New Medium Enterprises (NMEN) 10QSB 2008 Q2 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

Quarterly Report under Section 13 or 15 (d) Of the Securities Exchange Act of 1934

For the Quarter ended December 31, 2007

Commission File Number: 333-51880

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

NEVADA	11-3502174
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	(I.R.S. EMPLOYER IDENTIFICATION NO.)

Geoffrey Russell, COO

195 The Vale

London UK W3 7QS

Tel: 011 44 20 8746 2018

Fax: 011 44 208 749 8025

(Address, including zip code and telephone numbers, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12(g) of the Act:   Common Stock, $0.0001 par value

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 12 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x   No o

Indicate by check mark whether the registrant is a shell company (as defined in rule 12 b -2 of the Exchange Act).Yes o No x

Transitional Small Business Disclosure Format (Check One):Yes o No x

Shares of Common Stock, $0.0001 par value, outstanding as of February 12, 2008: 349,107,035

NEW MEDIUM ENTERPRISES, INC.

Form 10-Q for the Quarter Ended December 31, 2007

TABLE OF CONTENTS

		PAGE
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements & Supplementary Data	3
Item 2.	Management’s Discussion & Analysis	18
Item 3.	Controls & Procedures	20
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Default Upon Senior Securities	21
Item 4.	Submission of Matters to a Vote of Security Holders	21
Item 5.	Other Information	21
Item 6.	Exhibits	21
	Signatures	21

- 2 -

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

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: msbcpas@gmail.com

The Board of Directors and Stockholders New Medium Enterprises, Inc.

We have reviewed the accompanying consolidated balance sheets of New Medium Enterprises, Inc. as of December 31, 2007 and the consolidated statements of operations for the three & six months ended December 31, 2007 & 2006 and consolidated statements of cash flows and shareholders equity for the six months then ended. These financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

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 has incurred net losses and has experienced severe liquidity problems. These conditions raise substantial doubt about its ability to continue as a going concern. The statements do not include any adjustments that might result from the outcome of this uncertainty.

We have previously audited, in accordance with auditing standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of New Medium Enterprises, Inc. as of June 30, 2007 and the related consolidated statements of income retained earnings and comprehensive income, and consolidated statements of cash flows for the year then ended; and in our report dated September 07, 2007 we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2007, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Morgenstern, Svoboda, & Baer CPA's P.C.

Certified Public Accountants

New York, NY

February 14, 2008

- 3 -

NEW MEDIUM ENTERPRISES, INC.

(A development stage company)

CONSOLIDATED BALANCE SHEET

At December 31, 2007

	December 31, 2007			June 30, 2007
		$			$
ASSETS
Current Assets
Cash and Cash Equivalents		353,818			308,419
Cash receivable		-			1,875,000
Trade Debtors		320,830			-
Investments		-			-
Prepaid Expenses		443,878			409,752
Stock held by Third Party		57,714			72,957
Rental Deposits		51,395			45,595
Supplier Deposits		904			904
Other Receivable		140,263			79,090
Value Added Tax recoverable		30,151			31,342
Escrow Deposits		1,050,000			1,050,000
Total Current Assets		2,448,953			3,873,059
Property and Equipment		2,126,826			1,492,484
Less: Accumulated Depreciation		(264,282	)		(194,072	)
		1,862,544			1,298,412
Patents		90,491			57,002
Total Other Assets		1,953,035			1,355,414
Total Assets		4,401,988			5,228,473
Current Liabilities
Accrued Expenses and Accounts Payable		1,207,673			736,247
Note Payable		1,125,000
Total Current Liabilities		2,332,673			736,247
					--
Long Term Loan		3,244,000			2,269,000
COMMITMENTS AND CONTINGENCIES
Stockholders’ Equity
Preferred Stock $.0001 par value, Authorized 200,000,000 shares; none issued
Common Stock, $.0001 par value, Authorized 500,000,000,            issued and outstanding 349,107,035 & 323,035,700 shares		34,912			32,305
Additional paid in capital		69,300,791			63,041,095
Accumulated other comprehensive gain (loss)		(35,642	)		(38,641
Deficit accumulated during the development stage		(70,474,746	)		(60,811,533	)
Total Stockholders' Equity		(1,174,685	)		2,223,226
Total Liabilities & Stockholders' Equity		4,401,988			5,228,473

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

- 4 -

NEW MEDIUM ENTERPRISES, INC.

(A development stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended			Three Months Ended			From Inception(August 2, 1999) to
	December 31, 2007			December 31, 2006			December 31, 2007
	$			$			$
Revenues (sale of players)		419,677			-			647,650
Cost Of Goods Sold		(390,635	)		-			(591,744	)
Gross Profit		29,042						55,906
Operating Expenses:
Direct expenses		48,851			-			48,851
Marketing Expenses		403,699			-			1,444,547
General and Administrative		1,086,626			4,308,817			12,603,953
Research and Development Costs		211,998			107,906			14,827,507
IP Written Off-Adjustment		-			-			15,183,860
Founders Stock Option 2001 Exercised		-			-			2,991,719
Staff Compensation Based Stock Issue		989,950			-			21,365,776
Officer's Compensation		142,845			77,784			1,472,431
Unrecoverable Debt Written Off		-			-			431,529
Loss on Foreign Currency		6,930			13,190			84,792
Depreciation		37,286			23,627			286,516
Total Operating Expenses		2,928,185			4,531,324			70,741,481
Income (Loss) From Operations		(2,899,143	)		(4,531,324	)		(70,685,575	)
Other Income		979			1,326			47,927
Investment Income		-			-			150,405
Value added tax recovered		-			-			12,897
Loss Before Income Taxes		(2,898,164	)		(4,529,998	)		(70,474,346	)
Income Tax		-			-			(400	)
Net Loss		(2,898,164	)		(4,529,998	)		(70,474,746	)
Loss Per Common Share - Basic and Diluted		(0.01	)		(0.02	)		N/A
Weighted Average Number of Shares Outstanding		346,715,535			223,773,316			N/A

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

- 5 -

NEW MEDIUM ENTERPRISES, INC.

