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








Geoffrey
 Russell,  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-KSB/A  for the Year Ended June 30, 2006





Table
of Contents


PAGEPART
      IITEM
      1. BUSINESS
            4ITEM
      2. PROPERTIES
            15ITEM
      3. LEGAL PROCEEDINGS
            16ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            16PART
      IIITEM
      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
            36PART
      IIIITEM
      9. DIRECTORS & EXECUTIVE OFFICERS OF THE REGISTRANT
            35ITEM
      9A. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
            37ITEM
      10. EXECUTIVE COMPENSATION
            37ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT
            39ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
            39ITEM
      13. PRINCIPAL ACCOUNTANT FEES AND SERVICES
            41ITEM
      14. EXHIBITS INCORPORATED BY REFERENCE
            41PART IVITEM
      15. EXHIBITS INDEX
            42ITEM
      16. SUBSEQUENT EVENTS
            42SIGNATURES
            42





- 2
-








Explanatory
Note
 
 The
Amendment is being filed to amend  the financial statements and
related footnotes to Form 10KSB for the annual period ending June 30, 2006
previously filed.







Table 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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Table of
Contents




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 4th 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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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).







- 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 4th 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
30th
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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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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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;





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





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





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





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





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





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RoHS





We also
have to ensure that all our electrical and electronic products comply with the
RoHS Directive which came into effect on 1st 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.




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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.





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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.





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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.





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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





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VDL-ODMS
BV


Daalakkersweg
8


5641 JA
Eindhoven


The
Netherlands





Sistech
Corporation Ltd


Dong Le
Plaza


10th 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
1st
November 2005, the following Items of the By Laws were amended to:





Article
III - Board of Directors


Item 2:
Number, Tenure and Qualifications:


Item 2 of
Artcle III amended to:


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





Item11 of
Article III amended to:


Item 11:
Compensation:


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





Article V
- Officers:


2.
Election and Term of Office


Item 2 to
Article V amended to:


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





PART
II





ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK





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





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




To date,
none of the warrants were exercised.


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





Warrant
      Series
            
            Exercise
      Price
            
            Number
      of Warrants 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)
            $
            (2,381,442)Total
      Current Assets
            
            3,442,141
            
            241,388Total
      Assets
            
            3,629,108
            
            355,202Total
      Current Liabilities
            
            266,390
            
            136,393Total
      Stockholders’ Equity
            
            3,362,718
            
            218,809




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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 4th 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 NME 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.





KEY
FACTORS AFFECTING  RESULTS OF OPERATIONS AND FINANCIAL
CONDITIONS





Statement
of Financial Accounting Standards No 142 addresses financial accounting and
reporting for acquired goodwill and other intangible assets. An intangible asset
that is acquired either individually or with a group of other assets (but not
those acquired in a business combination) shall be initially recognized and
measured based on its fair
value.General concepts related to the initial measurement of assets
acquired in exchange transactions, including intangible assets, are provided in
paragraphs 5–7 of Statement 141. The cost of a group of
assets acquired in a transaction other than a business combination shall be
allocated to the individual assets acquired based on their relative fair values
and shall not give rise to goodwill. Intangible assets
acquired in a business combination are initially recognized and measured in
accordance with Statement 141.





In
January 2004, when 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





The Board
observed that the useful lives of intangible assets are related to the expected
cash inflows that are associated with those assets. Accordingly, the Board
concluded that the amortization periods for intangible assets should generally
reflect those useful lives and, by extension, the cash flow streams associated
with them. The Board noted that the useful lives and amortization periods
of intangible assets should reflect the periods over which those assets will
contribute to cash flows, not the period of time that would be required to
internally develop those assets.





RESTATEMENT





During
the year ended June 2007, it was determined that the correct application of
accounting principles had not been applied in 2006, 2005 and 2004 for the write
–off as required under FASB 142. The financial statements for those years have
been restated to reflect the purchased R&D intellectual properties being
charged to Research and Development costs of $306,351 for 2005, and $14,877,509
for 2004.





The
effect of this restatement affects the deficit accumulated and
the  loss per share for the years ended June 30, 2005 and 2004 of
($18,604,572) and ($16,224,487) respectively..


