10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB/A

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

For the Fiscal year ended June 30, 2006

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

For the transition period from _______ To: _______

Commission file number: 333-51880

NEW MEDIUM ENTERPRISES, INC.

(Name of Small Business Issuer in its Charter)

Nevada	13502174
State or Other Jurisdiction of Incorporation of Organization)	(I.R.S. Employer Identification No.)

MAHESH K JAYANARAYAN, CEO

195 The Vale

London W3 7QS

Tel: 011 44 208 746 2018

Fax: 011 44 208 749-8025

(Address, including zip code, and telephone number, including area code,

of registrant's principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

OTC Bulletin Board

Name of each exchange on which registered

Common

Title of each class

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock

(Title of class)

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NEW MEDIUM ENTERPRISES, INC.

Form 10-K for the Year Ended June 30, 2006

Table of Contents

	PAGE
PART I
ITEM 1. BUSINESS	4
ITEM 2. PROPERTIES	18
ITEM 3. LEGAL PROCEEDINGS	19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS	19
ITEM 5A. SELECTED FINANCIAL DATA	21
ITEM 6. MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL CONDITION	21
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	28 - 43
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	44
ITEM 8A. CONTROLS AND PROCEDURES	44
ITEM 8B. OTHER INFORMATION	45
PART III
ITEM 9. DIRECTORS & EXECUTIVE OFFICERS OF THE REGISTRANT	45
ITEM 9A. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT	47
ITEM 10. EXECUTIVE COMPENSATION	48
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	50
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	51
ITEM 13. PRINCIPAL ACCOUNTANT FEES AND SERVICES	53
ITEM 14. EXHIBITS INCORPORATED BY REFERENCE	54
PARTIV
ITEM 15. EXHIBITS INDEX	54
ITEM 16. SUBSEQUENT EVENTS	55
SIGNATURES	56

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Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.

State issuer’s revenue for its most recent fiscal year: None

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

As of trade date June 30, 2006 the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $16,500,000

Note: If determining whether a person is an affiliate will involve an unreasonable effort and expense, the issuer may calculate the aggregate market value of the common equity held by non-affiliates on the basis of reasonable assumptions, if the assumptions are stated.

ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the issuer has filed all documents and reports required to be filed by Sections 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 ___ - N.A.

APPLICABLE ONLY TO CORPORATE REGISTRANTS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, $.0001 par value	205,477,579
(Title of Class)	(Shares outstanding at June 30, 2006)

If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-KSB (e.g., Part 1, Part II, etc) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 (“Securities Act”). The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1990).

Transitional Small Business Disclosure Format (Check One): Yes ___; No X___

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CAUTION REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained in this annual filing, including, without limitation, statements containing the words "believes," "anticipates," "expects" and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such factors include, among others, the following: international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; manufacturing costs and availability; new product development and introduction; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other factors referenced in this and previous filings.

Given these uncertainties, readers of this Form 10-KSB and investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

ITEM 1. Business

(a) Business Development

(1) Form and year of organization;

We were incorporated in Nevada on August 2, 1999 under the name Shopoverseas.com Inc. On July 10, 2000, we changed our name to New Medium Enterprises, Inc.

(2) Any bankruptcy, receivership or similar proceeding;

None

(3) Any material reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business.

On January 13, 2004 we acquired the all of the intellectual property assets of a new and emerging DVD format known as VMD out of development stage (Versatile MultiLayer Disc). We have discontinued all our internet and wireless businesses and have since focused all of our resources to developing our proprietary VMD prototypes and pipeline of products as our core business. As a result, we are positioned in the Optical Disc Storage sector, a huge and growing segment of the data storage market, of which DVD formats have an effective monopoly presently. This sector of the storage market is currently undergoing a cycle of change precipitated by the emergence of high definition TV into the marketplace.

(b) Business of Issuer

NME has acquired and thereafter developed a technology which increases the capacity of a conventional DVD by a factor of 5-10, allowing much greater storage for data and film content. This new technology is called Versatile Multilayer Disc (VMD). Because VMD is based on current DVD 'red laser' technology it means that after a simple software upgrade VMD is compatible with new DVD drives and potentially all existing 1Bn drives currently used by businesses and consumers around the globe.

Significantly, VMD can be produced by a DVD-9 replication line with modifications to the sputtering and bonding process. The Company is negotiating valuable partnerships with major production facilities, drive manufacturers and content owners to exploit VMD's capabilities.

In the information driven, digitally dependant marketplace, controlling, accessing and storing large quantities of data is a fundamental requirement. These markets now consume 6bn DVDs each year, largely pre-recorded with film content and increasing capacity is a key driver. We believe VMD represents a huge leap in the availability of that capacity, yet based on current market products.

We are targeting the pre-recorded video segment of the entertainment industry by offering them VMD as a solution to thwart video piracy.

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As the desire for ever greater capacities rises, consumers are traditionally reluctant to adopt new technologies unless there is a clear market leader. The blue laser technologies have several competing approaches by rival companies, and no single format has emerged. The battle between Betamax and VHS is being revisited.

VMD on the other hand, requires no such ultimatum to the consumer.

We believe this represents a significant market opportunity for NME with VMD, particularly as we believe the blue laser based systems will take three to four years to become mainstream even if one format does become dominant.

We are centered on further developing innovative storage technologies, along with congruous video compression technology; enabling a new generation of high performance, low cost digital storage devices. We believe the convergence of High Definition with VMD technology leverages the company's expertise in the development of high definition players, recorders and personal video recorders.

As of financial year end June 30, 2006, NME remains a development stage company. The company is planning to emerge out of development stage and roll out its products in 4^th quarter of 2006.

How It Works

VMD is a system based on currently available technology. We believe it therefore delivers capacity, flexibility and market potential far greater than currently available and which is also capable of competing with emerging technologies in blue laser.

Conventional DVDs are either single, or increasingly, dual layer discs which store and retrieve digital (e.g. film) content from a data layer(s) within the thickness of the DVD. DVDs are usually 0.8mm thick and have a reflective layer to bounce the laser back that is used to read or record the data.

VMD works by being able to store data on multiple layers within the standard DVD disc format. NME's scientific team have pioneered and patented two crucial processes to make this technology commercially viable:

Producing multiple layers within the 0.8mm DVD thickness, each capable of storing nearly as much data as a conventional DVD.

Basing this on existing red laser drives and being able to manufacture these discs using existing DVD production lines.

As VMD discs can be read by standard DVD-R drives once their internal software (firmware) has been updated, this enables VMD to be reverse compatible with many selective DVD-R drives.

We anticipate the VMD player technology will be delivered into a number of other devices, such as PC's, set-top boxes, access devices and game consoles. We anticipate the software up-grade will be available free to download on the internet for PC users, or burnt on a specific track within every VMD disc. Manufacturers find this attractive since it represents zero cost and yet enables their drives for greater capacity and future proofing.

Key Advantages

Versatile: Inherent backward compatibility with all the existing and previous Disc formats. VMD Drives will be able to read other standard formats including CD and DVD.

Adaptable: VMD multilayer technology does not strictly function with red laser only, but can easily be applied to blue laser as well once the Blue laser technology is flawless. We anticipate that VMD would therefore attain even larger storage capacities by offering increased storage whichever base it uses.

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Affordable: We anticipate VMD will require only marginal modifications of the manufacturing equipment but practically keeps untouched all basic components that are used today. This would translate into lower costs to the producers and will have no trickle-down effect burdening the end-consumer. In other words, we anticipate prices will barely differ from existing DVDs and players. VMD technology is based on classical CD/DVD machinery, technologies and inexpensive commercial red lasers and consequently holds the advantage of simplicity in disc and drive manufacturing.

Significantly, we believe VMD can be produced by every standard DVD-9 replicator in the world without modification to the plant. The Company is negotiating valuable partnerships with major production facilities, drive manufacturers and content owners to exploit VMD's capabilities.

In the information driven, digitally dependant marketplace, controlling, accessing and storing large quantities of data is a fundamental requirement. These markets now consume at least 7bn DVDs each year, largely pre-recorded with film content and increasing capacity is a key driver.

As DVD can work in VMD players and allow content owners to deliver their material in much higher quality (such as the new High Definition standard in film), uniquely it also avoids persuading consumers to replace their existing DVD collection or DVD player. We believe this is a crucial advantage in terms of VMD's market potential.

(1) Principal products or services and their markets;

VMD DISC

We anticipate the VMD disc will be produced in a number of formats:

·   READ ONLY

·   WRITE ONCE

·   RE-WRITABLE

·   READ ONLY/RE-WRITABLE COMBINED

We anticipate the VMD will be mass manufactured at low cost using existing DVD-9 type manufacturing facilities and equipment. The technology is patent pending and has a self protect feature as it is completely impregnable to analysis after manufacture. The disc architecture serves as an additional protection from copyright violations and existing problems in the optical media industry. The storage capacity on the first generation of VMD disc is expected to be 24GB.

THE PLAYER

The VMD drive is very similar to the standard DVD drive with modifications to the firmware to instruct the laser to read multiple layers. The modifications in the software re-calibrate the red laser, enabling it to read data on all data layers (not just top and bottom as in conventional DVDs). Most modern DVD players can be upgraded in this way.

We anticipate VMD will provide the same storage as five to ten DVD-9 discs using the existing DVD burner/player.

We have to date developed a prototype HD VMD player which will complement the VMD disc technology and we anticipate by the last quarter of 2006, samples to be available for distribution to distributors, retailers, etc for trials.

We also anticipate the HD VMD player technology to be used in a number of other devices such as personal computers (PC), set-top boxes, access devices and game consoles. We believe the software upgrade can be made available free and downloaded from the internet for PC users or burnt on a specific track within every VMD disc. We anticipate a website being ready for this purpose around Q4 2006 where PC users would be able to download the software which has already been developed.

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CONTENT

Vendors will be able to retail HD quality films at a premium price, or provide whole collections of films on one disk, thus minimizing both disk purchase and packaging prices.

In the last few months, NME has been working on building a content library. We are in discussions with different film studios and independent content distributors in China, Germany, France, Russia, US, UK, Australia and India. We believe the content market could be another revenue source to NME through format fees, content conversion, disc royalties and content partnerships. To date we have, we have signed an agreement with Eros Media Ltd. who are content providers for mainly Bollywood films.

VMD REPLICATION LINE

The first VMD disc manufacturing line prototype should be finished and be “in production” over the next three to four months. This line is designed and co-developed by ODMS and NME and will allow for the manufacturing of four different types of discs: dual-layer red laser (DVD-9), a multilayer red laser (VMD), a dual-layer blue laser (HD-DVD) and a multi-layer blue laser.

MARKET OPPORTUNITY

Global DVD Market

Competing technologies coming to market are blue laser based and although offering higher data densities, currently provide less storage capacity than VMD and require the consumer to buy new content and replace their DVD drive or player with expensive and proprietary new equipment. In many regions of the world, the DVD type optical disc technologies have, or are gradually becoming the dominant consumer storage and transport medium, primarily due to their low cost of production, ready distribution and relative longevity and reliability.

DVD disk replication worldwide in 2005 consisted of over 7 billion units. By value, the International market for DVDs will be worth approximately $85bn (USD) by 2010 (Source: Informa Telecomms and Media).

The pre-recorded market consists almost exclusively of pre-recorded feature film content. This market is dominated by Hollywood film studios in the West and equivalents in the East and Far East. It is these content owners who control which entity replicates for them, with Hollywood studios being the most influential. The net result of this is that the majority of the current pre-recorded DVD supply chain is concentrated into five replication companies, which between them will provide a high proportion of the global output.

Although pre-recorded DVDs currently outstrip sales of blank media by 4:1, by 2009 this will have reduced to just over 50% of the market, driven by the increase in popularity of DVD as a home data storage medium. Most manufacturing for both blank and pre-recorded DVDs is handled by a small number of very large scale manufacturers located in S.E. Asia.

Most DVD-ROM discs are also pre-recorded for computer games. All three leading games consoles use DVD as a delivery platform. The greatest quantity of X-box and Sony PlayStation2 discs are replicated in the USA and 'in-house' while Nintendo Game Cube discs are replicated by Panasonic in the USA and Japan.

We anticipate that emerging markets for red laser based DVD formats are likely to be the most attractive, whilst established DVD markets keen to adopt blue laser technologies will be the most difficult to compete in. We anticipate the UK and Europe will likely present a legacy market, where consumers who do not wish to change formats or replace equipment will provide commercially fertile group for VMD for some years, provided appropriate channels can be found.

Latin America is an emerging DVD market, but which is likely to follow North American trends due to their attraction to Hollywood content.

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DVD Players

A DVD disc is only useful if it can be played or recorded on in a DVD player or DVD recorder. Although there are some minor differences, the actual DVD drives found in most personal computers, game consoles and stand alone DVD players/recorders, are identical. There are currently approximately one billion of these in use in the market today.

Of this one billion, Understanding and Solution's research suggest that 450m of these are DVD-R drives. It is these drives that are most suitable for a simple firmware upgrade to enable them to read the extra data that VMD discs can store.

(2) Distribution methods of the products or services;

LAUNCH/DISTRIBUTION/SALES OF PRODUCTS

A soft launch is planned in the 4^th quarter of 2006 where a HD VMD bundle consisting of a HD VMD player and HD Demo Disc will be sent to distributors, content owners, replicators, studios, production companies, press, etc. The launch is planned in the following regions: Europe, UK, North America, India, and China.

As the VMD technology is in direct competition with DVD, market assessment could be based on the performance of DVD and we could form alliances with companies that already have existing infrastructure in place for distribution/sales of our products. We are also planning to set up more regional representative offices or with partners in strategic countries to promote distribution/sales to the mass market. At present we have representative offices in France, Germany, Japan, China, Brazil and India. We are also planning E-Commerce where our products could be sold via the web.

NME Inc has established two companies in China, New Medium Enterprises Asia Pacific Ltd (NME Asia Pacific) and New Medium Enterprises China Ltd (NME China). The former is a wholly owned subsidiary of NME Inc and the latter is owned by NME Asia Pacific (51%) and Sistech Corporation Ltd (49%). These two companies have been formed for joint ventures and to handle operations working in conjunction with the principal existing Chinese market manufacturers and distributors to promote the products of NME Inc.

MARKETING AND SALES OF VMD LINES IN THE FUTURE

On 30^th of May 2006 we exhibited at the Mediatech show in Frankfurt. Our participation had been sponsored by the Mediatech themselves and supported by VDL-ODMS.

At this exhibition we demonstrated our discs and our VMD line concept to major replicators from around the world. The focus of attending the exhibition was to encourage existing replicators to adopt our VMD technology.

The outcome of attending this show was that NME has now entered into several vital relationships in commercialization of VMD lines.

OUR SALES AND MARKETING STRATEGY FOR ELECTRONICS

Initially our plans are to partner with OEM and ODM manufacturers in China to license our technology to them. Most OEM manufacturers have their own sales channels and we intend to tap into that market.

We also plan to market and sell directly to electronic distributors worldwide independently of the OEMs and have our Shenzhen operations to be the global Sales, Product development and marketing operations and support our worldwide partners and representative offices.

We also anticipate selling directly to retailers who have no global sourcing arrangements in China and also work with leading brands outside of the 6C to license our technology to them.

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NME Inc has also signed a Memorandum of Understanding with Sistech Corporation Ltd (Sistech) in China for the purpose of promoting the business interest of NME through New Medium Enterprises China Ltd in which NME Asia Pacific owns 51% and Sistech owns 49%. (See Exhibit No 99.1).

(3) Status of any publicly announced new product or service;

As of September 30, 2004 we have completed the initial first-generation product prototype of prerecorded 120 mm Red Laser 20GB VMD (Multilayer Video Disc), providing 180 minutes of High-Definition (1080i) Video Content in full MPEG-2 format. During the second quarter we achieved six layers yielding 30GB of storage capacity with bit rates up 60 Mbs maximal, capable of playing High Definition content for both HDTV and Digital Cinema on a single VMD Player. To date we have been able to create an eight layer disc yielding 48GB of storage capacity. A normal HD film requires 18-22 GB of space; a longer Bollywood film would require in the region of 36-40 GB. Therefore the HD VMD could provide a solution for this.

In April 2006, we concluded an agreement with Plasmon OMS, a global glass mastering house and a leader in the development of new formats of DVD discs, to produce a VMD glass mother set. Plasmon will also provide technical support for NME’s product development in the future. (See Incorporation by reference Exhibit No. 2)

(4) Competitive business conditions and the small business issuer's competitive position in the industry and methods of competition;

The market for our technology is very competitive, is subject to rapid technological changes and varies for different individual products. We believe that there are potentially many competitive approaches being pursued in competition to our technology, including some by private companies for which information is difficult to obtain. Most of all, our competitors have significantly greater resources, more product candidates and have developed product candidates and processes that directly compete with our technology. Our competitors may have developed, or could in the future develop, new technologies that compete with our technology or even render our technology obsolete. Our technology is designed to produce high capacity, next generation discs that could effectively compete with the current blue-ray products being produced by Industry Giants such as Sony, Toshiba, etc. Even if we are able to demonstrate improved or equivalent results, researchers and practitioners may not use our technology and we will suffer a competitive disadvantage. As a result, we may be unable to compete successfully in the market place which could have a material adverse effect on the price of our stock.