(A development stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

	Six Months Ended			Six Months Ended			From Inception(August 2, 1999) to
	December 31, 2007			December 31, 2006			December 31, 2007
		$			$			$
Revenues		647,650			-			647,650
Cost Of Goods Sold		(591,744	)		-			(591744	)
Gross Profit		55,906						55,906
Operating Expenses:
Direct expenses		48,851			-			48,851
Marketing Expenses		691,443			-			1,444,547
General and Administrative		2,400,180			5,231,341			12,603,953
Research and Development Costs		653,467			222,390			14,827,507
IP Written Off-Adjustment		-			-			15,183,860
Founders Stock Option 2001 Exercised		-			-			2,991,719
Staff Compensation Based Stock Issue		5,559,803			-			21,365,776
Officer's Compensation		284,305			184,051			1,472,431
Unrecoverable Debt Written Off		-			-			431,529
Loss on Foreign Currency		16,919			21,237			84,792
Depreciation		70,210			47,827			286,516
Total Operating Expenses		9,725,178			5,706,846			70,741,481
Income (Loss) From Operations		(9,669,272	)		(5,706,846	)		(70,685,575	)
Other Income		6,060			3,715			47,927
Investment Income		-			-			150,405
Value added tax recovered		-			-			12,897
Loss Before Income Taxes		(9,663,212	)		(5,703,131	)		(70,474,346	)
Income Tax		-			-			(400	)
Net Loss		(9,663,212	)		(5,703,131	)		(70,474,746	)
Loss Per Common Share - Basic and Diluted		(0.03	)		(0.03	)		N/A
Weighted Average Number of Shares Outstanding		336,071,368			223,635,650			N/A

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

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NEW MEDIUM ENTERPRISES, INC.

(A development stage company)

STATEMENT OF CASH FLOWS

	Six Months Ended December 31, 2007			Six Months Ended December 31, 2006			From Inception (August 2, 1999) to December 31, 2007
Cash flows from operating activities
Net loss	$	(9,663,213	)	$	(5,703,131	)	$	(70,474,746	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		70,210			47,827			269,023
Profit on Insurance claim on Screen Broken		-			-			(3,262	)
Stock Issued for Intellectual Property R&D bought		-			-			22,621,155
Write off of web site development costs		-			-			314,303
Stock issued for services rendered		5,912,303			1,727,529			30,948,846
Stock issued for services rendered – Escrow		-			1,650,000			(1,050,000	)
Loss on sale of securities		-			-			(5,044	)
Changes in assets and liabilities:
Change in current assets		(399,695	)		7,598			(964,590	)
Change in security deposits		(5,800	)		-			(51,395	)
Change in current liabilities		1,596,426			185,380			2,332,674
Net cash used in operating activities		(2,489,769	)		(2,084,797	)		(16,063,037	)
Cash flows from investing activities
Proceed from insurance claim		-			-			14,039
Proceeds from the sale of other co. securities		-			-			13,584
Purchase of fixed assets (including Patents)		(667,831	)		(767,757	)		(2,038,177	)
Purchase (write off) of fixed assets		-			460			(212,151	)
Web site development costs/software asset		-			-			(261,402	)
Investment purchased – net		-			-			(20,198	)
Net cash provided from investing activities		(667,831	)		(767,297			(2,504,305	)
Cash flows from financing activities
Proceeds from sale of A, B, and C units		-			-			2,019,950
Offering costs-private placements		-			-			(69,625	)
Deferred offering costs-registration statement		-			-			(40,000	)
Purchase of Treasury Stock		-			-			(13,205	)
Long-term loan + SDN		975,000			-			3,244,000
Proceeds from sale of shares and warrants to various officers, founders and investors		-			-			1,346,670
Shares issued for purchase of fixed asset		-			-			137,468
Short-term loan		-			1,100,000			-
Proceeds from sale of shares		350,000			1,475,000			12,331,544
Net cash provided from financing activities	$	1,325,000		$	2,575,000		$	18,956,802
Effects of Exchange gain on Cash		2,999			(1713	)		(35,642	)
Net increase (decrease) in cash and cash equivalents		(1,829,601	)		(278,807	)		353,818
Cash and cash equivalents, beginning of period		2,183,419			665,597			-
Cash and cash equivalents, December 31, 2007	$	353,818		$	386,790		$	353,818

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

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NEW MEDIUM ENTERPRISES, INC.

(A development stage company)

