM
      7. FINANIAL STATEMENTS**








42










**NEW
      MEDIA LOTTERY SERVICES, INC.**


**&
      SUBSIDIARIES**


(Formerly
      Residential Resales, Inc.)





Financial
      Statements for the Years


Ended
      April 30, 2006 and 2005


and
      Report of Independent Registered


Public
      Accounting Firm














43


**CONTENTS**




Report
                  of Independent Registered Public Accounting Firm
              F-2Consolidated
                  Balance Sheet
              F-3Consolidated
                  Statements of Operations
              F-4Consolidated
                  Statements of Stockholders’ Deficit
              F-5Consolidated
                  Statements of Cash Flows
              F-6
                  - F-7Notes
                  to the Consolidated Financial Statements
              F-8






F-1




Bouwhuis, Morrill & Company,
                  LLC
                Certified Public Accountants
              12
                  South Main, Suite 208
                Layton,
                  Utah 84041
                801-546-1357
                  Tel
                801-546-1348
                  Fax









REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM











Board
      of
      Directors


New
      Media
      Lottery Services, Inc. & Subsidiaries


Harrisonburg,
      Virginia








We
      have
      audited the accompanying consolidated balance sheet of New Media Lottery
      Services, Inc. & Subsidiaries as of April 30, 2006 and the related
      consolidated statements of operations, stockholders’ deficit and cash flows for
      the years ended April 30, 2006 and 2005. These consolidated financial statements
      are the responsibility of the Company’s management. Our responsibility is to
      express an opinion on these consolidated financial statements based on our
      audits.





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





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of New Media
      Lottery Services, Inc. & Subsidiaries as of April 30, 2006 and the
      consolidated results of their operations and their cash flows for the years
      ended April 30, 2006 and 2005 in conformity with accounting principles generally
      accepted in the United States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 11 to the
      consolidated financial statements, the Company has negative 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.




As
        discussed in Note 15, the accompanying consolidated financial statements
        have
        been restated.





/s/
      Bouwhuis, Morrill & Company





Bouwhuis,
      Morrill & Company


August
      4,
      2006,
      except
      for Note 15 as to which the date is September 19, 2006





F-2




**NEW
        MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**
 Consolidated
        Balance Sheet
 As
        at
        April 30, 2006
 (restated)
  ASSETSCURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              2,242,883Accounts
                  receivable
              
              
              54,884Other
                  receivables
              
              
              84,225Marketable
                  securities (Note 3)
              
              
              18,000Prepaid
                  assets
              
              
              106,344Total
                  Current Assets
              
              
              2,506,336PROPERTY
                  AND EQUIPMENT, NET (Note 2)
              
              
              249,505TOTAL
                  ASSETS
              
              $
              2,755,841LIABILITIES
                  AND STOCKHOLDERS' DEFICITCURRENT
                  LIABILITIESAccounts
                  payable and accrued expenses
              
              $
              366,152Deferred
                  compensation
              
              
              112,500Due
                  to related parties (Note 4)
              
              
              202,465Loans
                  payable - related parties (Note 5)
              
              
              333,177Total
                  Current Liabilities
              
              
              1,014,294NOTES
                  PAYABLE - LONG-TERM PORTION
              
              
              1,500,000TOTAL
                  LIABILITIES
              
              
              2,514,294MINORITY
                  INTEREST
              
              
              4,012,527STOCKHOLDERS'
                  DEFICITCommon
                  stock, $0.001 par value; 50,000,000 sharesauthorized,
                  21,442,143 shares issue and outstanding
              
              
              21,442Additional
                  paid-in capital
              
              
              3,335,688Accumulated
                  deficit
              
              
              (7,114,785
              )Accumulated
                  other comprehensive income (loss)Foreign
                  currency translation adjustment
              
              
              (31,325
              )Unrealized
                  gain on marketable securities
              
              
              18,000Total
                  Stockholders' Deficit
              
              
              (3,770,980
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              2,755,841




F-3




**NEW
        MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**
 Consolidated
        Statements of Operations
  For
                  the Years EndedApril
                  30,2006
              
              2005(restated)NET
                  REVENUES
              
              $
              51,380
              
              $
              -OPERATING
                  EXPENSESDepreciation
                  & amortization expense
              
              
              115,046
              
              
              13,506General
                  and administrative
              
              
              778,515
              
              
              211,309Management
                  fees
              
              
              101,000
              
              
              294,000Professional
                  fees
              
              
              503,332
              
              
              454,082Programming
                  fees
              
              
              526,489
              
              
              420,482Rent
                  expense
              
              
              60,822
              
              
              60,945Website
                  expense
              
              
              273,602
              
              
              91,943Total
                  Operating Expenses
              
              
              2,358,806
              
              
              1,546,267LOSS
                  FROM OPERATIONS
              
              
              (2,307,426
              )
              