Blue Laser Based Technology

The USA is the biggest global consumer and producer of pre-recorded DVDs with European based factories contributing a further 25%. The market is set to change significantly with the emergence of two new higher specification technologies: Blu-ray and HD DVD, both being blue laser based optical disc technologies allowing greater storage capacities.

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Blu-ray, is the next-generation optical disc format jointly developed by the Blu-ray Disc Association (BDA), a group of leading consumer electronics companies including Panasonic, Samsung, Apple, Dell and Hewlett-Packard but is effectively a Sony product. The format uses blue laser rather than current red laser to enable recording, rewriting and playback of large amounts of data. A single-layer Blu-ray Disc can hold 25GB of data, which can record over 2 hours of HD or 13 hours of standard TV. HD DVD was developed by Toshiba and NEC, and is supported by Warner Bros., Paramount and Universal. Like Blu-ray, this enables a disc the size of a current DVD disc, but with much greater storage capacity to hold an entire film at HDTV resolution with single-layer disc storage capacity of 15GB and dual-layer 30GB.

Although Toshiba and Sony have been in dialogue since last year, after pressure by the content owners fearing a format war, agreement on a combined format has been abandoned for now and we believe will cause indecision in the market and aid the case for VMD significantly.

Microsoft is supporting HD DVD in its next version of Windows, but the new Xbox 360 contains neither an HD DVD nor Blu-ray drive. Sony will include a blue laser drive in PlayStation 3.

USA & Europe

Both the USA and Europe pose significant barriers to entry for the new or small player wishing to enter the market. The key inhibitors are cash flow rich, aggressive competitors in Blu-ray and HD DVD who are Hollywood driven. Access to these markets can be extremely difficult, particularly as all key enterprises within the market place are aligned with one or other of the blue laser based technologies.

We have therefore focused on the other world markets and content vendors such as Eros. Eros distributes Bollywood content worldwide and enjoys significant sales in Europe and specifically the UK. We anticipate that VMD technology will trickle down into the market through such partners, who see VMD as a market ready, compatible technology which enhances their own business development plans.

China

In China there is also a competing High Definition technology - digital videodisk (HDV) player and also independently developed IDVD (Internet DVD) player. However only EVD is proven technology, currently available in the shops and government backed and with whom we are negotiating a commercial partnership.

(5) Sources and availability of raw materials and the names of principal suppliers

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Our potential principal suppliers/vendors for each division are as follows:

Optical

-   VDL-ODMS - for VMD replication and VMD replication line R&D

-   Axxicon - for mould manufacturing

-   Plasmon - for optical mastering and stamper manufacturing

Electronics

-   DCA - for VMD file format development

-   ST Microelectronics - for HD decoder chip

-   Sigma Design - for HD decoder chip

-   LSI - for HD decoder chip

-   Via Tech - for Optical drive controller chip

-   Beijing E-World - for HD player board development

Disc - File Format

-   DCA - for VMD file format development

-   Technicolor Creative Services UK - for authoring of VMD

-   Digital Challenge - for navigation system to VMD optical player

We are at present in discussions with various OEMs (original equipment manufacturers) and EMS (electrical manufacturer supplier) in China and Europe to manufacture the HD VMD player. For our soft launch Beijing E-World would be the major supplier of the electronic board for the VMD players.

(6) Dependence on one or a few major customers;

Besides the office in London, we at present have representative offices in France, Germany, Japan, China, Brazil, India and Australia and the company is working to establish a global presence. We intend to build a customer base in each of these regions thus negating our reliance on a few customers.

7) Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts, including duration;

We have applied for three patents relating to our VMD technologies as listed below. In addition we have applied for two Provisional Patents. Supporting these are a variety of unique skills and core operational IPR and although may not necessarily be patentable in themselves, will necessarily be jealously guarded and ruthlessly protected by the Company.

·   PCT/IL2005/000728 - Multilayer Optical Disc and Method and Apparatus for Making Same

·   PCT/US2003/041715 - Multilayer Reflective Information Carrier and Method for Manufacturing Thereof

·   PCT/IB2005/003628 - Optical Pick-Up Method and System for Multilayer Recording Medium

·   US Provisional Patent Application 60/731.923 - Industrial Cycle of VMD Production and the Design of

·   Production Line for Multilayer VMD Optical Discs

·   US Provisional Patent Application Serial No. 60/822.773 - Storage Case

The first comprehensive patent titled "Multi-layer quasi-reflective media and method of its manufacturing" has been filed initially as a provisional US patent application with the enlarged version prepared as regular PCT & US application which has been submitted in 2003.

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This patent covers the basic technological principles and processes of manufacturing of VMD. In addition, as per the acquisitions of MultiDisk and we acquired from TriGm International S.A., a portfolio of researched and isolated patentable inventions related to VMD technologies for which we plan to apply for patent protection in the future. We have so far refrained from applying for these more detailed patents on the basis that by making the information public as required by the application, they are more likely to give away the technology in territories where patents are near impossible to enforce e.g. China. Instead we are strongly pursuing a commercial strategy for protecting the VMD technology. We believe that by partnering with the biggest content providers in the market, and in the case of China - a government backed company, it is effectively locking out any potential competitors from the market. In the long-run we believe this should prove far more effective than any legal redress. It is also expected that we will develop new derivative concepts, as well as supplementary technological solutions and processes, resulting in patents and/or know-how, which we anticipate will be expanded upon and enhance the original VMD concept and intellectual property.

(8) Need for any government approval of principal products or services.

Not applicable.

(9) Effect of existing or probable governmental regulations on the business;

CE Marking

CE Marking on a product is a manufacturer's declaration that the product complies with the essential requirements of the relevant European health, safety and environmental protection legislation, in practice by many of the so-called Product Directives.

Product Directives contains the "essential requirements" and/or "performance levels" and "Harmonized Standards" to which the products must conform. Harmonized Standards are the technical specifications (European Standards or Harmonization Documents) which are established by several European standards agencies (CEN, CENELEC, etc). CEN stands for European Committee for Standardization. CENELEC stands for European Committee for Electrotechnical Standardization.

1.   CE Marking on a product indicates to governmental officials that the product may be legally placed on the market in their country.

2.   CE Marking on a product ensures the free movement of the product within the European Free Trade Association (EFTA) & European Union (EU) single market (total 28 countries), and

3.   CE Marking on a product permits the withdrawal of the non-conforming products by customs and enforcement/vigilance authorities.

More and more products are required to bear the CE Marking for gaining access to the EFTA & European Union market and there are agreements on Mutual Recognition of conformity assessment between European Union and other countries such as USA, Japan, Canada, Australia, New Zealand and Israel.

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RoHS

We also have to ensure that all our electrical and electronic products comply with the RoHS Directive which came into effect on 1^st July 2006. RoHS stands for “the restriction of the use of certain hazardous substances in electrical and electronic equipment.” This Directive bans the placing on the EU market of new electrical and electronic equipment containing more than agreed levels of lead, cadmium, mercury, hexavalent chromium, polybrominated biphenyl (PBB) and polybrominated diphenyl ether (PBDE) flame retardants. The HD VMD players and other electrical/electronic equipment manufactured by NME would have to comply with this regulation if they are to be sold in the EU and UK markets.

(10) Estimate of the amount spent during each of the last two fiscal years on research and development activities, and if applicable the extent to which the cost of such activities are borne directly by customers;

The estimated amounts spent on research and development during each of the last two fiscal years are: 2005 - $970,000 and 2006 - $545,000.

None of the costs will be borne directly by customers.

(11) Costs and effects of compliance with environmental laws (federal, state and local); and

Does not apply.

(12) Number of total employees and number of full time employees

There are only eight full time employees.

(C) REPORTS TO SECURITY HOLDERS

We do not provide you with an annual report and we will not voluntarily send an annual report to you. We are required to file reports with the Securities and Exchange Commission under section 15(d) of the Securities Act. The reports will be filed electronically. The common reports that we are required to file are known as Forms 10-KSB, 10-QSB, and 8-K. You may read copies of any materials we file with the SEC at their Public Reference Room at 450 Fifth Street, NW. Washington, D.C., 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at I -800-SEC-0330. The SEC also maintains an Internet site at http:www.sec.gov that contains reports, proxy and information statements, and will contain copies of the reports that we file electronically.

ITEM 1A. RISK FACTORS

GENERAL RISKS

With the acquisitions of the VMD business and intellectual property assets, we are subject to certain risks and uncertainties. In considering whether to acquire our common stock, you should carefully consider the risk factors described below. You should consider these risk factors, together with all of the other information in this 10K Report and the documents we have incorporated by reference, before you decide to purchase shares of our common stock.

The following risks and uncertainties are not the only ones we face. Risks and uncertainties which either we do not know about or we currently believe are immaterial may also materially impair our business operations. If any of the following risks occur, our business, results of operations, financial position or cash flows, could be materially adversely affected. In that event, the trading price of our common stock could decline, and you may lose all or part of your investment.

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TECHNOLOGY RISKS

We have no history of revenue, and expect to continue to incur operating losses until such time as our first generation products achieve commercial acceptance.

We have no revenue history and therefore we have not achieved profitability. We expect to continue to incur operating losses for the foreseeable future at least until such time the first generation products are commercialized, and only provided we are able to generate fees through royalty agreements and joint venture agreements. Any fees we could potentially generate would most likely not occur until and unless the actual products are produced after validation of the industrial prototype.

We have never generated any revenues or profits, and there is no assurance that, in the future, we will be profitable on a quarterly or annual basis. We anticipate that we will continue to incur losses until, at the earliest, our first generation of products achieve commercial acceptance and we generate enough revenue from the sale or licensing of our products to offset our operating costs. We have limited capital resources.

OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR BUSINESS

We have not yet generated any revenues from the sale of products. Although we have completed our industrial prototypes, we do not anticipate generating material revenue from the sale of products in the immediate future. Accordingly, there are no meaningful period-to-period comparisons of our operating results from which to evaluate our performance. The lack of performance history of our products, our limited forecasting experience and processes and the emerging nature of our target markets makes forecasting our future sales and operating results difficult.

We cannot assure you that any revenues generated in the future, if any, will be sufficient to finance the complete cost of our research and development. We will require significant additional funds before we achieve positive cash flow from operations. Our future capital requirements and profitability depend on many factors, such as the timely success of product development projects, the timeliness and success of joint venture and corporate alliance strategies and our marketing efforts. Terms on which we may raise additional capital may include restrictions that could create difficulties in obtaining future financings limit our options for changing the business and cause substantial cash flow problems. Any equity raises of additional stock or convertible debt financing which we obtain, if any, could result in substantial dilution to stockholders.

NEED FOR ADDITIONAL CAPITAL

We may have to raise additional capital through Private Placements of equity shares. If we are unable to secure additional sources of capital we will need to substantially curtail our level of research and development efforts and other activities. We anticipate that we will require substantial additional financing to fund our working capital requirements. There can be no assurance, however, that additional funding will be available or, if available, that it will be available on terms acceptable to us. There can be no assurance that we will be able to raise additional cash if our cash resources are exhausted. Our ability to arrange such financing in the future will depend, in part, upon the prevailing capital market conditions as well as our business performance and the success of our prototypes.

RISKS IN COST ESTIMATES FOR FUTURE MASS PRODUCTION

These risks are the most difficult to assess at this stage of development. Changes might occur in the estimated cost of equipment needed for commercial VMD mass production and distribution. An important attribute of our technology is that it is based on standard red laser technology which we believe will result in minimum infrastructure costs as opposed to the competing Blue-Ray products, which are believed to require significant infrastructure costs. This is the most important competitive edge we may have over industry giants such as Sony and the Blu-Ray consortium, and other giants such as Toshiba and others. In the event the cost for mass producing the products proves to be materially more expensive than anticipated, it may cause the product to be too expensive as a result of the higher than anticipated production cost, and thus less competitive with the Blu-Ray products or other products developed by industry giants such as Sony and Toshiba which may have a material adverse effect on our company and on the price of our stock.

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INTELLECTUAL PROPERTY RISK

WE CANNOT ASSURE YOU THAT WE WILL SUCCESSFULLY PROTECT OUR VMD TECHNOLOGY AND ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS

Intellectual property Risks - Our initial patent application has not yet been fully assessed by a patent office, so there is still a possibility, that some prior art or similar recent application may be found that would significantly reduce the value of intellectual property which would have a material adverse effect on our company and the price of our stock. We expect to develop trade secrets and may seek patent or copyright protection for trade secrets. We cannot assure you that we will develop trade secrets or seek patent or copyright protection for any or all of them. We have entered into and intend to enter into confidentiality and non-disclosure agreements to protect one or more trade secrets which we or our employees or independent contractors may develop, but we cannot assure you that we will do so or that the appropriate parties will maintain the confidentiality necessary to protect our trade secrets. A failure to maintain one or more trade secrets could have a material adverse impact on us.

We may offer products in the U.S. and in foreign countries based on the patented Versatile Multilayer Disc (VMD). However, certain countries in the Pacific Rim and elsewhere may not offer the same degree of intellectual property protection that the U.S., European Community and Japan afford. Therefore, we may be unable to enforce our patent rights in those jurisdictions, even if we are able to obtain intellectual property rights.

We cannot guarantee that any patents, copyrights, trade secrets, trademarks or domain names that we develop or obtain will provide sufficient protection to us. Furthermore, we cannot assure you that other parties will not challenge the validity of our intellectual property results or that other parties will not assert affirmative defenses to infringement or dilution. If another party succeeds in developing optical data storage technology comparable to VMD without infringing, diluting, misusing, misappropriating or otherwise violating our intellectual property rights, our financial condition may materially suffer.

WE MAY REQUIRE ADDITIONAL TECHNOLOGY IN ORDER TO SUCCESSFULLY DEVELOP AND LICENSE OUR TECHNOLOGY

We believe that we have researched a substantial amount of technology for our products. However, we may need to develop or acquire some additional technology in order to produce products that are ready for commercial sale or licensing. If we cannot develop the additional technology that we need in order to be able to sell the products, we may have to purchase technology from others. We cannot promise or accurately forecast whether we will succeed in performing these acquisitions.

BUSINESS RISK

DEPENDENCE ON KEY PERSONNEL

We depend upon certain key personnel, and we may become unable to maintain or attract, knowledgeable and experienced personnel vital to our financial success.

To date, the two key personnel who have brought the company to its present status are the CEO and CTO. Both are crucial for taking the company from research and development to commercialization stage. The risk of losing either or both of them at this crucial stage of the development of the company would definitely affect the future success of the company.

Furthermore, in order to succeed, we depend upon our ability to attract and retain highly qualified technical and management personnel, including experts in the field of optical storage technology and the sciences underlying such technology. We cannot assure you that we will be able to attract and retain the qualified personnel we need for the business. We have entered into an Agreement with V-Tech, LaDIS and Silicon Valley Plc for the research and development of the prototypes and commercializing the products. Should any of the required crucial scientists leave V-Tech, LaDIS or Silicon Valley Plc our research and development efforts and capabilities might be adversely impacted. A departure of required scientist could delay our ability to successfully market or bring our products to market. Qualified scientists and other technical personnel are in high demand and are often subject to competing offers. We face competition for such personnel from other companies, research and academic institutions, government entities and other organizations. We do not currently maintain "key man" insurance for any personnel. We have attempted to retain our key personnel, including our officers & directors by providing them with attractive incentive packages, which include competitive salaries and stock grants. However, we cannot assure you that these incentives will guarantee retention of our key employees.

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WE MAY BECOME FINANCIALLY DEPENDENT ON ONE OR A SMALL NUMBER OF CUSTOMERS

Because we are a research and development company, we have not developed a customer base for our products. We hope to establish joint ventures and licensing arrangements with strategic partners to license VMD technology. In the future, it is possible that we, the joint ventures and licensees will have sales to one or a small number of customers which equal ten percent or more of our consolidated revenues. This would subject us to depending on that supplier or joint venture partner, which could have an adverse effect on our company and on the price of our shares.

CONCENTRATION OF OWNERSHIP OF OUR COMMON STOCK AMONG THE SHAREHOLDERS TO WHOM WE ISSUED SHARES IN EXCHANGE OF THE VMD ASSETS, INCLUDING NEWLY APPOINTED OFFICERS AND DIRECTORS, MAY PREVENT CURRENT AND NEW INVESTORS FROM INFLUENCING SIGNIFICANT CORPORATE DECISIONS

In connection with the acquisition the Company issued 72,605,776 shares of its stock to the shareholders of MultiDisk and TriGM. On May 10, 2005, an additional 10,000,000 shares were issued to an affiliate of the company in exchange of $200,000 investment. See also Subsequent Events regarding additional issuance of shares to principals and executive staff.

