UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: April 30, 2010

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File No.: 000-49884

NEW MEDIA LOTTERY SERVICES, INC.

(Exact name of Company as specified in its charter)

Delaware		87-0705063
(State or other jurisdiction of incorporation or organization)		I.R.S. Employer Identification No.)

1400 Technology Drive, Harrisonburg, Virginia 22802

(Address of principal executive offices)

540-437-1688

Issuer’s telephone number

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $0.0001 per share

(Title of Class)

Indicate by check mark if the Company is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

¨ Yes x No

Indicate by check mark if the Company is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

¨ Yes x No

Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes ¨ No

Indicate by check mark whether the Company has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Company was required to submit and post such files).

¨ Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Company’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

¨ Yes x No

Indicate by check mark whether the Company is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

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 last sold, or the average bid and asked price of such common equity, as of the last business day of the Company’s most recently completed second fiscal quarter. $159,182.74

APPLICABLE ONLY TO COMPANYS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the Company has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ¨ Yes ¨ No

(APPLICABLE ONLY TO CORPORATE COMPANYS)

Indicate the number of shares outstanding of each of the Company’s classes of common stock, as of the latest practicable date. At August 30, 2010 there were 33,897,843 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

PART I

Item 1. Description of Business	1
Item 1A. Risk Factors.	3
Item 2. Properties.	6
Item 3. Legal Proceedings.	6
Item 4. Submission of Matters to a Vote of Security Holders.	6

PART II

Item 5. Market for Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	6
Item 6. Selected Financial Data.	7
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	7
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.	11
Item 8. Financial Statements and Supplementary Data.	11
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	11
Item 9A. Controls and Procedures.	12
Item 9B. Other Information.	13

PART III

Item 10. Directors, Executive Officers and Corporate Governance.	15
Item 11. Executive Compensation.	16
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	18
Item 13. Certain Relationships and Related Transactions, and Director Independence.	18
Item 14. Principal Accounting Fees and Services.	20

PART IV

Item 15. Exhibits, Financial Statement Schedules.	21

Financial Statements	F-1 - F-16

SIGNATURES	26

FORWARD-LOOKING STATEMENTS

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

Our outstanding debt and economic condition, in general;

our ability to obtain capital to repay our debt and fund ongoing operations;

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; and

other risk factors set forth under "Risk Factors" in this report.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Annual Report on Form 10-K. In addition, even if our results of operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Annual Report on Form 10-K, those results or developments may not be indicative of results or developments in subsequent periods.

These forward-looking statements are subject to numerous risks, uncertainties and assumptions about us described in “Risk Factors.” The forward-looking events we discuss in this Annual Report on Form 10-K speak only as of the date of such statement and might not occur in light of these risks, uncertainties and assumptions. Except as required by applicable law, we undertake no obligation and disclaim any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

Item 1. Description of Business

General

Through March 11, 2010 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. (“NM-LTD”)(collectively, “we”, “us” the “Company” or like terms), designed, built, implemented, managed, hosted and supported Internet and wireless device based lottery programs operated by governments and their licensees, such as charitable organizations, outside of the United States. All of our operations were conducted through our subsidiary NM-PLC, an Irish corporation of which we own 80.23% of the outstanding stock, and through NM-PLC’s wholly owned Irish subsidiary, NM-LTD. As is further discussed below, the Company no longer engages in these lottery based programs and is currently seeking new lottery license opportunities outside of the business of its former subsidiaries.

Changes in Principal Stockholders and Loss of Subsidiaries

Joseph Dresner and Milton Dresner had been the holders of a majority of the outstanding shares of NM-US's common stock since 2004 and had funded the company's operations, as necessary through the second quarter of fiscal 2009. During the first and third quarters of fiscal 2009, the Company received loans from Trafalgar Capital Specialized Investment Fund-FIS (Trafalgar) in the aggregate principal amount of €2.45 million. The Company was in default under the terms of the documents governing these loans as of January 1, 2009 and in March 2009, entered into a series of agreements with Trafalgar to restructure the terms of the loans. Under the agreements, Milton Dresner and Joseph Dresner, the principal stockholders of NM-US as of the date thereof, agreed to transfer an aggregate of 9,005,700 shares of common stock they owned in NM-US to Trafalgar, representing approximately 42% of the outstanding shares of common stock of NM-US. As a result, the Dresners no longer controlled the Company.

In July 2009, NM-US, NM-PLC, NM-LTD, Milton Dresner, Joseph Dresner and Trafalgar entered into an agreement to restructure all of the Company's debt. Under the agreement, among other things, the Dresners agreed to convert the principal amount of the debt owed to them by the Company, amounting to $6,112,633, which included the amount of principal paid by the Dresners on behalf of the Company to satisfy amounts due to Comerica Bank under certain promissory notes dated June 1, 2008 in the aggregate amount of $2.1 million and to relieve the Company from any liability under remaining debt owed to Comerica Bank ($4 million), into 9,005,700 shares of common stock of NM-US. The Dresners also agreed to forgive all interest accrued on their debt (approximately $233,697).

On March 11, 2010, New Media Lottery Services, Inc. (the “Company”), New Media Lottery Services plc, (“NM-PLC”), New Media Lottery Services (International), Ltd. (“NM-LTD,” and, together with the Company and NM-PLC, “we”, “us” the “Company” or like terms); John Carson, a director and the chief executive officer of each entity; and Trafalgar Capital Specialized Investment Fund-FIS (“Trafalgar”), lenders to the Company, entered into an agreement that resulted in a global restructuring of the Company (the “Agreement”). Under the Agreement, among other things, Trafalgar exercised its rights under a certain Share Pledge Agreement dated March 24, 2009 (“Share Pledge Agreement”), under which the Company pledged all of the shares it owned in NM-PLC to Trafalgar as security for amounts due under various loans made by Trafalgar to the Company. The Company’s failure to pay sums owed by NM-PLC under a Guaranty Agreement made in favor of Trafalgar triggered a default under the Share Pledge Agreement, requiring the Company to convey the shares of NM-PLC to Trafalgar.

Prior to the Agreement, the Company conducted all of its commercial operations through NM-PLC and NM-LTD. Prior to the Agreement, the Company owned 80.23% of the outstanding common shares of NM-PLC, which owns all of the outstanding common shares of NM-LTD. Upon the consummation of the transactions among the parties to the Agreement, the Company no longer engages in these operations, but continues to seek lottery licenses

Delisting of NM-PLC's Ordinary Shares From Trading on the AIM Market

On April 12, 2009, the AIM Market delisted the ordinary shares of NM-PLC from trading. The suspension is a result of the resignation of NM-PLC's nominated advisor, Zimmerman Adams International Limited, and the resignation of NM-PLC's last non-executive director on March 12, 2009. As a result, NM-PLC no longer satisfied the listing requirements of the AIM Market. NM-PLC elected not to retain replacements in light of the cost involved. Management also believed that the AIM listing was expensive to maintain and no longer advantageous and decided to focus on the NM-US listing.

Operations During the Year Ended April 30, 2010

During the annual period ended April 30, 2010 we managed a lottery for Rehab Net Games Limited ("Rehab-Ireland") and developed games for Inspired Gaming Group. We have allowed contracts to manage lotteries for other organizations to lapse, given our financial condition and lack of capital. Additionally, as previously stated, as at March 11, 2010 our subsidiaries were taken over by Trafalgar due to our defaults on obligations owed to them. The discussion below concerns the business of our subsidiaries that we no longer operate. We currently generate no revenue as we pursue lottery licenses and other lottery related opportunities.

Rehab-Ireland Lottery.

In September 2001, we entered into an agreement with Rehab-Ireland, an Irish corporation, as amended in January 2004, April 2004 and November 2005, to develop, manage and operate lottery games for the Internet and wireless telephones within the Republic of Ireland for a period of 10 years from November 2005. This agreement was subject to automatic extensions for five-year periods in the event that Rehab-Ireland earns certain agreed upon minimum proceeds during the fifth through tenth years of the term of the agreement and the eleventh through fifteenth years of the term of the agreement. The agreement may be terminated by Rehab-Ireland in the event that we fail to pay the fees provided for in the agreement or, after the ninth year of the agreement upon twelve months notice of a party’s intention to terminate. Under the agreement we were responsible generally for all manner of implementation and operation of the lottery, including that we: (i) provide games for the lottery; (ii) undertake all accounting functions; (iii) undertake all administrative aspects of the operation of the lottery; (iv) undertake all marketing, advertising and promotion of the lottery; (v) provide cash management systems; (vi) distribute lottery proceeds to the lottery licensee; and (vii) ensure compliance with all applicable gaming laws.

We completed implementation of the Internet portion of the lottery program in August 2003 and were managing and operating the lottery until the seizure of our subsidiaries by Trafalgar on March 11, 2010.

Game Development Services.

By agreement dated October 12, 2005, Inspired retained us to provide a range of services, including developing content for its server based gaming terminals in the UK; facilitating prize payouts; providing and maintaining all systems, software, servers and technical support; designing and implementing a game strategy focused on sales growth; proposing and designing co-branding game opportunities; assisting in the design and implementation of all advertising, promotional marketing and sales programs for the lottery games on the Inspired terminals and its Web site; and managing the process from selection, registration, regulatory reporting, accounting statement preparation and charity payment processing. Inspired paid us of a percentage of the net proceeds generated by these terminals.

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

New Business Opportunities

Since the loss of our subsidiaries on March 11, 2010 the Company has been seeking new business opportunities. These opportunities may be unrelated to our previous business and it is unknown when the Company will find an appropriate opportunity.

Competition.

The government-licensed lottery market can be divided into four distinctive categories: large government operated lotteries; small national operated lotteries; small state-operated lotteries; and independently operated charitable lotteries. We believe that present lottery service suppliers concentrate their marketing efforts on the large government operated lotteries. Government operated lotteries have the financial wherewithal to install substantial dedicated lottery systems and equipment. Competition for this clientele is competitive; however, this segment of the market is supported by only a few known companies. Competition for small and mid-sized government- and charity- operated lotteries has become more competitive as service providers explore new revenue streams. To date, we believe that neither the charitable lottery market place nor the Internet/wireless lottery marketplace has been significantly penetrated and that these markets currently are under-serviced. We believe that by being the among the first companies dedicated to serving this market we can develop a competitive advantage over future industry participants.

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

The Internet-based solutions previously offered by the Company do not rely on the products or services that the large lottery service organizations currently market. Any larger lottery service provider entering this market and encouraging clients to explore this technology would do so at the peril of substantial capital loss, as it would decrease the industry’s reliance on its current products. Additionally, Internet technology creates a client conflict for these companies. Currently, most of their clients protect their sales borders 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.

Since the loss of our subsidiaries we are currently evaluating business opportunities. However, there is intense competition for new business opportunities and there is no guarantee that we will find a suitable opportunity in the near term. Additionally, there are larger better capitalized companies competing for these same opportunities.

Government Regulation.

Lotteries may be lawfully conducted only in jurisdictions in which they are expressly permitted by law and are subject to extensive government regulation. Regulation typically includes some form of licensing of applicants and their subsidiaries. Applicants for, or holders of, a license may be subject to a broad examination including, among other items, financial stability, integrity and business experience. Although certain of the features of a lottery, such as the percentage of gross revenues that must be paid back to players in prize money, are sometimes fixed by legislation, lottery regulatory authorities generally exercise significant discretion, including the determination of the types of games played, the price of each wager, the manner in which the lottery is marketed, the selection of the vendors of equipment and services and the retailers of lottery products. Laws and regulations applicable to lotteries in the jurisdictions in which we operate and will seek to operate are evolving and are subject to change, and the effect of such changes on our ongoing and potential operations cannot be predicted with certainty. In many jurisdictions existing regulations have not kept pace with current electronic gaming technology and governments are taking a closer look at their laws pertaining to electronic gaming. Evolving regulations in the UK have delayed the launch of products and lotteries we have developed for these markets. In some cases, most notably in Brazil and Venezuela, where we were party to agreements under which we were to build lottery systems, regulatory actions taken by the national governments have prompted us to abandon our efforts.

Item 1A. 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.

Our substantial debt combined with the absence of operations raises substantial doubt about our ability to continue as a going concern.

The report of our independent auditor and Note 11 to the financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2010 indicates that, historically, the Company’s negative cash flows from operations, recurring negative working capital deficiencies and recurring operating losses raise substantial doubt about the Company’s ability to continue as a going concern. As of the date of this report, after giving effect to the Agreement, we are not engaged in any substantive operations and have no means of generating revenue. Moreover, we are burdened by substantial debt, have only limited cash on hand and have not identified any sources of capital. We will continue to incur costs and expenses in connection with being a public company and for other general and administrative purposes. Our operating and financial condition renders it unlikely that we would be able to obtain third-party financing to sustain operations, if necessary. In light of our limited resources, we cannot assure you that we will be able to continue operations, in which case you could lose the entire amount of your entire investment in us.

Our sole director will devote most of his time to other businesses which may have a negative impact on our ability to identify other operating entities with which to become involved.