The
restatements for the year –ended June 30, 2004, June 30, 2005 and June 30, 2006
are summarized as follows:





New
Medium Enterprises, Inc


Financial
Statment Restatements




Balance
Sheet




June
      30 , 2004
            June
      30, 2005
            June
      30, 2006Previously
              reported
            
            
            As
      restated
            
            
            Previously
      reported
            
            
            As
      restated
            
            
            Previously
      reported
            
            
            As
      restatedTotal
      assets
            
            $
            15,147,078
            
            
            $
            269,569
            
            
            $
            15,539,062
            
            
            $
            355,202
            
            
            $
            18,812,968
            
            
            $
            3,629,108Total
      liabilities
            
            
            53,314
            
            
            
            53,314
            
            
            
            136,393
            
            
            
            136,393
            
            
            
            266,390
            
            
            
            266,390Additional
      paid-in capital
            
            
            16,452,400
            
            
            
            16,452,400
            
            
            
            18,839,361
            
            
            
            18,839,361
            
            
            
            28,407,777
            
            
            
            28,407,777Accumulated
      deficit
            
            
            (1,358,636
            )
            
            
            (16,236,145
            )
            
            
            (3,436,692
            )
            
            
            (18,620,552
            )
            
            
            (9,861,199
            )
            
            
            (25,045,059
            )Total
      shareholders' equity
            
            
            15,093,764
            
            
            
            216,255
            
            
            
            15,402,669
            
            
            
            218,809
            
            
            
            18,546,5782
            
            
            
            3,362,718Total
      liabilities and shareholders' equity
            
            $
            15,147,078
            
            
            $
            269,569
            
            
            $
            15,539,062
            
            
            $
            355,202
            
            
            $
            18,812,968
            
            
            $
            3,629,108Statement
      of OperationsJune
      30, 2004
            June
      30, 2005
            June
      30, 2006Previously
              reported
            
            
            As
      restated
            
            
            Previously
      reported
            
            
            As
      restated
            
            
            Previously
      reported
            
            
            No
      restatmentGeneral,
      Administrative, Depreciation & Officers Compensation
            
            $
            188,086
            
            
            $
            188,086
            
            
            $
            1,103,801
            
            
            $
            1,103,801
            
            
            $
            5,939,714
            
            
            $
            5,939,714Research
      and Development Costs
            
            
            0
            
            
            
            0
            
            
            
            971,290
            
            
            
            971,290
            
            
            
            544,663
            
            
            
            544,663Purchased
      IP and R&D Costs Written off
            
            
            0
            
            
            
            14,877,509
            
            
            
            0
            
            
            
            306,351
            
            
            
            0
            
            
            
            0Other
      Income
            
            
            (31,585
            )
            
            
            (31,585
            )
            
            
            (1,557
            )
            
            
            (1,557
            )
            
            
            (43,889
            )
            
            
            (43,889
            )Income
      Tax
            
            
            0
            
            
            
            0
            
            
            
            200
            
            
            
            200
            
            
            
            200
            
            
            
            200Net
      loss
            
            $
            (156,483
            )
            
            $
            (15,033,992
            )
            
            $
            (2,073,734
            )
            
            $
            (2,380,085
            )
            
            $
            (6,440,688
            )
            
            $
            (6,440,688
            )Loss
      per share, basic and diluted
            
            $
            (0.01
            )
            
            $
            (0.30
            )
            
            $
            (0.02
            )
            
            $
            (0.03
            )
            
            $
            (0.03
            )
            
            $
            (0.03
            )
















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
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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.











