**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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            1
            -




**NEW
      MEDIUM ENTERPRISES, INC.**


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





Table
      of Contents





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


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            2
            -




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___


-
            3
            -




**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.




-
            4
            -


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.


-
            5
            -




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.




-
            6
            -


**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.




-
            7
            -


**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.


-
          8
          -


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.


-
          9
          -


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


-
            10
            -




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.




-
            11
            -


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.




-
            12
            -


**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.




-
            13
            -


**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.




-
            14
            -


**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.




-
            15
            -


**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.




-
            16
            -


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.




-
            17
            -
 **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


-
            18
            -


**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.


-
          19
          -


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 OutstandingSeries
                A
            
            $1.50
            
            4,790,000Series
                A at 25
            
            $.25
            
            410,000Series
                C
            
            $.10
            
            993,000





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





New
                Series
            
            Exercise
                Price
            
            Valid
                Until2,000,000
            
            $0.10
            
            6-9
                20071,100,000
            
            $0.065
            
            4-20-20113,750,000
            
            $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
            
            HighFirst
            
            .04
            
            .11Second
            
            .07
            
            .14Third
            
            .08
            
            .21Fourth
            
            .07
            
            .299





FISCAL
      YEAR ENDING June 30, 2005





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


-
            20
            -




**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, 2005Loss
                from Operations
            
            $
            (6,484,377
            )
            $
            (2,075,091
            )Total
                Current Assets
            
            
            3,442,141
            
            
            241,388Total
                Assets
            
            
            18,812,968
            
            
            15,539,062Total
                Current Liabilities
            
            
            266,390
            
            
            136,393Total
                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.




-
            21
            -


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.




-
            22
            -


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.


-
          23
          -


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.


-
          24
          -


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 OutstandingSeries
                A
            
            $1.50
            
            4,790,000Series
                A at 25
            
            $.25
            
            410,000Series
                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
                Until2,000,000
            
            $0.10
            
            6-9
                2007$1,100,000
                Value
            
            $0.065
            
            4-20-20113,750,000
            
            $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
            
            $
            196,529Investment
            
            
            --
            
            
            0Prepaid
                expenses
            
            
            414,823
            
            
            0Rental
                Deposits
            
            
            26,911Supplier
                Deposits
            
            
            560,972Other
                Receivables
            
            
            65,968Escrow
                Deposits
            
            
            1,650,000
            
            
            44,859Value
                Added Tax recoverable
            
            
            57,870Total
                current assets
            
            
            3,442,141
            
            
            241,388Property
                and equipment
            
            
            288,512
            
            
            179,140Less:
                accumulated depreciation
            
            
            (101,545
            )
            
            (65,326
            )186,967
            
            
            113,814Intellectual
                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
            
            $
            136,393Total
                current liabilities
            
            
            266,390
            
            
            136,393Commitments
                and contingenciesStockholders'
                equityPreferred
                stock $.0001 par value, authorized 200,000,000 shares; none
                issuedCommon
                stock, $.0001 par value, authorized 500,000,000 shares, issued and
                outstanding 205,477,579 & 119,571,344 shares
            
            
            20,448
            
            
            11,957Additional
                paid in capital
            
            
            28,424,747
            
            
            18,827,404Accumulated
                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
            
            $
            7,048,018Research
                and Development Costs
            
            
            544,663
            
            
            971,290
            
            
            2,078,530Officer's
                Compensation
            
            
            397,323
            
            
            136,816
            
            
            777,369Loss
                on Foreign currency
            
            
            15,834
            
            
            0
            
            
            15,834Depreciation
            
            
            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
            
            
            
            
            
            30,990Investment
                Income
            
            
            2
            
            
            1,557
            
            
            148,913Value
                Added Tax Recovered
            
            
            12,897
            
            
            
            
            
            12,897Loss
                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/AWeighted
                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
            
            
            118,995Issuance
                of shares for acquisition of Intellectual property
            