              (1,546,267
              )OTHER
                  INCOME (EXPENSES)Gain
                  on settlement of debt
              
              
              -
              
              
              3,170Interest
                  income
              
              
              14
              
              
              -Interest
                  expense
              
              
              (242,623
              )
              
              (140,028
              )Total
                  Other Income (Expenses)
              
              
              (242,609
              )
              
              (136,858
              )NET
                  LOSS BEFORE INCOME TAXES ANDMINORITY
                  INTEREST
              
              
              (2,550,035
              )
              
              (1,683,125
              )PROVISION
                  FOR INCOME TAXES
              
              
              -
              
              
              -MINORITY
                  INTEREST IN SUBSIDIARIES LOSSES
              
              
              226,574
              
              
              -NET
                  LOSS
              
              $
              (2,323,461
              )
              $
              (1,683,125
              )BASIC
                  AND DILUTED NET LOSS PER SHARE
              
              $
              (0.18
              )
              $
              (0.15
              )WEIGHTED
                  AVERAGE NUMBER OFSHARES
                  OUTSTANDING
              
              
              13,108,810
              
              
              11,167,143OTHER
                  COMPREHENSIVE INCOMENET
                  LOSS
              
              $
              (2,323,461
              )
              $
              (1,683,125
              )Foreign
                  currency translation adjustment
              
              
              (33,572
              )
              
              2,247Unrealized
                  gain on marketable securities
              
              
              (12,000
              )
              
              30,000COMPREHENSIVE
                  LOSS
              
              $
              (2,369,033
              )
              $
              (1,650,878
              )




F-4




**NEW
        MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**
 Consolidated
        Statements of Stockholders' Deficit
 (restated)
  Common
                  Stock
              
              AdditionalPaid-in
              
              Accumulated
              
              Accumulated
                  OtherComprehensive
              
              MinorityShares
              
              Amount
              
              Capital
              
              Deficit
              
              Income
              
              InterestBalance,
                  April 30, 2004
              
              
              11,167,143
              
              $
              11,167
              
              $
              2,055,757
              
              $
              (3,108,198
              )
              $
              -
              
              $
              -Foreign
                  currency translation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,247
              
              
              -Unrealized
                  gain on marketable securities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              30,000
              
              
              -Net
                  loss for the year endedApril
                  30, 2005
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,683,125
              )
              
              -
              
              
              -Balance,
                  April 30, 2005
              
              
              11,167,143
              
              
              11,167
              
              
              2,055,757
              
              
              (4,791,323
              )
              
              32,247
              
              
              -Common
                  stock issued for software at
              
              
              275,000
              
              
              275
              
              
              224,725$0.91
                  per share, May,2005Common
                  stock issued in conversion ofdebt
                  at $0.31 per share, March 2006
              
              
              10,000,000
              
              
              10,000
              
              
              3,076,699
              
              
              -
              
              
              -
              
              
              -Consolidation
                  of subsidiaries
              
              
              -
              
              
              -
              
              
              (2,021,493
              )
              
              -
              
              
              -
              
              
              4,012,527Unrealized
                  loss on marketable securities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (12,000
              )
              
              -Foreign
                  currency translation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (33,572
              )
              
              -Net
                  loss for the year endedApril
                  30, 2006
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,323,461
              )
              
              -
              
              
              -Balance,
                  April 30, 2006
              
              
              21,442,143
              
              $
              21,442
              
              $
              3,335,688
              
              $
              (7,114,784
              )
              $
              (13,325
              )
              $
              4,012,527




F-5




**NEW
        MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES**
 Consolidated
        Statements of Cash Flows
  For
                  the Years EndedApril
                  30,2006
              
              2005(restated)CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (2,323,461
              )
              $
              (1,683,125
              )Adjustments
                  to reconcile net loss tonet
                  cash used by operating activities:Depreciation
                  expense
              
              
              115,046
              
              
              13,506Gain
                  on settlement of debt
              
              
              -
              
              
              (3,170
              )Minority
                  interest in subsidiaries losses
              
              
              (226,574
              )
              
              -Change
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (54,884
              )
              
              -Accounts
                  payable and accrued expenses
              
              
              342,646
              
              
              241,497Deferred
                  compensation
              
              
              (94,000
              )
              