As of the date hereof, we have no executive officers to manage our business. Our sole director engages in other businesses and is not required to devote any specific amount of time to our affairs. We do not have and do not expect to have any full time employees for the foreseeable future. If our director’s other business affairs require him to devote more substantial amounts of time to such affairs, it could limit his ability to devote time to our affairs and could have a negative impact on our business.

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

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

Our future success is dependent on the ability of management to identify and obtain an interest in a business that operates profitably.

Our future success will depend on the ability of management to identify and negotiate a transaction that affords us an interest in an entity that is operating profitably. Our current director has limited experience in such activities.

Our company will be subject to all of the risks of any operating company with which we enter into a transaction.

To the extent we enter into a transaction that affords us an interest in an operating entity, we will be subject to all of the risks to which such operating entity is subject, the nature and extent of which cannot now be known to us.

There will be significant competition to identify and enter into a transaction with an attractive operating business.

We will encounter intense competition from other entities seeking to acquire attractive operating businesses, including blank check companies, finance companies, banks, venture capital funds, leveraged buyout funds, operating businesses and other financial buyers competing for acquisitions. Many of these entities are well established and have extensive experience in identifying and completing transactions with attractive operating companies. Nearly all of these competitors possess greater financial, technical, human and other resources than we do and our resources will be negligible when contrasted with those of many of these competitors.

If we consummate a transaction with an operating entity by way of an acquisition, stockholders may not have an opportunity to vote on the transaction.

If we consummate a transaction with an operating entity by way of an acquisition of the capital stock or assets of the operating entity, the transaction may be accomplished in the sole determination of management without any vote or approval by our securityholders.

If Trafalgar were to convert the shares of preferred stock it owns into common stock, it would own a majority of the outstanding shares of our capital stock and have the ability to exercise control of the Company.

Trafalgar owns 27% of the outstanding shares of our common stock and all of the outstanding shares of preferred stock, which are convertible into 40 million shares of common stock. If Trafalgar were to convert its preferred stock into common stock, it would own 66% of the outstanding shares of our voting stock and have the ability to exercise unfettered control of the Registrant.

Our existing stockholders would suffer substantial dilution if we issue a significant number of new shares of capital stock in connection with any transaction with an operating entity or upon the conversion of outstanding shares of preferred stock.

As of the date of this report, Trafalgar owns two million shares of Series A Convertible Preferred Stock that are convertible into 40 million shares of common stock. Our certificate of incorporation authorizes the issuance of 150 million shares of common stock and 5 million shares of preferred stock.

Our board has the power to issue any or all of our authorized but unissued shares without stockholder approval. To the extent that Trafalgar converts its shares of Series A Preferred Stock into common stock or we issue additional securities in connection with any transaction that we affect with an operating entity, existing stockholders would experience substantial dilution in the percentage of our common stock they then hold.

We may issue preferred stock in connection with any transaction with an operating entity or for any other purpose, which may have greater rights than our common stock.

Our certificate of incorporation authorizes the issuance of up to 5 million shares of preferred stock. The outstanding Series A Convertible Preferred Stock has a preference over the common stock as to amounts payable on any liquidation or deemed liquidation of the Registrant. In addition, our board can create new series of preferred stock having such terms as it deems advisable and issue shares of such series without seeking any further approval from our common stockholders. We may issue preferred stock in connection with any transaction with an operating entity or for any other purposes our board desires, which such series of preferred stock may rank ahead of our common stock in terms of dividend priority or liquidation premiums and may have greater voting rights than our common stock. In addition, such preferred stock may contain provisions allowing those shares to be converted into shares of common stock, which could dilute the value of common stock to current stockholders and could adversely affect the market price, if any, of our common stock.

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 liquid trading market and thus you may never realize any monies from holding these securities.

Our stock is admitted to quotation on the Over-the-Counter Bulletin Board, however, there has been little trading to date. Consequently, we do not consider there to be an established trading market for our common stock. If no active trading market develops for our common stock, holders of our common stock will have to rely on the appreciation thereof to realize any monies from holding these securities.

Our common stock may be considered a “Penny Stock,” and thereby be subject to additional sale and trading regulations that may make it more difficult to sell.

Our common stock may be considered to be a “penny stock” if it does not qualify for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Securities Exchange Act for 1934, as amended (the “Exchange Act”). Our common stock may be a “penny stock” if it meets one or more of the following conditions (i) the stock trades at a price less than $5.00 per share; (ii) it is not traded on a “recognized” national exchange; (iii) it is not quoted on the Nasdaq Capital Market, or even if so, has a price less than $5.00 per share; or (iv) is issued by a company that has been in business less than three years with net tangible assets less than $5 million.

The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of our common stock will be subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor’s account. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

Item 2. Properties.

The Company formerly leases approximately 500 square feet of office space at 1400 Technology Drive, Harrisonburg, Virginia. The Company leased the space on a month to month basis at a monthly rent of $1,000, which includes electric, local telephone and internet access. There is no lease agreement between the parties. The office building at which the Company leased the space is owned by an entity in which Nathan Miller is a principal. Mr. Miller is a former affiliate of the Group by virtue of having been an officer and director of the Company and NMLS-LTD.

Item 3. Legal Proceedings.

The Company presently is not a party to, nor is management aware of, any pending, legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders.

None

PART II

Item 5. Market for Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

The Company’s common stock was admitted for quotation on the OTC Bulletin Board in July 2005 under the symbol NWMD. It has been trading under the symbol NWMD since August 4, 2010 due to our failure to timely file this report on Form 10-K. However, we believe that our symbol will return to NWMD after this report has been filed. Since the commencement of trading through the end of the fiscal year ended April 30, 2010, there has been only de minimus trading in our stock. Consequently, we do not consider there to be an established trading market for our common stock.

Holders

At September 2, 2010, there were 47 record holders of the Company's common stock. The number of holders of record does not include beneficial owners of our common stock whose shares are held in the names of various security holders, brokers and clearing agencies.

Dividends

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

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth information as of April 30, 2010, 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		3,475,000	$	0.10		0
Equity compensation plans not approved by security holders		0	$			-
Total		3,475,000	$	0.10		0

Repurchases of Equity Securities.

None.

Recent Sales of Unregistered Securities.

On August 13, 2009, New Media Lottery Services, Inc. entered into a Securities Purchase Agreement with Trafalgar Capital Specialized Investment Fund-FIS ("Trafalgar"), which was described in the Registrant's annual report on Form 10-K as filed with the Securities and Exchange Commission on August 13, 2009 (the "2009 10-K"). Under the Purchase Agreement, Trafalgar agreed to purchase, in its sole discretion, upon the Registrant's request, up to $1 million in principal amount of convertible redeemable debentures from the Registrant. As additional consideration therefor, the Registrant agreed to issue 2 million shares of convertible, redeemable preferred stock to Trafalgar. On August 21, 2009, the parties agreed on the terms of the preferred stock and on that date, the Registrant filed a certificate of designation with the State of Delaware setting forth the terms and restrictions of the Series A Convertible Preferred Stock ("Series A Preferred Stock") to be issued to Trafalgar.

On August 24, 2009, the Registrant issued 2 million shares of Series A Preferred Stock to Trafalgar pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, afforded by Section 4(2) thereof.

Item 6. Selected Financial Data.

The information to be furnished under this Item 6 is not required of small reporting issuers.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview .

The Company designed, built, implemented, managed, hosted and supported Internet and wireless device based lottery programs operated by governments and their licensees, such as charitable organizations, outside of the United States. All of our operations were conducted through our subsidiary NM-PLC, an Irish corporation of which we own 80.23% of the outstanding stock, and through NM-PLC’s wholly owned Irish subsidiary, NM-LTD. The Company no longer engages in lottery based programs and is currently seeking new business opportunities.

Review of Annual Operations .

Key Events

During the first and second fiscal quarters of 2009, we received loans from Trafalgar Capital Specialized Investment Fund-FIS (Trafalgar) in the aggregate principal amount of approximately €2.45 million (the "Loans"). This funding allowed us to move beyond reliance on the financial support of our principal stockholders, who had provided, directly or indirectly, or guaranteed the majority of our capital since our inception.

Default on Loans and Debt Restructuring

On December 31, 2008, the Company defaulted under the various agreements governing the Loans (collectively, the "Loan Documents") for failing to make payments when due. Each of the Loans bears interest at the rate of 8% per annum and each payment of principal and interest is subject to a redemption premium of 12.5%. The first loan, by its terms, reached maturity in May 2010 and the second loan in April 2010. As security for the Loans, various constituents of the Company granted to Trafalgar (i) security interests in all of their assets, (ii) pledged all of the shares owned in NM-LTD and (iii) entered into guarantees in favor of Trafalgar. The default under the security documents triggered Trafalgar's right as a secured creditor.

In March 2009, each constituent of the Company entered into a Loan Facility Restructuring Agreement in favor of Trafalgar (and other agreements amending the terms of the existing Loan Documents) under which payments during the period December 30, 2008 through June 30, 2009 would be deferred and resume as of July 31, 2009 in the amounts provided for in the agreement. In addition, Trafalgar extended the maturity date of the October 2008 loan from April 30, 2010 to October 31, 2010. In consideration of the indulgence granted by Trafalgar, the Company agreed (i) to pay Trafalgar a restructuring fee of €150,000, half of which was to be added to the principal amounts outstanding principal balance of each loan, (ii) NM-US guaranteed the entire amount due under the Loans agreement and (iii) NM-US pledged all of the shares it owns in NM-PLC to Trafalgar. In addition, Milton Dresner and Joseph Dresner agreed to transfer an aggregate of 9,005,700 shares of NM-US common stock registered in their names to Trafalgar.

We did not make the payments required under the restructured Loan Documents on July 31, 2009. We had advised Trafalgar of our inability to make such payment prior thereto and Trafalgar did not call a default under the Restructuring Agreement or amended Loan Documents. Rather, by letter dated August 11, 2009, Trafalgar agreed to further defer and also restructure the payments due under the May 2008 and October 2008 loan documents.

On July 20, 2009, the Company entered into a letter agreement under which Trafalgar agreed to make available $1 million working capital line of credit whereby it agreed to purchase convertible debentures from the Company up to such amount for a period of up to two years ending on July 20, 2011, subject to the execution of definitive agreements that are described in the following paragraph (the "July 20 Letter Agreement"). As a material inducement for Trafalgar to enter into this agreement, the Company agreed to issue to Trafalgar 2,000,000 shares of preferred stock having a stated value of $1.00.

On July 23, 2009, each constituent entity comprising the Company, Milton Dresner, Joseph Dresner and Trafalgar entered into an agreement to restructure all of the Company's debt, a description of which is provided under “Item 13. Certain Relationships and Related Transactions, and Director Independence – Related Party Transactions." Under this agreement, Milton Dresner and Joseph Dresner agreed to convert an aggregate of approximately $6,112,633 of principal owed to them by the Company into shares of the common stock of NM-US. The debt converted included (i) the amounts owed to them under a series of promissory notes made by the Company during the period March 2006 through March 2008, (ii) the amount of principal paid by the Dresners on behalf of the Company to satisfy amounts due to Comerica Bank under certain promissory notes dated June 1, 2008 in the aggregate amount of $2.1 million and (iii) the amount of principal assumed by the Dresners under a promissory note made by the Company in favor of Comerica Bank in the amount of $1.9 million dated February 20, 2009 (the "Comerica Note"). In consideration of the benefits conferred upon the Company as a result of the actions taken by the Dresners in (i), (ii) and (iii), above, the Company issued an aggregate of 9,005,700 shares of Common Stock to them. The elimination of the debt described above significantly improved our balance sheet.

Also pursuant to this agreement, among other things, Trafalgar agreed to make available to the Company a $1,000,000 credit facility for a period of two years ending on July 20, 2011 under the terms of a Securities Purchase Agreement. The credit would be made available upon the request of the Company, which request could be accepted or rejected by Trafalgar in its sole discretion. In consideration of the funds provided, the Company would issue to Trafalgar a debenture in the principal amount of the loan that bears interest at the rate of 10% per year and that matures on July 20, 2011, provided that upon the completion of any capital raise in excess of $1,000,000, all unpaid principal and accrued but unpaid interest under outstanding debentures would be due and payable. The Company received the first draw down in the gross amount of $300,000, which the Company received on July 22, 2009. The Company received a second draw down in the amount of $275,000 in September 2009. The credit was to be available to the Company through a period ending on July 20, 2011.

Results of Operations .

Comparison of the Fiscal Years Ended April 30, 2010 and 2009

For the year ended April 30, 2010, the Company reported a net loss of from operations of $2,881,269 compared to a net loss of operations of $2,963,588 for the year ended April 30, 2009.. Net loss after interest expense and minority interest was $5,551,273 For the year ended April 30, 2010, and $3,111,500 for the year ended April 30, 2010. The difference is attributable to an increase in the expense for the beneficial conversion feature of our convertible debt and a loss on minority interest in our subsidiaries compared to a gain in 2009.

Net revenues decreased decreased to $765,753 from $1,120,833.

General and administrative expense decreased to 933,375 from approximately $1.1 million. This was because of lower salary expenses.