PROVISIONS OF CORPORATE LAW AND OUR CERTIFICATE OF INCORPORATION COULD DETER TAKEOVER ATTEMPTS

The provisions of the corporate law of our state of incorporation and our certificate of incorporation could make it more difficult for a third party to acquire control of us, even if the change of control would benefit the stockholders.

INDUSTRY RISKS

OUR EXPECTED PRODUCTS MAY BE SUBJECT TO VARIOUS LEGAL AND REGULATORY CONTROLS

We are unaware of any particular electrical, telecommunication, environmental, health or safety laws and standards that will apply to our products. While we do not anticipate special regulations of our products, we cannot assure you that we will not have to comply with laws and regulations of domestic, international or foreign governmental or legal authorities. Compliance with these laws and regulations could have a material adverse affect on us.

WE MAY BE UNABLE TO OBTAIN SUFFICIENT COMPONENTS ON COMMERCIALLY REASONABLE OR SATISFACTORY TERMS, WHICH MAY HAVE A MATERIAL ADVERSE IMPACT ON OUR FINANCIAL CONDITION

It is common in the data storage technology manufacturing and assembly industry for certain components to be available only from a few or sole-source suppliers. We cannot assure you that the key components for future products will be available from more than a few suppliers. Therefore, we, our joint ventures and our licensees may experience difficulty in obtaining a sufficient supply of key components on a timely basis. We hope to develop relationships with qualified manufacturers with the goal of securing high-volume manufacturing capabilities, thus controlling the cost of current and future models of our future products.

We cannot assure you that we will be able to obtain a sufficient supply of components on a timely basis or on commercially reasonable terms. The same supply and cost problems could adversely affect our sales of products. The inability to obtain sufficient components and equipment, to obtain or develop alternative sources of supply at competitive prices and quality or to avoid manufacturing delays, could prevent joint ventures from producing sufficient quantities of our products to satisfy market demand. Additionally, in the case of a component purchased exclusively from one supplier, joint ventures could become unable to produce any quantity of the affected products until the component becomes available from an alternative source. These problems could cause delays to product shipments, thereby increasing the joint venture's material or manufacturing costs or causing an imbalance in the inventory levels of certain components. Moreover, difficulties in obtaining sufficient components may cause joint ventures and licensees to modify the design of our products to use a more readily available component. These design modifications may also result in product performance problems. Any or all of these problems could result in the loss of customers, provide an opportunity for competing products to achieve market acceptance and otherwise adversely affect our business and financial results.

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Due to potential intellectual property claims and litigation that parties may initiate against us, we may suffer economic losses and become unable to research, develop or license the sale or manufacture of the technology.

As is typical in the data storage industry, other parties may in the future notify us of claims that may be infringing, diluting, misusing, misappropriating or otherwise violating our intellectual property rights. It is impossible to predict the outcome of such potential claims, and we cannot assure you that the relevant authorities will resolve the potential claims in our favor. We also cannot assure you that an unfavorable resolution of a claim will not have a material adverse effect on our business or financial results. In particular, there has been significant litigation in the data storage industry relating to infringement of patents and other intellectual property rights. We cannot assure you that future intellectual property claims will not result in litigation. If another party were to establish infringement, dilution, misuse, misappropriation or any other intellectual property rights violation, we or our joint ventures might have to pay substantial damages, or courts might enjoin us from developing, marketing, manufacturing and selling the infringing products in one or more countries. In addition, the costs of engaging in intellectual property litigation can be substantial regardless of outcome. If we seek licensure for intellectual property that we cannot otherwise lawfully use, we cannot assure you that we will be able to obtain such licensure on satisfactory terms. We might not own intellectual property that we believe we own or that we need in order to successfully research, develop and license our technology.

RISKS RELATED TO OUR COMMON STOCK

THE MARKET FOR OUR COMMON STOCK MAY BE ILLIQUID

Historically the trading volume of our common stock has been very low. There can be no assurance that volumes will increase to a consistently higher level or that holders of the shares will be able to sell their shares in a timely manner or at all.

WE MAY EXPERIENCE VOLATILITY IN OUR COMMON STOCK PRICE

The stock market and especially the stock prices of technology companies have been very volatile. This volatility may not be related to the operating performance of the companies. The broad market volatility and industry volatility may reduce the price of our common stock without regard to our operating performance. The market price of our common stock could significantly decrease at any time due to this volatility. The uncertainty that results from such volatility can itself depress the market price of our common stock. We do not expect to generate cash flow from operations for the foreseeable future. Consequently, we will be required to raise additional capital against the issuance of equity which will cause dilution to existing shareholders. There is no assurance that we will be successful in raising additional capital under acceptable terms.

DOUBT ABOUT OUR ABILITY TO CONTINUE OPERATIONS AS A "GOING CONCERN"; YOU MAY LOSE ALL OF YOUR INVESTMENT IF WE ARE UNABLE TO CONTINUE OPERATIONS

Our ability to continue as a going concern is subject to substantial doubt given its current financial condition and requirements for additional funding. There can be no assurance that we will be able to obtain sufficient funds to continue the development of and, if successful, to commence the sale of our products and services under development. As a result of the foregoing, we anticipate that our auditors will express substantial doubt about our ability to continue as a going concern. If we cannot continue as a going concern, then you may lose all of your investment.

WE ARE CONSIDERED A PENNY STOCK

Our stock is characterized as a Penny Stock which has a huge adverse effect on the price and liquidity of our stock. The regulations relating to penny stocks limit the ability of broker-dealers to sell our common stock and thus affect the ability of shareholders to sell their common stock in the secondary market which may have a material adverse effect on the price of our stock.

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INVESTORS WHO NEED IMMEDIATE OR FUTURE INCOME SHOULD REFRAIN FROM THE PURCHASE OF OUR COMMON STOCK

We do not intend to pay dividends to the holders of our outstanding common stock in the foreseeable future. Investors who need immediate or future income by way of dividends from their investment should refrain from the purchase of our common stock.

ITEM 2. DESCRIPTION OF PROPERTY

In the second quarter of 2005 we moved our operations from Brooklyn, NY to the UK at the address of:

195 The Vale

London W3 7QS

United Kingdom

Tel: +44 208 746 2018

Fax: +44 208 749 8025

The tenancy for the above premises is a Tenancy at Will for an unspecified period subject to either the Landlord or the Tenant providing the other party with three months written notice or unless terminated by forfeiture e.g. the Landlord may forfeit his Tenancy at Will by re-entering the property if payment of any rent is 14 (fourteen) days over due whether formally demanded or not. There is also a Trust Deed with the Landlord for the rent deposit of £11,500 for the two floors which is refundable on termination. The area occupied by NME is approximately 3,000 sq ft for both floors.

We conduct R&D in the following locations:

LaDIS Ltd.

Id No. 3 0 5 3 8 6 9 2

Legal address: 79060, Ukraine

L`viv-60, 3 Naukova Str.

Tel.: +380 (322) 40-97-55

Mailing address: 79060, Ukraine

L`viv-60, p/o box 2682

V-technology, Ltd.

2027729000880

Address: RF, Moscow 117454

Vernadskii Prospect, 78, Building 7

Silicon Valley PLC

195 The Vale

London W3 7QS

Turtle Technologies (India) Pvt Ltd

'Prayogashala', Auroville 605101

Tamil Nadu, India

VDL-ODMS BV

Daalakkersweg 8

5641 JA Eindhoven

The Netherlands

Sistech Corporation Ltd

Dong Le Plaza

10^th Floor, 1001 Near Guangsheh Hotel

Shennan East Road

2019 Luoho

Shenzhen 518002

China

Beijing E-World

5F East Tower

Triumph Plaza

143A Xizhimenwai Street

Beijing

China

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ITEM 3. LEGAL PROCEEDINGS

We are not currently nor have ever been a party to any legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE

During the fiscal year ended on June 30, 2006, amendment to the Articles of Incorporation were submitted to a shareholders vote whereby the authorized Common Shares were increased from 200,000,000 par value $0.0001 to 500,000,000 par value $0.0001. Furthermore, the authorized Preferred Shares were increased from 10,000,000 par value $0.0001 to 200,000,000 par value $0.0001. This was on November 1, 2005 via consent of shareholders representing 80% of the outstanding shares of the company.

Also on 1^st November 2005, the following Items of the By Laws were amended to:

Article III - Board of Directors

Item 2: Number, Tenure and Qualifications:

Item 2 of Artcle III amended to:

The number of directors shall be not less than one (1) nor more than ten (10).

Item11 of Article III amended to:

Item 11: Compensation:

Directors may receive compensation for their services as Directors, in accordance to reasonable and standard compensation plus expenses for service provided. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefore.

Article V - Officers:

2. Election and Term of Office

Item 2 to Article V amended to:

The Officers of the corporation shall be elected by the directors at a meeting of the directors held when determined by the directors. Each officer shall hold office for one year and be subject to re-election by consent of the directors.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK

As of June 30, 2006, the company had issued and outstanding 205,477,579 Common Shares. The Company’s authorized capital stock consists of 500,000,000 shares of Common Stock (par value $0.0001) and 200,000,000 on non-voting Preferred Stock (par value $0.0001). No preferred shares have been issued to date.

The company has outstanding 8,000,000 Stock Purchase Warrants issued pursuant to the 2001 Stock Option Plan. Warrants are exercisable at .045 per share and have reload provisions. Warrants Expire in December 2008.

To date, none of the warrants were exercised.

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The Company has outstanding the following Stock Purchase Warrants as of June 30, 2006. These warrants expire in July 2006. (See also Subsequent Events).

Warrant Series	Exercise Price	Number of Warrants Outstanding
Series A	$1.50	4,790,000
Series A at 25	$.25	410,000
Series C	$.10	993,000

In July 2005, all Series B, D & E Stock Purchase Warrants expired.

New Series	Exercise Price	Valid Until
2,000,000	$0.10	6-9 2007
1,100,000	$0.065	4-20-2011
3,750,000	$0.04	8-11-2009

As of the date of this report, the Company has approximately 362 shareholders of record.

On April 20, 2001, the Company's registration statement was rendered effective by the SEC. The Company's common stock has been listed on the NASD OTC Bulletin Board with the symbol of NMEN. The following table sets forth the range of high and low sale prices for our common stock for each full quarterly period for the fiscal year ended June 30, 2006.

FISCAL YEAR ENDING June 30, 2006

Quarter	Low	High
First	.04	.11
Second	.07	.14
Third	.08	.21
Fourth	.07	.299

FISCAL YEAR ENDING June 30, 2005

Quarter	Low	High
First	.07	.46
Second	.05	.37
Third	.055	.26
Fourth	.04	.25

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ITEM 5A. SELECTED FINANCIAL DATA

The selected historical financial data presented below were derived from the Company's financial statements, which as of and for the year ended June 30, 2006 and June 30, 2005 were Audited by Morgenstern, Svoboda & Baer.

	June 30, 2006			June 30, 2005
Loss from Operations	$	(6,484,377	)	$	(2,075,091	)
Total Current Assets		3,442,141			241,388
Total Assets		18,812,968			15,539,062
Total Current Liabilities		266,390			136,393
Total Stockholders’ Equity		18,564,578			15,402,669

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

We are a development stage company currently engaged in the development of our proprietary technology, VMD, a next generation, high capacity storage discs as described in the "Business" description. We have generated no revenues to date.

We have entered into agreements with V-Tech, LaDIS and Silicon Valley Plc. Silicon Valley plc is using one of its subsidiaries, OneSoft Retail & Business Solutions Ltd to carry out work on its behalf. For the research and development of the prototypes and Commercializing the Products. V-Tech consists of a unique scientific and entrepreneurial team with many years of experience in optical storage Media development and specifically multi-layer technology. The overall management of our Company is carried out from our headquarters in the UK. Silicon Valley Plc and V Tech are related parties. See Related Party Transactions # 3 and 6.

The agreement with LADIS was signed in August 2005 but has since been terminated in December 2005.

Development History

In January 2004, at the time our company acquired the R & D intellectual properties and know how from MultiDisc Ltd. and TriGM International S.A. the VMD technology was in the pre- prototype stage, had no planned operational activities, and could not yet identify customers for an end product that it has not yet proven it can produce since it existed only as a computer model.

As of September 30, 2004 we have completed the initial first-generation product prototype of prerecorded 120 mm Red Laser 20GB VMD (Multilayer Video Disc), providing 180 minutes of High-Definition (1080i) Video Content in full MPEG-2 format. During the second quarter of 2005 we achieved six layers yielding 30GB of storage capacity with bit rates up 60 Mbs maximal, capable of playing High Definition content for both HDTV and Digital Cinema on a single VMD Player. To date we have been able to create an eight layer disc yielding 48GB of storage capacity. A normal HD film requires 18-22 GB of space; a longer Bollywood film would require in the region of 36-40 GB. Therefore the HD VMD could provide a solution for this.

In April 2006, we concluded an agreement with Plasmon OMS, a global glass mastering house and a leader in the development of new formats of DVD discs, to produce a VMD glass mother set. Plasmon will also provide technical support for NME’s product development in the future. (See Incorporation by reference Exhibit 2). The 8K report of the agreement should be disclosed as Exhibit incorporated by reference.

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The company plans to begin to gear up for production of VMD discs in the first quarter 2007. To this end, NME has signed an agreement in May 2006 with VDL-ODMS BV, an optical replication plant design and manufacturing company to design and build NME’s production lines for multilayer discs as well as the usual DVD. (See Incorporation by reference Exhibit 2) Referring to the 8K report State Agreement with VDL-OMS state Exhibit incorporated by reference. We believe in the future, similar machines could also manufacture multilayer discs for blue laser applications. These machines will combine the DVD processes and production modules of ODMS with new processes and modules stemming from novel technology developed by NME. The design will remain the sole ownership of NME. VDL-ODMS will promote and sell the VMD’s proprietary lines to other parties globally on a licensing basis. In order to do so, the company will need to raise additional capital to finance the manufacturing facility and engineering teams.

Work started in earnest with them in May and our team of Engineers our currently in Eindhoven with VDL-ODMS. The work is progressing extremely well. In a joint development program, a 3D model of the VMD replication line has been engineered. VDL-ODMS have also validated the technical potential of the 2P process developed by NME scientists. We expect the VMD disc to reach commercial test in the next couple of months and the lines to be in commercial use in the 4^th quarter of 2006.

In June 2006, NME Inc signed a proposal with Doug Carson and Associates (DCA) to enable NME to manufacture VMD format optical discs. This is expected to be completed by December 2006.

We also anticipate finalizing a joint-venture (J/V) agreement with Beijing E-World (BEW) after withdrawing from a planned acquisition of BEW and associated operations as it was realized that the objectives of both companies would be better served by a J/V rather than an acquisition. (See Reference by Incorporation Exhibit No 3). The withdrawal from this acquisition will not have any bearing or impact on other technical or business activities with other partners in China In the meantime R & D is still on-going on the combination of technologies from both companies.

The J/V would allow for a commercial partnership between NEM and BEW to exploit NME's VMD technology under which the objective is for E-World to adopt VMD for the Chinese market and upgrade their standard EVD player to read VMD discs.

Plan of Operations for the Next 12 months

The company has sufficient funds to support its operations for the next three months after which we intend to raise additional funds through accredited investors for general operations of the company. We also plan to raise funds through a Private Investment in Public Equity (PIPE) offering in the last quarter of 2006.

The company plans to continue with the research and development to enhance and master the application of its VMD disc and player to diversify the product range for different market segments around the globe. The company intends to develop its own file format in order to be self-reliant. The company also plans to develop in-house authoring tools to complement the conversion of media contents to our VMD disc.

We have entered into an agreement with VDL-ODMS for design and development of VMD disc manufacturing line which should be completed in the last quarter of 2006. We intend to order purchase of the first line from the same vendor and plan to commence production by the first quarter of 2007.

The company plans to hire key personnel for further development of business as it grows. However we do not expect significant changes in the number of employees.

The company's management plans to pursue an active policy towards growth and the creation of revenue through means of sale of products using strategic alliances, joint ventures and acquisitions within the realm of content providers, manufactures, replicators and drive manufacturing OEMs.

Over the next 12 months the company plans several commercial launch strategies for its products and services.

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One of these is the 2p process including other proprietary modules developed with ODMS will be installed and licensed in future disc manufacturing lines.

The first VMD disc manufacturing line prototype should be finished and be “in production” over the next three to four months. This line is designed and co-developed by ODMS and NME and will allow for the manufacturing of four different types of discs…a dual-layer red laser (DVD-9), a multilayer red laser (VMD), a dual-layer blue laser (HD-DVD) and a multi-layer blue laser.

In our electronics division, we have taken a new stance on what type of player is to be released first. Instead of initially launching with our original disc player which was to be future-proof for VMD discs, the management has decided to release a deeply discounted player which will be the first of its kind, a first player to play high definition titles with the HD VMD file format.

