NEXTMART, INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE

QUARTERLY PERIOD ENDED December 31, 2009June 30, 2010

Table of Contents

INDEX

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PART I   FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

See notes to consolidated financial statements.

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See notes to consolidated financial statements.  

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4

See notes to consolidated financial statements.

5

See notes to consolidated financial statements.

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NEXTMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

JUNE 30, 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations.

On August 1, 2009, weMarch 31, 2010, NextMart, Inc. (“NextMart” or “Company”) entered into an Asset Exchange and Subscription Agreement with Miss Wang Yihan and Beijing Chinese Art Exposition's Media Co., Ltd. (“CIGE”), a subscriptionleading Chinese art services, events, and media company located in Beijing, China. The agreement was amended on May 10, 2010 but effective March 31, 2010. Under the amended agreement NextMart agreed to sell directly to Ms. Wang the following assets (“Transferred Assets”) (”see NOTE 9 HELD FOR SALE OPERATIONS): 1) 100% of the shares of William Brand Administer Ltd, a BVI registered company and a wholly owned subsidiary of NextMart; 100% of the shares of Credit Network 114 Limited, a BVI registered company and a wholly owned subsidiary of NextMart; 2) 100% of NextMart’s 60% shareholdings in Wuxi Sun Network Technology Ltd., a PRC registered company; 3) 100% of NextMart’s 80% shareholdings in Naixiu Ex hibition Ltd., a PRC registered company; 4) the net assets of NextMart’s 100% owned subsidiary Sun New Media Group Ltd. (a BVI registered company) and its 100% owned subsidiary China Cancer Institute Ltd. (a PRC registered company) and 5) certain other miscellaneous non material assets. The Transferred Assets excluded cash in the subsidiaries, certain office furniture and equipment and certain securities.

About the Transferred Assets, Ms. Wang agreed to transfer to NextMart certain land usage rights for commercial real estate property within 24 months from date of the amended agreement. The value of the land use rights will be determined by an appraisal conducted by a licensed third party appraiser acceptable to both parties. In the PRC, there is no private land ownership. Rather, land in the PRC is owned by the government and cannot be sold to any individual or entity. The government grants or allocates landholders a “land use right,” which is sometimes referred to informally as land ownership. Land use rights are granted for specific purposes and for limited periods. Each period may be renewed at the expiration of the initial and any subsequent terms. Granted land use rights are transferable and may be used as security for borrowings and other obligations. In the event Ms. Wang fails to provide land usage rights for adequate real estate prope rty within the 24 month period, she is obligated to provide NextMart with equivalent common stock of a publicly traded company acceptable to NextMart.

On June 22, 2010, the Company entered into an asset saleacquisition agreement (the “Agreement”“Acquisition Agreement”) with Beijing Hua Hui Hengye Investment Lt. (“Hua Hui”), an unaffiliated PRC company. Hua HuiCIGE and Ms. Wang Yihan, the sole owner and director of CIGE who is part of The Beijing Hua Hui Corporation, a PRC real estate constructionalso our Chairman and development group that specializes in constructing and developing travel, resort, hotel, and apartment properties in popular tourist and other destinations within China.CEO. Under the terms of the Acquisition Agreement, we receivedNextMart acquired from Hua HuiCIGE the commercial income rightsbelow described Assets for an agreed price of $750,000 (the “Consideration”). NextMart agreed to 10,000 square meterspay the Huadun Changde International Hotel (“Hotel”) located in the cityConsideration by issuing to Ms. Wang Yihan 75,000,000 shares of Changde in China’s Hunan Province (“Project”), which is currently under construction.

its common stock. As a result of this transaction, we intendMs. Wang will become NextMart’s second largest shareholder with a 27.96% ownership of the company.