Liquidity and Capital Resources .

During fiscal 2010, we used approximately $1.565 million in our operating activities. We have historically supported our operations from cash provided from the sale of securities by NM-PLC and from third party loans extended to NM-PLC as well as from loans provided or guaranteed by our principal stockholders. As discussed elsewhere in this filing we defaulted on certain obligations owed to Trafalgar and they seized our operating subsidiaries.

We are not certain we will have or identify capital sufficient for all the purposes we require. We expect to incur losses for the 2011 fiscal year. In light of our financial performance and condition and debt structure, as depicted in the table above, it will be difficult to access capital. Affiliates who had loaned funds to our Company or guaranteed third party loans made to our Company have indicated that they will no longer make funds available to us or guarantee any further loans.

Contractual Obligations .

The following table presents our contractual obligations and commercial commitments as of April 30, 2010:

Payments Due By Period
(all amounts in $)
Contractual Cash Obligations	Total		Less than One Year		1-3 Years		3-5 Years	After 5 Years
Loans Payable – Trafalgar (1)		3,544,644		3,394,649		149,995
Loan Payable – Third Party		183,177		183,177
Total Contractual Cash Obligations		3,727,821		3,577,826		149,995

(1) Net of discounts (see footnotes)

Recent Accounting Developments .

We refer readers to the footnote tilted "Recent Accounting Developments" appearing on page F-9 of our audited financial statements accompanying this report.

Critical Accounting Policies .

We refer readers to the footnote tilted "Critical Accounting Policies" appearing on page F-8 of our audited financial statements accompanying this report.

Foreign Currency Translation .

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

Revenue Recognition .

We formerly generated the majority of our revenue from gross sales of lottery tickets by our client’s lotteries. For accounting purposes, our net revenue, which is calculated after settlement of all discounts, refunds, and adjustments, in accordance with the provisions of the contracts with our clients and which varies from client to client, is deemed to be a "commission."

Presently, the Company is not generating any revenue.

Financing Activities During the Last Fiscal Year .

During the 2010 fiscal year, we received financing from the following sources:

Trafalgar loaned the Company the aggregate principal amount of $685,000;

Trafalgar Loans

In June 2008, the Company borrowed the sum of €1.3 million from Trafalgar and in November 2008, we borrowed an additional €1.15 million. We realized net proceeds from the Loans of €2,079,908 after paying direct fees and expenses payable in connection with the Loans, consisting principally of facility commitment fees, structuring fees, due diligence fees and professional fees payable to the lender and finder's fees in each instance payable to a third party, which aggregated approximately €370,092 (this amount does not include expenses associated with the issuance of warrants or shares in NM-PLC to Trafalgar and a third party, nor does it include a €150,000 restructuring fee levied in March 2009 as described above).

The documents governing the Loans are alike in all material respects and provide that the amounts outstanding bear interest at the rate of 8% per year, are payable in equal monthly installments of principal and accrued interest and that each payment of principal and interest is subject to a redemption premium of 12.5%. The Company may redeem any and all outstanding amounts of the Loan at a premium of 12.5% at any time on three days advance notice. The November loan originally matured in April 2010, though said date was deferred to October 2010 under the Restructuring Agreement described above, and the June loan matures in May 2010. As security for the Loans, various constituents of the Company granted to Trafalgar (i) security interests in all of their assets, (ii) pledged all of the shares owned in NM-LTD and (iii) entered into guarantees in favor Trafalgar.

The amounts outstanding under the loan are convertible at the option of Trafalgar into ordinary shares of NM-PLC, provided that such shares are eligible to trade on the AIM market operated by London Stock Exchange plc. At the date of this report, such shares were suspended from trading on the AIM Market. The Loans are convertible at a conversion price equal to the lower of (i) the 120% of the VWAP (as defined below) on certain dates or if no VWAP is available on such dates, the closing bid price on such dates and (ii) 85% of the lowest daily closing VWAP for the five consecutive trading days prior to the date on which Trafalgar gives notice of its intention to convert. For purposes of the loan documents, "VWAP" is defined as the volume weighted average price (as reported by Bloomberg) of the ordinary shares on AIM for that trading day.

As additional consideration for the Loans, NM-PLC issued to Trafalgar warrants to purchase up to 4.5 million ordinary shares at a price 5 pence per share at various times through October 2010. If the warrants are not exercised, New Media PLC is required to pay the lender a total of £180,000.

In connection with the Loans, certain existing lenders to the Company and a subsidiary of NM-PLC, including Milton Dresner and Joseph Dresner, who are affiliates of the Company, agreed to subordinate loans due to them and Milton Dresner agreed to guarantee all amounts due to Comerica Bank under various promissory notes in the aggregate principal amount of $4 million.

We used the proceeds of the loans for working capital and, as required, to pay amounts due under the loan agreements.

As described elsewhere herein, in March 2009, we entered into a series of restructuring agreements with Trafalgar to cure the continuing defaults and materially modified the November 2008 loan documents. On March 11, 2010, Trafalgar declared a default and seized our operating subsidiaries.

As a result of the above described transactions with Trafalgar Capital, the Company has debt with conversion options that provide for a rate of conversion that is below market value. This feature is normally characterized as a beneficial conversion feature ("BCF"), which is recorded by the Company pursuant to Emerging Issues Task Force (“EITF”) Issue No. 98-5 ("EITF 98-5"), Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios , and EITF Issue No. 00-27, Application of EITF Issue No. 98-5 to Certain Convertible Instruments . The value of the beneficial conversion feature was determined using the intrinsic value method. In accordance with EITF 00-27 paragraph 6, when detachable warrants are associated with the issuance of convertible debt, the ratios of the relative fair values of the convertible debt and detached warrants are allocated to the proceeds received, with those amounts being recorded in the paid-in-capital accounts of the balance sheets of the Company. The amount recorded as a discount to the convertible debt was $1,210,793. This amount consists of $1,141,679 related to the beneficial conversion features of the convertible debt and $69,114 related to the allocation to the value of the detachable warrants associated with the issuance of the debt. The discount is being amortized over the 2 year term of the convertible debt; accordingly, the Company recorded $439,582in expense for the accretion of the discount during the year ended April 30, 2009.

Off-Balance Sheet Arrangements .

We do not have any off-balance sheet arrangements or commitments.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The information to be furnished under this Item 7A is not required of small reporting issuers.

Item 8. Financial Statements and Supplementary Data.

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

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Previous independent registered public accounting firm

On August 31, 2010 (the “Dismissal Date”), New Media Lottery Services Inc. (the “Company”) dismissed Chisholm, Bierwolf, Nilson & Morrill LLC, as its independent certifying accountant. The Company’s Board of Directors approved of the dismissal on August 30, 2010. There were no disputes or disagreements between Chisholm, Bierwolf, Nilson & Morrill LLC and the Company during the previous two fiscal years. Except for the provision of a “Going Concern” opinion, the reports of Chisholm, Bierwolf, Nilson & Morrill LLC on the Company’s financial statements for the years ended March 31, 2010 and 2009 did not contain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle.

During the years ended April 30, 2010 and 2009, and through the Dismissal Date, the Company has not had any disagreements with Chisholm, Bierwolf, Nilson & Morrill LLC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved Chisholm, Bierwolf, Nilson & Morrill LLC’s satisfaction, would have caused them to make reference thereto in their reports on the Company’s financial statements for such years.

During the years ended April 30, 2010 and 2009, and through the Dismissal Date, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.

The Company provided Chisholm, Bierwolf, Nilson & Morrill LLC with a copy of this Current Report on Form 8-K prior to its filing with the Securities and Exchange Commission (“SEC”) and requested that Chisholm, Bierwolf, Nilson & Morrill LLC furnish the Company with a letter addressed to the SEC stating whether it agrees with the above statements and, if it does not agree, the respects in which it does not agree, a copy of which is filed as Exhibit 16.1 herewith.

New independent registered public accounting firm

On August 31, 2010, the Company engaged Larry O’Donnell CPA, PC (“O’Donnell”), as its independent registered public accounting firm, to audit the Company’s financial statements. The decision to engage O’Donnell was approved by the Company’s Board of Directors at a Board meeting called for such purpose.

During the Company’s two most recent fiscal years and through the date of the engagement of O’Donnell, the Company did not consult with O’Donnell regarding either (1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, or (2) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).

Prior to the engagement of O’Donnell, O’Donnell did not provide the Company with any written or oral advice that O’Donnell concluded was an important factor considered by the Company in reaching any decision as to any accounting, auditing or financial reporting issue.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information we are required to disclose in the reports we file pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s ("SEC") rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, who is also our principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision of our Chief Executive Officer, who is also our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the year covered by this report. Based on this evaluation, because of the Company’s limited resources and limited number of employees, our management concluded that, as of April 30, 2010, our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

-	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

-	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect all misstatements or instances of fraud. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of April 30, 2010, our management assessed the effectiveness of our internal control over financial reporting. Based on that evaluation, management concluded that, during the period covered by this report, our internal control over financial reporting was not effective to detect the inappropriate application of US GAAP rules, as more fully described below. This flaw in the design or operation of our internal control over financial reporting adversely affected our internal controls and may be considered to be a significant deficiency.

The elements of our internal controls and procedures and internal control over financial reporting that our management considered to be deficient under the standards of the Public Company Accounting Oversight Board were: (1) a lack of a functioning audit committee (arising from the fact that we have no independent/outside directors on our board of directors), which resulted in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) an inadequate segregation of duties consistent with control objectives; (3) the lack of documented risk assessment policies and procedures and (4) a Company-wide lack of familiarity with technical accounting issues arising from insufficient resources to retain personnel that possess the expertise to have detected the accounting issues related to the proper accounting of convertible debt.

Our management believes that the deficiencies enumerated in items (2) and (3) above did not have a material effect on our financial results. However, our management believes that the lack of sufficient resources to identify and properly address technical accounting and reporting issues related to the accounting for convertible debt is a significant deficiency that resulted in a material misstatement in our financial statements as detected by our auditors and subsequently corrected. Additionally, the lack of a functioning audit committee comprised of a majority of outside directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which also could result in a material misstatement in our financial statements in future periods.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Our management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only our management’s report in this annual report.

Management’s Remediation Initiatives

In an effort to remediate the identified deficiencies and enhance our internal controls, we have initiated, or plan to initiate upon the receipt of sufficient funds and increase in operations, the following series of measures:

We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function;

We plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management.

We anticipate that these initiatives will be at least partially, if not fully, implemented by April 30, 2010, pending the availability of resources to accomplish this goal. Additionally, we plan to test our updated controls and remediate our deficiencies by April 30, 2010.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended April 30, 2009 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

For certain additional information relating to transactions with related parties that occurred after the end of the period covered by this report, we refer readers to "Item 13. Certain Relationships and Related Transactions, and Director Independence."

On July 20, 2009, the Company entered into a letter agreement under which Trafalgar agreed to make available $1 million working capital line of credit whereby it agreed to purchase convertible debentures from the Company up to such amount, subject to the execution of definitive agreements that are described in the ensuing paragraph (the "July 20 Letter Agreement"). As a material inducement for Trafalgar to enter into the letter agreement, the Company agreed to issue 2,000,000 of preferred stock having a stated value of $1.00. The July 20 Letter Agreement makes reference to certain preliminary terms with respect to the preferred stock to be issued to Trafalgar, subject to the negotiation of more definitive terms and the filing of an amendment to the Company's certificate of incorporation. As contemplated in the July 20 Letter Agreement, the preferred stock (i) would rank senior to any and all other capital stock of the Company with respect to rights upon liquidation, winding up and dissolution; (ii) would be convertible, at the option of the holder thereof into shares of common stock at a conversion price equal to the lower of (a) $0.05 (the "Fixed Conversion Price") and (b) a 15% discount to the lowest daily closing Volume Weighted Average Price of the common stock as reported by Bloomberg, LP during the five trading days after the conversion date; (iii) the holders of the preferred stock would have the right to vote upon any matter submitted to a vote of the holders of common stock with the holders of all other classes and series of capital stock of the Company entitled to vote on such matter, taken together as a single class, and would be entitled to cast votes equal to the number of shares of common stock into which the preferred stock is then convertible if it were to be converted at the Fixed Conversion Price, and (iv) the holders of the preferred stock would be entitled to receive dividends in an amount equal to the amount of dividends such holders would have received if each share of preferred stock had been converted into common stock at the Fixed Conversion Price. The parties expect to negotiate the definitive terms of the preferred stock promptly.

On August 13, 2009, the Company entered into a series of agreements with Trafalgar with respect to a credit facility that it agreed to extend to the Company in the agreement executed on July 20, 2009. The various documents, including a Securities Purchase Agreement, a Secured Convertible Redeemable Debenture and Security Agreement, are deemed to be effective as of July 20, 2009.