            
            0
            
            
            0
            
            
            14,521,155Write
                off of web site development costs
            
            
            
            
            
            0
            
            
            314,302Stock
                issued for services rendered
            
            
            3,370,590
            
            
            452,961
            
            
            4,086,351Stock
                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
            
            
            13,584Purchase
                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
            
            
            1,819,950Offering
                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
            
            
            1,946,670Issuance
                of shares for warrants exercised
            
            
            0
            
            
            
            
            
            0Issuance
                of shares for services rendered
            
            
            0
            
            
            
            
            
            0Proceeds
                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
                ShareAmount
            
            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
            
            15,093,764Warrants
                exercised July and August 2004
            
            $
            0.25
            
            
            250,000
            
            
            25
            
            
            62,475
            
            
            
            
            
            
            
            
            62,500Issuance
                of shares for services rendered, August 2004
            
            $
            0.30
            
            
            100,000
            
            
            10
            
            
            29,990
            
            
            
            
            
            
            
            
            30,000Issuance
                of shares for services to be rendered, August 2004
            
            $
            0.40
            
            
            875,000
            
            
            88
            
            
            349,912
            
            
            
            
            
            
            
            
            350,000Sale
                of common stock to investor August 2004
            
            $
            0.20
            
            
            5,000,000
            
            
            500
            
            
            999,500
            
            
            
            
            
            
            
            
            1,000,000Issuance
                of shares for services rendered, September 2004
            
            $
            0.17
            
            
            6,315
            
            
            0
            
            
            1,074
            
            
            
            
            
            
            
            
            1,074Warrants
                exercised October, November, and December 2004
            
            $
            0.25
            
            
            390,000
            
            
            39
            
            
            97,461
            
            
            
            
            
            
            
            
            97,500Issuance
                of shares for services rendered, November December 2004
            
            $
            0.24
            
            
            18,750
            
            
            2
            
            
            4,498
            
            
            
            
            
            
            
            
            4,500Issuance
                of shares for services rendered, January 2004 until May
                2005
            
            
            0.045
            
            
            1,500,000
            
            
            150
            
            
            67,350
            
            
            
            
            
            
            
            
            67,500Sale
                of common stock to investor May 2005
            
            
            0.02
            
            
            10,000,000
            
            
            1,000
            
            
            199,000
            
            
            
            
            
            
            
            
            200,000Conversion
                Of Outstanding Debt June 2005
            
            
            0.05
            
            
            3,480,000
            
            
            348
            
            
            173,652
            
            
            
            
            
            
            
            
            174,000Sale
                of common stock to investor May 2005Stocks
                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
            
            
            15,402,782Issuance
                of shares for services August 18, 2005
            
            
            0.1
            
            
            1,000,000
            
            
            100
            
            
            99,900
            
            
            
            
            
            
            
            
            100,000Issuance
                of shares for services August 18, 2005
            
            
            0.1
            
            
            5,599,122
            
            
            560
            
            
            559,352
            
            
            
            
            
            
            
            
            559,912Issuance
                of shares for Pre-AcquistionShareholders September 15, 2005
            
            
            0.05
            
            
            915,080
            
            
            92
            
            
            45,908
            
            
            
            
            
            
            
            
            46,000Issuance
                of shares for services September 20, 2005
            
            
            0.1
            
            
            3,750,000
            
            
            375
            
            
            374,625
            
            
            
            
            
            
            
            
            375,000Issuance
                of shares for services September 20, 2005
            
            
            0.1
            
            
            250,000
            
            
            25
            
            
            24,975
            
            
            
            
            
            
            
            
            25,000Issuance
                of shares for services September 20, 2005
            
            
            0.1
            
            
            2,000,000
            
            
            200
            
            
            199,800
            
            
            
            
            
            
            
            
            200,000Issuance
                of shares for services September 20, 2005
            
            
            0.1
            
            
            350,000
            
            
            35
            
            
            34,965
            
            
            
            
            
            
            