STATEMENT OF STOCKHOLDERS’ EQUITY

For the period July 1, 2006 - December 31, 2007

												Retained			Accumulated
	Per								Additional			Earnings			Other
	Share		Common			Stock			Paid-in			(Accumulated			Comprehensive
	Amount		Shares			Amount			Capital			Deficit)			Loss			Totals
Balances July 01, 2006				205,477,579			20,448			28,424,747			(25,045,059	)		(37,418	)		3,362,718
Issuance of shares for services
17 July 2006		0.09		133,333			13			11,987									12,000
Issuance of shares for services
05 September 2006		0.23		50,000			5			11,495									11,500
Issuance of shares for services
05 September 2006		0.23		50,000			5			11,495									11,500
Issuance of shares for services
05 September 2006		0.23		25,000			3			5,747									5,750
Issuance of shares for services
13 September 2006		0.33		17,000			2			5,608									5,610
Issuance of shares for services
19 October 2006		0.44		104,167			10			45,823									45,833
Issuance of shares for services
19 October 2006		0.44		667,000			67			293,413									293,480
Issuance of shares for services
19 October 2006		0.44		1,000,000			100			439,900									440,000
Issuance of shares for services
19 October 2006		0.44		100,000			10			43,990									44,000
2001 Options exercised
5 December 2006		0.40		6,269,641			627			2,507,229									2,507,856
Sale of common shares to investor
5 December 2006		0.25		800,000			80			199,920									200,000
Sale of common shares to investor
5 December 2006		0.25		480,000			48			119,952									120,000
Sale of common shares to investor
5 December 2006		0.25		1,000,000			100			249,900									250,000
Sale of common shares to investor
5 December 2006		0.25		400,000			40			99,960									100,000
Sale of common shares to investor
5 December 2006		0.25		100,000			10			24,990									25,000
Sale of common shares to investor
5 December 2006		0.25		1,000,000			100			249,900									250,000
Sale of common shares to investor
5 December 2006		0.25		400,000			40			99,960									100,000
Sale of Common Shares to Investor
5 December 2006		0.25		120,000			12			29,988									30,000
Sale of common shares to investor
5 December 2006		0.25		800,000			80			199,920									200,000
Sale of common shares to investor
5 December 2006		0.25		200,000			20			49,980									50,000
Sale of common shares to investor
5 December 2006		0.25		600,000			60			149,940									150,000
Termination of MPEG Joint Venture
29 December 2006		0.11		(15,000,000	)		(1,500	)		(1648,500	)								(1,650,000	)
Adjustment to Opening Balance REF
12 May 06 (200 should be 300)							100			(100	)
Issuance of share(Held in Escrow)
29 December 2006		0.05		3,000,000			300			149,700									150,000
Issuance of share (Held in Escrow)
29 December 2006		0.1		24,000,000			2,400			2,397,600									2,400,000
Issuance of share (Held in Escrow)
29 December 2006		0.30		10,000,000			1,000			2,999,000									3,000,000
Issuance of shares for Services
3 January 2007		0.26		1,000,000			100			259,900									260,000
Issuance of share to investor
3 January 2007		0.2		4,000,000			400			799,600									800,000
Issuance of share to investor
28 February 2007		0.2131		117,316			12			24,988									25,000
Issuance of share for services
20 March 2007		0.30		40,000,000			4,000			11,996,000									12,000,000
Issuance of share to investor
31 March 2007		0.25		1,500,000			150			374,850									375,000
Termination of BEW Joint Venture
31 March 2007		0.10		(24,000,000	)		(2,400	)		(2,397,600	)								(2,400,000	)
Adjustment to issuance for services
1 April 2007		0.30		(1,000,000	)		(100	)		(299,900	)								(300,000	)
Issuance for services
3 April 2007		0.29		275,000			28			79,722									79,750
Issuance for services
3 April 2007		0.29		275,000			28			79,722									79,750
Issuance for services
4 April 2007		0.28		100,000			10			27,990									28,000
Issuance of share to investor
11 April 2007		0.18		555,422			56			99,944									100,000
Issuance of share to investor
24 April 2007		0.23		2,173,913			217			499,783									500,000
Issuance for services
30 April 2007		0.23		2,250,000			225			517,275									517,500
Penalty issuance of share to investors for nonSB2 registration
25 May 2007		0.26		668,000			67			173,613									173,680
Penalty issuance of share to investors for nonSB2 registration
25 May 2007		0.26		287,000			29			74,591									74,620
Issuance of shares for assets purchased from Semilla
1 June 2007		0.27		30,000,000			3,000			8,097,000									8,100,000
Issuance for services
1 June 2007		0.27		5,000,000			500			1,349,500									1,350,000
Issuance for services
1 June 2007		0.27		2,000,000			200			539,800									540,000
Issuance of share to investors
7 June 2007		0.25		2,400,000			240			599,760									600,000
Issuance for services
7 June 2007		0.18		250,000			25			44,975									45,000
Warrants exercised
7 June 2007		0.10		2,000,000			200			199,800									200,000
2001 Options exercised
14 June 2007		0.30		1,612,875			161			483,702									483,863
Issuance of shares to investor
20 June 2007		0.25		400,000			40			99,960									100,000
Issuance for services
20 June 2007		0.18		41,667			4			7,496									7,500
Issuance of shares to investor
29 June 2007		0.25		1,500,000			150			374,850									375,000
Issuance of shares to 10 investors
29 June 2007		0.25		6,000,000			600			1,499,400									1,500,000
Issuance for services Re Jan 07 inv
29 June 2007		0.32		45,208			4			14,463									14,467
Issuance for services Re Feb 07 inv
29 June 2007		0.35		59,619			6			20,861									20,867
Issuance for services Re Mar 07 inv
29 June 2007		0.29		96,092			10			27,857									27,867
Issuance for services Re Apr 07 inv
29 June 2007		0.23		105,217			11			24,189									24,200
Issuance for services Re May 07 inv
29 June 2007		0.28		86,429			8			24,192									24,200
Issuance for services Re June 07 inv
29 June 2007		0.30		86,222			8			25,859									25,867
Issuance for services
29 June 2007 - Shares last year issued		0.095		1,400,000			140			132,860									133,000
Cancellation of shares buy back		0.2198		(43,000	)		(4	)		(9,451	)								(9,455	)
Comprehensive Loss																(1,223	)		(1,223	)
Net Loss for the year to June 30, 2007													(35,766,474	)					(35,766,474	)
Balances June 30, 2007				323,035,700			32,305			63,041,095			(60,811,533	)		(38,641	)		2,223,226
Issuance of shares for services
2 July 2007		0.3		3,750,000			375			1,124,625									1,125,000
Issuance of shares for services
18 July 2007		0.18		41,667			4			7,496									7,500
Issuance of shares for services
9 August 2007		0.23		1,000,000			100			229,900									230,000
Issuance of shares for services
15 August 2007		0.24		2,000,000			200			479,800									480,000
Issuance of share to investors for nonSB2 registration
16 August 2007		0.24		240,000			24			57,576									57,600
Issuance of shares to investors June 2007
20 August 2007		0.25		400,000			40			99,960									100,000
Issuance of shares for services
20 August 2007		0.23		1,500,000			150			344,850									345,000
Issuance of shares for services
30 August 2007		0.22		113,334			11			24,922									24,933
Issuance of shares for Director services
30 August 2007		0.22		4,500,000			450			989,550									990,000
Issuance of share to investors for nonSB2 registration
31 August 2007		0.22		396,000			40			87,080									87,120
Issuance of share to investors for nonSB2 registration
Issuance of share to investors for nonSB2 registration
6 September 2007		0.23		330,000			33			75,867									75,900
Issuance of shares for services
11 September 2007		0.24		503,334			50			120,750									120,800
Issuance of share to investors for nonSB2 registration
18 September 2007		0.25		144,000			14			35,986									36,000
Issuance of share to June 2007 investor
25 September 2007		0.25		400,000			40			99,960									100,000
Issuance of share to June 2007 investor
28 September 2007		0.25		400,000			40			99,960									100,000
Issuance of share to investors for nonSB2 registration
30 September 2007		0.25		120,000			12			29,988									30,000
Issuance of shares for Director services
30 September 2007		0.25		5,250,000			525			1,311,975									1,312,500
Issuance of shares to June 2007 investors
30 September 2007		0.25		200,000			20			49,980									50,000
Issuance of shares for services
02 October, 2007		0.23		500,000			50			114,950									115,000
Issuance of shares for services
02 October, 2007		0.23		500,000			50			114,950									115,000
Issuance of shares for services
02 October, 2007		0.23		667,000			67			153,343									153,410
Issuance of shares for services
08 November, 2007		0.20		1,450,000			145			289,855									290,000
Issuance of shares Director services
03 December, 2007		0.19		1,666,000			167			316,373									316,540
Comprehensive Loss																2,999			2,999
Loss for Quarter ending December 31, 2007													(9,663,213)						(9,663,213)
Balance as at December 31, 2007				349,107,035			34,912			69,300,791			(70,474,746)			(35,642)			(1,174,685)