Under the Securities Purchase Agreement, or Purchase Agreement, Trafalgar agreed to make available to the Company credit in the amount of up to $1 million for a period of two years ending on July 20, 2011, which credit is and shall be evidenced by Secured Convertible Redeemable Debentures, or Debentures. The Company received an initial draw down of $300,000, for which it issued a Debenture to Trafalgar in said amount on August 13, 2009 (effective as of July 20, 2009). The Company may exercise future draw downs under the Purchase Agreement by delivering a Draw Down Notice to Trafalgar, which shall be subject to acceptance or rejection by Trafalgar, in its sole discretion, within five calendar days (a "Settlement Date"). Once accepted, Trafalgar is obligated to deposit the amount of the funding into an escrow account to be released upon the issuance of a Debenture in the principal sum of the Draw Down, which must be within five calendar days of acceptance of a Draw Down Notice. If a Debenture is not timely delivered by the Company, the Company shall pay to Trafalgar, as liquidated damages for such failure to deliver and not as a penalty, 2% of the amount of the Draw Down for each seven calendar day period, or part thereof, following such failure, in cash, until the Debentures have been delivered. Such amount may be subtracted by Trafalgar from the amount of the Draw Down for which the Debenture is being delivered.

In connection with the sale of the Debentures, the Company agreed to issue shares of preferred stock to Trafalgar under the Purchase Agreement. The Company and Trafalgar are negotiating the rights designations, preferences and the qualifications, limitations and restrictions terms of the preferred stock but have not yet concluded such negotiations. It is likely that the preferred stock we issue to Trafalgar will have preferences over the common stock upon a liquidation of our assets, upon any merger of our Company with another entity and upon any distributions or dividends (or other assets) paid to stockholders which would restrict cash or assets available for us to distribute or pay to holders of common stock upon any such event. Moreover, the preferred stock likely will be convertible into common stock on terms favorable to the holder such that the preferred stock would be convertible into common stock at some discount to an established independent price or value for the stock, such as the trading price on the OTCBB.

The Debentures bear interest at the rate of 10% per annum and mature on July 20, 2011. In addition, upon the completion of any capital raise in excess of $1,000,000, all unpaid principal and accrued but unpaid interest under outstanding Debentures plus the applicable redemption premium (as described below) on the amount redeemed will become immediately due and payable. The principal amount of the Debenture, plus accrued interest thereon, is convertible, in whole or in part of the, into shares of common stock in an amount equal to the quotient obtained by dividing the outstanding amount of the Debenture to be converted by the Conversion Price. “Conversion Price” means the lower of (a) 100% of the Volume Weighted Average Price (“VWAP”) of the common stock on the day prior to July 20, 2009 and (b) a fifteen percent (15%) discount to the lowest daily closing VWAP of the common stock during the five trading days after the date set forth in the conversion notice.

The holder of the Debentures will not have the right to convert more than $50,000 of the principal amount of the Debenture plus accrued interest per week. In addition the Company may not affect any conversions of Debentures and the holder shall not have the right to convert any portion of its Debenture or receive shares of common stock as payment of interest hereunder to the extent that after giving effect to such conversion or receipt of such interest payment the holder (when aggregated with any its affiliates) would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to such conversion or receipt of shares as payment of interest.

The Company may redeem the Debentures, in whole or in part, at any time by providing the holder with three days advance notice and by paying the unpaid principal and interest accrued to the date of a redemption and a 12.5% redemption premium on the amount redeemed so long as our common stock is trading below the fixed conversion price (as defined in the Debenture) at the time it receives the redemption notice.

In connection with the $300,000 Debenture issued on August 13, 2009, commencing on October 30, 2009 and in each month thereafter through July 20, 2011, the Company is required to pay Trafalgar (i) $13,864.58 of outstanding principal, plus (ii) applicable accrued interest on the outstanding balance as of such payment date, plus (iii) the redemption premium on the principal amount redeemed. In addition, if the Company successfully completes a capital raise in excess of $1,000,000, all unpaid principal and accrued but unpaid interest under the Debentures plus a redemption premium on the amount redeemed shall be immediately due and payable.

The Debentures are subject to provisions to protect a holder in the event that the Euro strengthens against the U.S. Dollar during the life of a Debenture, in which case, the holder will be afforded an adjustment to compensate for any such rise in the exchange rate.

The Company will be in default under a Debenture: (a) if it fails to pay amounts due within two calendar days of the required payment date; (b) if it fails to issue freely tradable common stock within five calendar days of a conversion date; (c) if it fails for ten calendar days after notice to comply with any of its other agreements in the Debentures; (d) upon any event of bankruptcy or insolvency of the Company; (e) if it breaches its obligations under any of the transaction documents (as such term is defined in the Purchase Agreement) which is not cured within ten calendar days after receipt of written notice thereof. Upon the occurrence of an event of default, the holder may, in its sole discretion, accelerate full repayment of all Debentures outstanding and accrued interest thereon or may, notwithstanding any limitations contained in this Debenture, the Purchase Agreement or any other document governing the transaction ("Transaction Documents"), convert all Debentures outstanding and accrued interest thereon into shares of common stock.

Under the terms of a Security Agreement, the Company pledged to Trafalgar and granted a security interest in and to all of its property (broadly defined) during such time as any of its obligations under the Transaction Documents are paid in full. Trafalgar is entitled to all of the benefits typically granted to a secured party under such agreement, provided that while there was no default under the Transaction Documents, the Company could operate its business in the ordinary course.

The Company will be in default under the Security Agreement if (i) it fails to pay any amount of principal, interest or other item comprising the obligations under any Transaction Document; (ii) it fails to observe or perform any of its obligations or other covenants, terms or provisions to be performed under the Transaction Documents; (iii) if any representation or warranty made or furnished in connection with any of the Transaction Document proves to have been incorrect or misleading in any material respect when made or furnished; (iv) if Trafalgar, reasonably and in good faith, deems itself to be insecure; (v) if the Company (1) makes a general assignment for the benefit of its creditors; (2) applies for or consents to the appointment of a receiver, trustee or similar official for itself or any of its assets and properties; (3) commences a voluntary case for relief as a debtor under the US Bankruptcy Code; (4) files with or otherwise submits to any governmental authority any petition, answer or other document seeking: (A) reorganization, (B) an arrangement with creditors or (C) seeks to take advantage of any other present or future applicable law respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief of debtors, dissolution or liquidation; (5) files or otherwise submit any answer or other document admitting or failing to contest the material allegations of a petition or other document filed or otherwise submitted against it in any of the proceedings described in the Security Agreement, or (6) is adjudicated a bankrupt or insolvent by a court of competent jurisdiction; or any case, proceeding or other action shall be commenced against the Company for the purpose of effecting, or an order, judgment or decree shall be entered by any court of competent jurisdiction approving anything specified above, or any receiver, trustee, liquidator or other official shall be appointed with respect to the Company, is appointed to take or otherwise acquires possession or control of all or a substantial part of the Company's assets and properties and any of the foregoing shall continue unstayed and in effect for any period of thirty calendar days.

Upon the occurrence and during the continuance of an event of default under the Security Agreement Trafalgar is entitled to act as the Company's attorney-in-fact to do such things as the Company could do with its property, including collect its debts or sell its properties and exercise all of its other rights as a secured creditor. In the event that the Company receives any asset during the pendency of the security interest, it is required to hold such asset for the benefit of Trafalgar.

Under the terms of the Agreement dated March 11, 2010, Trafalgar exercised its rights under the Share Pledge Agreement dated March 24, 2009, under which the Registrant pledged all of the shares it owned in NM-PLC to Trafalgar as security for amounts due under various loans made by Trafalgar to the Company. The Registrant’s failure to pay sums owed by NM-PLC under a Guaranty Agreement made in favor of Trafalgar resulted in a default of the Share Pledge Agreement, requiring the Registrant to convey the shares of NM-PLC to Trafalgar.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The table below sets forth, as of September 1, 2010, the officers and directors of the Company.

Name		Age		Title
Jeffrey Sternberg		64		Director

Jeffrey Sternberg has served as a director of the Company since May 2009. Since 2007, Mr. Sternberg has served as an analyst for Trafalgar, tracking and evaluating potential transactions and monitoring the company's expenditures. Trafalgar is principal stockholder of our Company but does Mr. Sternberg does not own any interest in Trafalgar. From 2004 to 2006, he served as the president of Advantage Capital Development Corporation, a small business development company, where he was responsible primarily for eliminating debt of client companies and managing that company's general operations.

Item 11. Executive Compensation.

During the fiscal year ended April 30, 2010, all of our employees were remunerated by our indirect subsidiary, NM-LTD for all services rendered to our group. NM-US did not pay or otherwise remunerate directly any employee during the last fiscal year.

Compensation of Directors.

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

Executive Compensation.

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

SUMMARY COMPENSATION TABLE

Name and Principal Position	Year	Salary ($)		All Other Compensation ($)			Total
John T. Carson,	2010	$	71,000		1,039	(1)		72,039
Former Chief Executive Officer (former principal executive officer)	2009	$	167,000		13,361	(1)		180,361

Certain columnar information required by Item 402(n)(2) of Regulation S-K has been omitted for categories where there has been no compensation awarded to, or paid to, the named executive officer required to be reported in the table during fiscal years ended April 30, 2010 and April 30, 2009.

All compensation was paid in US Dollars

(1) Represents car allowance.

Employment Agreements.

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

NM-PLC Employment Agreements

Pursuant to an employment agreement dated March 13, 2008, NM-PLC engaged John Carson to serve as the chief executive officer of NM-PLC at a salary of $192,000 per annum (excluding bonuses and benefits including a payment equal to 10% of his total annual emoluments by way of pension contribution). The term of the agreement is for a period of twenty-four months and thereafter the agreement is terminable by either party on the giving of two month’s written notice. John Carson was appointed a director of the NM-PLC on November 14, 2005. Mr. Carson resigned as of March 11, 2010.

Milton Dresner has been engaged to serve as a non-executive director of NM-PLC under the terms of a letter of appointment dated March 13, 2006. Mr. Dresner has waived the payment of any fees which may be due him under this agreement. Mr. Dresner resigned as a director in July 2009.

Compensation Plans.

2004 Stock Plan

In 2004, the Company adopted and approved a stock option plan (the "2004 Plan"), the purpose of which is to enable the Company to provide its officers, directors, employees and consultants and advisors performance-based incentives and other equity interests in the Company, and afford us the ability to attract, retain and reward such personnel. There is reserved for issuance under the Plan an aggregate of 2,000,000 shares of Common Stock. All of such shares may, but need not, be issued pursuant to the exercise of incentive stock options. Options granted under the Plan may be either "incentive stock options," as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or non-statutory stock options. In addition, awards of or rights to purchase shares of the common stock ("Stock Rights") may be granted under the Plan.

As of April 30, 2010, there were outstanding qualified options to purchase an aggregate of 2,875,000 shares of common stock and non-qualified options to purchase an aggregate of 600,000 shares of common stock.

Currently, the Plan is administered by the board of directors. The board has broad discretion with respect to the Plan and has authority to, among other things:

select the persons to whom options and Stock Rights are to be granted;

determine the number of shares of common stock to be covered by each option and Stock Right granted;

determine the terms and conditions of any option or Stock Right;

interpret the Plan and awards granted under the Plan;

prescribe, amend and rescind rules and regulations relating to the Plan or sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;

All decisions, interpretations and other actions of the board are final and binding on all holders of options and Stock Rights.

Non-statutory stock options and Stock Rights may be granted under the Plan to employees, directors and consultants of the Company or any parent or subsidiary of the Company. Incentive stock options may be granted only to employees. The Plan provides that no employee may be granted, in any fiscal year of the Company, options to purchase more than 1,000,000 shares of Common Stock plus options to purchase up to an additional 1,000,000 shares of Common Stock in connection with such employee's initial commencement of service to the Company.

Options granted under the Plan are subject to additional terms and conditions under the individual option agreement, including the exercise price, exercise of options and the term of options. Options granted under the Plan generally are not transferable other than by will or the laws of descent and distribution, and may be exercised during the optionee's lifetime only by the optionee.

The board may amend, alter, suspend or terminate the Plan at any time and for any reason.

Option Grants in the Last Fiscal Year.

NM-US granted 3,475,000 options to purchase securities during the fiscal year ended April 30, 2010. They had an exercise price of $.10 per share.

Outstanding Equity Awards at Fiscal Year End

Below is information relating to unexercised options held by John T. Carson, our former Chief Executive Officer, as of April 30, 2009. No other executive officer held any unexercised options or unvested stock as of such date.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR

OPTION AWARDS

Name

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)

Option

Exercise

Price

($)

Option

Expiration

Date

John Carson

2,500,000

—

.10

May 28, 2019

Certain columnar information required by Item 402(p)(2) of Regulation S-K has been omitted because there were not unvested options to report in the table for the fiscal year ended April 30, 2010.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth, as of August 30, 2010, certain information regarding beneficial ownership of our common stock by each person who is known by us to beneficially own more than 5% of our common stock. The table also identifies the stock ownership of each of our directors, each of our named executive officers, and all directors and officers as a group. Except as otherwise indicated, the stockholders listed in the table have sole voting and investment powers with respect to the shares indicated.

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

The applicable percentage of ownership is based on 33,897,843 shares outstanding as of August 31, 2010.