Under the terms of the Acquisition Agreement, CIGE sold to developNextMart the following assets (the “Assets”):

1)

 ownership of CIGE’s 10,000 member consumer database,

2)

 exclusive ownership of all advertising space for every art exhibition event held by CIGE in greater China (including Hong Kong and Macao, and Taiwan) for the next 30 years, and

3)

 exclusive ownership of the "Gallery Guide" brand name and all gross revenues generated by the magazine publication for the next 30 years, including but not limited to advertising revenue and sponsorship revenue.

The agreement further provides that if for any reason or under any circumstance during the next 30 years CIGE ceases holding any of its exhibitions or ceases publishing the Gallery Guide, NXMR shall have the right to buy those exhibitions and “Gallery Guide” brand name for the price of $1 each from CIGE.

As a networkresult, NextMart’s current business operations consists of upscale, private member health clubs in1) the PRC,sale of marketing solutions through our art events and art media marketing channels, and 2) the design and marketing of art-themed products lines for existing luxury and high-end goods and services, and art themed real estate developments.

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On June 22, 2010, NextMart also entered into a strategic cooperative agreement (“Strategic Agreement”) with its shareholder Sun Media Investment Holdings Ltd. (“SMIH”) and with Redrock Land Investment Ltd. (“Redrock Land”), an affiliate of the initial location beingCompany’s major shareholder Redrock Capital Venture Ltd. (“Redrock”).

Under the Strategic Agreement, Redrock Land will provide NextMart a $1,000,000 interest free, unsecured loan. The loan is due on demand any time after the first anniversary of the loan. As of the date of this report, the loan has not been provided to the Company. Redrock Land also has agreed that within the Hotel. These clubs would provide first class preventative and recovery care using the most modern methods and products. This product and services modelnext 24 months, it will partner with NextMart on three of its real estate development projects that will be rolled outart related.  For each such project, NextMart will act as the project’s concept, marketing, and sales consultant (see below for details on the Company’s planned Real Estate Marketing and Sales business). Redrock Land is a PRC registered company engaged in two phases. In phase one, weland investment and development in China. The company typically co-invests with real estate developers to acquire land and launch development projects. As part of its cooperation with NextMart, Redrock Land will seeksecure land and developing partners for thr ee art related developments that NextMart will supply paid consulting service. SMIH has agreed to establish a networkprovide NextMart with approximately $6,000,000 worth of health clubs, called “Demao Tang” which means health throughadvertising space over the harmonynext five years in various media outlets owned by it or its affiliates. The $6,000,000 worth of peopleadvertising space will be allocated to NextMart such that every year for 5 succeeding years NextMart will have access to $1,200,000 in advertising space in various print magazines and online websites and e-magazines owned by SMIH or its affiliates. Such advertising space will be subject to availability and market prices, and the heavens. In phase two, we will package and market our own branded health products. We expectCompany intends to limit the use of the advertising space to market our products and services to affluent individuals and business in the general vicinity of each location.its Artslux products.

Basis of Consolidation and Presentation

The accompanying unaudited consolidated financial statements of Nextmart, Inc. (the “Company”) and its subsidiaries and variable interest entities or VIEs have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. All significant inter-company accounts and transactions have been eliminated. Investments in entities in which the Company can exercise significant influence, but which are less than majority owned and not otherwise controlled by the Company, are accounted for under the equity method. The Company has adopted FASB Interpretation No.46R consolidationASC No. 810consolidation of Variable Interest Entities, FIN 46R, an Interpretation of Accounting Research Bulletin No.51. FIN 46REntities. ASC No. 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIEs or is entitled to receive a majority of the VIE’s residual returns. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United StatesSt ates of America.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of consolidated financial position as of December 31, 2009,June 30, 2010, and consolidated results of operations, and cash flows for the three month periods and nine months periods ended December 31,June 30, 2010 and 2009, and 2008, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses for the periods that the financial statements are prepared. Actual amounts could differ from these estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Financial instruments

The Company’s financial instruments include cash and cash equivalents, accountsother receivable, accountsother payable and marketable securities, other payables, and factoring in loans.securities. The fair values of these financial instruments approximate their carrying values due to the short-term maturity of the instruments.