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







- 22
-









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, 2005AssetsCurrent
      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
            
            
            
            113,814Total
      assets
            
            $
            3,629,108
            
            
            $
            355,202Liabilities
      and stockholders' equityCurrent
      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 (Note 4)
            
            
            (25,045,059
            )
            
            
            (18,604,572
            )Total
      stockholders’ equity
            
            
            3,362,718
            
            
            
            218,809Total liabilities &
      stockholders' equity
            
            $
            3,629,108
            
            
            $
            355,202





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





- 23
-









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, 2006RevenuesOperating
      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
            
            
            15,834Purchased
      IP and R&D costs written off  (Note 4)
            
            
            0
            
            
            306,351
            
            
            15,183,860Depreciation
            
            
            36,219
            
            
            33,718
            
            
            118,995Total
      Operating Expenses
            
            $
            6,484,377
            
            $
            2,381,442
            
            $
            25,222,606Income
      (Loss) From Operations
            
            
            (6,484,377
            )
            
            (2,381,442
            )
            
            (25,222,606
            )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
            )
            
            (2,379,885
            )
            
            (25,029,806
            )Income Tax
            
            
            200
            
            
            200
            
            
            400Net
      Loss
            
            $
            (6,440,688
            )
            $
            (2380,085
            )
            $
            (25,030,206
            )Loss
      Per Common Share - Basic and Diluted
            
            
            (0.04
            )
            
            (0.03
            )
            
            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.








- 24
-









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 30-6-06Cash
      flows from operating activitiesNet loss
            
            $
            (6,440,487
            )
            
            $
            (2,380,085
            )
            
            $
            (25,045,059
            )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
            
            
            (1,054,774
            )
            
            
            (14,192
            )
            
            
            (1,097,133
            )Change in security deposits
            
            
            (26,911
            )
            
            
            0
            
            
            
            (26,911
            )Change in current liabilities
            
            
            129,997
            
            
            
            83,079
            
            
            
            263,890Net
      cash used in operating activities
            
            $
            (5,635,366
            )
            
            $
            (1,829,563
            )
            
            $
            (8,519,454
            )Cash
      flows from investing activitiesProceeds 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 purchased – net
            
            
            0
            
            
            
            --
            
            
            
            (20,198
            )Net
      cash provided by investing activities
            
            $
            (130,810
            )
            
            $
            (11,838
            )
            
            $
            (599,738
            )Cash
      flows from financing activitiesProceeds from sale of A, B, and C units
            
            
            103,700
            
            
            
            0
            
            
            
            1,819,950Offering costs - private placements
            
            
            0
            
            
            
            0
            
            
            
            (69,625
            )Deferred offering costs - registration statement
            
            
            0
            
            
            
            0
            
            
            
            (40,000
            )Treasury Stock
            
            
            0
            
            
            
            0
            
            
            
            (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
            
            
            
            
            
            
            
            6,131,544Net
      cash provided by financing activities
            
            $
            6,235,244
            
            
            $
            1,934,000
            
            
            $
            9,784,789Net
      increase (decrease) in cash and cash equivalents
            
            
            469,068
            
            
            
            92,599
            
            
            
            665,597Cash
      and cash equivalents, July 1
            
            
            196,529
            
            
            
            103,930
            
            
            
            0Cash
      and cash equivalents, June 30
            
            
            665,597
            
            
            
            196,529
            
            
            
            665,597





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 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
            
            TotalsBalances,
      July 1, 2004
            
            
            
            92,147,220
            
            9,215
            
            16,443,185
            
            (16,224,487)
            
            (11,658)
            
            216,255Warrants
      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
            
            
            
            
            
            
            400,000Net
      loss for year ended
              June
      30, 2005
            
            
            
            
            
            
            
            
            
            
            
            
            (2,380,085)
            
            
            
            (2,380,085)Comprehensive
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (4,322)
            
            (4,322)Balances
      June 30, 2005
            
            
            
            
            119,571,879
            
            
            11,957
            
            18,827,517
            
            
            (18,604,572)
            
            (15,980)
            
            218,809Issuance
      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
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (21,438
            )
            (21,438
            )Net
      Loss for the year to 30 June 2006
            
            
            
            
            
            
            
            
            
            
            
            
            (6,440,487
            )
            
            
            (6,440,487
            )Balances
      30 June 2006
            
            
            
            
            205,477,579
            
            
            20,448
            
            28,424,747
            
            
            (25,045,059
            )
            (37418
            )
            3,362,108





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





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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.





