The accompanying notes are an integral part of the financial statements.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
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 Optical Disc format. An industrial prototype was produced in March 2006. As of September 30, 2006 the Company had generated minimal revenues and is considered a development stage company. Management is pursuing additional capital through various methods.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of New Medium Enterprises, Inc. and its subsidiaries. Inter company 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.
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 consist of cash, money market funds and other highly liquid investments with a maturity of three months or less from the date of purchase. The Company has not experienced any losses on its cash or cash equivalents.
Investments 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.
Intangible Assets are amortized using the straight-line method over their estimated period of benefit, ranging from one to ten years. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization. No impairments of intangible assets have been identified during any of the periods presented.
The components of finite-lived intangible assets are as follows:
| September 30, 2006 | September 30, 2005 |
| $15,183,860 | $15,183,860 |
Components of finite-lived Intangible assets acquired during fiscal years ended
| September 30, 2006 | September 30, 2005 |
| $ 0 | $ 0 |
The estimated future amortization expense related to intangible assets as of September 30, 2006 is as follows:
| 2007 | 2,277,579 |
| 2008 | 3,036,772 |
| 2009 | 3,036,772 |
| 2010 | 3,036,772 |
| 2011 | 3,036,772 |
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 three months ended September 30, 2006 and 2005 there were no revenues.
Other Income of $2,389 consists of interest received on its bank and fixed deposit account.
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 product 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.
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.
STOCK - BASED COMPENSATION
As permitted by Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" (SFAS 123). The Company continues to apply the accounting rules of APB No. 25. APB No. 25 measures compensation expenses on the first date at which both numbers of share and exercise price are known. Under the Company's plans this would typically be the grant date. To the extent that the exercise price equals or exceeds the market value on the date of the grant, no compensation expenses are reorganized under this accounting treatment.
NOTE 3 LIQUIDITY AND PROFITABILITY
As reflected in the accompanying financial statements, the Company incurred losses for the current and prior periods and expects to incur a loss in the upcoming fiscal period. Based upon the cash utilization rate and in order to maintain the Company for the following year, management will have to raise additional funds through equity and or debt financing. It is management's opinion that it can raise the needed capital.
NOTE 4 INVESTMENT IN INTELLECTUAL PROPERTY
On January 13, 2004, the Company acquired the business and all the intellectual property assets pertaining to a new DVD format from MultiDisk Ltd. and TriGM International SA. In connection with the acquisition the Company issued 72,605,776 shares of its stock to the shareholders of MultiDisk and TriGM. These shares were valued at $14,521,155, which approximates the fair market value of that property. The Company also paid additional fees in funding, legal and brokerage fees, which have been capitalized, part of these funds ($150,000) was allocated to Machinery and Equipment.
The asset "Investment in Intellectual Property," having a definite life will be amortized over its expected life using the straight-line method starting in the period reflecting the pattern in which the Company use up the benefits the asset provides.
NOTE 5 INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, (SFAS 109) "Accounting for Income Taxes." Under the asset and liability method, deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statements carrying amounts and the tax bases of existing assets and liabilities. Under SFAS 109, deferred tax assets may be recognized for temporary differences that will result in deductible amounts in future period. A valuation allowance is deferred tax asset will not be realized. As of June 30, 2006 the Company had a Federal and State tax net operating loss of approximately $6,440,688, which may be applied against future taxable income expiring in the year 2020. The Company established a 100% valuation allowance equal to the net deferred tax assets, as the Company could not conclude that it was more likely than not that the deferred tax asset would be realized.
NOTE 6 COMMITMENTS AND CONTINGENCIES
The Company rents office space from a third party on a month-to-month basis, amounting to $11,200 per month. On 1st November 2006, the company also contracted to rent office space in Los Angeles, California for seven months, at $1,976 per month. We have also hired office machinery costing about $500 per month.
In May 2006, the company entered into a contract of sale with VDL ODMS and is committed to payments of Euro 1.75 million for equipment purchases and a further Euros 479,235 for the phase 2-4 of the development and engineering projects.