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Impairment of Long-lived Assets

The Company assesses the carrying value of long-lived assets in accordance with ASC No 360 (formerly SFAS No.144 (ASC No. 360)No.144), accounting for the Impairment or Disposal of Long-lived Assets. Factors considered important which could trigger this review include a significant decrease in operating results, a significant change in its use of assets, competitive factors, strategy of its business, and significant negative industry or economic trends. The company cannot predict the occurrence of future impairment-triggering events nor the impact such events might have on the reported asset values. Such events may include strategic decisions made in response to the economic conditions relative to product lines, operations and the impact of the economic environment on our customer base.  When the Company determines that the carrying value of long-lived assets may not be recoverable based on as assessment of future cash flows from the use of those assets, an impairment chargechar ge to record the assets at fair value may be recorded. Impairment is measured based on fair values utilizing estimated discounted cash flow, published thirty-partythird-party sources, and third-party offers.

Comprehensive Income (Loss)

The Company reports comprehensive income (loss) in accordance with ASC No. 220 (formerly FASB No. 130 (ASC No. 220)130), “Reporting Comprehensive Income (Loss)”. The comprehensive loss for the Company includes currency translation adjustments and unrealized loss on marketable securities.

Recently Issued Accounting Pronouncements Affecting the Company

In October 2009, the Financial Accounting Standards Board (FASB) issued amended revenue recognition guidance for arrangements with multiple deliverables (ASU No. 2009-13) (ASC No. 605). The new guidance eliminates the residual method of revenue recognition and allows the use of management’s best estimate of selling price for individual elements of an arrangement when vendor specific objective evidence (VSOE), vendor objective evidence (VOE) or third-party evidence (TPE) is unavailable. For the Company, this guidance is effective for all new or materially modified arrangements entered into on or after January 1, 2011 with earlier application permitted as of the beginning of a fiscal year. Full retrospective application of the new guidance is optional. The Company is currently assessing its implementation of this new guidance, but does not expect a material impact on the Consolidated Financial Statements.

In October 2009, the FASB issued guidance which amends the scope of existing software revenue recognition accounting (ASU No. 2009-14) (ASC No. 985). Tangible products containing software components and non-software components that function together to deliver the product’s essential functionality would be scoped out of the accounting guidance on software and accounted for based on other appropriate revenue recognition guidance. For the Company, this guidance is effective for all new or materially modified arrangements entered into on or after January 1, 2011 with earlier application permitted as of the beginning of a fiscal year. Full retrospective application of the new guidance is optional. This guidance must be adopted in the same period that the Company adopts the amended accounting for arrangements with multiple deliverables described in the preceding paragraph. The Company is currently assessing its implementation of this new guidance, but does not ex pectexpect a material impact on the Consolidated Financial Statements.

In September 2009, the FASB issued amended guidance concerning fair value measurements of investments in certain entities that calculate net asset value per share (or its equivalent) (ASU No. 2009-12) (ASC No. 820). If fair value is not readily determinable, the amended guidance permits, as a practical expedient, a reporting entity to measure the fair value of an investment using the net asset value per share (or its equivalent) provided by the investee without further adjustment. The amendments are effective for interim and annual periods ending after December 15, 2009. The Company does not expect a material impact on the Consolidated Financial Statements due to the adoption of this amended guidance.

In August 2009, the FASB issued guidance on the measurement of liabilities at fair value (ASU No. 2009-5) (ASC No. 820). The guidance provides clarification that in circumstances in which a quoted market price in an active market for an identical liability is not available, an entity is required to measure fair value using a valuation technique that uses the quoted price of an identical liability when traded as an asset or, if unavailable, quoted prices for similar liabilities or similar assets when traded as assets. If none of this information is available, an entity should use a valuation technique in accordance with existing fair valuation principles. The Company adopted this guidance in the year ended November 30, 2009 and there was no material impact on the Consolidated Financial Statements.