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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


The
Company had previously capitalised intangible assets purchased in 2004 and 2005
totalling $14,877,509 and $306,351 respectively. To comply with SFAS 141, and to
correct the accounting error in accordance with the requirements of SFAS 154 and
APB 20, we have been restated  the current  retained losses
to reflect the intangible assets written off in their year of
acquisition,





Revenue
Recognition





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





Research
and Development





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





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Loss Per
Share





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





New
Accounting Pronouncements





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





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





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





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





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.





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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.





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.





To comply
with SFAS141, and to correct the accounting error in accordance with the
requirements of SFAS 154 and APB 20, we have been restated  the
current  retained losses to reflect the intangible assets written off
in their year of acquisition. The effect of this is to increase the previously
reported accumulated  losses on June 30, 2005, from $3,420,712 to
$18,604,572; and the accumulated losses for June 30, 2006 from $9.861,199 to
$25,045,059





NOTE
4 - 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 $9,585,000. 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
5 - 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
6 - 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
instalments





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.





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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 - 1st
year


3.3
million @ 25 cents per share - 2nd
year


3.4
million @ 30 cents per share - 3rd
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
7 -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.





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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.





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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
$3,362,718.





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
8 - 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
8 - SUBSEQUENT EVENTS OTHER





Subsequent
Events Other:





1.
            August
      8, 2006. After pulling out of the merger with Beijing E-World, NME, Inc
      was able to renegotiate a Joint Venture instead.2.
            August
      31, 2006. The Company obtained a short term loan for 180 days from Tribal
      Sart for $1.1 million, through its subsidiary New Medium Enterprises UK
      Ltd, in return for a debenture placed and shares of NME, Inc used as
      collateral.3.
            August
      31, 2006. Philip David, resigned as Director.4.
            We
      deemed the time recently necessary to start hiring very well known and
      respected people as Advisors to the Board and in-house employees. This
      wave started with bringing Jim Cardwell, ex-President of Warner Home Video
      on board. At the same time, NME has lately hired the services of Zeno, a
      subsidiary of Edelman, the only independent global PR firm to handle the
      PR worldwide regarding our commercialization and launch strategies. Over
      the next 12 months, Zeno will guide NME along the right tracks to truly
      bring out the best of our fascinating and industry-enhancing
      technologies.





Off-Balance
Sheet Transactions:





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




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ITEM 8A. FINANCIAL CONTROLS & PROCEDURES





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





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





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





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





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





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





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





·
            Integrated
      system for the purchase of fixed assets, goods and services as per the
      attached flow chart·
            Defined
      more closely the segregation of duties among the staff·
            Improved
      control over cost of business travel by centralising bookings of flights,
      trains, hotels, etc. by one member of staff subject to approval by the
      CEO·
            Standard
      expense form for staff to claim for expenses which are categorized and
      supported by receipts subject to approval by the CEO·
            Increase
      in monitoring and training of staff·
            Production
      of monthly management accounts and reports·
            Formalized
      the organization of the company as per the attached
  chart·
            Installation
      of an approved accounting package which improved the system to ensure that
      all information required to be disclosed in the Exchange Act reports are
      accumulated and communicated to management in the manner that permits
      adequate time for the principal executive and financial officers to
      consider such information and allow timely decisions of such information
      required by disclosures





Payments
are also made in accordance with signed agreements for contractual obligations
and services rendered. The internal controls were put in place from the 3rd and
4th
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.





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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.





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





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





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





EDUCATION





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





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





PUBLICATIONS





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





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





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





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





On June
5th,
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).





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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.





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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.





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Table of
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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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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.





ITEM14. 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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PART
IV





ITEM 16. SUBSEQUENT EVENTS





1.
            On
      July 31, 2006.Warrant Series A and C expired. New Warrants F have been
      issued, totalling $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 Quorus 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/Geoff  Russell,President, CEO
 April 4,
2008
 
 By: /s/Geoff
Russell,
 Principal
Executive Officer
 April 4,
2008
   By: /s/Irene SP
Kuan
 Principal
Accounting Officer
 April 4,
2008
 
 By: /s/Irene SP
Kuan
 Principal
Financial Officer
 Date:
April 4, 2008
 
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