              96,000Prepaid
                  assets
              
              
              (97,773
              )
              
              (8,571
              )Other
                  receivables
              
              
              (81,921
              )
              
              (2,304
              )Due
                  to related parties
              
              
              (2,000
              )
              
              -Net
                  Cash Used by Operating Activities
              
              
              (2,422,921
              )
              
              (1,346,167
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPurchases
                  of property and equipment
              
              
              (81,764
              )
              
              (44,238
              )Net
                  Cash Used by Investing Activities
              
              
              (81,764
              )
              
              (44,238
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESBank
                  overdraft
              
              
              -
              
              
              (49
              )Proceeds
                  from issuance of common stock
              
              
              3,517,908
              
              
              -Common
                  stock offering costs
              
              
              (1,300,299
              )
              
              -Proceeds
                  from issuance of notes payable
              
              
              1,500,000
              
              
              -Proceeds
                  from issuance of notespayable,
                  related parties
              
              
              1,077,460
              
              
              1,309,905Payments
                  on notes payable, related parties
              
              
              (100,000
              )
              
              -Payments
                  on notes payable
              
              
              (5,929
              )
              
              (750
              )Net
                  Cash Provided by Financing Activities
              
              
              4,689,140
              
              
              1,309,106EFFECT
                  OF FOREIGN CURRENCYTRANSLATION
                  ADJUSTMENT
              
              
              (33,572
              )
              
              2,247NET
                  INCREASE (DECREASE) IN CASHAND
                  CASH EQUIVALENTS
              
              
              2,150,883
              
              
              (79,052
              )CASH
                  AND CASH EQUIVALENTS,BEGINNING
                  OF PERIOD
              
              
              92,000
              
              
              171,052CASH
                  AND CASH EQUIVALENTS,END
                  OF PERIOD
              
              $
              2,242,883
              
              $
              92,000




F-6




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


Consolidated
      Statements of Cash Flows (continued)


For
                  the Years EndedApril
                  30,2006
              
              2005(restated)SUPPLEMENTAL
                  DISCLOSURES:Cash
                  paid for interest
              
              $
              57,180
              
              $
              194Cash
                  paid for income taxes
              
              $
              -
              
              $
              -NON-CASH
                  INVESTING AND FINANCING ACTIVITIES:Common
                  stock issued for note payable
              
              $
              2,785,981
              
              $
              -Note
                  payable issued to purchase equipment
              
              $
              -
              
              $
              6,679Increase
                  (decrease) in fair valueof
                  marketable securities
              
              $
              (12,000
              )
              $
              30,000




F-7


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2006 and 2005


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.





On
                March 17, 2006, our Irish subsidiary, New Media Lottery Services,
                Plc
                concluded an offering of 3,672,572 ordinary shares at a price of
                50 pence
                ($.878) per share for an aggregate gross offering price of approximately
                £1.84 million ($3,517,908). After giving effect to the issuance of
                the
                ordinary shares sold in the offering and the other ordinary shares
                issued
                for debt, we own approximately 82.3% of New Media Lottery Services,
                Plc’s
                outstanding capital stock.








NOTE
                2 -
            SIGNIFICANT
                ACCOUNTING POLICIES





This
                summary of significant accounting policies of the Company is presented
                to
                assist in understanding the Company’s consolidated financial statements.
                The consolidated financial statements and notes are representations
                of the
                Company’s management who are responsible for their integrity and
                objectivity. These accounting policies conform to accounting principles
                generally accepted in the United States of America and have been
                consistently applied in the preparation of the consolidated financial
                statements. The following policies are considered to be
                significant:





a.  Nature
      of
      Operations





New
                Media Lottery Services, Inc., through its direct and indirect
                subsidiaries, designs, builds, implements, manages, hosts and supports
                internet and wireless device based lottery programs operated by
                governments and charitable organizations outside of the United States.
                We
                also design and distribute games for use on video lottery terminals
                and
                other electronic kiosks.




F-8


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2006 and 2005




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. 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
              
              2006Computer
                  Equipment
              
              
              3
                  Years
              
              $
              83,712Furniture
                  & Equipment
              
              
              7
                  Years
              
              
              10,377Computer
                  Software
              
              
              3
                  Years
              
              
              285,617Less
                  - Accumulated Depreciation & Amortization
              
              
              
              
              
              (130,201
              )Net
                  Property and Equipment
              
              
              
              
              $
              249,505


Depreciation
                expense for the years ended April 30, 2006 and 2005 was $115,046
                and
                $13,506, 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
                30,2006
            
            April
                30,2005Net
              loss (numerator)
            
            $
            (2,323,461
            )
            $
            (1,683,125
            )Weighted
              average shares outstanding
              (denominator)
            
            
            13,108,810
            
            
            11,167,143Loss
              per share amount
            
            $
            (0.18
            )
            $
            (0.15
            )





Stock
      options have not been included as their effect is antidilutive.