The above player is based on an LSI chipset and has already been developed with the collaboration of our joint venture partner E-World in Beijing and NME China Ltd., our subsidiary in Shenzhen. We anticipate this initial player will be launched in the next 2 months in certain key launch territories (ie. China, India, Russia) and will continue into Latin America and Eastern Europe.

Notwithstanding our relationships with key industry and commercial partners continuing with the development of our second and third generation players due to be out over the next three to four months, which we expect to launch at the CES 2007 show beginning of January.

In the next quarter, NME plans to render a decision regarding global assembly and logistics for the medium- and long-term. We are currently deciding between two of the world’s largest EMS (Electronics Manufacturing Service) firms that have a global presence and who assemble for many large international companies. Along with this task, NME anticipates that it will be adopting a global CRM and business software package to suit the operations of our EMS, OEM and ODM partners and keep track of production, logistics and sales.

Some of our most important contracts regarding content distribution and are in signing phase. In many countries we are preparing to launch, we have the likes of VCL in Germany and Europa Corp. in France. In this new fiscal year, we anticipate we will be heavily concentrated on closing content distribution deals and growing the existing library of titles available on VMD.

This library of titles will be available inside a newly designed VMD disc box, which we plan to launch in the upcoming month. The new disc packaging design will allow the consumer to differentiate a VMD title from any other DVD or other disc title.

Because we are a global company and our technologies must be launched globally, over the next year, we plan to develop e our representational offices to handle their local markets with more independence. These new representational offices include our Paris, France; Munich, Germany; Uppsala, Sweden (Nordic); Los Angeles, USA and Sydney, Australia locations. London will however remain the global headquarters with a key decision-making structure.

Key trade fairs we intend to visit over the next 12 months are: For our content division…MIPCOM, American Film Market, Berlinale, Cannes Film Market, Shanghai Film Market, MIPTV. For our electronics division…Hong Kong Electronics Show, CES, CeBIT, IFA. For our optics division…MediaTech.

Appointments to the Board

We also intend to appoint additional directors as well as independent directors to the board in the coming months to complement the current board.

Beijing E-World

We also anticipate finalizing a joint-venture (J/V) agreement with Beijing E-World (BEW) after withdrawing from a planned acquisition of BEW and associated operations. The withdrawal from this acquisition will not have any bearing or impact on other technical or business activities with other partners in China.

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The JV would allow for a commercial partnership between NEM and BEW to exploit NME's VMD technology under which the objective is for E-World to adopt VMD for the Chinese market and upgrade their standard EVD player to read VMD discs.

E-World is one of China's largest DVD and consumer electronics design companies. They own EVD, a technology that currently includes a lower quality High Definition optical disc and player format validated by the Chinese Government for the Chinese market. E-World's EVD and other technologies are DVD 'red laser' based as they see it as the current market standard.

E-World provides its customers with one-stop DVD based products and services such as software development, hardware design and system integration. The Company's current main products are special EVD chips developed in conjunction with US companies as LSI Logic (LSI), ST Microelectronic, and Sigma Designs.

E-World owns EVD key technologies and the EVD trademark. The company has applied for 29 items technology patents related to EVD of which 9 items have already acquired authorization and 20 are pending. An additional 40 items are being prepared for application.

The company's aim is to make high definition multimedia entertainment possible and affordable while allowing the partners upstream (content owners) and downstream (player manufacturers and content distributors) to maintain good profit margins. By using the current generation red lasers and current technology disc media, E-World recognized that red laser based disc formats were currently the only consumer affordable format able to make full use of High Definition Capable Televisions such as most Plasma Displays and LCD TV's as well as some Projection TV's and CRT's. This makes the EVD, and by agreement, VMD formats a very attractive and cost effective product for any markets where there is a high penetration or growing sales of HD capable TV.

Foreign control of core intellectual property has been a major problem restricting the development of the DVD industry of China for many years. Foreign companies mastered and control the kernel technology, and Chinese enterprises have been restricted to the role of only being the factories. The country's industry has hoped to develop its own kernel technology and set up new industrial standards to control its own fate. EVD became that solution, licensed for production in February 2005.

The business combination would allow E-World to expand overseas whilst enhancing it's EVD red laser standard with VMD's compatible technology, gaining much greater capacity, NME's Western World momentum and potential markets.

Short Term

In August 2006, as short term finance, NME Inc negotiated $1.1 million Short Term Debenture Loan Note for 180 days through one of its subsidiaries, New Medium Enterprises UK Ltd from Tribal S.A.R.L, a company registered in Luxembourg. The funds will be used for general working capital purposes.

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The Short Term Note will be redeemed at maturity or at any time from funds raised before the maturity date. NME Inc Common Shares have been used as collateral of the debenture loan note where the loan can be converted into shares in case of default.

Medium Term

For the medium term, NME plans to raise funds through a Private Investment in Public Equity (PIPE) offering for up to 10% of the company of the expanded share capital after joint-venture with the Chinese and the issuance of shares to Directors, Management, Consultants and strategic partners. There is no assurance that we will be successful at raising funds through a PIPE offering.

Provided the PIPE offering is successful, we anticipate the focus will change to much larger and wider scale operations in support of its partners and licensees, establishing VMD as the key content delivery and data storage platform in target markets: building partners and channels for scalability through licensing Securing relationships with other OEMs, (for future HD markets) providing support and marketing operations with partners in target markets and regions Licensing VMD to a major blank disc replicator for the PC market to have VMD firmware upgrade technology installed as standard in all new DVD players being produced for key markets.

Long Term

As market penetration increases in each region, the Company's priorities will emphasize bringing in key people to support an international development, licensing and brand marketing business, and with an underlying strategy for acquisition from this forward.

Liquidity and Capital Resources

On June 30, 2006, we had available in cash the sum of $665,597. See also additional financing we secured in Note 8, Commitments and Contingencies.

For the period ended June 30, 2006, net cash flows used in operating activities was $ 5,635,366 compared to $1,523,212 for the fiscal year ended June 30, 2005.

For the period ending June 30, 2006, net cash flows used in investing activities was $130,810 compared to the fiscal year ended June 30, 2005, whereby net cash flows used in investing activities was $318,189.

For the period ending June 30, 2006 net cash flow from financing activities was $6,235,244 compared to the fiscal year ended June 30, 2005, whereby net cash flow from financing activities was $1,934,000.

For the period ending June 30, 2006 the net operating loss was $6,440,287 compared to the fiscal year ending June 30, 2005 where the net operating loss was $2,073,734. The increase in the net loss from operations resulted from the company's expanded operations as it gears up for the rollout of its products.

- 25 -

For the period ending June 30, 2006 Research & Development expenditures was $544,663 compared to fiscal year ended June 30, 2005 which Research & Development expenditure was $971,290.

For the period ending June 30, 2006 net assets was $18,564,578 compared to the fiscal year ended June 30, 2005, whereby net assets was $15,402,669.

For the period ending June 30, 2006 General & Administration expenses was $5,490,338 compared to the fiscal year ended June 30, 2005 whereby General & Administration expense was $933,267.

The increase in General Administration expense resulted from the company's expanded operations as it gears up for the rollout of its products.

During the Fiscal year ending June 30, 2006, the company raised funds through warrant exercise and private equity transactions from various investors:

1.   During the year we generated $103,700 from warrant exercise proceeds.

2.   From September 2005 to year end, the Company issued 33,349,986 Common Shares to various accredited investors in exchange for $4,181,431. See Note 9, Stockholders Equity.

Other Sources of Funds

In December 2005, for the proposed acquisition of BEW, NME Inc arranged through New Medium Enterprises UK Ltd, its wholly owned subsidiary, a letter of credit with Tribal SARL to finance the purchase of chip sets. The amount of $309,000 drawn down on the letter of credit is shown as an amount recoverable (including interest and other ancillary cost) of $560,972 from BEW. This amount of $560,972 has been put forward as a deposit to BEW for our chip sets ordered.

We intend to meet our long-term liquidity needs through available cash and cash flow as well as through additional financing from outside sources. We anticipate raising additional funds from the possible exercise of outstanding warrants or equity financing with private investors. As of June 30, 2006 no agreements have been undertaken to obtain any funding. The three new warrants currently issued are exercisable at price ranges from $0.04 per share to $0.10 per share.

The Company has outstanding the following Stock Purchase Warrants as of June 30, 2006. These warrants expire in July 2006. (See also Subsequent Events).

Warrant Series	Exercise Price	Number of Warrants Outstanding
Series A	$1.50	4,790,000
Series A at 25	$.25	410,000
Series C	$.10	993,000

- 26 -

In July 2005, all Series B, D & E Stock Purchase Warrants expired.

Newly Issued Warrants:

New Series	Exercise Price	Valid Until
2,000,000	$0.10	6-9 2007
$1,100,000 Value	$0.065	4-20-2011
3,750,000	$0.04	8-11-2009

At the end of August 2006, the company obtained a short term loan of $1.1 million for 180 days (See Note 8: Commitments and Contingencies). No new agreements have been entered into. There is no assurance that the company will enter into an agreement for funding, or that funding will be available at an acceptable cost of funds. In the event the company is unable to raise the necessary funds, it will be forced to significantly curb its activities in order to preserve its capital.

Off Balance Sheet Transactions

The Company had obtained a short term loan of $1.1 million for 180 days through its subsidiary New Medium Enterprises UK Ltd. In return, New Medium Enterprises, Inc has guaranteed repayment of this loan, including interest, and its shares have been used as collateral.

- 27 -

ITEM 7. FINANCIAL STATEMENTS

MORGENSTERN, SVOBODA, & BAER, CPA’s, P.C.

CERTIFIED PUBLIC ACCOUNTANTS

40 Exchange Place, Suite 1820

New York, NY 10005

TEL: (212) 925-9490

FAX: (212) 226-9134

E-MAIL: MORGENCPA@CS.COM

Board of Directors and Stockholders of

New Medium Enterprises, Inc.

We have audited the accompanying consolidated balance sheets of New Medium Enterprises, Inc. (“Company”) as of June 30, 2006 and 2005, and the related consolidated statements of income, comprehensive losses, consolidated statement of stockholders' equity, and cash flows for the years ending June 30, 2006 and 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated 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 consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of New Medium Enterprises, Inc. as of June 30, 2006 and 2005, and the results of their operations and their cash flows for the years ending June 30, 2006 and 2005, in conformity with generally accepted accounting principles in the United States of America.

/s/ Morgenstern, Svoboda & Baer, CPAs, P.C.

Certified Public Accountants

New York, NY

October 11, 2006

- 28 -

NEW MEDIUM ENTERPRISES, INC.

(A development stage company)

CONSOLIDATED BALANCE SHEETS

For the years ending June 30, 2006 - June 30, 2005

	June 30, 2006			June 30, 2005
Assets
Current assets:
Cash and cash equivalents	$	665,597		$	196,529
Investment		--			0
Prepaid expenses		414,823			0
Rental Deposits		26,911
Supplier Deposits		560,972
Other Receivables		65,968
Escrow Deposits		1,650,000			44,859
Value Added Tax recoverable		57,870
Total current assets		3,442,141			241,388
Property and equipment		288,512			179,140
Less: accumulated depreciation		(101,545	)		(65,326	)
		186,967			113,814
Intellectual property		15,183,860			15,183,860
Total assets	$	18,812,968		$	15,539,062
Liabilities and stockholders' equity
Current liabilities:
Accrued expenses and amount payable	$	266,390		$	136,393
Total current liabilities		266,390			136,393
Commitments and contingencies
Stockholders' equity
Preferred stock $.0001 par value, authorized 200,000,000 shares; none issued
Common stock, $.0001 par value, authorized 500,000,000 shares, issued and outstanding 205,477,579 & 119,571,344 shares		20,448			11,957
Additional paid in capital		28,424,747			18,827,404
Accumulated other comprehensive (loss)		(37,418	)		(15,980	)
Deficit accumulated during the development stage		(9,861,199	)		(3,420,712	)
Total stockholders’ equity		18,564,578			15,402,669
Total liabilities & stockholders' equity	$	18,812,968		$	15,539,062

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

- 29 -

NEW MEDIUM ENTERPISES, INC.

(A development stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the year ended June 30, 2006			For the year ended June 30, 2005			From inception (August 2, 1999) through June 30, 2006
Revenues
Operating Expenses:
General and Administrative	$	5,490,338		$	933,267		$	7,048,018
Research and Development Costs		544,663			971,290			2,078,530
Officer's Compensation		397,323			136,816			777,369
Loss on Foreign currency		15,834			0			15,834
Depreciation		36,219			33,718			118,995
Total Operating Expenses	$	6,484,377		$	2,075,091		$	10,038,746
Income (Loss) From Operations		(6,484,377	)		(2,075,091	)		(10,038,746	)
Other Income		30,990						30,990
Investment Income		2			1,557			148,913
Value Added Tax Recovered		12,897						12,897
Loss Before Income Taxes		(6,440,488	)		(2,073,534	)		(9,845,946	)
Income Tax		200			200			400
Net Loss	$	(6,440,688	)	$	(2,073,734	)	$	(9,846,346	)
Loss Per Common Share - Basic and Diluted		(0.03	)		(0.02	)		N/A
Weighted Average Number of Shares Outstanding		162,524,729			84,543,598			N/A

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

- 30 -

NEW MEDIUM ENTERPISES, INC.

(A development stage company)

STATEMENT OF CASH FLOWS

	As at June 30, 2006			As at June 30, 2005			From inception (2-8-99) to 30-6-06
Cash flows from operating activities
Net loss	$	(6,440,487	)	$	(2,073,734	)	$	(9,860,999	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		36,219			33,718			118,995
Issuance of shares for acquisition of Intellectual property		0			0			14,521,155
Write off of web site development costs					0			314,302
Stock issued for services rendered		3,370,590			452,961			4,086,351
Stock issued held in Escrow for merger		(1,650,000	)					(1,650,000	)
Loss of sale on securities					(5,044			(5,044	)
Changes in assets and liabilities:
Change in current assets		(2,704,774	)		14,192			(2,747,133	)
Change in security deposits		(26,911	)		0			(26,911	)
Change in current liabilities		129,997			83,079			263,690
Net cash used in operating activities	$	(5,635,366	)	$	(1,523,212	)	$	6,664,406
Cash flows from investing activities
Proceeds from the sale of securities					13,584			13,584
Purchase of fixed assets (including investments)		(109,372	)					(109,372	)
Effects of Exchange gain on Cash		(21,438	)		(4,322	)		(25,760	)
Purchase (write off) of fixed assets		0			(21,100	)		(196,590	)
Web site development costs/software asset		0			--			(261,402	)
Investment in intellectual property		0			306,351			(15,183,860	)
Investment purchased - net		0			--			(20,198	)
Net cash provided by investing activities	$	(130,810	)	$	(318,189	)	$	(15,783,598	)
Cash flows from financing activities
Proceeds from sale of A, B, and C units		103,700			0			1,819,950
Offering costs - private placements		(69,625	)					(69,625	)
Deferred offering costs - registration statement		(40,000	)					(40,000	)
Treasury Stock		(3,750	)					(3,750	)
Proceeds from sale of shares and warrants to various officers, founders, and investors		0			1,934,000			1,946,670
Issuance of shares for warrants exercised		0						0
Issuance of shares for services rendered		0						0
Proceeds from sale of shares		6,131,544						6,131,544
Net cash provided by financing activities	$	6,235,244		$	1,934,000		$	9,784,789
Net increase (decrease) in cash and cash equivalents		469,068			92,599			665,597
Cash and cash equivalents, July 1		196,529			103,930			0
Cash and cash equivalents, June 30		665,597			196,529			665,597

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

- 31 -

NEW MEDIUM ENTERPISES, INC.