In May 2006, the company signed a Share Purchase and Investment Agreement with MPEG Technology Company Ltd, for 51% of MPEG on the following terms:
| a) | Pay 15 million fully paid up 1 year restricted shares at time of contract |
| b) | Pay a sum of US $1.25 million in cash in installments |
On June 17, 2006, The company signed an agreement with Doug Carson, Inc. to manufacture VMD format optical discs for a contractual price of $500,000.In July 2006, the company approved the security agreement with DCA, Inc, and signed a promissory note for $150,000 secured by 3,000,000 shares in NME, Inc. Between July to September, a total of $250,000 was paid, leaving, $100,000 due in October and a final payment of $150,000 end December 2006. The 3,000,000 shares will be payable in the event of default on the final December payment of $150,000
In August 8 2006, after re-negotiations with Beijing E-World, the Company has formulated a joint venture agreement whereby when signed, the company shall issue in total 71.5 million shares in the following manner:
| a) | 20 million fully paid up shares Restricted under Rule 144 at 10 cents per share on the establishment of the Joint Venture, with a lock-up period of 12 months and a selling limit of 5% per month |
| b) | Warrants of up to 10 million shares to be exercised over a 3 year period i.e. 3.3 million @ 20 cents per share - 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 shares in the parent Company were offered as collateral for the loan. The interest payable as at September 30, 2006 is $5,920.
In October 2006, the company placed an order with Jiangsu Shinco Electronics Group Manufacturing Co. Ltd for producing first generation VMD players to be launched in November 2006. The company is committed to pay $46,000 upon delivery of the first batch of players.
LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company is a party to, or to which any of the Company's properties are subject.
RELATED PARTY TRANSACTIONS
The company paid for R&D to the following - $38,400 to V Tech, for the scientists, $13,737 to Turtle Technologies (India) Pvt Ltd and $7,429 its associated company, for contracted staff - $9,295 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, and will receive and ongoing monthly fee of $6666.66.
NOTE 8 STOCKHOLDERS' EQUITY
The Company's authorized capital stocks consist of 500,000,000 shares of common stock (par value of $.0001) and 200,000,000 shares of non-voting preferred stock (par value $.0001).
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.
During the period to 30 September 2006, 275,333 shares of common stock were issued for services rendered (for analysis, see notes under Liquidity and resources). The total number of shares issued as at 30 September, 2006, is 205,752,912 with a valuation of $82,000,000.
On July 17 2006 the Company has issued 133,333 common shares for services rendered. Shares were valued at $12,000.
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.
No preferred shares have been issued. It is within the discretion of the Board of Directors to determine the references of the preferred stock. The Company on November 1, 2005 determined the preferences of the preferred stock. The Preferred shares shall be issued from time to time in one or more series, with such distinctive serial designations as shall be stated and expressed in the resolution or resolutions providing for the issuance of such shares as adopted by the Board of Directors; the Board of Directors is expressly authorized to fix the number of shares of each series, the annual rate or rates of dividends for the particular series, the dividend payment dates for the particular series and the date from which dividends on all shares of such series issued prior to the record date for the first dividend payment date shall be cumulative, the redemption price or prices for the particular series, the voting powers for the particular series, the rights, if any, of holders of the shares of the particular series to convert the same into shares of any other series or class or other securities of the corporation, with any provisions for the subsequent adjustment of such conversion rights, the rights, if any, of the particular series to participate in distributions or payments upon liquidation, dissolution or winding up of the corporation, and to classify or reclassify any un issued preferred shares by fixing or altering from time to time any of the foregoing rights, privileges and qualifications.
All the Preferred shares of any one series shall be identical with each other in all respects, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative; and all preferred shares shall be of equal rank, regardless of series, and shall be identical in all respects except as to the particulars fixed by the Board as hereinabove provided or as fixed herein.
NOTE 9 SUBSEQUENT EVENTS
On August 8, 2006, after pulling out of the merger with Beijing E-World, NME, Inc was able to renegotiate a Joint Venture Agreement instead. This agreement is subject to approval by the Chinese Authorities, and is currently still on-going.