Name of Beneficial Owner (1)	Amount of Beneficial Ownership		Percent of Outstanding Class Owned
John Carson (2)		3,387,714		8.63	%
Jeffrey Sternberg		-0-		-0-
Sterling Herbst (3)		396,429		1.01	%
Milton Dresner (4)		7,750,000		19.73	%
Joseph Dresner (5)		7,750,000		19.73	%
Trafalgar Capital Specialized Investment Fund-FIS (6)		9,005,700		22.93	%
All officers and directors as a group (2 persons) (7)		3,784,143		9.64	%

* Less than 1%.

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

(2)	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 2,500,000 shares of common stock.

(3)	Includes 21,429 shares of common stock and options to purchase 375,000 shares of common stock.

(4)	Includes 7 million shares of common stock and warrants to purchase 750,000 shares of common stock.

(5)	Includes 7 million shares of common stock and warrants to purchase 750,000 shares of common stock.

(6)

Includes 9,005,700 shares of common stock. Does not include shares of common stock issuable upon the conversion of outstanding shares of preferred stock to be issued to Trafalgar or shares issuable upon conversion of an outstanding debenture held by Trafalgar, which cannot be calculated as of the date hereof.

(7)	Includes options to purchase an aggregate of 2,875,000 shares of common stock.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Related Party Transactions

During the period 2004 through 2009, Milton Dresner and Joseph Dresner, former directors of the Company and the holders of in excess of 10% of the outstanding shares of the common stock of NM-US, made significant loans to the Company and as of April 30 the outstanding aggregate of these loans $2.1 million. The loans were evidenced by a series of instruments bearing interest at rates varying from prime plus 2% to prime plus 3% and 5.25%. The disposition of theses loans is described below:

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 NM-LTD which is payable on demand. As of March 17, 2006: $1,539,561 of debt, including interest, owed to Milton Dresner was converted into 5,000,000 shares of our common stock at a price of $0.307912 per share and $1,547,137 of debt, including interest, owed to Joseph Dresner 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.

On July 23, 2009, Milton Dresner and Joseph Dresner agreed to convert an aggregate of approximately US$6,112,633 of principal owed to them by the Company into shares of the common stock of NM-US. The debt converted included (i) the amounts owed to them under a series of promissory notes made by the Company during the period March 2006 through March 2008, (ii) the amount of principal paid by the Dresners on behalf of the Company to satisfy amounts due to Comerica Bank under certain promissory notes dated June 1, 2008 in the aggregate amount of $2.1 million and (iii) the amount of principal assumed by the Dresners under a promissory note made by the Company in favor of Comerica Bank in the amount of $1.9 million dated February 20, 2009 (the "Comerica Note"). In consideration of the benefits conferred upon the Company as a result of the actions taken by the Dresners in (i), (ii) and (iii), above, the Company issued an aggregate of 9,005,700 shares of Common Stock to them. Specifically, Milton Dresner converted $3,230,133 in principal amount of debt into 4,502,850 shares of Common Stock, at a price of $0.71735 per share, and Joseph Dresner converted $2,882,500 in principal amount of debt into 4,502,850 shares of Common Stock at a price of $0.64015 per share. The conversion of debt by the Dresners described herein was completed in connection with a part of more encompassing agreement among the Dresners, the Company and Trafalgar, described below.

During the period October 2005 through July 2007, the Company borrowed the sum of $4.0 million from Comerica Bank, the payment of all of which was guaranteed by Joseph Dresner and Milton Dresner. During June 2009, the Dresners repaid an aggregate of $2.1 million of the principal amount and accrued interest to Comerica on behalf of the Company. In addition, the Dresners agreed to relieve and discharge the Company from any liability for any amounts due or to become due under the remaining promissory note made by the Company in favor of Comerica in the amount of $1.9 million. These sums were converted into common stock of NM-US as described in the foregoing paragraph.

On July 23, 2009, NM-US, NM-PLC, NM-LTD, Milton Dresner, Joseph Dresner and Trafalgar entered into an agreement to restructure all of the Company's debt, pursuant to which, among other things:

The Dresners agreed to convert the principal amount of the debt owed them by the Company, as described above;

The Company issued warrants to purchase 750,000 shares of common stock to each of Milton Dresner and Joseph Dresner that are exercisable for a period of three years at a price of $.05 per share;

NM-US, NM-PLC, NM-LTD agreed not to issue any shares of common stock, other than in connection with a capital raising transaction, without first obtaining the written approval of the Dresners, who are entitled to customary anti-dilution protection as to such issuances for a period of one year;

Milton Dresner agreed to resign from the boards of directors of each board of directors of the Company;

Trafalgar agreed to make available to the Company a $1,000,000 credit facility for a period of one year commencing as of the date of the agreement, with the first draw down in the gross amount of $300,000, which the Company received on July 22, 2009.

During the one-year period after the date of the agreement, Trafalgar agreed not to (i) issue any shares of the common stock to itself for any purposes (if it acquired the power to do so), (ii) convert any outstanding debt owed to it by any member of the Group into securities of any member of the Group or to exercise any outstanding securities it held in any member of the Group or (iii) convert any convertible securities into shares of common stock of any member of the Group.

On May 12, 2009, NM-US and NM-PLC each appointed Jeffrey Sternberg to serve as a member of its board of directors at the request of management of Trafalgar, the holder of 9,005,700 shares of the NM-US's common stock, or approximately 42% of the class as of such date. There are no written or oral agreements in place to nominate or vote for Mr. Sternberg or any representative of Trafalgar to serve on the board of directors in the future. The Company and Mr. Sternberg have not discussed compensation arrangements or his appointment to any committees of the board of directors.

As of December 31, 2008, the Company was in default under the terms of loan agreements with Trafalgar, as more fully described under the heading " Management Discussion and Analysis of Financial Condition and Results of Operations – Default on Loans and Debt Restructuring. " In order to cure the defaults, on March 24, 2009, NM-US and NM-PLC entered into a Restructuring Agreement in favor of Trafalgar under which payments during the period beginning on December 30, 2008 through June 30, 2009 would be deferred and resume as of July 31, 2009 in the amounts provided for in the agreement. In addition, Trafalgar extended the maturity date of the October 2008 loan from April 30, 2010 to October 31, 2010. In consideration of the indulgence granted by Trafalgar, the Company agreed (i) to pay Trafalgar a restructuring fee of €150,000, half of which was to be added to the principal amounts outstanding principal balance of each loan and (ii) NM-US agreed to enter into each of a pledge agreement and corporate guaranty agreement in favor of Trafalgar. In addition, Milton Dresner and Joseph Dresner transferred an aggregate of 9,005,700 shares of NM-US common stock to Trafalgar so that after the transfer, Trafalgar would own approximately 42% of the outstanding shares of NM-US.

Under the Pledge Agreement executed by NM-US in favor of Trafalgar, NM-US pledged all of the common shares it owns in NM-PLC to Trafalgar and upon any default under any of the loan documents (the loan agreements, the debenture or the guaranty) it would transfer title to said shares to Trafalgar. Under the Corporate Guaranty, upon a default by NM-PLC in the payment of any amount due to Trafalgar under the loan documents, NM-US would be required to pay any amount not paid when required to be paid.

On July 20, 2009, the Company entered into a letter agreement under which Trafalgar agreed to make available $1 million working capital line of credit whereby it agreed to purchase convertible debentures from the Company up to such amount for a period of up to two years ending on July 20, 2011, subject to the execution of definitive agreements that are described in the following paragraph (the "July 20 Letter Agreement"). As a material inducement for Trafalgar to enter into this agreement, the Company agreed to issue to Trafalgar 2,000,000 of preferred stock having a stated value of $1.00. The July 20 Letter Agreement makes reference to preliminary terms with respect to the preferred stock which are described under "Item 9B. Other Information," which section also provides a more complete description of the terms of the debentures to be issued and the other agreements executed by the parties in connection with the line of credit and the purchase of the debentures. The parties expect to negotiate the definitive terms of the preferred stock promptly.

We did not make the payments required under the Trafalgar loan documents that had been deferred until July 31, 2009 pursuant to the Restructuring Agreement described above. We had advised Trafalgar of our inability to make such payment prior thereto and Trafalgar did not call a default under the Restructuring Agreement or amended Loan Documents. Rather, by letter dated August 11, 2009, Trafalgar agreed to further defer and also restructure the payments due under the May 2008 and October 2008 loan documents which are to resume commencing October 30, 2009.

On August 13, 2009, the Company entered into a series of agreements with Trafalgar evidencing the credit facility described above, which agreements were effective as of July 20, 2009. The various documents, including a Securities Purchase Agreement, a Secured Convertible Redeemable Debenture and Security Agreement, are deemed to be effective as of July 20, 2009.

Under the Securities Purchase Agreement, or Purchase Agreement, Trafalgar agreed to make available to the Company credit in the amount of up to $1 million for a period of two years ending on July 20, 2011 under the terms of a Securities Purchase Agreement to be evidenced by Secured Convertible Redeemable Debentures, or Debentures. The Company may exercise future draw downs under the Purchase Agreement by delivering a Draw Down Notice to Trafalgar, which shall be subject to acceptance or rejection by Trafalgar, in its sole discretion, within five calendar days (a "Settlement Date"). The Debentures bear interest at the rate of 10% per annum and mature on July 20, 2011. In addition, upon the completion of any capital raise in excess of $1,000,000, all unpaid principal and accrued but unpaid interest under outstanding Debentures plus the applicable redemption premium on the amount redeemed will become immediately due and payable. The principal amount of the Debenture, plus accrued interest thereon, is convertible, in whole or in part of the, into shares of common stock in an amount equal to the quotient obtained by dividing the outstanding amount of the Debenture to be converted by the conversion price then in effect. Under the terms of the Security Agreement, the Company pledged to Trafalgar and granted a security interest in and to all of its property (broadly defined) during such time as any of its obligations under the transaction documents are paid in full. Trafalgar is entitled to all of the benefits typically granted to a secured party under such agreement, provided that while there was no default under the Transaction Documents, the Company could operate its business in the ordinary course. A more complete description of the Purchase Agreement, the Debentures and the Security Agreement is provided under "Item 9B. Other Information."

The Company received an initial draw down of $300,000, for which it issued a Debenture to Trafalgar in said amount. After giving effect to the above deductions, the Company received a net amount of $199,831.20 from this draw down.

Director Independence.

The Company has not established its own definition for determining whether its directors and nominees for directors are “independent” nor has it adopted any other standard of independence employed by any national securities exchange or inter-dealer quotation system.

Item 14. Principal Accounting Fees and Services.

AUDIT FEES. The aggregate fees billed for professional services rendered by Larry O’Donnell CPA, BC for the audits of the Company's annual consolidated financial statements for the 2010 fiscal year ending on April 30, 2010 is $0, as the Company has not yet been billed.

AUDIT-RELATED FEES. The aggregate fees billed by Larry O’Donnel CPA, PC for audit-related services rendered for the Company for the 2010 fiscal year were $0. Audit-related fees generally include fees in support of the Company's filing of registration statements with the SEC and similar matters.

TAX FEES. The aggregate fees billed by Larry O’Donnel CPA, PC for tax-related services rendered for the Company for the 2010 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 Larry O’Donnel CPA, PC , other than the audit services, audit-related services, and tax services, were $0 for the 2009 fiscal year.

PRE-APPROVAL POLICY. The Board of Directors and managment are 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 Board of Directors prior to completion of the audit.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)	Financial Statements Documents filed as a part of this report:

(1) The following financial statements are filed as part of this report:

The audited consolidated financial statements of New Media Lottery Services, Inc. and the report of independent registered public accounting firm thereon are set forth after the list of exhibits included under section (b) of this Item 15.

(2) The Company is not required to file any financial statement schedules required by Item 8 of Form 10-K.

(3) No exhibits required by Item 601 of Regulation S-K are required to be filed with this report.