F-9


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


Notes
      to
      the Consolidated Financial Statements


April
      30,
      2006 and 2005





NOTE
                2 -
            SIGNIFICANT
                ACCOUNTING POLICIES (Continued)





g.  Recent
      Accounting Pronouncements





In
      April
      2002, the Financial Accounting Standards Board issued Statement No. 145 (“SFAS
      145”), “Rescission of FASB Statements Nos. 4, 44, and 64 and Amendment of FASB
      Statement No. 13.” SFAS 145 addresses the presentation for losses on early
      retirements of debt in the statement of operations. The Company has adopted
      SFAS
      145 and will not present losses on early retirements of debt as an extraordinary
      item.





In
      June
      2002, the Financial Accounting Standards Board issued Statement No. 146 (“SFAS
      146”), “Accounting for Costs Associated with Exit or Disposal Activities.” The
      provisions of SFAS 146 become effective for exit or disposal activities
      commenced subsequent to December 31, 2002. The adoption of SFAS 146 had no
      impact on the Company’s financial position, results of operations or cash flows.





In
      November 2002, the Financial Accounting Standards Board issued FASB
      Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure
      Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
      of
      Others.” This interpretation elaborates on the disclosures to be made by a
      guarantor in its interim and annual financial statements about its obligations
      under certain guarantees that it has issued. It also clarifies (for guarantees
      issued after January 1, 2003) that a guarantor is required to recognize, at
      the
      inception of a guarantee, a liability for the fair value of the obligations
      undertaken in issuing the guarantee. At April 30 2006 and 2005, the Company
      does
      not have any outstanding guarantees and accordingly does not expect the adoption
      of FIN 45 to have any impact on their financial position, results of operations
      or cash flows.





In
      December 2003, the Financial Accounting Standards Board issued FASB
      Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.”
This interpretation provides guidance on consolidation of entities defined
      as
      variable interests. Variable interests are entities that expose the holder
      of
      the interest to another entity’s expected losses and expected residual returns.
      Using the guidance of FIN 46, the Company has consolidated its fifty percent
      interest in the Brazilian joint venture.





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, 2006 and 2005.





At
      April
      30, 2006 , the Company has capitalized approximately $1,600,000 (for tax
      purposes) as Internal Revenue Code Section 195 start up costs. The Company’s LNS
      subsidiary has capitalized approximately $3,800,000 as Code Section 195 start
      up
      expenditures. These start-up expenditures represent substantially all Company
      and subsidiary expenditures from inception to December 2005. With the January
      2006 inception of operating revenues by the Company’s foreign subsidiary, the
      Company has deemed that business has begun operations, as defined by Section
      195. These cumulative startup costs will be amortized over sixty months for
      income tax accounting purposes separately on each company’s tax return. The
      Company and its LNS subsidiary will not file a consolidated income tax return.
      Neither the domestic parent or the foreign subsidiaries expect any income tax
      expense for the year ended April 30, 2006.





Due
      to
      the change in ownership provisions of the Tax Reform Act of 1986, net operating
      loss carryforwards for Federal income tax reporting purposes are subject to
      annual limitations. Should a change in ownership occur, net operating loss
      carryforwards may be limited as to future use.




F-10




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


Notes
      to
      the Consolidated Financial Statements


April
      30,
      2006 and 2005





NOTE
                2 -
            SIGNIFICANT
                ACCOUNTING POLICIES (Continued)





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 wholly-owned subsidiaries New Media
                Lottery Services, Inc. (Canada), New Media Lottery Services, Plc
                and New
                Media Lottery Services (International) Limited. All significant
                intercompany accounts and transactions have been eliminated in the
                consolidation.





Using
      the
      guidance of FIN 46, the Company has consolidated its fifty percent interest
      in
      the Brazilian joint venture.





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.





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, 2006
                the Company had no uninsured cash balances in the United States.
                The
                remainder of the Company’s cash reserves are held in Ireland with Allied
                Irish Bank.





m.  Advertising





The
                Company expenses advertising costs as they are incurred. Advertising
                expenses for the years ended April 30, 2006 and 2005 were $135,977
                and
                $4,952, respectively.





n.  Prior
      Year Development Stage





In
                the year ending April 30, 2005 and prior years, the Company was a
                development stage company. For the year ended April 30, 2006, the
                Company
                began operations and realized significant revenues. Therefore, the
                Company
                is no longer a development stage company and is not required to present
                the cumulative disclosures required by SFAS 7 Accounting And Reporting
                by
                Development Stage Enterprises.