On 6 October 2006, New Medium Enterprises Inc (NME) entered into a content Licensing and Distribution agreement with VCL Communications GmbH (VCL) of Wolfratshauser Str. 84, 81379 Munich, Germany. VCL will make available its entire catalogue of 800 titles to NME. According to Datty Ruth, CEO of VCL, the new HD VMD format has the potential to radically influence the European consumer market for high definition content. VCL also has a long-standing history of supporting emerging formats where it is clear that there is the potential to shape the market for the benefit of consumers, as is the case with HD VMD.
In October 2006, the company placed an order with Jiangsu Shinco Electronics Group Manufacturing Co. Ltd for producing first generation VMD players to be launched in November 2006. The company is committed to pay $46,000 upon delivery of the first batch of players.
NME, Inc. were visitors at the MIPCOM 2006 show in Cannes in October 2006, where the company entered into a License Agreement with VCL Communications GmbH - who will provide contents for the company’s product pilot launch in Germany. The company also signed a Distribution Agreement with VCL being sole and exclusive distributor of VMD products in German speaking Europe for three years.
FORWARD LOOKING STATEMENTS
Some of the information in this 10Q Report or the documents we incorporate by reference in this 10Q Report may contain forward-looking statements. You can identify forward-looking statements by the use of forward-looking language such as "will likely result," "may," "believes," "is expected to," "is anticipated to," "is forecasted to," "is designed to," "plans to," "predicts," "seeks," "estimates," "projects," "intends to" or other similar words. Important factors that could cause actual results to differ materially from expectations include:
| · | failing to produce a workable product; |
| · | failure to raise sufficient capital to fund business operating plans; |
| · | market conditions and demand for new optical storage Media development and storage technology; |
| · | our competitors' ability to successfully develop new technologies to satisfy demand for data storage; |
| · | difficulties in achieving sales, gross margin and operating expense targets based on competitive market factors; |
| · | difficulties in competing successfully in the markets for new products with established and emerging competitors; |
| · | difficulties with single source suppliers, product defects or product delays; |
| · | difficulties in forming and maintaining successful joint venture relationships; |
| · | difficulties in obtaining, maintaining and using intellectual property protections; |
| · | changes in data storage technological protocols and standards; |
| · | difficulties in state, federal, foreign and international regulation and licensing requirements; |
| · | litigation actions by directors, employees, investors and others; |
| · | limited operation and management history; |
| · | dependence on key personnel; |
| · | inability to conclude the relationship as outlined in the letter of intent and other documents executed with Eros into definitive agreements; |
| · | other factors discussed in this 10Q Report |
We are a development stage company currently engaged in the development of our proprietary technology, VMD, a next generation, high capacity optical storage disc. To date, we have generated no revenues.
We have entered into agreements with V-Tech, LaDIS and Silicon Valley Plc for the research and development of prototypes and commercializing product. V-Tech consists of a unique scientific and entrepreneurial team with many years of experience in optical storage Media development and specifically multilayer technology. All intellectual property, patents, equipment, know-how and products developed by V-Tech, LaDis and Silicon Valley Plc belong to us. The overall management of our Company is carried out from our headquarters in the UK. V-Tech became a subsidiary of Silicon Valley Plc at the end of February 2006.
In the fourth quarter 2006, the company began to gear up for production of VMD discs and the first generation VMD players. By doing so, the company will need to continue to raise additional capital to finance the manufacturing facility and engineering teams.
Plan of Operations for the next 12 months:
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 (i.e. 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.
By the end of 2006, 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… 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.
Beijing E-World, China
On June 25, 2005, New Medium Enterprises, Inc. and Beijing E-World Technology Co Ltd executed a Memorandum of Intent to form a joint R&D program for the production of a disc player which will incorporate/combine EVD and VMD technologies.
NME, Inc. and Beijing E-World have finalized a definitive agreement for a commercial partnership to exploit NME's VMD technology. The objective is for Beijing E-World to adopt VMD for the Chinese market and upgrade their standard EVD player to read VMD discs.
Beijing E-World is one of China's largest optical disc 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. Beijing E-World's EVD and other technologies are 'red laser' based as they see it as the current market standard like with CDs and DVDs.
Beijing E-World is currently seeking expansion funding and has aspirations to trade outside of mainland China. We are seeking growth funding and are keen to expand in to Far Eastern and other emerging DVD markets.
