**Exhibit
      99.1**





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





**PARTIES
      TO THE AGREEMENT**





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





And





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





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


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





**Purpose
      of the Agreement**





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





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





The
      shareholders agree that





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

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




**Objective
      of the New Business**





The
      objective of the new company is





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

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




In
      specific the company will carry out the following activities:





**Electronics**





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

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

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

|d) | Collection
              of licensing fees.
|-- | -------------------------------------------

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

|f) | Aggressively
              promote VMD in the press etc.
|-- | --------------------------------------------------------

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

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



**Optics**





|a) | Researching
              and appointing licensing for optic
              replication
|-- | --------------------------------------------------------------------------------------

|b) | Sales
              of VMD discs and coordinate with content
              providers
|-- | ------------------------------------------------------------------------------------

|c) | Collection
              of licensing fees
|-- | ------------------------------------------

|d) | Aggressively
              promote VMD optic in the press etc.
|-- | --------------------------------------------------------------




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





***It
      is agreed henceforth***





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





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





**1.
      The Directors shall not:**





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

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

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

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

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

|· | Establish
              any subsidiary
|- | --------------------------------------

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

|· | Agree
              the sale or takeover of the business
|- | --------------------------------------------------------

|· | Authorise
              any share option schemes or revise director
              emoluments
|- | --------------------------------------------------------------------------------------------




**2.
      The directors shall:**





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

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

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

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




**3.
      Banking Arrangements/Transfer of Funds**





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

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

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




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





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

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




**5.
      In the event of shareholder incapacity**  **or
      worse**





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

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

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




**6.
      Removal of Directors**





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





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

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

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




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





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




**8.
      Dividend Policy**





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




**9.
      Shareholder and director confidentially obligations.**





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

|· | Each
              parties obligations
|- | --------------------------------------




**Sistech
      Obligations**





Sistech
      role will be to source and establish





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

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




Further





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

|b) | Provide
              within Sistech office a showroom of our
              products
|-- | ------------------------------------------------------------------------------------

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

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

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




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





**NME
      Obligations**





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





Further
      NME's obligation is to





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

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

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

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




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





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








We
      agree
      to be bound by this agreement:





Director
                / Shareholder Name:
            Signature:
            Date:








Witnessed
      by the Company Secretary:





Company
                Secretary:
            Signature:
            Date:





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