NOTE
              3 -
            MARKETABLE
                SECURITIES





Marketable
      securities at April 30, 2006 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
                  30,2006Fair
                  value of marketable securities at beginning of year
              
              $
              30,000Realized
                  gain (loss) on marketable securities
              
              
              --Proceeds
                  from the sale of marketable securities
              
              
              --Unrealized
                  gain (loss) on marketable securities
              
              
              (12,000
              )Fair
                  value of marketable securities at end of year
              
              $
              18,000
 Unrealized
        holding gains and losses are reported in other comprehensive income


F-11


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2006 and 2005


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 $1,531 during the years ending April 30,
                2006
                and 2005. The Company owed ME $202,465 at April 30, 2006 and 2005
                (see
                Note 9).





Virginia
                Business Planning and
                Investments


The
                Company has used the services of Virginia Business Planning and
                Investments (VBP) for consulting services or operating capital. Some
                of
                the Company’s major shareholders are the majority owners of VBP. The
                Company owed VBP $0 and $2,000 at April 30, 2006 and 2005. The company
                paid Virginia Business Planning $2,000 and $0 during the years ended
                April
                30, 2006 and 2005, respectively.





Nathan
                Miller


As
                April 30, 2006, 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 $24,917 in accrued interest,
                which is repayable on terms to be
                determined.





Milton
                Dresner


In
                three months prior to the closing of the AIM Offering, Milton Dresner,
                a
                principal shareholder and director of the New Media Lottery Services,
                Inc., loaned New Media Lottery Services International $150,000. New
                Media
                Lottery Services International has executed a demand note in favor
                of Mr.
                Dresner with respect to such amount that bears interest at the prime
                rate
                of interest plus 2%. During December 2005, Milton Dresner loaned
                New Media
                Lottery Services, Inc. $50,000 which it repaid to him without interest
                eight days later upon the receipt of funding from Comerica Bank on
                an
                additional $500,000 loan.





Joseph
                Dresner


During
                December 2005, Joseph Dresner loaned New Media Lottery Services,
                Inc.
                $50,000 which it repaid to him without interest eight days later
                upon the
                receipt of funding from Comerica Bank on an additional $500,000
                loan.





F-12


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2006 and 2005




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
                  30,2006Loan
                  payable to an individual, interest at prime plus 2%, due on demand,
                  unsecured
              
              $
              183,177Loan
                  payable to an individual, interest at prime plus 2%, due on demand,
                  unsecured
              
              
              150,000Loan
                  payable to an individual, interest at prime plus 2%, due on demand,
                  unsecured
              
              
              -Total
                  Loans Payable
              
              
              333,177Less:
                  Current Portion
              
              
              (333,177
              )Long-Term
                  Loans Payable
              
              $
              -




NOTE
                6 -
            NOTES
                PAYABLE





Notes
      payable consisted of the following:




April
                  30,2006Capital
                    lease payable to a finance company with imputed interest of 12.097%,
                    due
                    December
                    31, 2006, secured by equipment
              
              $
              -Comerica
                    Bank note with interest approximately equal to the Euro dollar
                    prime rate
                    Plus
                    2.5%, due October 10, 2007
              
              
              1,500,000Total
                  Notes Payable
              
              
              1,500,000Less:
                  Current Portion
              
              
              -Long-Term
                  Notes Payable
              
              $
              1,500,000




Fiscal
                Year
                  Ending
                April
                  30
              
              Amount2007
              
              $
              -2008
              
              
              1,500,000Thereafter
              
              
              -$
              1,500,000




F-13




**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2006 and 2005




NOTE
              7 -
            EQUITY
                TRANSACTIONS




Effective
                July 2000, the Company issued 28,571 shares of common stock to the
                incorporators of the Company for
                $1.





Effective
                March 2002, the Company sold 28,571 shares of its common stock to
                a
                company for cash of $100,000. Shortly thereafter in May 2002, the
                Company
                sold an additional 42,857 shares of its common stock to the same
                company
                for cash of $150,000.





Effective
                May 2002, the Company issued 3,154,286 shares of its common stock
                for
                various services rendered valued at $0.18 per
                share.


Effective
                May 2002, the Company issued 174,286 shares of its common stock to
                convert
                a related party loan in the amount of
                $37,600.