(A development stage company)

STATEMENT OF STOCKHOLDERS’ EQUITY

For the period July 1, 2004 - June 30, 2006

	Per Share Amount		Common Shares		Stock Amount		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Totals
Balances, July 1, 2004			92,147,220		9,215		16,443,185		1,346,978			11,658			15,093,764
Warrants exercised July and August 2004	$	0.25		250,000		25		62,475								62,500
Issuance of shares for services rendered, August 2004	$	0.30		100,000		10		29,990								30,000
Issuance of shares for services to be rendered, August 2004	$	0.40		875,000		88		349,912								350,000
Sale of common stock to investor August 2004	$	0.20		5,000,000		500		999,500								1,000,000
Issuance of shares for services rendered, September 2004	$	0.17		6,315		0		1,074								1,074
Warrants exercised October, November, and December 2004	$	0.25		390,000		39		97,461								97,500
Issuance of shares for services rendered, November December 2004	$	0.24		18,750		2		4,498								4,500
Issuance of shares for services rendered, January 2004 until May 2005		0.045		1,500,000		150		67,350								67,500
Sale of common stock to investor May 2005		0.02		10,000,000		1,000		199,000								200,000
Conversion Of Outstanding Debt June 2005		0.05		3,480,000		348		173,652								174,000
Sale of common stock to investor May 2005
Stocks issued August 2005		0.0689		5,804,594		580		399,420								400,000
Net loss for year ended June 30, 2005										-2,073,734						-2,073,734
Comprehensive loss													-4,322			-4,322
Balances June 30, 2005				119,571,879		11,957		18,827,517		-3,420,712			-15,980			15,402,782
Issuance of shares for services August 18, 2005		0.1		1,000,000		100		99,900								100,000
Issuance of shares for services August 18, 2005		0.1		5,599,122		560		559,352								559,912
Issuance of shares for Pre-Acquistion Shareholders September 15, 2005		0.05		915,080		92		45,908								46,000
Issuance of shares for services September 20, 2005		0.1		3,750,000		375		374,625								375,000
Issuance of shares for services September 20, 2005		0.1		250,000		25		24,975								25,000
Issuance of shares for services September 20, 2005		0.1		2,000,000		200		199,800								200,000
Issuance of shares for services September 20, 2005		0.1		350,000		35		34,965								35,000
Sale of common stock to investor September 20, 2005		0.15		5,000,000		500		749,500								750,000
Sale of common stock to investor October 13, 2005		0.1		3,000,000		300		299,700								300,000
Sale of common stock to investor November 14, 2005		0.1		1,500,000		150		149,850								150,000
Sale of common stock to investor December 14, 2005		0.1		1,500,000		150		149,850								150,000
Sale of common stock to investor December 15, 2005		0.1		500,000		50		49,950								50,000
Sale of common stock to investor December 20, 2005		0.125		480,000		48		59,952								60,000
Sale of common stock to investor December 28, 2005		0.1		1,500,000		150		149,850								150,000
Sale of common stock to investor January 20, 2006		0.1		1,500,000		150		149,850								150,000
Warrants Exercised February 1, 2006		0.1		100,000		10		9,990								10,000
Sale of common stock to investor March 9, 2006		0.12		500,000		50		59,950								60,000
Warrants Exercised March 10, 2006		0.1		100,000		10		9,990								10,000
Warrants Exercised March 22, 2006		0.1		100,000		10		9,990								10,000
Warrants Exercised 6-Apr-06		0.10		300,000		30		29,970								30,000
Sale of common shares to investor 7-Apr-06		0.12		2,083,334		208		249,792								250,000
Sale of common shares to investor 12-Apr-06		0.15		10,000		1		1,499								1,500
Issuance of shares for services 13-Apr-06		0.17		1,250,000		125		212,375								212,500
Sale of common shares to investor 13-Apr-06		0.15		100,000		10		14,990								15,000
Sale of common shares to investor 13-Apr-06		0.15		300,000		30		44,970								45,000
Sale of common shares to investor 13-Apr-06		0.15		200,000		20		29,980								30,000
Sale of common shares to investor 13-Apr-06		0.15		300,000		30		44,970								45,000
Sale of common shares to investor 17-Apr-06		0.15		90,000		9		13,491								13,500
Warrants Exercised 17-Apr-06		0.10		200,000		20		19,980								20,000
Sale of common shares to investor 18-Apr-06		0.14		1,428,571		143		199,857								200,000
Sale of common shares to investor 18-Apr-06		0.15		333,334		33		49,967								50,000
Sale of common shares to investor 20-Apr-06		0.15		200,000		20		29,980								30,000
Sale of common shares to investor 20-Apr-06		0.15		60,000		6		8,994								9,000
Sale of common shares to investor 20-Apr-06		0.15		50,000		5		7,495								7,500
Sale of common shares to investor 20-Apr-06		0.12		7,178,593		718		860,713								861,431
Sale of common shares to investor 21-Apr-06		0.15		50,000		5		7,495								7,500
Sale of common shares to investor 24-Apr-06		0.15		100,000		10		14,990								15,000
Sale of common shares to investor 25-Apr-06		0.15		283,334		28		42,472								42,500
Sale of common shares to investor 25-Apr-06		0.145		1,666,666		167		241,500								241,667
Sale of common shares to investor 25-Apr-06		0.145		1,666,666		167		241,500								241,667
Sale of common shares to investor 25-Apr-06		0.15		300,000		30		44,970								45,000
Sale of common shares to investor 25-Apr-06		0.15		300,000		30		44,970								45,000
Sale of common shares to investor 1-May-06		0.15		90,000		9		13,491								13,500
Sale of common shares to investor 3-May-06		0.15		200,000		20		29,980								30,000
Issuance of shares for services (in event of payment default) 12-May-06		0.1		3,000,000		200		299,800								300,000
Sale of common shares to investor 19-May-06		0.15		266,666		27		39,973								40,000
Sale of common shares to investor 19-May-06		0.15		100,000		10		14,990								15,000
Warrants exercised 24-May-06		0.10		237,000		24		23,676								23,700
Issuance of shares for services 6/1/2006		0.15		1,000,000		100		149,900								150,000
Issuance of shares for services 6/1/2006		0.15		250,000		25		37,475								37,500
Release of debenture on subsidiary 23-Jun-06		0.095		12,500,000		1,250		1,186,250								1,187,500
Issuance of shares for services 23-Jun-06		0.095		2,000,000		200		189,800								190,000
Issuance of shares for services 23-Jun-06		0.095		1,000,000		100		94,900								95,000
Sale of common shares to investor 23-Jun-06		0.13		256,411		25		33,308								33,333
Issuance of shares for services 23-Jun-06		0.095		160,256		16		15,208								15,224
Issuance of shares to officer for services 23-Jun-06		0.095		667,000		66		63,299								63,365
Issuance of shares to officer for services 23-Jun-06		0.095		667,000		67		63,298								63,365
Sale of common shares to investor 23-Jun-06		0.13		256,411		26		33,307								33,333
Issuance of shares for services 23-Jun-06		0.095		160,256		16		15,208								15,224
Issuance of shares for merger held in Escrow 29-Jun-06		0.11		15,000,000		1,500		1,648,500								1,650,000
Comprehensive Loss													(22,964	)		(22,964	)
Net Loss for the year to 30 June 2006										(6,811,650	)					(6,811,650	)
Balances 30 June 2006				205,477,579		20,448		28,424,747		(10,232,362	)		(38,944	)		18,173,889

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

- 32 -

NOTE 1 - FORMATION AND BUSINESS OF THE COMPANY

New Medium Enterprises Inc. (The "Company") was organized on August 2, 1999 in the State of Nevada under the name Shopoverseas.com, Inc. On July 10, 2000 the name was changed to New Medium Enterprises, Inc. The Company's original intention was to operate as an Internet based E-commerce Company. Several web sites were formulated whose purpose was the sale of various goods and services to both consumers and businesses. During a prior fiscal period management had decided to cease any further expenditures in regard to the web site and had written off the total cost in the prior period. The Company has acquired the rights to and is currently developing a new DVD format. As of September 30, 2004 the Company completed the initial first-generation product prototype of prerecorded 120 mm Red Laser 20GB VMD (Multilayer Video Disc), providing 180 minutes of High-Definition (1080i) Video Content in full MPEG-2 format. During the second quarter the Company achieved six layers yielding 30GB of storage capacity with bit rates up 60 Mbs maximal, capable of playing High Definition content for both HDTV and Digital Cinema on a single VMD Player. As of the June 30, 2005 the Company had generated minimal revenues and is considered a development stage company. Management is pursuing additional capital through various methods.

Subsidiaries

A)   New Medium Enterprises UK Ltd (formed previously as Prime Discs UK Ltd), incorporated on February 18, 2004, under the laws of England and Wales,

B)   New Medium Management Ltd (formed previously as Wilton Business Solutions Ltd), incorporated on February 18, 2004, under the laws of England and Wales,

C)   New Medium Enterprises Asia Pacific, incorporated on June 2, 2006 under the laws of China, Peoples Republic of China.

D)   New Medium Enterprises China Ltd, incorporated on June 2, 2006 under the laws of China, Peoples Republic of China.

New Medium Enterprises, Inc owns 100% of A), B) and C). New Medium Enterprises, Asia Pacific owns 51% of NME, China, the other 49% is owned by other parties.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The financial statements include the accounts of New Medium Enterprises, Inc. and its subsidiaries. Intercompany transactions and balances have been eliminated. Equity investments in which we exercise significant influence but do not control and are not the primary beneficiary are accounted for using the equity method. Investments in which we are not able to exercise significant influence over the investee are accounted for under the costs method.

No allocation of minority interests in subsidiary, which incurred a material loss, are recorded.

- 33 -

Foreign Currencies

Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process are charged or credited to Other Comprehensive Income (OCI).

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities in the financial statement. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consists of cash, money market funds and other highly liquid investments with a maturity of three months or less from the date of purchase. The Company has not experienced any losses on its cash or cash equivalents.

Investments

Investments include marketable common stock securities traded on the stock exchange. The marketable securities are classified as available for sale, and are measured at fair value in the balance sheet. Unrealized gains and losses on investments are recorded net of tax as a separate component of stockholders' equity. Gains and losses on securities sold are determined based on the specific identification method.

Property and Equipment

Property and equipment are recorded at cost and depreciated or amortized over the estimated useful lives of the assets (three to seven years) using the straight-line depreciation method allowed by the Internal Revenue Code.

Intangible Assets

Intangible assets are amortized using the straight-line method over their estimated period of benefit, ranging from one to ten years. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization. No impairments of intangible assets have been identified during any of the periods presented.

- 34 -

The components of finite-lived intangible assets are as follows:

June 30, 2006	June 30, 2005
$15,183,860	$15,183,860

Components of finite-lived intangible assets acquired during fiscal years ended

June 30, 2006	June 30, 2005
$None	$306,351

The estimated future amortization expense related to intangible asset as of June 30, 2006 is as follows:

2007	2,277,579
2008	3,036,772
2009	3,036,772
2010	3,036,772
2011	3,036,772

During the fiscal year ending June 30, 2004 there were "no impairments of the intangible assets since the company did not yet achieve a working prototype. As of June 30, 2006 the company, using outside consultants, performed extensive market analysis and research to determine that this property had the ability to generate revenues substantial enough to re-coup the cost of this property. This research indicated that the product had a finite once introduce into the market. The estimates for future amortization of this property were based upon this analysis. This research and analysis also was used as a basis for not recording any impairment as of June 30, 2006.

Revenue Recognition

The Company recognizes revenue on the accrual basis as the related services are provided to customers and when the customer is obligated to pay for such services. Revenue from product sales is recognized when title transfers to customers, primarily on shipment. For the years ended June 30, 2006 and 2005 there were no significant revenues.

Research and Development

Research and development expenses include payroll, employee benefits, stock-based compensation, and other headcount-related costs associated with product development. We have determined that technological feasibility for our software products is reached shortly before the products are released to manufacturing. Costs incurred after technological feasibility is established are not material, and accordingly, we expense all research and development costs when incurred.

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Loss Per Share

In accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share", the computation of net loss per share is based upon the weighted average number of common shares issued and outstanding for the reporting period. Common stock equivalents related to options, warrants and convertible securities are excluded from the computation when the effect would be anti-dilutive.

New Accounting Pronouncements

In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51," as revised in December 2003. A Variable Interest Entity ("VIE") is an entity with insufficient equity investment or in which the equity investors lack some of the characteristics of a controlling financial interest. Pursuant to FIN 46, an enterprise that absorbs a majority of the expected losses of the VIE must consolidate the VIE. The provisions of this statement are not applicable to the Company and therefore have not been adopted.

In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." The Statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts entered into or modified after June 30, 2003. The guidance should be applied prospectively, the provisions of this Statement that relate to SFAS 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with respective dates. In addition, certain provisions relating to forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to existing contracts as well as new contracts entered into after June 30, 2003. The adoption of SFAS No. 149 is not expected to have an impact on the Company's financial statements.

In May 2003, the FASB issued Statement of Accounting Standards No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS No. 150"). SFAS No. 150 establishes standards for classification and measurements in the statement of financial position of certain financial instruments with characteristics of both liabilities and equity. It requires classification of a financial instrument that is within its scope as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instrument entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have an impact on the Company's financial statements

In December 2004, the FASB issued SFAS No. 123(R), “Accounting for Stock-Based Compensation" ("SFAS No. 123(R)"). SFAS No. 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) requires that the fair value of such equity instruments be recognized as an expense in the historical financial statements as services are performed. Prior to SFAS No. 123(R), only certain pro forma disclosures of fair value were required. The provisions of this statement are effective for small business filers the first interim reporting period that begins after December 15, 2005.

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In November 2004, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 151 "Inventory Costs." This statement amends Accounting Research Bulletin No. 43, Chapter 4, and “Inventory Pricing" and removes the "so abnormal" criterion that under certain circumstances could have led to the capitalization of these items. SFAS No. 151 requires that idle facility expense, excess spoilage, double freight and re-handling costs be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." SFAS 151 also requires that allocation of fixed production overhead expenses to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this statement are effective for all fiscal years beginning after June 15, 2005.

On December 16, 2004, the FASB issued SFAS No. 153, "Exchange of Non-monetary Assets," an amendment of Accounting Principles Board ("APB") Opinion No. 29, which differed from the International Accounting Standards Board's ("IASB") method of accounting for exchanges of similar productive assets. Statement No. 153 replaces the exception from fair value measurement in APB No. 29, with a general exception from fair value measurement for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The statement is to be applied prospectively and is effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005.

In May 2005, the FASB issued Statement SFAS No. 154 “Accounting Changes and Error Corrections” (SFAS 154) which supercedes APB Opinion No. 20, Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements.” SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. The correction of an error in previously issued financial statements is not an accounting change. However, the reporting of an error correction involves adjustments to previously issued financial statements similar to those generally applicable to reporting an accounting change retroactively. Therefore, the reporting of a correction of an error by restating previously issued financial statements is also addressed by this Statement. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company is in the process of determining the impact of SFAS 154 on its consolidated results of operations and financial condition.

NOTE 3 - LIQUIDITY AND PROFITABILITY

As reflected in the accompanying financial statements, the Company incurred losses for the current and prior periods and expects to incur a loss in the upcoming fiscal period. Based upon the cash utilization rate and in order to maintain the Company for the following year, management will have to raise additional funds through equity and or debt financing. It is management's opinion that it can raise the needed capital.

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NOTE 4 - INVESTMENT IN INTELLECTUAL PROPERTY

On January 13, 2004, the Company acquired the business and all the intellectual property assets pertaining to a new DVD format from MultiDisk Ltd. and TriGM International SA. In connection with the acquisition the Company issued 72,605,776 shares of its stock to the shareholders of MultiDisk and TriGM. These shares were valued at $14,521,155, which approximates the fair market value of the shares. The Company also paid additional fees in funding, legal and brokerage fees, which have been capitalized, part of these funds ($150,000) was allocated to Machinery and Equipment. The non-cash transactions in Note 4 referred to in the comment were only supplemental disclosures.

According the acquisition agreement, MultiDisk Ltd and TriGM International, S.A. the Company was obligated to pay certain milestone payments amounting to $87,000 to each upon the raising of capital in excess of $500,000. Payment total $174,000. In August 2004 the Company entered into consulting agreement for consulting services. The Company paid a fee of $75,000 and issued 875,000 common shares the shares were valued at $.40, which approximates the fair market value of the shares at the date of issuance.

On June 23, 2005, the Company converted the following outstanding obligations owed to two of its principal shareholders into The Common stock of the company. May Ltd. $87,000 debt converted into 1,740,000 Common shares TriGM Ltd. $87,000 debt converted into 1,740,000 Common Shares. This reflects the payment of the $174,000.

Additionally, the Company offered Series A warrant holders the right to lower the exercise price for $1.50 to $.25 a share in return for assigning six out of seven warrants to certain parties providing services to the Company in lieu of compensation. A total of 1,300,000 warrants were lowered to .25 cents exercise price. On July 18, 2003 the Board of Directors voted to extend the Series A, B, C, D and E warrants until July 2005.

NOTE 5 - INCOME TAXES

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, (SFAS 109) "Accounting for Income Taxes." Under the asset and liability method, deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statements carrying amounts and the tax bases of existing assets and liabilities. Under SFAS 109, deferred tax assets may be recognized for temporary differences that will result in deductible amounts in future period. A valuation allowance is deferred tax asset will not be realized. As of June 30, 2006 the Company had a Federal and State tax net operating loss of approximately $4,060,000. The Company established a 100% valuation allowance equal to the net deferred tax assets, as the Company could not conclude that it was more likely than not that the deferred tax asset would be realized.

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NOTE 6 - INVESTMENTS

The Company had purchased shares of publicly traded companies on the open market. These investments were sold during the year and at the balance sheet date did not hold any. Unrealized gains and losses on investments are shown a separate component of stockholders equity.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

The Company rents office space from a third party on a month-to-month basis, amounting to $11,200 per month. We have also hired office machinery costing about $500 per month.

In May 2006, the company entered into a contract of sale with VDL ODMS and is committed to payments of Euro 1.75 million for equipment purchases and a further Euros 479,235 for the phase 2-4 of the development and engineering projects.