(b) Exhibits

The following financial statements are filed as part of this report:

The following are filed as exhibits to this report:

Exhibit No.	Exhibit Title	Location Reference
2.1	Share Exchange Agreement dated March 19, 2004 by and among the Company, Lottery Network Services Ltd. and the holders of all of the outstanding shares of capital stock of Lottery Network Services Ltd.	2
2.2	Agreement and Plan of Merger dated June 14, 2004 by and between New Media Lottery Services, Inc. and Residential Resales, Inc.	3
2.2	Agreement and Plan of Merger dated January 25, 2005 by and between New Media Lottery Services, Inc., a Virginia corporation, and New Media Lottery Services, Inc., a Delaware corporation.	6
3(i)(a)	Articles of Incorporation of Media Acquisitions Group, Inc.	1
3(i)(b)	Certification of Reinstatement	1
3(i)(c)	Articles of Amendment to Articles of Incorporation to change the corporate name to Residential Resales, Inc.	1
3(i)(d)	Certification of status of Residential Resales, Inc.	1
3(ii)	Bylaws of Residential Resales, Inc.	1
3(i)(e)*	Articles of Association of Lottery Network Services Ltd.	2
3(i)(f)*	Memorandum of Association of Lottery Network Services Ltd.	2
3(i)(g)	Articles of Incorporation of New Media Lottery Services, Inc. (Virginia).	3
3(i)(h)	Certificate of Incorporation of New Media Lottery Services, Inc. (Delaware).	6
3(i)(i)	Certificate of Amendment to Certificate of Incorporation of New Media Lottery Services, Inc. (Delaware).	15
3(i)(j)	By-Laws of New Media Lottery Services, Inc. (Delaware).	6

3(i)(k)	Articles of Association of New Media Lottery Services plc	9
3(i)(l)	Memorandum of Association of New Media Lottery Services plc	9
10.1	Agreement dated September 13, 2001, as amended as of January 26, 2004 by and between Lottery Network Services Ltd. and Rehab Net Games Limited.	2
10.2	Agreement dated December 12, 2001 by and between Lottery Network Services Ltd. and Rehab Charities UK Limited.	2
10.3	Agreement dated November 27, 2001 by and between Lottery Network Services Ltd. and Tropical Gaming Ltd., Belize.	2
10.4	Agreement dated February 12, 2002 by and between Lottery Network Services Ltd. and Guatemalan Pediatric Foundation.	2
10.5	Agreement dated December 7, 2001 by and between Lottery Network Services Ltd. and Intellect Foundation.	2
10.6	Agreement dated February 3, 2004 by and between Lottery Network Services Ltd. and Carnegie Cooke & Company Inc.	2
10.7	Joint Venture Agreement dated October 28, 2004 by and between New Media Lottery Services, Inc. and Cybercyte Sistemas e Serviços Ltda.	7
10.8	Agreement dated May 6, 2005 by and between New Media Lottery Services, Inc. and Alladdin Lotteries Limited.	7

10.9	Quota Holders Agreement dated June 22, 2005 by and between New Media Lottery Services, Inc. and Cybercyte Sistemas e Serviços Ltda.	7
10.10	Agreement dated June 7, 2005 by and between New Media Lottery Services, Inc. and Parlay Entertainment Limited.	8
10.11	Floating Eurodollar Note dated October 7, 2005 in the principal amount of $1,000,000 made by New Media Lottery Services, Inc. in favor of Comerica Bank.	9
10.12	Services Agreement dated November 25, 2005 by and among Lottery Network Services Ltd., and Friends of Rehab Society and Rehab Net Games Limited.	9
10.13	Letter agreement dated December 15, 2005, between Milton Dresner and the Company with respect to conversion of debt into 5,000,000 shares of common stock.	9
10.14	Letter agreement dated December 15, 2005, between Joseph Dresner and the Company with respect to conversion of debt into 5,000,000 shares of common stock.	9
10.15	Amended and Restated Floating Eurodollar Note (amending the Floating Eurodollar Note dated October 7, 2005) in the principal amount of $1,500,000, dated December 14, 2005 made by New Media Lottery Services, Inc. in favor of Comerica Bank.	9
10.16	Placing Agreement dated March 13, 2006 by and among, New Media Lottery Services plc, New Media Lottery Services, Inc., certain directors of the foregoing companies and Zimmerman Adams International Limited	9
10.17	Asset Purchase and Assumption of Liabilities Agreement dated March 13, 2006 between New Media Lottery Services, Inc. and New Media Lottery Services (International) Limited.	9
10.18	Technology License Agreement dated March 13, 2006 between New Media Lottery Services, Inc. and New Media Lottery Services (International) Limited.	9
10.19	Sublicense Agreement dated March 13, 2006 between New Media Lottery Services, Inc. and New Media Lottery Services (International) Limited.	9
10.20	Employment Agreement, dated March 13, 2006 between New Media Lottery Services plc and John T. Carson.	9
10.21	Employment Agreement, dated March 13, 2006 between New Media Lottery Services plc and Randolph H. Brownell, III.	9
10.22	Supplemental Letter to Employment Agreement, dated March 13, 2006 between New Media Lottery Services plc and John T. Carson.	9
10.23	Relationship Deed dated March 13, 2006 between New Media Lottery Services, Inc. and New Media Lottery Services plc.	9
10.24	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	9
10.25	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	9
10.26	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.	9

10.27	Agreement dated October 12, 2005 by and between New Media Lottery Services International, Ltd. and Inspired Broadcast Networks	10
10.28	Floating Eurodollar Note in the principal amount of $600,000, dated December 5, 2006 made by New Media Lottery Services (International) Limited in favor of Comerica Bank.	11
10.29	Floating Eurodollar Note in the principal amount of $1,900,000, dated February 20, 2007 made by New Media Lottery Services (International) Limited in favor of Comerica Bank.	11
10.30	Convertible Loan Agreement dated June 6, 2008 between Trafalgar Capital Specialized Investment Fund-FIS and New Media Lottery Services, plc	11
10.31	Debenture made by New Media Lottery Services, plc in favor of Trafalgar Capital Specialized Investment Fund-FIS	11
10.32	Convertible Loan Agreement dated June 6, 2008 between Trafalgar Capital Specialized Investment Fund-FIS and New Media Lottery Services, plc	12
10.33	Debenture made by New Media Lottery Services, plc in favor of Trafalgar Capital Specialized Investment Fund-FIS	12
10.34	Convertible Loan Agreement dated October 31, 2008 between Trafalgar Capital Specialized Investment Fund-FIS and New Media Lottery Services, plc	14

10.35	Amended and Restated Debenture made by New Media Lottery Services, plc in favor of Trafalgar Capital Specialized Investment Fund-FIS	14
10.36	Cross Corporate Guarantee, dated January 26, 2009 between New Media Lottery Services (International), Ltd., and Trafalgar Capital Specialized Investment Fund-FIS	14
10.37	Debenture made by New Media Lottery Services (International), Ltd. in favor of Trafalgar Capital Specialized Investment Fund-FIS	14
10.38	Comerica Bank $1.9 million Amended & Restated Single Payment Note dated February 20, 2009	14
10.39	Loan Facility Restructuring Agreement, dated March 24, 2009 between New Media Lottery Services, Inc., New Media Lottery Services, plc and Trafalgar Capital Specialized Investment Fund-FIS	14
10.40	Share Pledge Agreement, dated March 24, 2009 between New Media Lottery Services, Inc., and Trafalgar Capital Specialized Investment Fund-FIS	14
10.41	Cross Corporate Guarantee, dated March 24, 2009 between New Media Lottery Services, Inc., and Trafalgar Capital Specialized Investment Fund-FIS	14
10.42	Agreement dated July 20, 2009 by and among New Media Lottery Services, Inc., New Media Lottery Services plc (“NM-PLC”), New Media Lottery (International) Services Ltd., Milton Dresner and Joseph Dresner, on the one hand, and Trafalgar Capital Specialized Investment Fund-FIS.	16
10.43	Letter Agreement dated July 20, 2009 by and among New Media Lottery Services, Inc., and Trafalgar Capital Specialized Investment Fund-FIS with respect to $1 million line of credit	17
14	Code of Ethics	5
16 .1	Letter of Earl M. Cohen, CPA, PA, on change in certifying accountant.	4
16.2	Letter from Bouwhuis, Morrill & Company, LLC regarding change in certifying accountant.	13
31.1	Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	18
32.1	Section 1350 Certification	18

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

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.

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

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

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.

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

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.

To be filed by amendment.

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

10.

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

11.

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

12.

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

13.

Previously filed with the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 23, 2009.

14.

Previously filed with the Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2009 as filed with the Securities and Exchange Commission on April 3, 2009.

15.

Previously filed as an exhibit to a Preliminary Information Statement on Schedule 14C filed with the Securities and Commission on June 3, 2009

16.

Previously filed with the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2009.

17.

Previously filed with the Annual Report on Form 10-K for the fiscal year ended April 30, 2010

18.

Filed herewith

NEW MEDIA LOTTERY SERVICES, INC.

& SUBSIDIARIES

Financial Statements for the Years

Ended April 30, 2010 and 2009

and Report of Independent Registered

Public Accounting Firm

CONTENTS

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheet		F-3

Consolidated Statements of Operations		F-4

Consolidated Statements of Stockholders’ Deficit		F-5

Consolidated Statements of Cash Flows		F-6

Notes to the Consolidated Financial Statements		F-7

F-1

Larry O'Donnell, CPA, P.C.

Telephone (303) 745-4545	2228 South Fraser Street
Fax (303) 369-9384	Unit I
Email larryodonnellcpa@comcast.net	Aurora, Colorado 80014
www.larryodonnellcpa.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

New Media Lottery Services, Inc.

Harrisonburg, Pennsylvania

I have audited the accompanying consolidated balance sheet of New Media Lottery Services, Inc., and subsidiaries as of April 30, 2010, and the related consolidated statements of operations, changes in stockholders deficit and cash flows for the year then ended. These financial statements are the responsibility of management. My responsibility is to express an opinion on these financial statements based on my audit.

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

In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of New Media Lottery Services, Inc. as of April 30, 2010, and the results of operations and its cash flows for the year then, in conformity with accounting principles generally accepted in the United States.

These 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 a working capital deficiency of $4,052,838, has not yet achieved profitable operations, has accumulated losses of $21,585,869. These factors, along with other matters as set forth in Note 11, raise substantial doubt that the Company will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Larry O’Donnell, CPA, PC

September 2, 2010

F-2

NEW MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	April 30,			April 30,
	2010			2009
ASSETS

CURRENT ASSETS

Cash and cash equivalents	$	254		$	69,233
Accounts receivable, net		-			88,122
Prepaid assets		-			17,280

Total Current Assets		254			174,635

PROPERTY AND EQUIPMENT, NET		-			73,215

DEFERRED LOAN FEES - NET		1,429,809			743,075

TOTAL ASSETS	$	1,430,063		$	990,925

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES

Accounts payable and accrued expenses	$	424,297		$	1,004,612
Other payable		-			69,713
Deferred compensation		-			62,500
Due to related parties		50,969			202,465
Notes payable, net		-			5,406,628
Notes payable - related party		221,589			2,293,177
Convertible notes - related party, net		3,356,237			-

Total Current Liabilities		4,053,092			9,039,095

NOTES PAYABLE – LONG-TERM PORTION, NET		149,995			448,021

TOTAL LIABILITIES		4,203,087			9,487,116

Convertible Redeemable Preferred Stock, Series A ($2,000 stated value, 5 million shares authorized, 2 million shares issued and outstanding at April 30, 2010) (redeemable in liquidation at an aggregate of $2 million at April 30, 2010)		2,000			-

Stockholder's Deficit:
Common stock, $0.001 par value; 150,000,000 shares authorized, 33,897,843 shares issued and outstanding		33,898			21,442
Additional paid-in capital		18,538,370			3,605,859
Prepaid consulting equity		(26,052	)		-
Accumulated deficit		(21,585,869	)		(16,034,596	)
Accumulated other comprehensive income		264,629			264,628

Total Stockholders' Deficit		(2,775,024	)		(12,142,667	)

Minority Interest		-			3,646,476

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	1,430,063		$	990,925

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

F-3

NEW MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

	For the Twelve Months Ended
	April 30,
	2010			2009

NET REVENUES	$	765,753		$	1,120,833

OPERATING EXPENSES

Depreciation and amortization expense		1,356,667			404,613
General and administrative		933,375			1,112,712
Management fees		27,500			75,930
Professional fees		411,030			577,831
Programming fees		381,160			608,950
Rent expense		91,498			98,393
Contract development		-			39,129
Website expense		445,792			895,547

Total Operating Expenses		3,647,022			3,813,105

LOSS FROM OPERATIONS		(2,881,269	)		(2,692,272	)

OTHER INCOME (EXPENSES)

Gain (loss) on sale of property and equipment		(52	)		400
Interest income		1,601			3,645
Interest expense		(336,184	)		(568,768	)
Interest expense - beneficial conversion feature		(930,839	)		(598,923	)

Total Other Income (Expenses)		(1,265,474	)		(1,163,646	)

NET LOSS BEFORE INCOME TAXES AND MINORITY INTEREST		(4,146,743	)		(3,855,918	)

PROVISION FOR INCOME TAXES		-			-

MINORITY INTEREST IN SUBSIDIARIES LOSSES		(1,404,530	)		744,418

NET LOSS	$	(5,551,273	)	$	(3,111,500	)

PREFERRED STOCK DIVIDEND		-			-
LOSS ON REDEMPTION OF PREFERRED STOCK		-			-

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(5,551,273	)	$	(3,111,500	)

BASIC AND DILUTED NET LOSS PER SHARE	$	(0.16	)	$	(0.15	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING		33,897,843			21,442,143

OTHER COMPREHENSIVE INCOME

NET LOSS ATTRIBUTABLE TO COMMON STOCK HOLDERS	$	(5,551,273	)	$	(3,111,500	)

Foreign currency translation adjustment		-			159,670
Unrealized gain (loss) on marketable securities		-			(3,000	)

COMPREHENSIVE LOSS	$	(5,551,273	)	$	(2,954,830	)

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

F-4

NEW MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Deficit

For the period May 1, 2008 through April 30, 2010

																	Accumulated
									Additional								Other
	Preferred Stock				Common Stock				Paid-in		Prepaid			Accumulated			Comprehensive			Minority
	Shares		Amount		Shares		Amount		Capital		Equity			Deficit			Income			Interest