            
            35,000Sale
                of common stock to investor September 20, 2005
            
            
            0.15
            
            
            5,000,000
            
            
            500
            
            
            749,500
            
            
            
            
            
            
            
            
            750,000Sale
                of common stock to investor October 13, 2005
            
            
            0.1
            
            
            3,000,000
            
            
            300
            
            
            299,700
            
            
            
            
            
            
            
            
            300,000Sale
                of common stock to investor November 14, 2005
            
            
            0.1
            
            
            1,500,000
            
            
            150
            
            
            149,850
            
            
            
            
            
            
            
            
            150,000Sale
                of common stock to investor December 14, 2005
            
            
            0.1
            
            
            1,500,000
            
            
            150
            
            
            149,850
            
            
            
            
            
            
            
            
            150,000Sale
                of common stock to investor December 15, 2005
            
            
            0.1
            
            
            500,000
            
            
            50
            
            
            49,950
            
            
            
            
            
            
            
            
            50,000Sale
                of common stock to investor December 20, 2005
            
            
            0.125
            
            
            480,000
            
            
            48
            
            
            59,952
            
            
            
            
            
            
            
            
            60,000Sale
                of common stock to investor December 28, 2005
            
            
            0.1
            
            
            1,500,000
            
            
            150
            
            
            149,850
            
            
            
            
            
            
            
            
            150,000Sale
                of common stock to investor January 20, 2006
            
            
            0.1
            
            
            1,500,000
            
            
            150
            
            
            149,850
            
            
            
            
            
            
            
            
            150,000Warrants
                Exercised February 1, 2006
            
            
            0.1
            
            
            100,000
            
            
            10
            
            
            9,990
            
            
            
            
            
            
            
            
            10,000Sale
                of common stock to investor March 9, 2006
            
            
            0.12
            
            
            500,000
            
            
            50
            
            
            59,950
            
            
            
            
            
            
            
            
            60,000Warrants
                Exercised March 10, 2006
            
            
            0.1
            
            
            100,000
            
            
            10
            
            
            9,990
            
            
            
            
            
            
            
            
            10,000Warrants
                Exercised March 22, 2006
            
            
            0.1
            
            
            100,000
            
            
            10
            
            
            9,990
            
            
            
            
            
            
            
            
            10,000Warrants
                Exercised 6-Apr-06
            
            
            0.10
            
            
            300,000
            
            
            30
            
            
            29,970
            
            
            
            
            
            
            
            
            30,000Sale
                of common shares to investor 7-Apr-06
            
            
            0.12
            
            
            2,083,334
            
            
            208
            
            
            249,792
            
            
            
            
            
            
            
            
            250,000Sale
                of common shares to investor 12-Apr-06
            
            
            0.15
            
            
            10,000
            
            
            1
            
            
            1,499
            
            
            
            
            
            
            
            
            1,500Issuance
                of shares for services 13-Apr-06
            
            
            0.17
            
            
            1,250,000
            
            
            125
            
            
            212,375
            
            
            
            
            
            
            
            
            212,500Sale
                of common shares to investor 13-Apr-06
            
            
            0.15
            
            
            100,000
            
            
            10
            
            
            14,990
            
            
            
            
            
            
            
            
            15,000Sale
                of common shares to investor 13-Apr-06
            
            
            0.15
            
            
            300,000
            
            
            30
            
            
            44,970
            
            
            
            
            
            
            
            
            45,000Sale
                of common shares to investor 13-Apr-06
            
            
            0.15
            
            
            200,000
            
            
            20
            
            
            29,980
            
            
            
            
            
            
            
            
            30,000Sale
                of common shares to investor 13-Apr-06
            
            
            0.15
            
            
            300,000
            
            
            30
            
            
            44,970
            
            
            
            
            
            
            
            
            45,000Sale
                of common shares to investor 17-Apr-06
            
            
            0.15
            
            
            90,000
            
            
            9
            
            
            13,491
            
            
            
            
            
            
            