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

- 8 -

NEW MEDIUM ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

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 expenditure in regard to the web site and had written off the total cost in the prior period.

On January 13th, 2004 the Board of Directors and majority shareholders of the Company agreed to restructure the Business and acquired all the intellectual property assets pertaining to a new High Storage Optical Disc format with a storage capacity of eight times the normal DVD9 disc available today. The acquisition of the intellectual property was made from MultiDisk Ltd and TriGM International SA. Having assimilated the intellectual property of both companies, the Company embarked upon the development of the Versatile Multilayer Optical Disc and related products.

This Quarter the company has generated minimal revenues from the sale of its players to one European distributor.

Subsidiaries:

The following are the subsidiaries of the Company.

A)	New Medium Enterprises UK Ltd, incorporated on February 18, 2004, under the laws of England and Wales.
B)	New Medium Management Ltd, incorporated on May 13, 2004, under the laws of England and Wales.
C)	New Medium Enterprises Asia Pacific Ltd, incorporated on June 2, 2006 under the laws of Peoples Republic of China.
D)	New Medium Enterprises China Ltd, incorporated on June 2, 2006 under the laws of  Peoples Republic of China.
E)	New Medium Entertainment Ltd - incorporated 19 September 2006, under the laws of England and Wales.
F)	New Medium Electronics Ltd – incorporated 19 September 2006, under the laws of England and Wales.
G)	New Medium Films Inc (Formerly known as Intellitain Media, Inc.)- incorporated 13 July 2000 under the laws of the state of Nevada, USA.
H)	New Medium Optics UK Ltd-incorporated on July 07, 2007 under the laws of England and Wales.

New Medium Enterprises, Inc. owns 100% of all above subsidiaries.

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

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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NEW MEDIUM ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

(continued)

Investments

Investments include marketable common stock 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 stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and settlements are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of:

Furniture and Fixtures and Office Equipment	3 years
Plant and Machinery	3 years
Others	3 years

As of December 31, 2007, and June 30, 2007 Property, Plant & Equipment consist of the following:

	December 31, 2007			June 30, 2007
Furniture and Fixture	$	374,286		$	325,865
Plant and Machinery		329,373			163,396
Others		1,423,167			1,003,223
Total		2,126,826			1,492,484
Accumulated depreciation		(264,282	)		(194,072	)
Net Fixed Asset	$	1,862,544		$	1,298,412

Intangible Assets

Intangible assets are amortized using the straight-line method over their estimated period of benefit, ranging from one to ten years. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists.

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 quarter ended December 31, 2007 there is small revenue from the sale of players.

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.

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.

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NEW MEDIUM ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

(continued)

New Accounting Pronouncements

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections." This statement applies to all voluntary changes in accounting principle and requires retrospective application to prior periods' financial statements of changes in accounting principle, unless this would be impracticable. This statement also makes a distinction between "retrospective application" of an accounting principle and the "restatement" of financial statements to reflect the correction of an error. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The company had restated the Financial Statements as required by accounting standards. Please see Note 5 on Intellectual property.

In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires companies to recognize in the statement of operations the grant-date, fair value of stock options and other equity-based compensation issued to employees. FAS No. 123R is effective beginning in the Company's first quarter of fiscal 2006.The financial statements of New Medium Enterprises Inc has been prepared in accordance with this new standard.

In June 2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization Period for Leasehold Improvements ("EITF 05-6.") EITF 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. The guidance in EITF 05-6 will be applied prospectively and is effective for periods beginning after June 29, 2005. EITF 05-6 is not expected to have a material effect on the company’s consolidated financial position or results of operations.

In June 2005, the FASB Staff issued FASB Staff Position 150-5 ("FSP 150-5"), "Issuers Accounting under FASB Statement No. 150 for Freestanding Warrants and Other Similar Instruments on Shares that are Redeemable." FSP 150-5 addresses whether freestanding warrants and other similar instruments on shares that are redeemable, either puttable or mandatorily redeemable, would be subject to the requirements of FASB Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity," regardless of the timing or the redemption feature or the redemption price. The FSP is effective after June 30, 2005. The financial statements of the Company have been prepared in accordance with this new standard.

On February 16, 2006 the Financial Accounting Standards Board (FASB) issued SFAS 155, “Accounting for Certain Hybrid Instruments,” which amends SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. SFAS 155 also clarifies and amends certain other provisions of SFAS 133 and SFAS 140. This statement is effective for all financial instruments acquired or issued in fiscal years beginning after September15, 2006. The Company does not expect its adoption of this new standard to have a material impact on its financial position, results of operations or cash flows.

In March 2006, the FASB issued FASB Statement No. 156, "Accounting for Servicing of Financial Assets," an amendment to FASB Statement No. 140 ("Statement 156'). Statement 156 requires that an entity recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a service contract under certain situations. The new standard is effective for fiscal years beginning after September 15, 2006. The Company does not expect its adoption of this new standard to have a material impact on its financial position, results of operations or cash flows.

In September, 2006, FASB issued SFAS 157 "Fair Value Measurements". This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The management is currently evaluating the effect of this pronouncement on financial statements.