Balance, April 30, 2008		-	$	-		21,442,143	$	21,442	$	3,335,688	$	-		$	(12,923,096	)	$	107,958		$	2,887,722

Consolidation of subsidiaries		-		-		-		-		-		-			-			-			758,754

Unrealized loss on marketable securities		-		-		-		-		-		-			-			(3,000	)		-

Transfer of related party shares for convertible note financing cost		-		-		-		-		270,171		-			-			-			-

Foreign currency translation		-		-		-		-		-		-			-			159,670			-

Net loss for the year ended April 30, 2009		-		-		-		-		-		-			(3,111,500	)		-			-

Balance, April 30, 2009		-	$	-		21,442,143	$	21,442	$	3,605,859	$	-		$	(16,034,596	)	$	264,628		$	3,646,476

Consolidation of subsidiaries		-		-		-		-		-		-			-			-			(1,404,530	)

Preferred stock issued for costs related to Convertible debt		2,000,000		2,000		-		-		1,998,000		-			-			-			-

Common stock issued for conversion of debt		-		-		9,005,700		9,006		6,103,627		-			-			-			-

Common stock issued for services		-		-		3,450,000		3,450		177,550		(98,500	)		-			-			-

Valuation of options and warrants		-		-		-		-		248,273		-			-			-			-

Value attributed to beneficial conversion features		-		-		-		-		140,686		-			-			-			-

Disposal of Subsidiaries		-		-		-		-		6,264,375		-			-			-			(2,241,946	)

Amortization of prepaid equity		-		-		-		-		-		72,448			-			-			-

Foreign currency translation		-		-		-		-		-		-			-			-			-

Net loss for the period ended April 30, 2010		-		-		-		-		-		-			(5,551,273	)		-			-

Balance, April 30, 2010 - unaudited		2,000,000	$	2,000		33,897,843	$	33,898	$	18,538,370	$	(26,052	)	$	(21,585,869	)	$	264,628		$	-

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

F-5

NEW MEDIA LOTTERY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

	For the Twelve Months Ended
	April 30,
	2010			2009

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss	$	(5,551,273	)	$	(3,111,500	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization expense		1,356,667			404,613
Loss (gain) on disposition of assets		52			(400	)
Common Stock issued for services		154,948			598,923
Warrants and Options granted for services		248,273			-
Forgiveness of related party interest		233,697			-
Accretion of beneficial conversion feature		930,839			-
Loss from disposition of subsidiary		202,500			-
Minority interest in subsidiaries losses		1,404,530			(744,418	)
Change in operating assets and liabilities:
Accounts receivable		88,122			245,655
VAT receivable		(69,713	)		(22,712	)
Accounts payable and accrued expenses		(580,312	)		178,749
Prepaid assets		15,944			65,228

Net Cash Used by Operating Activities		(1,565,726	)		(2,385,862	)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment		-			(39,460	)
Proceeds from sale of property and equipment		2,200			-

Net Cash Used by Investing Activities		2,200			(39,460	)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of notes payable		-			3,721,671
Loan fees paid		(92,500	)		(960,593	)
Proceeds from issuance of convertible
notes payable, related parties		575,000			-
Proceeds from issuance of
notes payable, related parties		110,500			610,000
Payments on notes payable, related parties		(82,088	)		(500,000	)
Payments on notes payable		-			(516,250	)

Net Cash Provided by Financing Activities		510,912			2,354,828

EFFECT OF FOREIGN CURRENCY TRANSLATION ADJUSTMENT		983,635			(76,020	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(68,979	)		(146,513	)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		69,233			215,746

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	254		$	69,233

SUPPLEMENTAL DISCLOSURES:

Cash paid for interest	$	988		$	318,685
Cash paid for income taxes	$	-		$	-

NON-CASH INVESTING & FINANCING ACTIVITIES:

Common stock issued for services	$	154,948		$	-
Common Stock issued to convert debt	$	6,112,633		$	-
Warrants and options granted for services	$	248,273		$	-
Forgiveness of related party interest	$	233,697		$	-

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

F-6

NOTE 1 -

ORGANIZATION AND DESCRIPTION OF BUSINESS

New Media Lottery Services, Inc. the (“Company” or “NMLS”) was organized under the laws of the State of Florida on June 29, 1998. The Company was originally organized to provide media consulting services. The Company’s headquarters is currently located in Harrisonburg, Virginia.

On June 17, 2004, the Company changed its State of Incorporation from Florida to Virginia with authorized common stock of 50,000,000 shares with par value of $0.001 per share. All references to shares issued and outstanding in the consolidated financial statements have been retroactively restated to reflect the effects of this change in capital structure.

On March 18, 2004, the Company reorganized by entering into a stock purchase agreement with Lottery Network Services Limited (“LNS”) whereby the Company issued 10,000,000 shares of its common stock in exchange for all of the outstanding common stock of LNS. Immediately prior to executing the stock purchase agreement the Company had 1,000,000 shares of common stock issued and outstanding. The reorganization was accounted for as a recapitalization of LNS because the shareholders of LNS controlled the Company immediately after the acquisition. Therefore, LNS is treated as the acquiring entity. Accordingly there was no adjustment to the carrying value of the assets or liabilities of LNS. The Company is the acquiring entity for legal purposes and LNS is the surviving entity for accounting purposes.

Lottery Network Services Limited was organized under the laws of the Republic of Ireland on July 11, 2000 for the purpose of designing, building, implementing, managing, hosting and supporting internet and wireless based lottery programs.

New Media Lottery Services, Inc. (“NMLS-C”) was organized as an extra-provincial corporation in Alberta, Canada on July 27, 2004. NMLS-C is a wholly owned foreign subsidiary of NMLS. NMLS-C provides software development and technical expertise for NMLS.

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

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

During March 2006, our Irish subsidiary, NM-PLC concluded an Offering of 4,244,850 ordinary shares (the “AIM Offering”) wherein it raised an aggregate $3,750,338 using the March 17, 2006 exchange rate. The AIM Offering associated costs were $1,617,644 using a March 17, 2006 exchange rate. This yielded $2,132,694 to the Company. After giving effect to the issuance of the ordinary shares sold in the Offering and the other ordinary shares issued for debt, we owned approximately 82.3% of New Media Lottery Services, Plc’s outstanding capital stock. On March 13, 2009 our shares were removed from trading on the AIM market. Currently the Company owns 80.23% of the outstanding share capital of NM-PLC.

On May 29, 2009, our board of directors and stockholders holding approximately 70% of our outstanding common stock executed written consents in lieu of a meeting to approve an amendment to our certificate of incorporation (the “Amendment”) to increase the number of authorized shares of common stock we may issue from 50,000,000 shares to 150,000,000 shares (the "Share Increase"). The consents constituted the only stockholder approval required for the Amendment under Delaware corporate law and our certificate of incorporation and bylaws.

On March 11, 2010, NMLS, NM-PLC, LNS and John Carson, a director and the chief executive officer of each entity; and Trafalgar Capital Specialized Investment Fund-FIS ("Trafalgar"), lenders to the Company, entered into an agreement that resulted in a global restructuring of the Company. Upon the consummation of the transactions among the parties to this agreement, the Company no longer engages in any operations.

F-7

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, designed, built, implemented, managed, hosted and supported internet and wireless device based lottery programs operated by governments and charitable organizations outside of the United States. The Company also designed and distributed games for use on video lottery terminals and other electronic kiosks. Since March 11, 2010 the Company has ceased those activities and is actively seeking lottery licenses and other lottery related business opportuntities.

Accounting Method

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

c. Cash and Cash Equivalents

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

d. Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

e. Property and Equipment

Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives. Computer software acquired for internal use is capitalized and amortized using the straight-line method over the software’s expected useful life. When assets are disposed of, the cost and accumulated depreciation (net book value of the assets) are eliminated and any resultant gain or loss reflected accordingly. Betterments and improvements are capitalized over their estimated useful lives whereas repairs and maintenance expenditures on the assets are charged to expense as incurred.

Asset Class	Life	2010		2009
Computer Equipment	3 Years	$	-		106,476
Furniture & Equipment	7 Years		-		7,805
Computer Software	3 Years		-		297,589
Less - Accumulated Depreciation & Amortization			-		(318,583	)
Net Property and Equipment		$	-		93,287

Depreciation and amortization expense for the years ended April 30, 2010 and 2009 was $0 and $97,492, respectively.

F-8

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

f. Basic Net Loss per Share of Common Stock

In accordance with Financial Accounting Standards No. 128, “Earnings per Share,” basic net loss per common share is based on the weighted average number of shares outstanding during the periods presented. Diluted earnings per share is computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period as follows:

	April 30,			April 30,
	2010			2009
Net loss (numerator)	$	(5,551,273	)	$	(3,111,500	)
Weighted average shares outstanding (denominator)		33,897,843			21,442,143
Loss per share amount	$	(0.16	)	$	(0.15	)

The Company has issued the following securities that could potentially dilute basic earnings per share in the future that are not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the period ended April 30, 2010 and 2009.

Options	3,475,000	shares
Warrants	1,900,000	shares

g. Recent Accounting Pronouncements

In May 2009, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification Topic No. 855, Subsequent Events. This guidance establishes general standards of accounting for and, disclosure of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It sets forth (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The guidance is effective for interim or annual financial periods ending after June 15, 2009 and was adopted with no material effect on the Company's statement of financial condition or results of operations.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162" (“SFAS 168"). Under SFAS 168, the FASB Accounting Standards Codification (Codification) will become the sole source of authoritative U.S. GAAP to be applied by non-governmental entities. SFAS 168 is effective for the financial statements issued for interim and annual periods ending after September 15, 2009. The adoption will have no material impact on the Company’s financial statements but will require that interim and annual filings include references to the Codification.

In June 2009, the FASB issued Accounting Standards Codification Topic No. 105-10, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles ("ASC 105-10"). This guidance establishes the FASB Accounting Standards Codification (the "Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates ("ASUs"). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the basis for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.

In October 2009, the FASB issued Accounting Standards Codification Topic No. 605, Multiple-Deliverable Revenue Arrangements. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable and expands the disclosures required for multiple-deliverable revenue arrangements. This guidance is effective for revenue arrangements that are entered into or are materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The adoption will have no material impact on the Company’s financial statements.

h. Income Taxes

The Financial Accounting Standards Board (FASB) has issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. As a result of the implementation of FIN 48, the Company performed a review of its material tax positions. At the adoption date of May 1, 2007, the Company had no unrecognized tax benefit which would affect the effective tax rate. As of April 30, 2009 and 2008, the Company had no accrued interest and penalties related to uncertain tax positions.

F-9

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, 2009 and 2008.

At April 30, 2010, the Company has an approximately $600,000 net operating loss carryforward. The Company’s subsidiary, New Media Lottery Services (International), Ltd., has capitalized $4,952,923 as Code Section 195 start up expenditures. With the January 2006 inception of operating revenues by the Company’s foreign subsidiary, the Company has deemed that operations have begun, as defined by Section 195. These cumulative startup costs will be amortized over sixty months for income tax accounting purposes. The Company and its subsidiaries will not file a consolidated income tax return. Neither the domestic parent nor the foreign subsidiaries expect any income tax expense for the year ended April 30, 2010.

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

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

i. Reclassifications

Certain amounts in the accompanying consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications had no material effect on our consolidated financial statements.

j. Principles of Consolidation

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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

k. Trade Accounts Receivable

Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a periodic basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer's financial condition, credit history, and current economic conditions. Trade accounts receivable are written off when deemed uncollectible by management. The allowance at April 30, 2010 and 2009 was $0 and $0, respectively.

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 $250,000. As of April 30, 2010 the Company had uninsured cash balances of $0 in the United States.

m. Advertising

The Company expenses advertising costs as they are incurred. Advertising expenses for the years ended April 30, 2010 and 2009 were $295,472 and $685,713, respectively.

F-10

NOTE 2 -

SIGNIFICANT ACCOUNTING POLICIES (Continued)

n. Revenue Recognition

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

o. Foreign Currency Translation

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

p. Beneficial Conversion Feature

From time to time, the Company has debt with conversion options that provide for a rate of conversion that is below market value. This feature is normally characterized as a beneficial conversion feature ("BCF"), which is recorded by the Company pursuant to Emerging Issues Task Force (“EITF”) Issue No. 98-5 ("EITF 98-5"), Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, and EITF Issue No. 00-27, Application of EITF Issue No. 98-5 to Certain Convertible Instruments. If a BCF exists, the Company records it as a debt discount. Debt discounts are amortized to interest expense over the life of the debt on a straight-line basis, which approximates the effective interest method. Expense recorded on the Company's financial statements during the years ended April 30, 2010 and 2009 as a result of adoption of EITF issues No. 98-5 and 00-27 totaled $930,839 and $598,923, respectively.

q. Long-Lived Assets

The Company applies the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (‘SFAS 144”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the asset’s carrying amounts. In that event a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Company has not recorded an impairment of long-lived assets as of April 30, 2010 and 2009.