Beijing E-World provides its customers with one-stop optical disc based products and services such as software development, hardware design and system integration. The Company's current main products are special EVD boards developed in conjunction with US companies such as LSI Logic (LSI), ST Microelectronic, and Sigma Designs.
Beijing 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, Beijing 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, 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 very attractive and cost effective products 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 Beijing to expand overseas whilst enhancing its EVD red laser standard with VMD's compatible technology, gaining much greater capacity, NME's western world momentum and potential markets.
Beijing E-World Technology Co., Ltd is a Chinese public listed company engaged in the development of electronic chip and board technology. Beijing E-World is the developer of EVD which is currently selling in China. Under the parameters of the agreement NME Inc. and Beijing E-world will collaborate on R&D to develop a dual EVD/VMD player.
Beijing E-world will have access to the VMD technology in China, royalty free while NME Inc. will be free to market the player technology to the rest of the world, and charge a royalty for it.
NME Inc. will also grant Beijing E-World the right to produce VMD optical discs in China under a new brand.
For such a right, NME Inc. will have the right to royalty payments as will be agreed by separate agreement. Beijing E-World has agreed to place an order of 100,000 VMD discs from NME Inc. for pilot marketing work in China for 2006 subject to the positive result of the aforementioned R&D collaboration.
The parties are working towards establishing a joint international Marketing company operating from a jurisdiction outside of China in the UK, to market VMD and EVD products, including the players, compression technologies, audio systems, VMDs and the HD digital cinema systems.
Additionally, Beijing E-World will also allow NME to act as a marketing channel for Beijing E-World products in other world markets.
Eros, India
On June 24, 2005, New Medium Enterprises, Inc. entered into a strategic agreement with Eros Media Ltd, a leading distributor of Bollywood movies worldwide and mainstream western media in India.
Bollywood is the most prolific film industry in the world. Eros is the single largest International distributor of Bollywood films worldwide with over 70% market share in the business. It has distributed some of the biggest Bollywood blockbusters of all times - Dil Se, Hum Aapke Hain Kaun, Taal, Saath Hain, Dilwale Dulhaniya Le Jayenge to name a few. Eros content library includes: approximately 2,000 Indian film titles approximately 20,000 Indian music and dance videos, documentaries, sport and other genres.
According to the Letter of Intent executed with Eros, Eros will have rights to use VMD to distribute all the above content plus any new movies acquired or produced by Eros and plans to do this on 500,000 VMD discs later this year. Eros plans to show its movies at the Cannes film festival in High Definition on VMD discs and corresponding drives.
The other key terms of the agreement are; Eros has the right to showcase all of its content on VMD optical discs in high definition (HD) to promote itself and its content to the market. Eros will commercialize at its own expense 50 block buster Bollywood titles for 2006. These expenses will include: manufacturing of the VMD discs, stamping the content onto the discs distribution and marketing of HD Bollywood movies on VMD. Eros will place an order for 500,000 VMD discs (50 films, 10,000 each) for Christmas 2006, with a mutually agreed replicator. Eros has taken a 5% stake in our Company.
On September 30, 2006, we had available in cash the sum of $553,101 and accrued expenses of $132,600.
Further to our raised funds through private equity transactions from an accredited investors during the period to 30 September, 2006, we received in August 2006, 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.
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.
We are currently in discussions with several sources of funds for additional investments. 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.
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 is also 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.
Under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Operating Officer the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) of the end of the period covered by this report (the Evaluation Date). Based upon that evaluation, the Chief Executive Officer and Chief Operating Officer concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were effective in timely alerting them to the material information relating to the Company (or its consolidated subsidiaries) required to be included in the Company's periodic filings with the SEC.
During the quarter ended September,30, 2006 there was no significant change in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
There are no legal proceedings to which the company is a party to or which any of their property is subject.
None.
None.
None.
None.
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 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 36,754,249 common shares equal to 17.9%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 20.8 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.
May Ltd. also owns 58.8% of the outstanding stock each of Triband Global Limited and also owned 85% of OneSoft Technologies UK Limited and associated companies. The latter has now been acquired by Silicon Valley Plc through new issue of shares.