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NEW MEDIUM ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

(continued)

In September 2006, FASB issued SFAS 158 "Employers Accounting for Defined Benefit Pension and Other Postretirement Plans", an amendment of FASB Statements No. 87, 88, 106, and 132(R). This Statement improves financial reporting by requiring an employer to recognize the over-funded or under-funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position, and to recognize changes in that funded statues in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements:

a)	A brief description of the provisions of this Statement;
b)	The date that adoption is required;
c)	The date the employer plans to adopt the recognition provisions of this Statement, if earlier.

The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 permits entities to choose to measure many financial instruments, and certain other items, at fair value. SFAS No. 159 applies to reporting periods beginning after November 15, 2007. The adoption of SFAS No. 159 is not expected to have a material impact on the Company’s financial condition or results of operations.

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.

The company has written off intellectual property in the last financial year, previously capitalized, that has severely affected the Profit and Loss account of last year. All restated statements will shortly be filed.

NOTE 4 – REVENUE RECOGNITION

The company received purchase orders from European distributor and sold players during first quarter. During this quarter company has sold more players to same European distributor and as a result recognized revenues from sale of players.

The company has sold HD VMD products through its own Ecommerce website, www.nmestore.com. The website represents an important component of the company’s complex internet marketing strategy, in which promotion via the internet will provide essential support for distributors and retailers.

The company has received orders from PC Rush (for 10,000 players), Westan (for 250 players), and Iceland distributors (for 200 bundle boxes). A partial delivery for these orders has been fulfilled during January 2008.

NOTE 5 - INVESTMENT IN INTELLECTUAL PROPERTY

On January 13, 2004, the Company acquired the business and all the intellectual property assets pertaining to a new DVD format from MultiDisk Ltd. and TriGM International SA. In connection with the acquisition the Company issued 72,605,776 shares of its stock to the shareholders of MultiDisk and TriGM. These shares were valued at $14,521,155, which approximates the fair market value of the shares. The Company also paid additional fees in funding, legal and brokerage fees, which have been capitalized, and part of these funds ($150,000) was allocated to Machinery and Equipment.

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NEW MEDIUM ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

(continued)

According to the acquisition agreement with MultiDisk Ltd and TriGM International, S.A., the Company was obligated to pay certain milestone payments amounting to $87,000 each upon the raising of capital in excess of $500,000. To date, $174,000 of milestone payments have been made under this agreement.

On June 23, 2005, the Company converted the following outstanding obligations owed to two of its principal shareholders into the Common stock of the company: May Ltd. $87,000 debt converted into 1,740,000 Common shares; TriGM Ltd. $87,000 debt converted into 1,740,000 Common Shares. This reflects the payment of the $174,000.

On June 21, 2007, in response to a comment raised by the staff of the Securities and Exchange Commission (“SEC”) concerning New Medium Enterprises, Inc.’s (the “Company”) accounting treatment of its acquired intellectual property, and based upon our related discussions with the SEC, our management has concluded that the Company should expense amounts incurred in the acquisition of research and development projects from MultiDisk Ltd. and TriGM International SA as of the date of the consummation of the acquisition of those projects. Those amounts had been capitalized as an intangible asset in the fiscal year ending June 30, 2004 and were to be amortized over the expected life of the asset.

The Company capitalized certain expenses as Intellectual Property in amounts totaling $14,877,509 and $306,351 during fiscal years ended June 30, 2004 and June 30, 2005, respectively. These costs, which are research and development in nature, are required to be expensed under U.S. generally accepted accounting principles. The effect of this change is a direct charge to expense in those periods of all amounts previously capitalized. This change in accounting treatment will cause our net loss to increase from $156,483 to $15,033,992 for the fiscal year ended June 30, 2004 and from $2,073,734 to $2,380,085 for the fiscal year ended June 30, 2005.

NOTE 6 - INCOME TAXES

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS 109"). 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, 2007 the Company had a Federal and State tax net operating loss of approximately $55,010,334. 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 7 - COMMITMENTS AND CONTINGENCIES

Commercial Property

The Company rents office space from a third party on a month-to-month basis in the UK, amounting to $12,200 per month and three month notice is required to cancel the contract. The Company also rents office in Los Angeles, California for $1,965.50 per month and in China for one year at $3,387 per month. New Space is rented in India for 1 year approximately at $900 per month from January 2008. Except UK, all above lease agreements can be terminated at one month notice.

Obligations Table:

Quarter Ending December 31,	Obligation
2008	$	42,852
Total	$	42,852

Commercial Commitments

1.   In May 2006, the company entered into a contract for Design and Construction of a VMD Replication Line with VDL-ODMS. The project was reassessed and re-priced in July 2007. Under the new deal with VDL-ODMS – the company agreed to pay Euros 1,550,000 for the first VMD Line and has paid Euros 240,000 in July. The balance is backed by the Atradius line of credit. The company will pay the balance in two installments on completion of assembly and testing of equipment. The balance will be paid during quarter 3 of financial year 07 – 08.

2.   On June 17, 2006, the Company signed an agreement with Doug Carson, Inc. to develop the VMD file format for VMD 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. From July to September, a total of $250,000 was paid, leaving $100,000 due in October and a final payment of $150,000 in December 2006. But it is important to note that the project was put on hold by mutual agreement awaiting certain technical developments related to the Encryption developed by the Studios - AACS. Since the Encryption developed by the Studios faced technical difficulties the integration of the encryption tool had to be delayed. As the project is yet to be completed, these shares are still held in Escrow and the final amounts are unpaid.   We have received from DCA the DDP 3.0 standard for VMD11, VMD22,DDP image maker software for DDP3.0 and we are waiting for the delivery of modified software and hardware DDP encoder for mastering.

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NEW MEDIUM ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

(continued)

3. In October 2006, the company appointed COMDRP for communication and press relation services in France for a monthly fee of Euros 1,800 ($2,440) commencing from 1st November 2006. This contract can be terminated at one month written notice.

4.   In December 2006, the company entered into a HD playback Software Purchase Agreement with SSX for a total purchase price of $22,500. The company made an initial payment of $11,250 and one installment of $5,625. The final balance of $5,625 was to be paid on delivery and verification of the software.