NOTE 3 - AVAILABLE FOR SALE SECURITIES

Marketable securities at April 30, 2009 are classified and disclosed as available-for-sale under the requirements of SFAS No. 115. The Company did not have proceeds from the sale of any available for sale securities. Under such statement, the Company’s securities are required to be reflected at their fair value as follows:

	April 30,		April 30,
	2010		2009

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

Unrealized holding gains and losses are reported in accumulated other comprehensive income on the balance sheets of the company, at April 30, 2010 and 2009.

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:

F-11

Miller & Earle, PLLC

The Company has utilized the services of a law firm named Miller & Earle, PLLC (ME) where one of the partners is a major shareholder of the Company. The Company paid ME $0 and $0 during the years ending April 30, 2010 and 2009. The Company owed ME $50,969 at April 30, 2010 and $202,465 at April 30, 2009 (see Note 9).

Nathan Miller

As of April 30, 2010, 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 $81,650 in accrued interest ($9,617 in 2010 and $11,334 of accrued interest in 2009), which is repayable on terms to be determined.

Milton Dresner

During fiscal years 2009, 2008 and 2006, Milton Dresner, a principal shareholder and director of the New Media Lottery Services, Inc., loaned New Media Lottery Services International an aggregate of $100,000, $967,500 and $150,000, respectively. New Media Lottery Services International executed a demand note in favor of Mr. Dresner with respect to such amount that bears interest at variable interest rates. During the fiscal year ended April 30, 2010, Mr. Dresner converted all debt into stock

Joseph Dresner

During fiscal year 2008, Joseph Dresner, a principal shareholder and director of the New Media Lottery Services, Inc., loaned New Media Lottery Services International $882,500. New Media Lottery Services International executed a demand note in favor of Mr. Dresner with respect to such amount that bears interest at variable interest rates. During the fiscal year ended April 30, 2010, Mr. Dresner converted all debt into stock

John Carson

During fiscal year 2009, John Carson, a shareholder, officer and director of the New Media Lottery Services, Inc., loaned New Media Lottery Services International $10,000. New Media Lottery Services International has executed a demand note in favor of Mr. Carson with respect to such amount that bears interest at the Prime Rate plus 3%. During the fiscal year ended April 30, 2010 the note to Mr. Carson was paid in full.

Trafalgar

During fiscal year 2010, Trafalgar Capital, a principal shareholder, loaned the company $60,000 which was repaid and $50,500 of which $38,412 is outstanding at April 30, 2010.

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 had considerable loans payable due to related parties consisting of the following:

	April 30,			April 30,
	2010			2009
Loan payable to an individual, interest at prime plus 2%, due on demand, unsecured	$	183,177		$	183,177
Loan payable to an individual, interest at prime plus 2%, due on demand, unsecured		-			525,000
Loan payable to an individual, interest at prime plus 2%, due on demand, unsecured		-			260,000
Loan payable to an individual, interest at prime plus 3%, due on demand, unsecured		-			392,000
Loan payable to an individual, interest at prime plus 3%, due on demand, unsecured		-			622,500
Loan payable to an individual, interest at prime plus 3%, due on demand, unsecured		-			10,000
Loan payable to Trafalgar, unsecured		38,412			-
Loan payable to an individual, interest at 5.25%, due on demand, unsecured		-			200,000
Total Loans Payable		221,589			2,193,177
Less: Current Portion		(221,589	)		(2,193,177	)
Long-Term Loans Payable	$	-			-

Interest expense on loans payable to related parties for the years ended April 30, 2010 and 2009 was $30,976 and $132,936 respectively. Note that this does not include accrued interest on convertible notes due to Trafalgar (See Note 7)

F-12

NOTE 6 –

NOTES PAYABLE

Notes payable consisted of the following:

	April 30,			April 30,
	2010			2009
Comerica Bank note with interest approximately equal to the Euro dollar prime rate Plus 2.5%, due June 1, 2009		-			1,500,000
Comerica Bank note with interest approximately equal to the Euro dollar prime rate Plus 2.5%, due June 1, 2009		-			600,000
Comerica Bank note with interest approximately equal to the daily adjusted LIBOR rate Plus 2.5%, due February 20, 2010		-			1,900,000
Trafalgar Capital Note with interest equal to 8%,		3,019,714			2,140,740
Trafalgar Capital Convertible Note with interest equal to 10%, due July 31, 2011, secured by all assets of the company (less discount of $88,482 - See note 7)		486,518			-
Total Notes Payable		3,506,232			6,140,740
Less: Current Portion		(3,356,237	)		(5,625,120	)
Long-Term Notes Payable	$	149,995			515,620

Interest on the Trafalgar Capital notes has not been paid on a monthly basis; hence, accrued interest expense on notes payable for the years ended April 30, 2010 and 2009 was $282,641 and $0 respectively.

The following is a schedule of future principle payments required under the above notes as of April 30, 2009:

Year Ending
April 30	Amount

2010	$	3,538,129
2011		63,898
2012		-
2013		-
2014		-
Thereafter		-

NOTE 7 - CONVERTIBLE DEBT

During 2009, the Company raised €1,300,000 ($1,725,750) through the issuance of 8% unsecured convertible debt and €1,150,000 ($1,526,625) from the issuance of 8% unsecured convertible debt. The €1,300,000 debt is due on May 31, 2010 and the €1,150,000, by extension, on October 31, 2010. The Company was unable to repay the debt under the original terms; accordingly the lender modified the terms of the unsecured convertible debt. All stock and warrants referenced in this convertible debt, is stock in the subsidiary NM-PLC.

The lender shall have the right to convert the convertible debt, at its sole option and at any time, the NM-PLC stock is trading above 120% of the volume weighted average price (VWAP) on the day prior to close and if no VWAP is available, the closing bid price on the day prior to close. Should the monthly mandatory redemption amount not be paid within 5 days of due date, the lender shall have the option but not the obligation to take the payment in shares at the lower of the fixed conversion price or a 15 % discount to the lowest daily VWAP (or if there is not reported VWAP on such days, the lowest closing bid price) of the securities during the five (5) consecutive trading days after the issue of a conversion notice by the lender. The lender may state the sterling amount to be converted or the number of shares to be issued at the conversion price. Provided the Company is not in default, the lender shall not be able to convert the convertible debt into an amount that would result in the lender beneficially owning in excess of 2.99% of the outstanding ordinary shares of the Company without the prior approval of the Company.

On the convertible debt’s closing dates, the Company issued to the lender warrants to purchase 4,500,000 shares at an exercise price of 5 pence ($0.0743). The warrants shall have a 2 year term from the date of issuance. In the event the warrants remain unexercised by the lender at maturity, the Company shall repurchase the warrants from the lender for a cash consideration of £180,000 ($267,480).

F-13

NOTE 7 - CONVERTIBLE DEBT (Continued)

The value of the beneficial conversion feature was determined using the intrinsic value method. In accordance with EITF 00-27 paragraph 6, when detachable warrants are associated with the issuance of convertible debt, the ratios of the relative fair values of the convertible debt and detached warrants are allocated to the proceeds received, with those amounts being recorded in the paid-in-capital accounts of the balance sheets of the Company. The amount recorded as a discount to the convertible debt was $1,210,793. This amount consists of $1,141,679 related to the beneficial conversion features of the convertible debt and $69,114 related to the allocation to the value of the detachable warrants associated with the issuance of the debt. The discount is being amortized over the 2 year term of the convertible debt; accordingly, the Company recorded $620,632 in expense for the accretion of the discount during the year ended April 30, 2010.

NOTE 8 -

FAIR VALUE OF FINANCIAL INSTRUMENTS

On January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements. SFAS No. 157 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.

The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The carrying value of notes payable approximates fair value because negotiated terms and conditions are consistent with current market rates as of April 30, 2010 and 2009

NOTE 9 -

COMMITMENTS AND CONTINGENCIES

Compensation Agreements

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

Legal Fee Dispute

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

Leasing Arrangements and Commitments

- The Company, as of April 30, 2010, has no leasing arrangements or commitments.

Rental expense was $91,498 in 2009 and $98,393 in 2009.

NOTE 10 -

STOCK OPTIONS AND WARRANTS

The Company has adopted FASB Statement 123(R), "Share-Based Payments" ("SFAS No. 123R") to account for its stock options and warrants. The Company estimates the fair value of each stock award at the grant date by using the Black-Scholes pricing model. The assumptions used to calculate the fair value of options and warrants granted are evaluated and revised, as necessary, to reflect market conditions and our experience. Compensation expense is recognized only for those options expected to vest, with forfeitures estimated at the date of grant based on our historical experience and future expectations. The Company granted stock options or warrants during the fiscal year ended 2010 as listed in the tables below. The Company’s 80.23% subsidiary, NM-PLC, did not issue warrants and stock options during the fiscal year ended 2010.

F-14

EMPLOYEE STOCK OPTIONS

The following tables summarize the information regarding employee stock options at April 30, 2009 and 2008:

Outstanding, April 30, 2008		1,625,000
Granted		-
Canceled		-
Exercised		-

Outstanding, April 30, 2009		1,625,000

Granted		3,475,000
Canceled		1,625,000
Exercised		-

Outstanding, April 30, 2010		3,475,000

Weighted average exercise price of options outstanding at April 30, 2010	$	0.34

Outstanding

Exercisable

Weighted

Average

Weighted

Number

Remaining

Average

Number

Average

Outstanding

Contractual

Exercise

Exercisable

Exercise

Exercise Prices

at 4/30/10

Life (years)

Price

at 4/30/10

Price

0.10

3,475,000

9.90

0.10

3,475,000

0.10

WARRANTS

The following tables summarize the information regarding warrants at April 30, 2009 and 2008:

Outstanding, April 30, 2008		200,000

Granted		-
Canceled		-
Exercised		-

Outstanding, April 30, 2009		200,000

Granted		1,700,000
Canceled		-
Exercised		-

Outstanding, April 30, 2010		1,900,000

Weighted average exercise price of warrants outstanding at April 30, 2010	$	0.10

NOTE 10 -

STOCK OPTIONS AND WARRANTS (Continued)

		Outstanding						Exercisable
				Weighted
				Average		Weighted				Weighted
		Number		Remaining		Average		Number		Average
		Outstanding		Contractual		Exercise		Exercisable		Exercise
Exercise Price		at 4/30/10		Life (years)		Price		at 4/30/10		Price

$	0.25		200,000		5.00	$	0.25		200,000	$	0.25

$	0.30		200,000		1.0	$	0.30		200,000	$	0.30

$	0.05		1,500,000		2.3	$	0.05		1,500,000	$	0.05

F-15

NOTE 11 - GOING CONCERN CONSIDERATIONS

The accompanying condensed consolidated financial statements have been prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As reported in the consolidated financial statements, the Company has incurred $21,585,869 losses from inception of the Company through April 30, 2010. The Company’s stockholders’ deficit at April 30, 2010 was $2,775,024. Additionally, the Company has sustained additional operating losses for the year ended April 30, 2010 of $2,881,269, has a working capital deficit of $4,052,838, negative cash flows from operations, and no known borrowing capacity and has ceased all operations. These factors combined, raise substantial doubt about the Company’s ability to continue as a going concern. The Company no longer engages in lottery based programs and is currently seeking new business opportunities.

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

NOTE 12 - SUBSIDIARY CAPITAL STOCK OFFERING

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

NOTE 13 – OTHER ASSETS

The Company follows SFAS 142 for the loan fees and other intangible assets which requires other intangible assets to be amortized only if they have defined useful lives. The useful lives of the intangible assets that are being amortized are evaluated each reporting period as to whether events and circumstances warrant a revision to the remaining period of amortization.

On May 31, 2008, the Company entered into a convertible debenture agreement (See Note 7) whereby the Company paid fees of $271,636 in cash and 249,350 common shares of NM-PLC stock valued at $57,356. On March 24, 2009, the Company restructured this convertible debenture agreement whereby the Company paid fees of $105,135. These loan fees, a total of $434,127, were capitalized and are being amortized on a straight line basis over a 24 month period. During the fiscal years ended April 30, 2009 and April 30, 2010, the Company expensed $198,974 and $221,193 of these fees, respectively.

On October 31, 2008, the Company entered into a convertible debenture agreement (See Note 7) whereby the Company paid fees of $247,158. On March 24, 2009, the Company restructured this convertible debenture agreement whereby the Company paid fees of $105,135. These loan fees, a total of $352,293, were capitalized and are being amortized on a straight line basis over a 24 month period. During the fiscal years ended April 30, 2009 and April 30, 2010, the Company expensed $88,074 and $178,768 of these fees.

F-16

SIGNATURES

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

Dated: September 2, 2010	By:	/s/ Jeffrey Sternberg
		Name: Jeffrey Sternberg
		Title: Director
		(Principal Executive Officer and
		Principal Financial Officer)

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

Person	Capacity	Date

/s/ Jeffrey Sternberg	Director	September 2, 2010
Jeffrey Sternberg	(Principal Executive Officer and
	Principal Financial Officer)

New Media Lottery Services Inc 10-K