**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
 
 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)
 
  -
            1
            -
 *Table
            of Contents*
  **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
              15ITEM
                  3. LEGAL PROCEEDINGS
              16ITEM
                  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              16**PART
                  II**ITEM
                  5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER
                  MATTERS
              16ITEM
                  5A. SELECTED FINANCIAL DATA
              17ITEM
                  6. MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL
                  CONDITION
              18ITEM
                  7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
              23
                  - 34ITEM
                  8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND
                  FINANCIAL DISCLOSURE
              35ITEM
                  8A. CONTROLS AND PROCEDURES
              35ITEM
                  8B. OTHER INFORMATION
              36**PART
                  III**ITEM
                  9. DIRECTORS & EXECUTIVE OFFICERS OF THE REGISTRANT
              36ITEM
                  9A. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
              38ITEM
                  10. EXECUTIVE COMPENSATION
              38ITEM
                  11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT
              40ITEM
                  12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
              40ITEM
                  13. PRINCIPAL ACCOUNTANT FEES AND SERVICES
              42ITEM
                  14. EXHIBITS INCORPORATED BY REFERENCE
              42**PART****IV**ITEM
                  15. EXHIBITS INDEX
              42ITEM
                  16. SUBSEQUENT EVENTS
              43SIGNATURES
              43
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            of Contents*
  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 o  No x
 
 **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.
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            3
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  **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.
 
 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.
 
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 *Table
            of Contents*
  **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.
 
 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;
 
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            5
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 *Table
            of Contents*
  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.
 
 **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).
 
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            6
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 *Table
            of Contents*
  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.
 
 **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.
 
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            7
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 *Table
            of Contents*
  **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.
 
 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.
 
 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.
 
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            8
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 *Table
            of Contents*
  **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
 
 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;
 
 -
            9
            -
 *Table
            of Contents*
  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.
 
 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.
 
 -
            10
            -
 *Table
            of Contents*
 **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.
 
 **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.
 -
            11
            -
 *Table
            of Contents*
  **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.
 
 **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.
 
 -
            12
            -
 *Table
            of Contents*
  **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.
 
 **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.
 
 -
            13
            -
 *Table
            of Contents*
  **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.
 
 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.
 
 -
            14
            -
 *Table
            of Contents*
  **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.
  **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
 
 -
            15
            -
 *Table
            of Contents*
  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
 
 **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.
 -
            16
            -
 *Table
            of Contents*
  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
 
 **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
  -
            17
            -
 *Table
            of Contents*
  **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.
 
 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.
 
 -
            18
            -
 *Table
            of Contents*
  **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.
 
 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.
 
 -
            19
            -
 *Table
            of Contents*
  **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.
 
 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.
 
 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.
 
 -
            20
            -
 *Table
            of Contents*
  **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.
 
 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
 
 In
        July
        2005, all Series B, D & E Stock Purchase Warrants expired.
 -
            21
            -
 *Table
            of Contents*
  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.
 
  -
            22
            -
 *Table
            of Contents*
  **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
 
 
 The
        Board
        of Directors and Stockholders
 New
        Medium Enterprises, Inc.
 
 We
        have
        audited the accompanying consolidated balance sheet of New Medium Enterprises,
        Inc. (A development stage company) as of June 30, 2006 and 2005, and the
        related
        statements of operations, stockholders’ equity and cash flows for the year ended
        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 audits.
 
 We
        conducted our audit in accordance with standards of the Public Company Oversight
        Board (United States). Those standards require that we plan and perform the
        audit to obtain reasonable assurance about whether the financial statements
        are
        free of material misstatement. An audit includes examining, on a test basis,
        evidence supporting the amounts and disclosures in the financial statements.
        An
        audit also includes assessing the accounting principles used and significant
        estimates made by management, as well as evaluating the overall financial
        statement presentation. We believe that our audits provide 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 its operations and cash flows for
        period from August 2, 1999 through June 30, 2006, in conformity with accounting
        principles generally accepted in the United States.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As
        shown
        in the financial statements, the Company is a developing stage company, has
        had
        no significant income, has incurred net losses since its inception and has
        experienced severe liquidity problems. Those
        conditions raise substantial doubt about its ability to continue as a going
        concern. The financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.
 
 
 /s/
        Morgenstern, Svoboda & Baer, CPA’s, P.C.
 Certified
        Public Accountants
 
 New
        York,
        NY
 October
        11, 2006
   -
            23
            -
 *Table
            of Contents*
  **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.
 -
              24
              -
 *Table
              of Contents*
  **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.
 
  -
            25
            -
 *Table
            of Contents*
  **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.
 -
              26
              -
 *Table
              of Contents*
  **NEW
        MEDIUM ENTERPISES, INC.**
 (A
        development stage company)
 STATEMENT
        OF STOCKHOLDERS’ EQUITY
 For
        the
        period July 1, 2004 - June 30, 2006
 
 Per
                  Share Amount
              
              Common
                  Shares
              
              Stock
                  Amount
              
              Additional
                  Paid-in Capital
              
              Retained
                  Earnings (Accumulated Deficit)
              
              Accumulated
                  Other Comprehensive Loss
              
              Totals**Balances,
                  July 1, 2004**
              
              
              
              92,147,220
              
              9,215
              
              16,443,185
              
              1,346,978
              
              11,658
              
              15,093,764Warrants
                  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-Acquistion Shareholders
                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.
 -
              27
              -
 *Table
              of Contents*
  **NEW
          MEDIUM ENTERPISES, INC.**
 (A
          development stage company)
 NOTES
          TO FINANCIAL
          STATEMENTS
 **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.
 
 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.
 
 -
            28
            -
 *Table
            of Contents*
  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.
 
 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.
 
 -
            29
            -
 *Table
            of Contents*
  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.
 
 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.
 
 -
            30
            -
 *Table
            of Contents*
  **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.
 
 **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.
 
 **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
                  contractb)
              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.
 
 -
            31
            -
 *Table
            of Contents*
  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
 
 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.
 
 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.
 
 -
            32
            -
 *Table
            of Contents*
  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.
 
 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.
 
 -
            33
            -
 *Table
            of Contents*
  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.
 
 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.
  -
            34
            -
 *Table
            of Contents*
  **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.
 
 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.
 
 -
            35
            -
 *Table
            of Contents*
  **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.
 
 -
            36
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 *Table
            of Contents*
  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.
 
 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).
 
 -
            37
            -
 *Table
            of Contents*
  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.
 
 **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.
 
 -
            38
            -
 *Table
            of Contents*
 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
 
 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.
 
 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.
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  **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.
 
 (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.
 
 -
            40
            -
 *Table
            of Contents*
  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
 
 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.
 
 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.
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            41
            -
 *Table
            of Contents*
  **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.
 
 **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
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            42
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 *Table
            of Contents*
  **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.
   **SIGNATURES**
 
 Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange Act
        of
        1934, the registrant has duly caused this report to be signed on its behalf
        by
        the undersigned, thereunto duly authorized.
 
 
 New
        Medium Enterprises, Inc.
 (Registrant)
 
 
 By: /s/
        Mahesh Jaranayaran
 President
 October
        13, 2006
 
 By: /s/
        Mahesh Jaranayaran
 Principal
        Executive Officer
 October
        13, 2006
   By: /s/
        Irene SP Kuan
 Principal
        Accounting Officer
 October
        13, 2006
 
 By: /s/
        Irene SP Kuan
 Principal
        Financial Officer
 Date:
        October 13, 2006
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              of
              Contents*