5. In December 2006, the subsidiary, NME Entertainment Ltd signed an agreement with HGC Films (JIAHUA LTD) for the acquisition of 5 Chinese titles for $30,000 in total. The company has paid $15,000 upfront and is committed to pay $5,000 per year for next three years.

6. In August 2007 the subsidiary, NME Optics Ltd placed an order with Netstal-Maschinen AG for Injection Moulding Machine e–jet to be used in VMD Line for the total price of $350,028(420,000 CHF). $100,000 has been paid on August 20, 2007 as down payment. Balance is to be paid in March 2008.

7. In August 2007 the subsidiary, NME Optics Ltd also placed an order with Dr Schenk GMBH for transmission, Dishing VMD stamper to be used in VMD Line for the total price of $65,007.15(48,100 EUR). $32,503.58 has been paid on September 28, 2007 as down payment. Balance is to be paid in February 2008.

As at December 31,	Commercial Commitments
2008	$	2,340,097
Thereafter		10,000
Total	$	2,350,097

Please see subsequent events on further acquisitions of film rights as well as forward looking statements

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 the following to related parties during the quarters ended December 31, 2007 and 2006:

	Six months to December 31,				Three months to December 31,
RELATED PARTIES	2007		2006		2007		2006
		$		$		$		$
For R&D V Tech For Labs and Material		87,423		76,800		42,100		38,400
For Contracted Staff -Turtle Technologies (India) Pvt Ltd (Sub of Silicon Valley Plc)		27,450		24,913		15,000		17,484
For Contracted Staff -One Soft Retail Business Solutions (Sub of Silicon Valley Plc)		39,300		31,407		23,648		17,670

NOTE 8 - LONG TERM LOANS

On February 28, 2007 the Tribal Sarl Loan, (with accrued interest) was repaid and another long term loan of $1,144,000 was secured with Postie Trading Limited for 13 months through New Medium Enterprise Inc’s subsidiary, New Medium Enterprise UK Ltd. A debenture was filed by Postie Trading Ltd on the subsidiary, and shares in the parent Company have been offered as collateral for the loan. The rate of interest as per contract will be payable at maturity and carry an interest rate of 13% per annum and this will be paid as follows:

1.	8 % in cash
2.	5 % in warrant coverage @ 16 cents –already issued

The Loan was renegotiated in August 07 and the term period of the loan was extended up to August 31st 2008 which has now been extended to September 30, 2009.

As at December 31, 2007 the outstanding balance on the loan was $1,220,267 (including interest).

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NEW MEDIUM ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

(continued)

NOTE 9 – SENIOR DEBENTURE LOAN NOTE (SDN)

In October 2007, offer of a two year senior debenture note was sent to company’s non US resident shareholders. As at December 31, 2007 $ 2.47 Million senior debenture notes were signed and returned back to company. In return company has received $ 2.10 Million in cash during this quarter. Cash of $ 250,000 received in January 2008. Another $120,000 is due to be received next month.

The rate of interest as per senior debenture note term sheet is 12% per annum, payable annually. If the senior debenture note is repaid in full within 12 months, the full 12% will be paid. Interest will start accruing from January 2008.

Subscriber of every one dollar in senior debenture note will also be issued one warrant for 10 Common Shares (Rule 144) at an exercise price of US 2 cents per share.

During first year of issue, these warrants can only be exercised if debenture holder still holds 90% of his disclosed common shareholding at the time of application as per disclosure clause.

NOTE 10 - 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 $.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 were restated retroactively to recognize the new valuation.

During the quarter ending December 31, 2007, 4,783,000 of common stock were issued to various employees and consultants as per contracted agreement.

Summary of shares issued during the financial year:

Description	No. Of Shares		Amounts
			$
Opening Balance		323,035,700
Shares issued to various Directors & Employees		21,899,668		5,273,183
Shares issued to various Consultants		1,541,667		352,500
Shares issued in lieu of  Non SB2 Filing 30%		1,230,000		286,620
As Shown on Cash Flow Statement		24,671,335		5,912,303
Cash Received From Investment		1,400,000		350,000
Total		349,107,035

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 compensation packages which has been approved by the 53% majority shareholders.

In accordance with FASB issued SFAS No. 123R all "Share-Based Payments," are measured and recognized 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 preferences 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.

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NEW MEDIUM ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

(continued)

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 herein above provided or as fixed herein.

Deferred Share Subscriptions and Outstanding Warrants

Warrant Number	Number of Outstanding Warrants	Exercisable Price	Issue Date	Expiry Dates
F102	3,750,000	$0.04	August 12, 2005	August 11, 2009
F104	16,923,077	$.065	April 21, 2006	April 20, 2011
F105	1,000,000	$0.25	January 09,2007	May 31, 2010
F106	100,000	$0.10	September 01, 2006	August 31, 2011
F107	75,000	N/A	December 01, 2006	November 30, 2011
F108	250,000	$0.2325	October 17,2006	October 16, 2009
F109	2,500,000	$0.32	February 15,2007	February 15, 2012
F110	50,000	N/A	February 28, 2007	February 27, 2012
F111	387,292	$0.16	February 28, 2007	February 27, 2012
F112	7,150,000	$0.16	February 28, 2007	February 27, 2012
F113	50,000	$0.25	April 30, 2007	April 29, 2010
F114	10,000	$0.25	April 12, 2007	March 28, 2008
F115	1,500,000	$0.25	April 12, 2007	May 31, 2010
F116	800,000	$0.25	April 13, 2007	April  12, 2012
F117	11,000,000	$0.25	April 13, 2007	April 12, 2012
F118	400,000	$0.30	June 20, 2007	June 19, 2012
F119	41,667	$0.225	June 20, 2007	June 19, 2012
F120	555,556	$0.225	April 30, 2007	April 29, 2012
F121	250,000	$0.225	June  04, 2007	June  03, 2012
F122	2,400,000	$0.30	June 04, 2007	June 03, 2012
F123	1,500,000	$0.25	June 29, 2007	May 31, 2010
F124	7,178,593	$0.30	July 03, 2007	July 02, 2010
F125	400,000	$0.30	July 12, 2007	July 11, 2012
F126	41,667	$0.225	July 12, 2007	July 11, 2012
F127	600,000	$0.30	July 17, 2007	July 16, 2012
F128	800,000	$0.30	July 17, 2007	July 16, 2012
F129	1,500,000	$0.30	July 17, 2007	July 16, 2012
F130	400,000	$0.30	July 17, 2007	July 16, 2012
F131	1,000,000	$0.30	July 17, 2007	July 16, 2012
F132	200,000	$0.30	July 17, 2007	July 16, 2012
F133	400,000	$0.30	July 17, 2007	July 16, 2012
F134	200,000	$0.30	July 17, 2007	July 16, 2012
F135	300,000	$0.30	July 18, 2007	July 17, 2012
F136	200,000	$0.30	July 20, 2007	July 19, 2012
F137	2,000,000	$0.20	August 15, 2007	August 14, 2012
F138	400,000	$0.30	August 20,2007	August 19,2012
F139	300,000	$0.30	September 25, 2007	September 24, 2012
F140	100,000	$0.30	September 25, 2007	September 24, 2012
F141	300,000	$0.30	September 28, 2007	September 27, 2012
F142	100,000	$0.30	September 28, 2007	September 27, 2012
F143	50,000	$0.30	October 17, 2007	October 16, 2012
F144	150,000	$0.30	October 17, 2007	October 16, 2012
F145	4,500,000	$0.00	August 14, 2007	August 14, 2009
Total	71,812,851