Effective
                March 2004, the Company issued 6,571,429 shares of its common stock
                to
                convert loans payable - related party in the amount of
                $1,189,315.





Effective
                March 2004, the Company issued 167,143 shares of its common stock
                for
                services rendered in the amount of
                $25,071.





Effective
                May 2005, the Company issued 275,000 shares of its common stock for
                software per the agreement dated May 6,
                2005.





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





NOTE
                8 -
            FINANCIAL
                INSTRUMENTS





Statement
                of Financial Accounting Standards No. 107 (SFAS 107), “Disclosures about
                Fair Value of Financial Instruments” requires disclosure of the fair value
                of financial instruments held by the Company. SFAS 107 defines the
                fair
                value of a financial instrument as the amount at which the instrument
                could be exchanged in a current transaction between willing parties.
                The
                following methods and assumptions were used to estimate fair
                value:





The
                carrying amount of cash equivalents and accounts payable approximate
                fair
                value due to their short-term nature.





NOTE
                9 -
            COMMITMENTS
                AND CONTINGENCIES





Operating
                Leases


At
                April 30, 2006, the Company was obligated under an agreement to lease
                office space for the development of its gaming software in Alberta,
                Canada. This lease payment averages $4,556 (Canadian) per month and
                expires December 31, 2006.





At
                April 30, 2006, the Company was obligated under an agreement to lease
                office space for the Company offices in Dublin, Ireland. The lease
                payment
                is 1,028 euros per month and expires March 30,
                2008.





F-14


**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2006 and 2005





NOTE
                9 -
            COMMITMENTS
                AND CONTINGENCIES (Continued)




Compensation
                Agreements


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





Legal
                Fee Dispute


The
                Company is engaged in a fee dispute with one of its former law firms.
                The
                Company has accrued $202,465 in legal fees billed by a law firm named
                Miller & Earle, PLLC (ME) where one of the law firm partners is a
                major shareholder and former director of the Company. In addition
                to the
                $202,465, ME has billed an additional $43,808 during fiscal year
                2005. The
                Company believes that these additional billings were incorrect. Due
                to
                uncertainties in the settlement process with ME, no provision has
                been
                made in the accompanying financial statements to reflect the additional
                $43,808 in 2005 fees.




NOTE
                10 -
            EMPLOYEE
                STOCK OPTIONS
              
              The
                following tables summarize the information
                regarding employee stock options at April 30, 2006:




Outstanding,
                  April 30, 2005
              
              
              425,000Granted
              
              
              2,450,000Canceled
              
              
              -Exercised
              
              
              -Outstanding,
                  April 30, 2006
              
              
              2,875,000Weighted
                  average exercise price of options outstanding at April 30,
                  2006
              
              $
              0.34




Outstanding
              
              ExercisableExercise
                  Prices
              Number
                Outstanding
                at
                  4/30/06
              Weighted
                Average
                Remaining
                Contractual
                Life
                  (years)
              Weighted
                Average
                Exercise
                Price
              Number
                Exercisable
                at
                  4/30/06
              Weighted
                Average
                Exercise
                Price$
                  0.25
              425,000
              8.90
              $0.25
              425,000
              $0.25$0.35
              2,450,000
              9.50
              $0.35
              2,450,000
              $0.35





The
      Company applies Accounting Principles Board (“APB”) Opinion 25, “Accounting for
      Stock Issued to Employees,” and related Interpretations in accounting for all
      stock options issued to employees at the time of issuance under the stock option
      plan. Under APB Opinion 25, compensation cost is recognized for stock options
      granted to employees when the option price is less than the market price of
      the
      underlying common stock on the date of grant.





F-15




**NEW
        MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 April
        30,
        2006 and 2005




NOTE
                10 -
            EMPLOYEE
                STOCK OPTIONS (Continued)




FASB
      Statement 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”),
      requires the Company to provide proforma information regarding net income and
      net income per share as if compensation costs for the Company’s stock option
      plans and other stock awards had been determined in accordance with the fair
      value based method prescribed in SFAS No. 123. The Company estimates the fair
      value of each stock award at the grant date by using the Black-Scholes option
      pricing model with the following assumptions; dividend yield of zero percent
      for
      all years; expected volatility of 10.6%; risk-free interest rate of 4.26 percent
      to 4.65 percent and expected life of 10.0 years.