May Ltd. also Owns 100% of Visson Technology and 100% of V-Tech, a key R&D facility of the company. Towards the end of February 2006, the shares in V-Tech were sold to Silicon Valley Plc for approximately $44,000.
May Ltd. also owns 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.
| 1. | During the annual period ending September 30, 2006 the company paid $38,400 to VTech, a primary R & D Facility which pays key scientists. |
| 2. | The Company shares its office space with various entities in which May Ltd. is a principal shareholder. From October 2005, a new rental agreement was signed with Pentagon Glass for larger office space including previous Triband Global offices for a monthly fee of 6,098 British Pounds. During the Period ending September 30, 2006 NME reimbursed to OneSoft Retail and Business Solutions, a total of $9,295 for use of its office staff. The company also paid Triband Global $16,951 for Telephony Switch to enable the start of its FMTV project in the near future. |
| 3. | During the quarter ending September 30, 2006, the Company continued with the services of OneSoft Technologies UK, formerly Turtle Technologies UK Ltd to provide certain consulting services related to the design of its website, and for R&D with its associated company in India. For the September 30, 2006, the company paid $13,737 to Turtle Technologies (India) Pvt Ltd for their ongoing R&D and website development and maintenance. |
| 4. | During the quarter ending September 30, 2006, the company paid $9,295 to Global MediaCast Ltd., for use of its office staff. |
| 5. | During the quarter to September 30, 2006, the Company continued with 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 will receive an ongoing monthly fee of $6,666.66. |
MAHESH JAYANARAYAN, CEO- RELATED PARTY TRANSACTIONS:
Prior to being appointed as CEO, Mahesh Jayanarayan was a consultant to the company. In August 2004 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 British Pounds equivalent of approximately $60,000.
Mahesh Jayanarayan and family members owns 10.4% of Triband Global Ltd, had owned 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 also a Director of Triband Global Ltd (resigned 3 July 2006), 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. OneSoft Technologies and V-Tech are wholly owned subsidiaries 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. # 3 & 4.
| Date of Earliest Event | | Date 8k Filed | | Summary of 8K Incorporated by Reference |
| 10/10/2006 | | 18/10/2006 | | Contract Agreement with VCL Communications GmbH(VCL) for making available 800 titles of NME |
| 10/10/2006 | | 18/10/2006 | | NME appoints Lawrence Meyers as a Media and content Advisor to the board |
| 10/10/2006 | | 18/10/2006 | | NME announce appointment of Mr. Neil Bottrill as Vice President, Creative Services for the Authoring Compression Business |
| 05/09/2006 | | 13/09/2006 | | Short term Loan note issued US$1,100,000.00 to the order of tribal SARL |
| 05/09/2006 | | 07/09/2006 | | NME, Inc. announced today that it has negotiated a $1.1 million, Short Term Debenture Loan Note for 180 days through its UK subsidiary New Medium Enterprises UK Limited |
| 05/09/2006 | | 07/09/2006 | | Mr. Philip David, an independent director of NME, Inc has resigned with effect from 31 August 2006, citing other professional commitments |
| 22/09/2006 | | 26/09/2006 | | NME has appointed Zeno Communications (UK) Ltd (“Zeno”) a Daniel J Edelman company, to provide public relations support |
| 28/08/2006 | | 01/09/2006 | | Press release: NME invited James Cardwell, the former president of Warner home |
| 07/07/2006 | | 10/07/2006 | | NME withdraws from planned Acquisition of Beijing E-world |
| | | | | |
| | | | | Exhibits Period Ending 6-30-2006 |
AT SEPTEMBER 30, 2006, THE COMPANY'S CURRENT ASSETS AMOUNTED TO $3,224,648 WHILE CURRENT LIABILITIES AMOUNTED TO $1,460,063.
In accordance with the requirements of the exchange act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NEW MEDIUM ENTERPRISES, INC.
November 13, 2006
BY: /s/ MAHESH JAYANARAYAN
Mahesh Jayanarayan
PRESIDENT & CHIEF EXECUTIVE OFFICER