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NEW MEDIUM ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

(continued)

A new series of warrants will be issued on receipt of full money subscribed for senior debenture notes.

Each warrant will be entitled to exercise for 10 Common Shares (Rule 144) at an exercise price of US 2 cents per share. Total of 2.47 Million warrants (Covering 24.7 Million Shares) will be issued.

NOTE 11 - SUBSEQUENT EVENTS

OnJanuary 10, 2008 New Medium Enterprises signed an exclusive agreement with SFM Entertainment LLC (USA) for classic & award winning films and TV Titles.

On January 16, 2008 New Medium Enterprises received cash of $50,000 from Senior Debenture Note signed during the Quarter.

On January 22, 2008 New Medium Enterprises hosted “Global HD VMD day” at VDL – ODMS in Eindhoven where both companies unveiled the world’s first ever multilayer discs manufacturing line. The event marks the celebration of the HD VMD format giving the company an opportunity to provide industry and press with worldwide updates.

On January 25, 2008 New Medium Enterprises received cash of $200,000 from Senior Debenture Note signed during the Quarter.

On February 3, 2008, Mahesh K. Jayanarayan resigned as a director and as President and Chief Executive Officer of New Medium Enterprises, Inc. effective as of that date. Mr. Geoffrey Russell assumed the duties of President and Chief Executive Officer of the Company on an interim basis on February 3, 2008, following the resignation of Mr. Jayanarayan. Mr. Russell has served as the Chief Operating Officer since July 2007. From March 2006 until July 2007, Mr. Russell acted as a Director of Pentagon Glass Tech and Pentagon Glass Tech Franchising. From 2003 until March 2006, Mr. Russell served as a Technical Director and Managing Director at Pentagon Protection Plc.

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Item 2.   Management’s Discussion and Analysis

Forward Looking Statements

Some of the information in this report or the documents we incorporate by reference in this 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;

· other factors discussed in this report

The discussion below of NME's Plan of Operations for the next 12 months assumes that the Company will continue as a going concern. As stated in our 10-KSB filing for the period ended June 30, 2007, our auditors have raised substantial doubt about this assumption. As discussed further under "Liquidity and Capital Resources" below, we are operating under severe liquidity constraints, and we will be unable to execute the following initiatives unless we can raise adequate funds from outside sources.

Plan of Operations for the Next 12 Months

The Company released its first generation products in the 4th calendar quarter of 2007, while continuing its development efforts related to blue laser high capacity optical storage discs, the next generation of our proprietary VMD technology.

The Company’s first VMD replication line has commenced production in the 4th calendar quarter of 2007. The Company also plans to accelerate the marketing of its VMD replication lines, and is in negotiations with various companies regarding the sale of these lines.

The Company has produced two 1080p output VMD player models, ML622 and ML777, for demonstration at trade shows and conferences. In the fourth calendar quarter of 2007, we also started selling these players on our ecommerce website (www.nmestore.com) and fulfilled some orders during December, 2007.

We also expect to launch our HD authoring software commercially in mid-2008.

Sale of Players

The company received purchase orders for players from European Distributors towards the end of first quarter of fiscal year 2007-2008.  Partial delivery against these orders was made in the second quarter of fiscal year 2007-2008 and the remaining units were shipped in January 2008. The company also received another purchase order in the second fiscal quarter of 2007-2008, and a partial delivery was made, the remaining units are expected to be shipped in the third fiscal quarter 2007-2008. The revenues were recognized for the orders as the partial shipments were made in the second quarter of fiscal year 2007.

Planned Acquisition

On September 27, 2007 the Company signed a non-binding letter of intent to acquire FKH Electronic A.S. (FKH), a Slovakian producer and distributor of home appliances and consumer electronics devices in Central Europe that markets its products under the brand name Orava. The FKH Group estimates that Orava brand products had an 18% market share of their market in 2005 and had the largest market share of DVD player sales in Slovakia in 2006. Based on information provided by FKH's management to the Company, FKH has been profitable since its inception in and earned revenue in excess of US$25 million in each of three fiscal years ended December 2006. FKH acquired the Orava brand name in 1992.

According to FKH, FKH sells its Orava brand products in more than 1700 retail outlets, including European mega stores Carrefour, Tesco, Metro, AHOLD and others. FKH also has warehousing facilities, an automated fulfillment center and a sales network with a 24 hours x 7 days service desk.

As per the letter of intent, an audit of FKH accounts and systems was completed in December 2007 and waiting for funds to move to the next stage of acquisition.

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Content Acquisition Agreements

On October 31, 2007 NME finalized an agreement with Lazy Town Entertainment for the release of 53 episodes of the British Academy Film and Television Award winning series LazyTown on its HD VMD format in Iceland. NME intends to include LazyTown titles within its HD VMD Player Bundle Box, available in Scandinavian countries, Iceland and UK, with 12 episodes in each bundle. All of LazyTown's 53 episodes were originally produced in HD and are ready to be produced on HD VMD.