            
            13,500Warrants
                Exercised 17-Apr-06
            
            
            0.10
            
            
            200,000
            
            
            20
            
            
            19,980
            
            
            
            
            
            
            
            
            20,000Sale
                of common shares to investor 18-Apr-06
            
            
            0.14
            
            
            1,428,571
            
            
            143
            
            
            199,857
            
            
            
            
            
            
            
            
            200,000Sale
                of common shares to investor 18-Apr-06
            
            
            0.15
            
            
            333,334
            
            
            33
            
            
            49,967
            
            
            
            
            
            
            
            
            50,000Sale
                of common shares to investor 20-Apr-06
            
            
            0.15
            
            
            200,000
            
            
            20
            
            
            29,980
            
            
            
            
            
            
            
            
            30,000Sale
                of common shares to investor 20-Apr-06
            
            
            0.15
            
            
            60,000
            
            
            6
            
            
            8,994
            
            
            
            
            
            
            
            
            9,000Sale
                of common shares to investor 20-Apr-06
            
            
            0.15
            
            
            50,000
            
            
            5
            
            
            7,495
            
            
            
            
            
            
            
            
            7,500Sale
                of common shares to investor 20-Apr-06
            
            
            0.12
            
            
            7,178,593
            
            
            718
            
            
            860,713
            
            
            
            
            
            
            
            
            861,431Sale
                of common shares to investor 21-Apr-06
            
            
            0.15
            
            
            50,000
            
            
            5
            
            
            7,495
            
            
            
            
            
            
            
            
            7,500Sale
                of common shares to investor 24-Apr-06
            
            
            0.15
            
            
            100,000
            
            
            10
            
            
            14,990
            
            
            
            
            
            
            
            
            15,000Sale
                of common shares to investor 25-Apr-06
            
            
            0.15
            
            
            283,334
            
            
            28
            
            
            42,472
            
            
            
            
            
            
            
            
            42,500Sale
                of common shares to investor 25-Apr-06
            
            
            0.145
            
            
            1,666,666
            
            
            167
            
            
            241,500
            
            
            
            
            
            
            
            
            241,667Sale
                of common shares to investor 25-Apr-06
            
            
            0.145
            
            
            1,666,666
            
            
            167
            
            
            241,500
            
            
            
            
            
            
            
            
            241,667Sale
                of common shares to investor 25-Apr-06
            
            
            0.15
            
            
            300,000
            
            
            30
            
            
            44,970
            
            
            
            
            
            
            
            
            45,000Sale
                of common shares to investor 25-Apr-06
            
            
            0.15
            
            
            300,000
            
            
            30
            
            
            44,970
            
            
            
            
            
            
            
            
            45,000Sale
                of common shares to investor 1-May-06
            
            
            0.15
            
            
            90,000
            
            
            9
            
            
            13,491
            
            
            
            
            
            
            
            
            13,500Sale
                of common shares to investor 3-May-06
            
            
            0.15
            
            
            200,000
            
            
            20
            
            
            29,980
            
            
            
            
            
            
            
            
            30,000Issuance
                of shares for services (in event of payment default)
                12-May-06
            
            
            0.1
            
            
            3,000,000
            
            
            200
            
            
            299,800
            
            
            
            
            
            
            
            
            300,000Sale
                of common shares to investor 19-May-06
            
            
            0.15
            
            
            266,666
            
            
            27
            
            
            39,973
            
            
            
            
            
            
            
            
            40,000Sale
                of common shares to investor 19-May-06
            
            
            0.15
            
            
            100,000
            
            
            10
            
            
            14,990
            
            
            
            
            
            
            
            
            15,000Warrants
                exercised 24-May-06
            
            
            0.10
            
            
            237,000
            
            
            24
            
            
            23,676
            
            
            
            
            
            
            
            
            23,700Issuance
                of shares for services 6/1/2006
            
            
            0.15
            
            
            1,000,000
            
            
            100
            
            
            149,900
            
            
            
            
            
            
            