Under
      the
      accounting provisions of SFAS No. 123, the Company’s net loss would have been
      changed by the pro forma amounts indicated below:


April
                  30,2006
              
              2005Net
                  loss:As
                  reported
              
              $
              (2,323,461
              )
              $
              (1,683,125
              )Pro
                  forma
              
              $
              (2,323,461
              )
              $
              (1,689,040
              )Basic
                  loss per share:As
                  reported
              
              $
              (0.18
              )
              $
              (0.15
              )Pro
                  forma
              
              $
              (0.18
              )
              $
              (0.15
              )




NOTE
                  11 -
              GOING
                  CONCERN CONSIDERATIONS
                
                As
                    reported in the consolidated financial statements, the Company
                    has
                    incurred losses of approximately $7,100,000 from inception of
                    the Company
                    through April 30, 2006. The Company’s stockholders’ deficit at April 30,
                    2006 was $3,770,980.
                  
                  Management
                    is continually striving to overcome our operating losses by expanding
                    the
                    player base of our various projects and thereby increasing our
                    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
                    approximately $3.5 million from its public offering. Management
                    is
                    confident that both entities are in a better position to raise
                    future
                    potential funds subject to new project needs and existing project
                    performance. In addition to our on-going efforts to achieving
                    break-even
                    cash flow, we also have the support of two key current shareholders
                    who
                    can meet operating shortfalls.
                  
                  
                  The
                    ability of the Company to continue as a going concern is dependent
                    upon
                    its ability to successfully accomplish the plans described in
                    the
                    preceding paragraph and eventually attain profitable operations.
                    The
                    accompanying financial statements do not include any adjustments
                    that
                    might be necessary if the Company is unable to continue as a
                    going
                    concern.
  NOTE
                  12 -
              SUBSIDIARY
                  CAPITAL STOCK OFFERING
                
                On
                    March 17, 2006, the Company’s subsidiary, New Media Lottery Services, Plc,
                    issued 3,672,572 shares in a public offering on the Alternative
                    Investment
                    Market on the London stock exchange, “AIM.” The subsidiary received
                    1,836,262 pounds sterling from the offering. Offering expenses
                    were
                    $1,300,299 as measured in US dollars.
  F-16




**NEW
          MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
          to
          the Consolidated Financial Statements
 April
          30,
          2006 and 2005


NOTE
                  13 -
              LEASING
                  ARRANGEMENTS AND
                  COMMITMENTS
                
                The
                    Company conducts its operations from facilities that are leased
                    under
                    three noncancelable 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 2,200 square feet of office space
                    at
                    Hillsboro Tower, 1800-4thStreet, SW, Calgary, Alberta, Canada. This lease terminates December
                    31,
                    2006 and has a monthly rent of $4,456 (Canadian).
                  
                  New
                    Media Lottery Services, PLC, leases an office at 22/23 Upper
                    Pembroke
                    Street, Suite 402, Dublin 2, Ireland, from John R. McGuire at
                    a 1,028
                    euros monthly rent. This lease end March 30, 2008
                  
                  The
                    Company contracted on July 7, 2005 with Hosting 365, Limited,
                    to provide
                    on-line website hosting and to lease computer hardware. The agreement
                    requires a $3,375 monthly fee and expires June 30, 2006.
                  
                  The
                    Company has a contract, dated May 6, 2005, with Alladdin Lotteries,
                    Limited. The Company is obligated to pay a $8,000 monthly fee
                    for payment
                    processing and lottery management/consulting services. This obligation
                    continues through April 2007.
                  
                  The
                    Company also has a contract with Parlay Entertainment Limited.
                    The
                    financial terms of this contract are confidential, however, the
                    minimum
                    fee requirements have been included in the following table.
                  
                  The
                    following is a schedule of future minimum rental payments and
                    commitments
                    required under the above agreements as of April 30,
                    2006:
 Year
                    EndingApril
                    30,
                
                Amount2007
                
                $
                294,722.002008
                
                
                26,634.00thereafter
                
                
                -


Rental
      expense was $60,822 in 2006, and $60,945 in 2005.




NOTE
                  14 -
              MAJOR
                  CUSTOMER AND FOREIGN
                  OPERATIONS
                
                The
                      Company received virtually all of its revenue from Rehab Net
                      Games
                      Limited, an Irish corporation.
                    
                    In
                      addition, the Company is subject to the economic, political
                      and social
                      instability risks of doing business in a foreign
                      jurisdiction.




NOTE
                  15 -
              RESTATEMENT
                  OF FINANCIAL
                  STATEMENTS
                
                The
                      Company’s restated consolidated financial statements for the year ended
                      April 30, 2006 reflect the following adjustments:


1)
            General
                and administrative expenses increased by $284,994. Accounts payable
                and
                accrued expenses increased by $184,994. Payments on notes payable
                decreased by $100,000.