On October 30, 2007 the Company signed agreements with two independent film distributors, SENA and Myndform, to distribute their High Definition titles on the HD VMD format in Iceland. NME has released bundle box with each distribution company which feature its full high definition 1080p HD VMD Player bundled with five Popular Hollywood Titles in HD VMD.

SENA is also a licensee in Iceland of content from 20th Century Fox, Sony Pictures, Focus and various independent studios. Myndform is a distributor for New Line Cinema products, including the Lord of the Rings Trilogy, The Queen, Miss Potter, Scoop, The Descent, and the Rush Hour series.

New Medium Enterprises introduced its VMD player and High Definition Bollywood film titles on VMD in India at the Times AV Revolution Expo at the Bombay Exhibition Center held on October 23, 2007. The Company expects to offer its HD VMD Bundle Box, including five HD titles, through Indian retailers and e-commerce sites in the second Quarter of calendar year 2008.

On September 25, 2007, the Company signed a commercial agreement with Australian distribution and retail company Westan Australia to distribute its HD VMD players and discs in Oceana Region including Australia and New Zealand. NME intends to release its full high definition (HD) 1080p HD VMD players and bundle boxes with Westan to bring affordable true high definition to consumers in the region. Products will be sold in mainstream retail outlets.

Commercial Activities

During the fiscal year, 2007, the Company completed product trials market research and product demonstrations in 12 markets and commenced marketing of its first generation product the ML777s HD VMD player and its HD films.  Subsequent to the marketing research the company will be focusing it’s marketing campaign:  In the second quarter 2008 in Australia, Central Europe, Scandinavia & Iceland and the UK, in the third quarter France and India and the fourth quarter the USA.  The Company intends to focus its marketing initiatives on HD VMD content, authoring tools to production studios and HD VMD electronic players and HD VMD components and licenses to OEM manufacturers and the Multi layer disc Replication Lines including discs and packaging.

NME 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, and have hired consultants on a contractual basis and intend to form joint ventures with marketing partners in various regions of the world.

The company expects to focus the next 12 months on production and marketing of its HD line of products.

Research and Development

The company intends to devote financial and engineering resources to continue its research and development in the following areas:

1.	Next generation VMD replication lines.
2.	Next generation VMD electronic devices.
3.	Anti -piracy technology.

Furthermore, in the early part of calendar year 2008, the Company plans to enter into the development of products utilizing blue laser technology. The Company also intends to market any resulting products to the high end business-to-business storage market.

Liquidity and Capital Resources

On December 31, 2007, we had available in cash the sum of $353,818 and accrued expenses of $2,332,673.

In the audit report for the ended June 30, 2007, our auditors raised substantial doubt about our ability to continue as a going concern. The losses and severe liquidity constraints that led the auditors to express that opinion continued during the quarter ended December 31, 2007, and have resulted in the Company instituting significant restraints on the use of cash. The Company used $ 3,614,764 in cash to fund its operations during the last six months ended December 31, 2007, and had $ 353,818 in cash available at the end of the last six months. During January 2008, we received cash of $ 250,000 from senior debenture notes signed during this quarter. We will also receive another $ 120,000 in cash for which senior debenture notes are signed. Based on our cash burn rate during this quarter, we would have expected to run out of cash in the middle of February, 2008. Based upon our burn rate following the institution of the cost cuts to be implemented, we believe that we have sufficient cash to continue to operate for 2 months without additional financing. NME's management is actively seeking other sources of financing. Should we be unable to secure additional financing, we would be forced to cancel or postpone many of the initiatives discussed above, which would materially impact our financial results.

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On December 31, 2007, we had accrued expenses of $2,332,673, certain loans outstanding totaling $1,144,000 due on August 31, 2009, and senior debenture notes outstanding totals of $ 2,100,000 due on December 31, 2009.

Item 3. Control and Procedures

As of December 31, 2007, the end of the period covered by this quarter Report, our Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”) conducted an evaluation of our disclosure controls and procedures. As defined under Sections 13a-15(e) and 15d-15(e) of the Exchange Act, the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the issuer’s chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure. Based on their evaluation, the Certifying Officers have concluded that, as of December 31, 2007, our disclosure controls and procedures are effective. Our management, under the supervision of the Certifying Officers, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. An internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:

1.   pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets;

2.   provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board of Directors; and

3.   provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

A material weakness in internal control over financial reporting is a control deficiency (within the meaning of the Public Company Accounting Oversight Board’s Auditing Standard No. 2), or combination of control deficiencies, that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

The improvement in the control procedures as set out last financial year 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It is also a process that involves human diligence and compliance and may be subject to lapses in judgment and breakdowns resulting from human judgments. Internal control over financial reporting can also be circumvented by collusion or management override. Furthermore, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in condition, or that the degree of compliance with the policies or procedures may deteriorate.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not routine litigation incidental, or otherwise material, to the financial condition of our business. None of our directors, officers, affiliates or owners of record or beneficially of more than 5% of our common stock is involved in a proceeding adverse to our business or has a material interest adverse to our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about sales during the three months ended December 31, 2007 of securities that have not been registered under the Securities Act of 1933:

Date of Sale/Issuance	Type of Security Sold	Price per Share (US$)	Number Sold/Issued	Consideration Received	Exemption from Registration Claimed
October 2,2007	Common stock	0.23	500,000	Stock Issued for services	Section 4(2)
October 2,2007	Common stock	0.23	500,000	Stock Issued for services	Section 4(2)
October 22,2007	Common stock	0.23	667,000	Stock Issued for services	Section 4(2)
November 8,2007	Common stock	0.20	1,450,000	Stock Issued for services	Section 4(2)
December 3,2007	Common stock	0.19	1,666,000	Stock Issued to Director & services	Section 4(2)

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Item 3. Default Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Securities Holders

None during this quarter.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number	Description
31.1	Certification of Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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.

February 12, 2008
By:	/s/ Geoffrey Russell
	Geoffrey Russell
	Chief Operating Officer and Principal Officer
February 14, 2008
By:	/s/ Irene Kuan
	Irene Kuan
	Chief Financial and Principal Accounting Officer

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