            
            150,000Issuance
                of shares for services 6/1/2006
            
            
            0.15
            
            
            250,000
            
            
            25
            
            
            37,475
            
            
            
            
            
            
            
            
            37,500Release
                of debenture on subsidiary 23-Jun-06
            
            
            0.095
            
            
            12,500,000
            
            
            1,250
            
            
            1,186,250
            
            
            
            
            
            
            
            
            1,187,500Issuance
                of shares for services 23-Jun-06
            
            
            0.095
            
            
            2,000,000
            
            
            200
            
            
            189,800
            
            
            
            
            
            
            
            
            190,000Issuance
                of shares for services 23-Jun-06
            
            
            0.095
            
            
            1,000,000
            
            
            100
            
            
            94,900
            
            
            
            
            
            
            
            
            95,000Sale
                of common shares to investor 23-Jun-06
            
            
            0.13
            
            
            256,411
            
            
            25
            
            
            33,308
            
            
            
            
            
            
            
            
            33,333Issuance
                of shares for services 23-Jun-06
            
            
            0.095
            
            
            160,256
            
            
            16
            
            
            15,208
            
            
            
            
            
            
            
            
            15,224Issuance
                of shares to officer for services 23-Jun-06
            
            
            0.095
            
            
            667,000
            
            
            66
            
            
            63,299
            
            
            
            
            
            
            
            
            63,365Issuance
                of shares to officer for services 23-Jun-06
            
            
            0.095
            
            
            667,000
            
            
            67
            
            
            63,298
            
            
            
            
            
            
            
            
            63,365Sale
                of common shares to investor 23-Jun-06
            
            
            0.13
            
            
            256,411
            
            
            26
            
            
            33,307
            
            
            
            
            
            
            
            
            33,333Issuance
                of shares for services 23-Jun-06
            
            
            0.095
            
            
            160,256
            
            
            16
            
            
            15,208
            
            
            
            
            
            
            
            
            15,224Issuance
                of shares for merger held in Escrow 29-Jun-06
            
            
            0.11
            
            
            15,000,000
            
            
            1,500
            
            
            1,648,500
            
            
            
            
            
            
            
            
            1,650,000Comprehensive
                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
            2,277,5792008
            3,036,7722009
            3,036,7722010
            3,036,7722011
            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.





-
          35
          -


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.




-
            36
            -


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.


-
          37
          -


**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.


-
            38
            -
  **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


-
          39
          -


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.


-
          40
          -


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.


-
          41
          -


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.


-
          42
          -


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.





-
          43
          -




**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.


-
            44
            -




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
            
            PositionRupert
                Stow
            
            83
            
            DirectorMahesh
                Jaranayaran
            
            54
            
            CEO,
                DirectorDr.
                Eugene Levich
            
            58
            
            CTO,
                DirectorAlexander
                B. Hagerty
            
            24
            
            VP
                Business DevelopmentIrene
                Kuan
            
            50
            
            CFO,
                DirectorBarry
                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.





-
          45
          -




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.


-
          46
          -


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 5Mahesh
                Jayanarayan
            
            1
            
            8
            
            1Eugene
                Levich
            
            1
            
            6
            
            1Irene
                Kuan
            
            1
            
            1
            
            1Rupert
                Stow
            
            1
            
            
            
            1Alexander
                Bolker Hagerty
            
            1
            
            
            
            1Rahul
                Diddi
            
            1
            
            4Andrew
                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.