In May 2006, the company signed a Share Purchase and Investment Agreement with MPEG Technology Company Ltd, for 51% of MPEG on the following terms:

a)   Pay 15 million fully paid up 1 year restricted shares at time of contract

b)   Pay a sum of US $1.25 million in cash in installments

On June 17, 2006, The company signed an agreement with Doug Carson, Inc. to manufacture VMD format optical discs for a contractual price of $500,000.In July 2006, the company approved the security agreement with DCA, Inc, and signed a promissory note for $150,000 secured by 3,000,000 shares in NME, Inc. Between July to September, a total of $250,000 was paid, leaving, $100,000 due in October and a final payment of $150,000 end December 2006. The 3,000,000 will be payable in the event of default on the final December payment of $150,000

In August 8 2006, after re-negotiations with Beijing E-World, the Company has formulated a joint venture agreement whereby when signed, the company shall issue in total 71.5 million shares in the following manner:

a)   20 million fully paid up shares Restricted under Rule 144 at 10 cents per share on the establishment of the Joint Venture, with a lock-up period of 12 months and a selling limit of 5% per month

b)   Warrants of up to 10 million shares to be exercised over a 3 year period i.e.

3.3 million @ 20 cents per share - 1^st year

3.3 million @ 25 cents per share - 2^nd year

3.4 million @ 30 cents per share - 3^rd year

c)   51.5 million fully paid up shares for the joint venture to be issued to the Management Team of the Joint Venture, as per list on Schedule 6 of the joint venture agreement. These shares are restricted under Rule 144,with a lock-up period of 12 months and a selling limit of 5% per month per person

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In August 2006, the company secured a short term loan of $ 1.1 million for 180 days through its subsidiary, New Medium Enterprises UK Ltd. A debenture was granted by the subsidiary to Tribal SARL, and share in the parent Company was offered as collateral for the loan.

Legal Proceedings

There are no material legal proceedings to which the Company is a party to or which any of their property is subject.

Related Party Transactions

The Company now rents office space from an external landlord on a month-to-month basis. Rent for the year to June 30, 2006 was $84,900. Much work was required to fit offices on the premises costing around $7,910. During the ordinary course of business the Company has obtained short-term working capital loans from May Limited a related parties. There are no balances due to May Ltd as of June 30, 2006, but the company has taken a short term loan from another investor in September 2006 for $1.1million. See 8 above - contingencies and commitments. The company also paid May Ltd $39,304 for telephone, travel and reimbursement of certain expenses made on behalf of the company

The company paid for R&D to the following - $175,241 to V Tech, for the scientists, $72,217 to Turtle Technologies (India) Pvt Ltd and $50,398 its associated company, for contracted staff - $35,846 to Silicon Valley Plc.

The company engaged the services of Andrew Danenza, the son of Ann Kallgren, to provide consulting and other services for the Company. He has received $150,518 in fees, 2 million NME, Inc Common Stock valued at $220,000, and will receive and ongoing monthly fee of $6666.66

NOTE 8 -STOCKHOLDERS' EQUITY

The Company's authorized capital stock consists of 500,000,000 shares of common stock (par value of $.0001) and 200,000,000 shares of non-voting preferred stock (par value $.001).

The original par value had been $.001 per share. In January 2004 management voted to reduce the par value to $.0001 per share. The financial statements have been restated retroactively to recognize the new valuation.

The Company offered for sale 480 "A" units, 160 "B" units and 100 "C" units of its securities.

An "A" unit consisted of 10,000 shares of the Company's common stock, and 10,000 Class A warrants. Each Class A warrant entitled the warrant holder to purchase one share of the Company's common stock at $1.50. The warrants were to expire July 31, 2002. Each unit sold for $5,000. The warrants were extended to July 31, 2003.

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A "B" unit consisted of 5,000 shares of the Company's common stock, and 7,500 Class B warrants. Each Class B warrant entitled the warrant holder to purchase one share of the Company's common stock at $1.00. The warrants were to expire July 31, 2002. Each unit sold for $3,750. The warrants were extended to July 31, 2003.

A "C" unit consisted of 10,000 shares of the Company's common stock, and 10,000 Class D warrants. Each Class D warrant entitled the warrant holder to purchase one share of the Company's common stock at $1.25. The warrants were to expire July 31, 2002. Each unit sold for $12,500. The warrants were extended to July 31, 2003.

On July 22, 2004 the Company issued 100,000 shares to a consultant. The shares were valued at 30,000.

On July 22, 2004 the Company issued 100,000 shares to a warrant holder against receipt of $25,000 in Warrant Exercise proceeds. Shares were valued at 25,000.

On August 5, 2004 the Company issued 150,000 shares to a warrant holder against receipt of $37,500 in Warrant Exercise proceeds. Shares were valued at 37,500.

On August 11, 2004 the Company issued 555,000 shares to a shareholder part of the acquisition group which shares should have been issued on January 14 along with the other issuances. Valuation of the shares was included in the calculations of January 14, 2004 for an aggregate of $14,521,155.

On August 6, 2004 the Company entered into a Consulting Agreement with Business Plans Ltd. for consulting services pertaining to strategic planning, business management, marketing, strategic alliances, and industry contacts. The company paid a fee of $75,000 and issued 875,000 on August18 as of August 6. Shares were valued at 350,000.

On September 14, 2004 the Company issued 6,315 shares to a consultant. Shares were valued at 1,074.

On November 4, 2004 the Company issued 100,000 shares to a warrant holder against receipt of $25,000 in Warrant Exercise proceeds. Shares were valued at 25,000.

On November 8, 2004 the Company issued 7,500 shares to a consultant. Shares were valued at 1,875.

On November 29, 2004 the Company issued 100,000 shares to a warrant holder against receipt of $25,000 in Warrant Exercise proceeds. Shares were valued at 25,000.

On December 2, 2004 the Company issued 100,000 shares to a warrant holder against receipt of $25,000 in Warrant Exercise proceeds. Shares were valued at 25,000.

On December 10, 2004 the Company issued 90,000 shares to a warrant holder against receipt of $25,000 in Warrant Exercise proceeds. Shares were valued at 25,000.

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On December 23, 2004 the Company issued 11,250 shares to a consultant. Shares were valued at 1,812.

On May 9, 2005 the Company issued 1,500,000 common shares to its former CEO, Ethel Schwartz for services rendered from January 2004, until May 2005, in lieu of cash salary. Shares were valued at $67,500.

On May 10, 2005 the Company issued 10,000,000 common shares to May Ltd. against receipt of $200,000. May Ltd. is an affiliate of the company, see Related Party Transactions.

On June 23, 2005, the Company converted the following outstanding obligations owed to two of its principal shareholders into the common stock of the company. May Ltd. $87,000 debt converted into 1,740,000 common shares TriGM $87,000 debt converted into 1,740,000 common shares. Shares were valued at $87,000 for each issuance.

On June 14, 2005 the company received $400,000.38 investment from an accredited investor. The company is issuing 5,804,594 common shares to the investor at a price of $0.0689 cents per share valued at $278,629. Shares were issued on August 18, 2005 as of June 14, 2005. The investor will have the right to exercise 2,000,000 common shares at the price of $.10 cents per share within 180 days from June 9, 2005.

In connection with the acquisition the Company issued 72,605,776 shares of its stock to the shareholders of MultiDisk and TriGM. These shares were valued at $14,521,155, which approximated the fair market value of these shares. Additionally, the Company offered Series A warrant holders the right to lower the exercise price for $1.50 to $.25 a share in return for assigning six out of seven warrants to certain parties involved in the abovementioned acquisition. These warrants were transferred in lieu of compensation for services rendered. A total of 1,300,000 warrants were transferred.

As at 30 September 2005, 138,436,546 shares of common stock had been issued, giving a valuation of $15,773,627. During the period to 31 December 2005, 8,580,000 shares of common stock were issued in return for investments received from various accredited investors and officers for services rendered (for analysis, see notes under Liquidity and resources). The total number of shares issued as at 31 December, 2005, is 147,016,546 with a valuation of $15,838,972.

During the period to 31 March 2006, 4,383,334 shares of common stock were issued in return for investments received from various accredited investors and warrants exercised (for analysis, see notes under Liquidity and resources). The total number of shares issued as at 31 March, 2006, is 151,399,880 with a valuation of $15,601,263.

During the period to 30 June 2006, 56,261,498 shares of common stock were issued in return for investments received from various accredited investors, warrants exercised, shares held in escrow and officers for services rendered (for analysis, see notes under Liquidity and resources). The total number of shares issued as at 30 June 2006, is 205,477,579 with a valuation of $18,564,778.

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On June 1, 2006, the company approved a share buy back program to purchase 5,000,000 shares of the company’s public common stock. The timing and exact number of shares purchased will be determined at the Company’s discretion and will depend on market conditions. All repurchases will be on the open market and are expected to be funded from existing and future cash. As at June 30, 2006, the company had purchased 4,500 shares at 9 cents, and in July 2005, 3,500 share at 10.7 cents

No preferred shares have been issued. It is within the discretion of the Board of Directors to determine the preferences of the preferred stock. The Company has not yet determined the preferences of the preferred stock.

NOTE 9 - SUBSEQUENT EVENTS

On July 17 2006 the Company has issued 1,383,333 common shares for services rendered. Shares were valued at $124,500

On September 5, the company has issued 125,000 common shares for services rendered. Shares were valued at $28,750

On September 13, the company has issued 17,000 common shares for services rendered. Shares were valued at $5,610

For each issuance of equity instruments for services provided, the valuation of the issuances represents the fair market value of the shares at the date of issuance and has been charged to the statement of operations. The equity issuances to management do not have a compensatory component as the management are employed by the company and have their own compensation as per their service contracts. These initial issuances are further inducements for management to join a non - commercialized product entity and add to their punitive compensation packages.

In accordance with FASB issued SFAS No. 123R all "Share-Based Payment," are measured and recognizes as compensation expense for all stock-based payments at fair value. The Company has also awarded liability instruments that required employee and consultants to provide services over a requisite period. All of these issuances were also valued at fair value.

NOTE 10 - SUBSEQUENT EVENTS OTHER

Subsequent Events Other:

1.   August 8, 2006. After pulling out of the merger with Beijing E-World, NME, Inc was able to renegotiate a Joint Venture instead.

2.   August 31, 2006. The Company obtained a short term loan for 180 days from Tribal Sart for $1.1 million, through its subsidiary New Medium Enterprises UK Ltd, in return for a debenture placed and shares of NME, Inc used as collateral.

3.   August 31, 2006. Philip David, resigned as Director.

4.   We deemed the time recently necessary to start hiring very well known and respected people as Advisors to the Board and in-house employees. This wave started with bringing Jim Cardwell, ex-President of Warner Home Video on board. At the same time, NME has lately hired the services of Zeno, a subsidiary of Edelman, the only independent global PR firm to handle the PR worldwide regarding our commercialization and launch strategies. Over the next 12 months, Zeno will guide NME along the right tracks to truly bring out the best of our fascinating and industry-enhancing technologies.

Off-Balance Sheet Transactions:

The Company had obtained a short term loan of $1.1 million for 180 days through its subsidiary New Medium Enterprises UK Ltd. In return, New Medium Enterprises, Inc has guaranteed repayment of this loan, including interest, and its shares have been used as collateral.

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ITEM 8A. FINANCIAL CONTROLS & PROCEDURES

The Company's Chief Executive Officer (CEO) periodically reviews the design and effectiveness of its disclosure controls and internal controls, and their associated procedures, over financial reporting. The CEO makes modifications to improve the Company's disclosure controls and internal control structure, and may take corrective action, if such reviews identify a need for such modifications or actions.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the acts of some persons, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements may occur and not be detected, especially as a result of operational activities occurring in countries outside of the USA.

During the quarter ending December 31, 2004 we have evaluated, with the participation of the Company's former CEO and the Company's Treasurer who was up until June 21, 2005 Chairman of the Board of Directors the effectiveness of our disclosure controls and procedures as of December 31, 2004. Since August, with the re-establishment of the Company's UK office, the Treasurer and Chairman in the UK office handles the Company's funds and disbursements out of the UK office, formerly handled by our CEO. In the course of the audit for the previous quarter, the Company's former CEO identified certain areas in the authorization, allocation and documentation of expenses administered out of the UK office that the Company's former CEO believed needed to be improved. As a result the Company's former CEO has disseminated procedures to strengthen the allocation, documentation, certification & authorization of expenses.

During the following quarter ending March 31, 2005 the Company continued to experience weakness in the enforcement of financial controls related to the allocation and authorization of disbursements of funds, and in conflict of interest issues. The Company has taken this matter seriously and has addressed these issues with the assistance and guidance of an attorney familiar with securities compliance.

The company is in research & development and is close to commercialisation but has not traded, and was involved in investing the funds generated from inward investments. As such, control procedures were at a reasonably assurance level for the minimum activities of the business. Control procedures have been enlarged following relocation of the company from New York to London and the ensuing increase in business activity.

Following the relocation of the office from New York to London we replaced the CEO and initiated the transition into a commercial entity. The new CEO reviewed and implemented the system of controls and procedures necessary for the change in business activities. The company now has cross-border activities with staff running these operations.

·   Integrated system for the purchase of fixed assets, goods and services as per the attached flow chart

·   Defined more closely the segregation of duties among the staff

·   Improved control over cost of business travel by centralising bookings of flights, trains, hotels, etc. by one member of staff subject to approval by the CEO

·   Standard expense form for staff to claim for expenses which are categorized and supported by receipts subject to approval by the CEO

·   Increase in monitoring and training of staff

·   Production of monthly management accounts and reports

·   Formalized the organization of the company as per the attached chart

·   Installation of an approved accounting package which improved the system to ensure that all information required to be disclosed in the Exchange Act reports are accumulated and communicated to management in the manner that permits adequate time for the principal executive and financial officers to consider such information and allow timely decisions of such information required by disclosures

Payments are also made in accordance with signed agreements for contractual obligations and services rendered. The internal controls were put in place from the 3^rd and 4^th quarters of 2005 following the company’s relocation to the UK.

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The improvement in the control procedures as set out above gave management the assurance that the disclosure controls and procedures are effective as of the date of the end of the applicable reporting period. As a result, the principal executive and principal accounting officers conclude that the controls and procedures are effective to ensure that all information required to be disclosed in the Exchange Act reports are accumulated and communicated to management in a manner that permits adequate time for management, specifically the principal executive and financial officers, to consider such information and allow timely decisions of such information regarding the required disclosures.

ITEM 8B. OTHER

The Company had obtained a short term loan of $1.1 million for 180 days through its subsidiary New Medium Enterprises UK Ltd. In return, New Medium Enterprises, Inc has guaranteed repayment of this loan, including interest, and its shares have been used as collateral.

The Company also signed a Memorandum of Understanding with Sistech Corporation Ltd (Sistech) in China for the purpose of promoting the business interest of NME through New Medium Enterprises China Ltd in which NME Asia Pacific owns 51% and Sistech owns 49%.

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS

Name	Age	Position
Rupert Stow	83	Director
Mahesh Jaranayaran	54	CEO, Director
Dr. Eugene Levich	58	CTO, Director
Alexander B. Hagerty	24	VP Business Development
Irene Kuan	50	CFO, Director
Barry Williamson	62	Director

During the fiscal year ending June 30, 2006, the following changes were made to the management team: Rahul Diddi resigned in January 2006, and Irene Kuan was confirmed as the CFO in April 2006. February 1, Philip David was appointed to the Board and resigned on August 31, 2006.

INFORMATION CONCERNING OFFICERS & DIRECTORS

APPOINTMENT OF RUPERT STOW AS CHAIRMAN, AND DIRECTOR

On June 14, 2005 the board of Directors appointed Mr. Rupert Stow as Chairman, (stepped down on January 24, 2006) and Director of New Medium Enterprises, Inc. For the past five years, Mr. Rupert Stow has been a consultant in the fields of digital television and HDTV, specializing in production systems analysis, market penetration and ROI. In his 30-year career at CBS, he planned and monitored the introduction of Electronic Newsgathering, the Electronic Still Store, and a multi-cassette cartridge playback machine for news and commercials. For 20 years, he has been involved in HDTV program production, its economics, and the development of a single world standard for HDTV program production and international exchange. As Chair of the FCC's Advisory Committee on Advanced Television Services, Planning Subcommittee, Working Party on Economic Factors and Market Penetration, this work led directly to the completion of a North American Standard for the terrestrial transmission of programs in HDTV and other digital formats. During the space race, Stow developed an image dissector for the Lunar Orbiter; During the Cold War, the Luxicon camera tube for the USAF, and, during the World War, a bolometric camera tube for night time tank battles.