2)
            Offering
                proceeds were understated by $208,079 with a corresponding $208,079
                understatement of the offering costs. This is a reclassification
                adjustment and consequently the net effect of this change is zero
                as to
                the net offering proceeds.




F-17




**NEW
          MEDIA LOTTERY SERVICES, INC. & SUBSIDIARIES**
 Notes
          to
          the Consolidated Financial Statements
 April
          30,
          2006 and 2005




3)
            Payment
                on notes payable was overstated $100,000 while payment on notes payable
                related parties was understated $100,000. This is a reclassification
                that
                has a zero net change to total payments on notes payable.




The
                      above adjustments increased net loss by $234,550 before minority
                      interest
                      and net loss by $284,994. Basic and diluted net loss per share
                      have
                      increased to $0.18 per share.
                    
                    The
                      above adjustments have impacted the Financial Statements as
                      shown in the
                      table below:


Original
            
            Amended
            
            Difference**Balance
                Sheet**Minority
                Interests
            
            
            3,777,976
            
            
            4,012,527
            
            
            234,551Accumulated
                Deficit
            
            
            (6,880,234
            )
            
            (7,114,785
            )
            
            (234,551
            )Total
                Stockholders’ Deficit
            
            
            (3,536,429
            )
            
            (3,770,980
            )
            
            (234,551
            )**Statements
                of Operations**General
                and Administrative
            
            
            493,521
            
            
            778,515
            
            
            284,994Total
                Operating Expenses
            
            
            2,073,812
            
            
            2,358,806
            
            
            284,994Loss
                from Operations
            
            
            (2,022,432
            )
            
            (2,307,426
            )
            
            (284,994
            )Net
                Loss Before Income Taxes and Minority Interest
            
            
            (2,265,041
            )
            
            (2,550,035
            )
            
            (284,994
            )Minority
                Interest in Subsidiary Losses
            
            
            176,130
            
            
            226,574
            
            
            50,444Net
                Loss
            
            
            (2,088,911
            )
            
            (2,323,461
            )
            
            (234,550
            )Basic
                and Diluted Net Loss Per Share
            
            
            (0.16
            )
            
            (0.18
            )
            
            (0.02
            )Net
                Loss
            
            
            (2,088,911
            )
            
            (2,323,461
            )
            
            (234,550
            )Comprehensive
                Loss
            
            
            (2,134,483
            )
            
            (2,369,033
            )
            
            (234,550
            )**Statements
                of Cash Flow**Net
                Loss
            
            
            (2,088,911
            )
            
            (2,323,461
            )
            
            (234,550
            )Minority
                Interest in Subsidiary Losses
            
            
            (176,130
            )
            
            (226,574
            )
            
            (50,444
            )Accounts
                Payable and Accrued Expenses
            
            
            157,652
            
            
            342,646
            
            
            184,994Net
                Cash Used by Operating Activities
            
            
            (2,322,921
            )
            
            (2,422,921
            )
            
            (100,000
            )Proceeds
                from Issuance of Common Stock
            
            
            3,309,829
            
            
            3,517,908
            
            
            208,079Common
                Stock Offering Costs
            
            
            (1,092,220
            )
            
            (1,300,299
            )
            
            (208,079
            )Proceeds
                from Issuance of Notes Payable, Related Parties
            
            
            977,460
            
            
            1,077,460
            
            
            100,000Payments
                on Notes Payable
            
            
            (105,929
            )
            
            (5,929
            )
            
            100,000Payments
                on Notes Payable, Related Parties
            
            
            
            
            
            (100,000
            )
            
            (100,000
            )Net
                Cash Provided by Financing Activities
            
            
            4,589,140
            
            
            4,689,140
            
            
            100,000**Consolidated
                Statements of Stockholders’ Deficit**Consolidated
                of Subsidiaries
            
            
            3,777,976
            
            
            4,012,527
            
            
            234,551Net
                Loss for the year ended April 30, 2006
            
            
            (2,088,911
            )
            
            (2,323,461
            )
            
            (234,550
            )


In
                          addition, the restatement also resulted in changes to Notes
                          1,2f, 4, 10,
                          11 and 12.
                        
                        The
                          information contained in the financial statements and notes
                          thereto
                          reflect the adjustments described herein and does not reflect
                          events
                          occurring after September 15, 2006, the date of the original
                          filing of our
                          Annual Report on Form 10-KSB for the year ended April 30,
                          2006, or modify
                          or update those disclosures that have been affected by
                          subsequent
                          events.
  F-18