-
          47
          -




**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 AppointmentRupert
                Stow
            
            Director
            
            $12,000
            
            6-14-2005Mahesh
                Jaranayaran
            
            CEO,
                Director
            
            $131,701
            
            6-14-2005Dr.
                Eugene Levich
            
            CTO,
                Director
            
            $146,496
            
            6-30-2005Alexander
                B. Hagerty
            
            VP
                Business Development
            
            $66,815
            
            6-30-2005Irene
                Kuan
            
            CFO,
                Director
            
            $47,079
            
            8-4-2004Barry
                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
            
            SharesMr.
                Mahesh Jayanarayan
            8-05
            
            6-06
            
            $100,000
            
            $0.10
            
            1,000,0009-05
            
            6-06
            
            110,000
            
            0.11
            
            1,000,00012-05
            
            6-06
            
            180,000
            
            0.09
            
            2,000,000Mr.
                Eugene Levich
            9-05
            
            6-06
            
            220,000
            
            0.11
            
            2,000,0001-06
            
            6-06
            
            220,000
            
            0.11
            
            2,000,0006-06
            
            6-06
            
            73,370
            
            0.11
            
            667,000Ms.
                Irene SP Kuan
            9-05
            
            6-06
            
            27,500
            
            0.11
            
            250,0006-06
            
            6-06
            
            73,370
            
            0.11
            
            667,000Mr.
                Rupert Stow
            9-05
            
            6-06
            
            27,500
            
            0.11
            
            250,000Mr.
                Rahul Diddi
            9-05
            
            6-06
            
            27,500
            
            0.11
            
            250,000Alexander
                Bolker-Hagerty
            9-05
            
            6-06
            
            27,500
            
            0.11
            
            250,000




-
          48
          -




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.


-
          49
          -


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
            
            RemainingEthel
                Schwartz
            
            5,000,000
            
            1,875,000
            
            3,215,000Eva
                Beilus
            
            2,000,000
            
            750,000
            
            1,250,000Hyman
                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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            50
            -




(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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          51
          -


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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          52
          -


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.


-
            53
            -




**ITEM** **14. EXHIBITS****INCORORATED
      BY REFERENCE**





8K
      REPORTS INCORPORATED BY REFERENCE:





Date
                of Earliest Event
            
            Date
                8k Filed
            
            Summary
                of 8K Incorporated by Reference7/1/05
            
            7/6/05
            
            Appointment
                of Director & Officer, Professor Levich9/12/05
            
            9/20/05
            
            Appointment
                of Rahul Diddi, Director915/05
            
            10/14/05
            
            Sale
                of 7,500,000 & 5,000,000 Unregistered Shares11/1/05
            
            11/8/05
            
            Amendment
                to Articles of Incorporation10/24/05
            
            11/9/05
            
            Amended
                8K reporting resignation of Auditor, N. Blumenfrucht12/16/05
            
            12/23/05
            
            Entered
                into Definitive Agreement with E-World, Creation of A Direct Financial
                Obligation12/6/05
            
            12/23/05
            
            Departure
                of Director, Rahul Diddi12/14/05
            
            12/29/05
            
            Sale
                of 2,500,000 Unregistered Shares1/24/06
            
            2/3/06
            
            Irene
                Kuan appointed CFO2/1/06
            
            2/3/06
            
            Philips
                David appointed as Director3/30/06
            
            3/30/06
            
            Extended
                agreement with E-World3/28/06
            
            4/05/06
            
            Sale
                of 2,083,334 unregistered shares4/7/06
            
            4/7/06
            
            Sale
                of 3,846,154 & 3,333,334 Unregistered shares4/11/06
            
            4/21/06
            
            Entry
                into Definitive Agreement with MPEG3/2/06
            
            5/3/06
            
            Sale
                of 500,000 Unregistered Shares4/20/06
            
            5/9/06
            
            Sale
                of 7,178,593 Unregistered Shares5/3/06
            
            5/16/06
            
            Entry
                into Definitive Agreement Plasmon Agreement Included5/3/06
            
            5/16/06
            
            Entry
                into Definitive Agreement with VDL ODMS B.V. Agreement
                Included6/1/06
            
            6/5/06
            
            Company
                Share By Back Program6/23/06
            
            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, CEO31.2
            Certification
                906 Sarbanes Oxley, CFO32.1
            Certification
                302 Sarbanes Oxley, CEO32.2
            Certification
                302 Sarbanes Oxley, CFO


-
            54
            -




**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.


-
            55
            -
  **SIGN** **ATURES**





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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            56
            -