APPOINTMENT OF MAHESH JAYANARAYAN, AS CEO AND DIRECTOR

On June 14, 2005, the Board of Directors appointed Mr. Mahesh Jayanarayan, as President and CEO of New Medium Enterprises, Inc. Mr. Jayanarayan, has served as a self employed Business and Technology consultant for the past ten years. During this time he has consulted and acted as an executive advisor to the board of a number of Private and Public companies. Within this scope, he has been involved in business creation and development, and strategic corporate management, tailored to a number of different markets. He has a keen understanding on how to effectively control the core business processes of a company while increasing their market share and profitability at an accelerated rate. His specializations are in Corporate Finance, Marketing, Planning and Corporate Rescue: due to his long experience of working with and within large investment banks and as a Business Consultant to many companies. His career has shown consistent proof in advising technology companies to understand, identify, and evaluate emerging technologies; allowing for clear judgment, essential timing and vital maturity in delivering a finished product to market. Prior to Mr. Jayanarayan's appointment at CEO, he was a consultant to the company Since August 2004.

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JULY 1, 2005 APPOINTMENT OF PROFESSOR EUGENE LEVICH, AS CHIEF TECHNOLOGY OFFICER (CTO)

On July 1, 2005, the Board of Directors appointed Professor Eugene Levich as Chief Technology Officer, (CTO). From 2002-2005 Dr. Levich has been an independent Consultant to several companies developing new generation of optical storage based on multilayer concept. In 1999- 2002, Dr. Levich was President and Chairman of the Board of Directors of Constellation, Inc. Constellation 3D, a NASDAQ company, developed new generation technology of optical storage for application in consumer electronics (High Definition TV and Digital Cinema) and professional storage markets. (From 2002 onward, the development of fluorescent based storage has been carried out by US based company D Data Inc.)

From 1996-1998 Dr. Levich was President and Chief Scientist of a private company - Medevi Ltd. - developing general principles of new generation of optical storage-multilayer disks and cards. From 1991-1995 Dr. Levich was Senior partner and Chief Scientist in Orlev Scientific Ltd. - subsidiary of Ormat Industries Ltd., Israel (Orlev integrated US-Israeli team of distinguished scientists developing industrial implementations of new technologies for management of turbulent flows in pipes and aeronautics. Dr. E. Levich has discovered, together with Professor Lawrence Sirovich of Rockefeller University, previously unknown basic principles governing turbulent flows). From 1981-1991, Dr. Levich was a Professor of Theoretical Physics and Professor of Engineering at the City University of New York.

EDUCATION

M.Sc. in Physics, 1968, from Moscow State University; Ph.D. in Theoretical Physics from the Landau Institute of Theoretical Physics, 1970.

Dr. E. Levich was awarded major research grants by the US Department of Energy for seven (7) consecutive years from 1983 to 1991 and by National Science Foundation in 1990 and 1991.

PUBLICATIONS

E. Levich published over 90 papers and book contributions in the fields of astrophysics, nonlinear phenomena & chaos, turbulence in fluids and optical storage. His main research interest for the last 10 years has been in optical storage. E. Levich is the author of over 40 patents, supported in the US and world wide, in fundamental fields of technology, ranging from managing of drag and heat exchange in turbulent flows to new generation of optical storage. His most recent scientific contributions in the field of turbulence of fluids and turbulence control were published in the monograph -Turbulence Structure and Modulation (Springer, Wien - New York, 2001).

JULY 1, 2005 APPOINTMENT OF ALEXANDER BOLKER-HAGERTY AS CHIEF OPERATIONS OFFICER

On June 30, 2005 the board of Directors appointed Mr. Alexander Bolker-Hagerty as Chief Operating Officer of New Medium Enterprises, Inc. Mr. Alexander Bolker-Hagerty has been working as a consultant and as NME's Business Development Manager at their global headquarters in London, United Kingdom since April 2005. Actively involved in every aspect of the business, he has been organizing and promoting NME's business strategy and coordinating developments into new vertical markets and geographical regions. Over the past six years and while earning his degree (2000-2004), Mr. Bolker-Hagerty has trained in multiple industries and countries in Europe and North America, notably in the premium luxury consumer goods market within his family business: Hagerty. Based in the Principalities of Monaco and Liechtenstein, he was Head of Operations of the Export Division, where he oversaw business development and sales of niche market products in over 80 countries.

Mr. Bolker-Hagerty was educated in many countries, is quadric lingual, and possesses a library of international contacts which attracted him to numerous Project- and Product Management experiences in Construction, of the new Port Hercule of Monaco, with SGTM and Engeco; in Private and Investment Banking, with Metzler Bank of Germany and Schroder Salomon Smith Barney of the United Kingdom; and in Consumer Products with Unilever of the Netherlands and Rehau of Germany. Mr. Bolker-Hagerty received his Bachelor of Science in International Business Management and Russian from Babson College and Wellesley College, Massachusetts, USA.

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On June 5^th, 2006, Mr. Alexander Bolker-Hagerty was promoted from Chief Operating Officer to Executive Vice President, Business Development. Due to the business growth and the change in the company from a research and development company to a commercial one, he wanted to cover a more specific and defined role. Mr. Bolker-Hagerty continues by developing and managing internationally the business relations and partnerships, both commercial & technological, vertical & horizontal. Mr. Bolker-Hagerty remained an Officer of NME Inc.

IRENE KUAN, DIRECTOR: On June 14, 2005 Irene Kuan voluntarily resigned from her position as interim Chairman and interim CEO but retained her role as Treasurer. She was appointed interim CFO on the resignation of Rahul Diddi and later in April 2006, confirmed as CFO Irene is a qualified accountant and as more than 20 years experience in the accounting profession in the United Kingdom. She has vast experience in audits of large public limited companies and has worked in the Insurance, Investments, Property and Retail Management industries. From November 2003 to the Present she has been employed by Visson Technologies U.K as Finance Director. From May 2003, until November 2003 she was on a Sabbatical. From August 2, 2002 to May 2003, she was employed as an accountant and financial consultant to Euromaz Group. From April 2002 to until August 2002, she was self employed in Real Estate renovation. From December 2001 to April 2002 Irene was employed by Hardy Underwriting Group where she served in a finance operations capacity. From April 1991- November 2001 she was employed by Arig Insurance Company Limited in an Accounting & operations capacity. She has worked at management level in the United Kingdom for the last 8 years and is now at Board holding several finance directorships of UK companies, including a public company. Irene will manage the company's finances and will contribute towards the company's future expansion plans. Irene currently hold finance directorship in the following companies: Silicon Valley Plc (resigned August 1, 2006), Visson Displays Limited, HD Clearview Limited, Siptelcom Limited Wilton Business Solutions Limited (renamed New Medium Management Ltd), & Wilton Claims Ltd (renamed V-Tech UK Ltd).

BARRY WILLIAMSON was appointed Director of our company since September 13, 2004. Mr. Williamson has been the President and principal owner of Williamson & Co., a U.K Real estate entity engaged in sales, rentals, & construction, & raising the finance for the multimillion pound developments he has been involved in. Mr. Williamson is a Fellow of The Chartered Management Institute, Fellow Institute of Sales & Marketing Management, and a Member of The Land Institute. Williamson and Co also runs an executive head hunting and recruitment placing specialized persons in jobs in the Middle East.

ITEM 9A. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

There have been incidences of late filings of Form 3, 4 and 5 for the officers and directors in the schedule below.

Name of Filer	Incidence of Late Filing Form 3	Incidence of Late Filing Form 4	Incidence of Late Filing Form 5
Mahesh Jayanarayan	1	8	1
Eugene Levich	1	6	1
Irene Kuan	1	1	1
Rupert Stow	1		1
Alexander Bolker Hagerty	1		1
Rahul Diddi	1	4
Andrew Danenza	1	1	1

May Ltd. is an affiliate of the company who files their ownership reports on 13d form. On April 7, 2005 May Ltd. purchased shares of the company common stock, and reported it on May 20, 2005 in a 13d filing. The late filing resulted from the signatory being unavailable as a result of traveling. The sale of the shares to the affiliate was reported in an 8K filing on April 8, 2005.

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ITEM 10. EXECUTIVE COMPENSATION

The following represents that annual compensation to be paid to Executive Officers & Directors:

Compensation Table

Name	Title	Annual Compensation	Date of Appointment
Rupert Stow	Director	$12,000	6-14-2005
Mahesh Jaranayaran	CEO, Director	$131,701	6-14-2005
Dr. Eugene Levich	CTO, Director	$146,496	6-30-2005
Alexander B. Hagerty	VP Business Development	$66,815	6-30-2005
Irene Kuan	CFO, Director	$47,079	8-4-2004
Barry Williamson	Director	$2,500	9-13-2004

See Also Subsequent Events related to Shares Issuances to Officers & Directors:

Rahul Diddi, our former CFO, who resigned January 24, 2006, was paid an aggregate of approximately $8,333 for the fiscal period ending June 30, 2006.

See Also Executive Compensation History.

During the fiscal year ending June 30, 2006, the Company did not issue any Stock Options.

Executive Compensation History

Apart from the monetary compensations above, the following executives were also awarded shares as follows:

	From:	To:	FMV	Price	Shares
Mr. Mahesh Jayanarayan	8-05	6-06	$100,000	$0.10	1,000,000
	9-05	6-06	110,000	0.11	1,000,000
	12-05	6-06	180,000	0.09	2,000,000
Mr. Eugene Levich	9-05	6-06	220,000	0.11	2,000,000
	1-06	6-06	220,000	0.11	2,000,000
	6-06	6-06	73,370	0.11	667,000
Ms. Irene SP Kuan	9-05	6-06	27,500	0.11	250,000
	6-06	6-06	73,370	0.11	667,000
Mr. Rupert Stow	9-05	6-06	27,500	0.11	250,000
Mr. Rahul Diddi	9-05	6-06	27,500	0.11	250,000
Alexander Bolker-Hagerty	9-05	6-06	27,500	0.11	250,000

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Stock Options

We did not grant stock options in 1999. Likewise we have not granted stock options in 2000, or in 2005 or 2006.

2001 STOCK OPTION PLAN

On January 14, 2004, via consent of 78% of the shareholders of our Company the 2001 Stock Option Plan was ratified. Pursuant to our 2001 stock option plan, we granted stock options to various officers and directors as follows:

5,000,000 stock options granted to Ethel Schwartz, CEO. Options are exercisable at .045, which is the fair market price on the day the options were granted. Options are valid until 2008.

2,000,000 stock options granted to Eva Beilus, Secretary & V.P. Options are exercisable at .045, which is the fair market price on the day the options were granted. Options are valid until 2008.

1,000,000 stock options granted to Hyman Schwartz, Director. Options are exercisable at .045, which is the fair market price on the day the options were granted. Options are valid until 2008.

Transfer by warrant holders pursuant to the 2001 stock option plan of 37.5% of Warrants underlying the 2001 stock option plan, to the seller.

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To induce the Sellers to enter into an Asset Purchase Agreement with our company, all of the option holders of our 2001 stock option plan agreed to transfer to the Seller and/or their designees, on a pro-rata basis an aggregate of 37.5% of the warrants issued to each, underlying the 2001 stock option plan. Accordingly, the option holders’ position following the transfer will be as follows:

Option Holder 2001 Stock Option Plan Transferred Positions:

Original Position	Transferred	Options	Remaining
Ethel Schwartz	5,000,000	1,875,000	3,215,000
Eva Beilus	2,000,000	750,000	1,250,000
Hyman Schwartz	1,000,000	375,000	625,000

We did not grant any stock options for 2002, and 2003. The 2004 Stock Option Plan expired with no awards issued. We did not grant any stock options in 2005, or 2006.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table describes, beneficial ownership of our Common Stock by persons known to us to own more than 5% of such stock and the ownership of Common Stock by our directors, and by all officers and directors as a group.

Identity of Stockholder	Percentage of Or Entity Shares Owned	Shares Owned (1)
Mahesh Jayanarayan	2,336,352	.0113%
Dr. Eugene Levich	4,667,000	.0227%
Irene Kuan	917,000	.004%
Alexander Bolker-Hagerty	250,000	.0012%
Rupert Stow	250,000	.0012%
Southwark Properties	5,972,278	2.9%
Bite Investments (2)	12,500,000	6.1%
May Ltd.	33,004,249 (3) (4)	16.1%
TriGM International	11,722,999 (5)	5.7%
All Officers & Directors	8,420,352	4%

(1) Pursuant to the rules and regulations of the securities and exchange commission, shares of common stock that an individual or entity has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or entity, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person or entity shown in the table.

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(2) Bite Investments is a Panamanian registered company owned by a Cyprus registered company.

(3) (4) Ann Kellgren has controlling interest and is the beneficial owner of all of the shares for both May Ltd. and Southwark Properties. Ann was an original investor in MultiDisk, Ltd.

(5) Sergei Litvak is the authorized signatory and has controlling voting power of 29% of Tri GM International and has voting agreements with holders of additional 24.5% of their shares.

ITEM 12. RELATED PARTY TRANSACTIONS

MAY LTD - Affiliate:

May Ltd. is a private equity offshore investment company established in Nevis. It has a portfolio of Technology, Telecommunication, media and Property related investments in the UK and abroad. The key focus of May Ltd. is to invest in innovative, creative and fast growing companies with strong management and provides seed capital, R&D capital , working capital or Trade finance for a number of companies irrespective of it having a controlling interest. Most often May is at the forefront of business creation, change and technology, enabling the businesses partners to reach their strategic goals and achieve long-term success. May Ltd. investment portfolio includes investments in Technology related assets and companies. The company has a collective management expertise with a wide range of corporate specialization ranging from Venture Capital, Corporate Finance, Marketing and Planning to Corporate Rescue. Where a business calls for outside its range of expertise the company has the ability to call on a host of associate Consultants. The company specializes in identifying and evaluating emerging technologies, judging when they are appropriate and sufficiently mature to be commercialized.

May Ltd. is an affiliate of the Company which owns 33,004,249 common shares equal to Approximately 16.1% of the outstanding shares of the Company's common stock. Ann Kallgren is the sole shareholder of May Ltd. She is also the sole shareholder of Southwark Properties Limited which owns 5,822,279 shares of the Company's common stock. May Ltd. and Southwark Properties Limited, together own an aggregate of approximately 18.9% of the Company's outstanding common stock, over which Ann Kallgren and her spouse, Victor Danenza, share joint voting control. Victor Danenza is a control person of the company. See also Exhibit 3 to 10K Report for copy of Consulting Agreement for May Ltd.

May Ltd. also owns 79.2% of the outstanding stock each of Triband Global Limited and 85% of each OneSoft Technologies UK Limited, also known as Turtle Technologies PVT India, OneSoft Retails & Business Solutions Ltd and Turtle Electronics Ltd.

May Ltd. also Owns 100% of Visson Technology and 100% of VTech, a key R&D facility of the company. V-Tech was sold to Silicon Valley Plc in September 2005 for £25,000

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May Ltd. also own 29% of Silicon Valley plc which is a public limited company with over 2600 shareholders. It is an I.T service provider and specializes in Business related software and Device management software. Global Media Cast is a wholly owned subsidiary of Silicon Valley Plc. Andrew Danenza was a Director of Global Media Cast; he resigned in June 2005.

1.   In accordance to the acquisition agreement with MultiDisk, we were required to repay a loan to Visson at closing for the amount of $84,000, which included a loan of $77,500 plus additional expenses incurred by Visson on behalf of MultiDisk prior to the consummation of the acquisition. Furthermore, in accordance to the acquisition Agreement with MultiDisk, a sum of $87,000 was owed to May Ltd., which we are required to pay after the Company raises $500,000.

2.   During the annual period ending June 30, 2006, the Company paid to May Ltd. the sum of $39,303.98 for telephone, travel and reimbursement of certain expenses made on behalf of the Company.

3.   During the annual period ending June 30, 2006 the company paid $175,240.71 to VTech, a primary R & D Facility which pays key scientists.

4.   In October 2005, the Company signed a month to month lease for office space located at 195 The Vale, Acton London W3, 7QS England with Pentagon Glass Tech Limited for approximately 6088 British Pounds which is equivalent to USD approximately $11,250 per month plus VAT During the Period ending June 30, 2006, NME reimbursed to Triband Global a total of $77,906 which related to payments made by Triband Global on behalf of NME and included payment for use of its office staff.

5.   During the year, the Company engaged the services of OneSoft Technologies UK, formerly Turtle Technologies PVT Ltd to provide certain consulting services related to the design of its website, and for R&D with its associated company in India. During the annual period ending 6-30-2006, the company paid $72,217 to Turtle Technologies (India) Pvt Ltd and $50,398 to its associated company.

6.   During the fiscal year ending June 30, 2005, The Company entered into an IT Support Agreement with Silicon Valley PLC through Turtle Technologies (India) Pvt Ltd. The Company pays $2,500 monthly as per this agreement. Additionally, during the fiscal year ending 6-30-2006, the company paid $35,846 to Global Media Cast Ltd., (for the provision of staff for the procurement of media content for our DVDs), a wholly owned subsidiary of Silicon Valley PLC.

7.   During the fiscal year ending June 30, 2006, the Company engaged the services of Andrew Danenza, the son of Ann Kallgren, who is the sole shareholder of May Ltd. and Southwark Properties Limited to provide consulting and other services for the Company. Andrew Danenza is a consultant to the company and has received an aggregate of $150,518 in consulting fees, and 2 million NME, Inc. Common Stock, valued at $220,000. He will receive an ongoing monthly fee of $6,666.66.

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Mahesh Jayanarayan, CEO- Related Party Transactions:

10. Prior to being appointed as CEO, Mahesh Jayanarayan was a consultant to the company. In August the Company paid $75,000 consulting fee and 875,000 shares valued at $350,000 to Business Plans Ltd. Mahesh and family own 100% of Business Plans Ltd. Mahesh has received fees as a consultant prior to his appointment as CEO totaling 34,000 USD equivalent of approximately $60,000. B

Mahesh Jayanarayan owns 14% of Triband Global Ltd. Along with family members owns 10.8% of OneSoft Technologies UK Ltd and 15% of OneSoft Retail & Business Solutions Ltd. See related transaction May Ltd. #4 and #5. Mahesh Jayanarayan is a Director of Triband Global Ltd (resigned July 3), Siptalk Ltd, Global MediaCast Ltd Business Plans Ltd and New Medium Enterprises UK Ltd. Silicon Valley plc is a public limited company with over 2600 shareholders. It is an I.T service provider and specializes in Business related software and Device management software. Global Media Cast is a wholly owned subsidiary of Silicon Valley Plc. Mahesh Jayanarayan is a shareholder and along with family members owns 14% of Silicon Valley PLC. See related transaction May Ltd. # 6.

Irene Kuan -CFO - Related Parties:

Irene Kuan is a director of the following companies:

·   Silicon Valley, PLC (resigned August 1 2006), Triband Global Ltd (resigned July 3 2006, Triband Ltd (dormant), Wilton Claim Ltd (renamed V-Tech UK Ltd - dormant)

·   Wilton Business Solutions, Ltd (renamed New Medium Management). Visson Technologies, UK (dormant), Litecel Ltd. (dormant)

·   Global Media Cast Ltd. HD Clearview Ltd (dormant), and

·   OneSoft Retail & Business Solutions Ltd.

ITEM 13. PRINCIPAL ACCOUNTANT FEES & SERVICES

During the period ending June 30, 2006 we paid approximately $38,450 for accounting and auditing. We estimate the current audit will cost approximately $18,000.

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ITEM 14. EXHIBITS INCORORATED BY REFERENCE

8K REPORTS INCORPORATED BY REFERENCE:

Date of Earliest Event	Date 8k Filed	Summary of 8K Incorporated by Reference
7/1/05	7/6/05	Appointment of Director & Officer, Professor Levich
9/12/05	9/20/05	Appointment of Rahul Diddi, Director
915/05	10/14/05	Sale of 7,500,000 & 5,000,000 Unregistered Shares
11/1/05	11/8/05	Amendment to Articles of Incorporation
10/24/05	11/9/05	Amended 8K reporting resignation of Auditor, N. Blumenfrucht
12/16/05	12/23/05	Entered into Definitive Agreement with E-World, Creation of A Direct Financial Obligation
12/6/05	12/23/05	Departure of Director, Rahul Diddi
12/14/05	12/29/05	Sale of 2,500,000 Unregistered Shares
1/24/06	2/3/06	Irene Kuan appointed CFO
2/1/06	2/3/06	Philips David appointed as Director
3/30/06	3/30/06	Extended agreement with E-World
3/28/06	4/05/06	Sale of 2,083,334 unregistered shares
4/7/06	4/7/06	Sale of 3,846,154 & 3,333,334 Unregistered shares
4/11/06	4/21/06	Entry into Definitive Agreement with MPEG
3/2/06	5/3/06	Sale of 500,000 Unregistered Shares
4/20/06	5/9/06	Sale of 7,178,593 Unregistered Shares
5/3/06	5/16/06	Entry into Definitive Agreement Plasmon Agreement Included
5/3/06	5/16/06	Entry into Definitive Agreement with VDL ODMS B.V. Agreement Included
6/1/06	6/5/06	Company Share By Back Program
6/23/06	6/27/06	NME Redeems Debenture

Exhibits Period Ending 6-30-2006

ITEM 15. EXHIBIT INDEX

99.1	Sistech Corporation Ltd.
31.1	Certification 906 Sarbanes Oxley, CEO
31.2	Certification 906 Sarbanes Oxley, CFO
32.1	Certification 302 Sarbanes Oxley, CEO
32.2	Certification 302 Sarbanes Oxley, CFO

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PART IV

ITEM 16. SUBSEQUENT EVENTS

1.	On July 31, 2006.Warrant Series A and C expired. New Warrants F have been issued, totaling $1.2 million with an expiry date of 20 April 2011.
2.	On August 28, 2006 James Cardwell; the former President of Warner Home Video joined NME board as a media and content advisor.
3.	August 8, 2006. After pulling out of the merger with Beijing E-World, NME, Inc was able to renegotiate a Joint Venture instead. See Exhibit attached.
4.	August 31, 2006. The company obtained a short term loan for 180 days from Tribal Sart for $1.1 million, through its subsidiary New Medium Enterprises UK Ltd, in return for a debenture placed and shares of NME, Inc. used as collateral.
5.	August 31, 2006. Philip David resigned as Director.
6.	We deemed the time recently necessary to start hiring very well known and respected people as Advisors to the Board and in-house employees. This wave started with bringing Jim Cardwell, ex-President of Warner Home Video on board. At the same time, NME has lately hired the services of Zeno, a subsidiary of Edelman, the only independent global PR firm to handle the PR worldwide regarding our commercialization and launch strategies. Over the next 12 months, Zeno will guide NME along the right tracks to truly bring out the best of our fascinating and industry-enhancing technologies.

SUBSEQUENT EVENTS: EQUITY TRANSACTIONS:

1.	On September 5 2006 the Company issued to Sistech Corporation Limited 100,000 Common stock of New Medium Enterprises, Inc. Shares were valued at $23,000.
2.	On September 5, 2006 the Company issued 25,000 shares to Nicholas Lavrov, for services rendered. Shares were valued at $5,750.
3.	On September 13 2006 the Company issued 17,000 to Quoros Limited for services rendered. Shares were valued at $5610.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

New Medium Enterprises, Inc.

(Registrant)

By: /s/ Mahesh Jaranayaran

President

October 13, 2006

By: /s/ Mahesh Jaranayaran

Principal Executive Officer

October 13, 2006

By: /s/ Irene SP Kuan

Principal Accounting Officer

October 13, 2006

By: /s/ Irene SP Kuan

Principal Financial Officer

Date: October 13, 2006

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EX-31.1

Exhibit 31.1

I, Mahesh Jaranayaran, certify that:

1.	I have reviewed this Annual Report for Period Ending June 30, 2006, of New Medium Enterprises, Inc.
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4.	The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

New Medium Enterprises, Inc.

(Registrant)

By: /s/ Mahesh Jaranayaran

Principal Executive Officer

Date: October 13, 2006

By: /s/ Mahesh Jaranayaran

President

Date: October 13, 2006

EX-31.2

Exhibit 31.2

I, Irene Kuan, certify that:

1.	I have reviewed this Annual Report for Period Ending June 30, 2006, of New Medium Enterprises, Inc.
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4.	The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

New Medium Enterprises, Inc.

(Registrant)

By: /s/ Irene Kuan

Chief Financial Officer

October 13, 2006

By: /s/ Irene Kuan

Principal Accounting Officer

Date: October 13, 2006

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of New Medium Enterprises, Inc. (the “Company”) on Form 10-KSB for the period ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mahesh Jayanarayan, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Mahesh Jayanarayan

Chief Executive Officer and President

October 13, 2006

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of New Medium Enterprises, Inc. (the “Company”) on Form 10-KSB for the period ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Irene Kuan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Irene Kuan

Chief Financial Officer

Chief Accounting Officer

October 13, 2006

EX-99

Exhibit 99.1

MEMORANDUM OF UNDERSTANDING AND SHAREHOLDER AGREEMENT DATED 18^TH MAY 2006

PARTIES TO THE AGREEMENT

Sistech Corporation Limited, Room no.301,Kam On Building,176A Queen Road, Central, Hong Kong, hereinafter referred to as ‘Sistech’ and represented by the Directors, Pratibha Wadhwaney, Indian Passport Holder or her Power of Attorney Holder Manohar Wadhwaney and Ishwar Bhagwandas Somaya (Vinu) Indian Passport Holder.

And

New Medium Enterprises Inc, a USA, Nevada based corporation, headquartered in London, 195, The Vale, London W3 7QS hereinafter referred to as NME and represented by Mahesh K. Jayanarayan, Chief Executive Officer of the company, British passport holder -094427296

This agreement is executed at the Representative office of ‘Sistech’ in China

Sistech Corporation LTD. Dong Le Plaza,10th floor,1001.Near Guangshen Hotel, Shennan East Road,2019,Louho,Shenzhen-518002,China.:

Purpose of the Agreement

The purpose of this agreement is for the parties to create a new company in Hong Kong for the sole purpose of promoting the business interest of NME.

The new company will be named New Medium Enterprises China Ltd.

The shareholders agree that

·   NME will hold 51% of the issued share capital.

·   Sistech will hold 49% of the issued share capital.

Objective of the New Business

The objective of the new company is

a)   to license VMD technology to explicators and electronic manufacturers in China

b)   to promote, market and sell VMD products to overseas buyers in Europe etc.

In specific the company will carry out the following activities:

Electronics

a)   Licensing of VMD technology to OEMs, ODMs in China and South East Asia. This is a very big job as Licensing is the main feature of our activity and these guys have a lot of experience in this field.

b)   Sales & Marketing to European customers. Support US Sales operations

c)   Supervise all logistics and customer care of all shipments abroad

d)   Collection of licensing fees.

e)   Organise, coordinate and participate in relevant trade fairs in China and South East Asia

f)   Aggressively promote VMD in the press etc.

g)   Coordinate our activities in Taiwan with Drive manufacturers etc.

h)   Take care of Taiwan as well in a similar capacity.

Optics

a)   Researching and appointing licensing for optic replication

b)   Sales of VMD discs and coordinate with content providers

c)   Collection of licensing fees

d)   Aggressively promote VMD optic in the press etc.

General Liaison office for China and South East Asia on behalf of NME.

It is agreed henceforth

This agreement is made between the shareholders of the company and its directors to stipulate and clarify key issues in the running of the company and its relationship to, and the rights of its, shareholders above the legal requirements of the Companies Act 1985. It is a confidential internal company document and not available for public inspection. It complements the Memorandum and Articles of Association and covers only the shareholders who have signed up to it.

The directors and shareholders agree that without the written permission of shareholders representing 51% of the ordinary equity of the company, or as specifically stated otherwise in this agreement, the directors and shareholders will:

1. The Directors shall not:

·   Change the original shareholding structure of the company i.e. NME holds 51% and Sistech holds 49%

·   Open any new bank accounts other than to be opened by the new company at the time of establishment.

·   Enter any new loan agreements, debentures or provide any guarantees or indemnities

·   Deviate materially from the business plan or enter any new area of business

·   Transfer, lease, assign, grant any license over any company property other than the sale of current assets in the normal course of trading

·   Establish any subsidiary

·   Authorise any increase in the authorised share capital of the company

·   Agree the sale or takeover of the business

·   Authorise any share option schemes or revise director emoluments

2. The directors shall:

·   Hold a monthly board meeting, with a maximum of 30 days between meetings, and a minimum of 10 board meetings per calendar year.

·   At each board meeting, the time, date and place for the next meeting shall be agreed and each director and investor representative shall be notified at least 4 days prior to it.

·   Circulate an agenda a week in advance of the meeting, including minutes from the last board meeting for approval. The agenda will include a review of trading activities and financial status, as well as any other material issues that are proposed for inclusion by directors and/or shareholders representing 51% of issued shares. Proposed agenda items should be proposed to the chairman at least 4 days prior to the meeting.

·   Present a brief monthly management report, including a set of management accounts, covering progress in relation to plan, prospects for the business, and highlighting any key or material issues faced by the company.

3. Banking Arrangements/Transfer of Funds

·   The Company shall have 2 authorised signatories to all bank accounts, who must be directors, and shall be registered by the directors with the company’s banks.

·   In the normal running of the business one ‘cheque book’/register of payments shall be used and kept by the Financial Director who will usually make routine payments.

·   Any cheques or transfers in excess of $ 2,000 shall be required to be signed / authorised by two signatories, and any over $ 7,500 must additionally be approved by the board.

4. Share Issues and Sale of Shares by the company or shareholders:

·   Transfer of shares from an existing shareholder. Any transfer, other than within family members, or as a result of bereavement, or as a gift, must be approved by the board under the 51 % rule. Such consent shall not be unreasonably withheld.

·   Any sale of shares must be approved, such consent will not be reasonably withheld, and existing shareholders shall have first refusal to purchase the shares under the same terms. Any issue/sale of shares by the company shall be offered to the existing shareholders under the same terms and they will have a pre-emption right to purchase such shares.

5. In the event of shareholder incapacityor worse

·   The shareholder shall nominate a representative, or nominate a member of the board, or the chairman, to vote on matters relating to the company on his/her behalf in the vent of their incapacity until he/she issues written instructions to the contrary or legal clarity is established between his estate and its benefactors. In the event of no such representative being available, then a spouse, or next of kin, shall be asked to act. They shall have the right to attend board meetings. This representative shall not be held liable by any party to this agreement, or any party acting in behalf of the shareholders benefactors, for any consequences of their decision-making.

·   The board and all shareholders will accept the representative’s authority to vote on any matters of company policy.

·   The normal management of the company shall continue to under the remaining board based on normal board decision-making process. The directors shall be reasonable and consider the interests of the absent shareholder and act in good faith. They shall not be liable if decisions made were not to the maximum benefit of the absent shareholder.

6. Removal of Directors

In addition to the provisions under the Articles of Association, a director may be removed from the office of director if:

·   2 other directors or major shareholders propose his/her removal in writing, this shall immediately be put to a vote and confirmed by a simple majority of over 50%.

·   OR by the unanimous decision of the other board members providing there are at least four members on the board.

·   Under such circumstances the severance rights in the director’s service contract shall apply, as will their rights as shareholders under this agreement.

7. Right to appoint a Non Executive Director or Investor Representative

·   Any investor, holding 50% or more of the company’s issued shareholder capital shall have the right to appoint a non-executive director to the board, or to have a non-voting representative present at board meetings. The Board of Directors, acting unanimously, shall have the right to veto the appointment of any individual.

8. Dividend Policy

·   It is not expected that the company will make a dividend for the next one year. After that any shareholder, or shareholders acting as one through written authority, representing at least 5% of the ordinary voting equity of the company shall have the right to insist that at least 10% of profits available for distribution (within the definitions of the Companies Act 1985) in the accounting period, are distributed by way of cash dividends within 6 months of the end of that accounting period - providing it is lawful to do so.

9. Shareholder and director confidentially obligations.

·   To keep all matters relating to the company confidential except where disclosure is required by law, or as part of the process of seeking personal advice on the investment from professional advisers, whom the shareholder warrants will ensure confidentiality.

·   Each parties obligations

Sistech Obligations

Sistech role will be to source and establish

a)   optic replicators in China to replicate VMD's in the future

b)   electronic 2 and 3 tier manufacturers to adopt VMD in DVD players

Further

a)   Provide an office address with a dedicated Assistant to handle all J.V matters

b)   Provide within Sistech office a showroom of our products

c)   Aggressively promote and market our products - optics and electronics to the China industry

d)   Aggressively and market our product line to overseas customers who are current Sistech customers

e)   Aggressively act as a global sourcing agent for NME.

The new company should work with and support all other NME JV's in China without jeopardising NME relationships.

NME Obligations

NME will give rights to license to third parties VMD technology.

Further NME's obligation is to

a)   invest $ 100k in J.V and the funds to be drawn down at $ 15k per month to run all expenses including your fees in the J.V ( this will not include any overseas travel or participation in any exhibitions etc, marketing/advertisement etc which will be approved on a case by case basis by NME.)

b)   to support VMD sales and provide l/c facilities for confirmed l/c orders from abroad if necessary

c)   provide performance related bonuses to the Directors and management of the J.V in cash and NME shares as agreed by the board.

d)   to permit the Directors and management of the new company to participate in any share incentive schemes of NME which will form part of the Director service contracts.

The parties agree that should any item in this Agreement be construed to be in breach or does not confirm with Hong Kong company law then such items will be waived from this agreement.

This agreement will be governed by the laws of Hong Kong.

We agree to be bound by this agreement:

Director / Shareholder Name: Signature: Date:

Witnessed by the Company Secretary:

Company Secretary: Signature: Date:

An original copy should be given to every shareholder / director party to this agreement, plus one kept by the company secretary or the company’s lawyers in the company file.