In June 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2009-02. “Amendments to Various Topics for Technical corrections.” ASU No. 2009-2 is an omnibus update that is effective for financial statements issued for interim and annual periods ending after July 1, 2009. This Statement did not impact the Company’s Consolidated Financial Statements.

In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 168 (ASC No. 105), “The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (the Codification). The Codification, which was launched on July 1, 2009, became the single source of authoritative nongovernmental U.S. GAAP, superseding existing FASB, American Institute of Certified Public Accountants

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(AICPA), Emerging Issues Task Force (EITF) and related literature. The Codification eliminates the GAAP hierarchy contained in SFAS No. 162 and establishes one level of authoritative GAAP. All other literature is considered non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted this Statement for its year ended November 30, 2009. There was no change to the Company’s Consolidated Financial Statements due to the implementation of this Statement.

In June 2009, the FASB issued SFAS No. 167 (ASC No. 810), “Amendments to FASB Interpretation No. 46(R),” and SFAS No. 166 (ASC No. 860), “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140 (ASC No. 860).” SFAS No. 167 amends FASB Interpretation 46(R) to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity and requires ongoing qualitative reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS No. 166 amends SFAS No. 140 by removing the exemption from consolidation for Qualifying Special Purpose Entities (QSPEs). This Statement also limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial asset. The Company will adopt these Statements for interim and annual reporting periods beginning on January 1, 2010. The Company does not expect the adoption of these standards to have any material impact on the Consolidated Financial Statements.

In May 2009, the FASB issued SFAS No. 165 (ASC No. 855), “Subsequent Events.” This Statement sets forth: 1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; 2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and 3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This Statement is effective for interim and annual periods ending after June 15, 2009. The Company adopted this Statement in the year ended November 30, 2009. This Statement did not impact the consolidated financial results.

Property, Plant and equipment

Property, Plant and equipment are stated at cost, net of accumulated depreciation.  Depreciation is computed primarily on the straight-line method for financial reporting purposes over the following estimated useful lives:

Revenue recognition

We generate revenue through the provision of consulting services. We recognize revenues from consulting services in accordance with StaffASC No. 605 (Staff Accounting Bulletin (“SAB”) No. 104 (ASC No. 605),104) “Revenue Recognition,” when all of the following conditions exist: persuasive evidence of an arrangement exists in the form of providing consulting services; or

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services have been rendered; the Company’s consulting fee received from the clients is fixed or determinable pursuant to the terms of the consulting agreement and these amounts appear to be collectible.

Cost of revenues

Cost of revenues includes salary and other related costs for our management services and technical support staff, as well as third-party contractor expenses.  Additionally cost of revenues includes fees for hosting facilities, bandwidth costs, and equipment and related depreciation costs. Cost of revenues will vary significantly from period to period depending on the level of management services provided.

Trade receivables and allowances for Doubtful Accounts

The Company performs ongoing credit evaluations of its customers to minimize credit risk. The allowance for doubtful accounts is based on management’s estimates of the collectability of its accounts receivable after analyzing historical bad debts, customer concentrations, customer credit worthiness, and current economic trends. Specifically, the Company reviews the aged accounts receivables listing for balances that are specifically identifiable as credit risks or uncollectible, and may use its judgment for calculation of allowances for doubtful accounts.

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Earnings (loss) per share

Basic earnings (loss) per share includes no dilution and is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding for the year. As the Company has a loss, presenting diluted net loss per share is considered anti-dilutive and not included in the statement of operations.  

Foreign currency translation

The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards (“SFAS”)ASC No. 52 (ASC830 ( formerly SFAS No. 830)52), “Foreign Currency Translation”, since the functional currency of the Company is Renminbi (RMB), the foreign currency financial statements of the Company’s subsidiaries are re-measured into U.S. dollars (USD). Monetary assets and liabilities are translated using the foreign rate that prevailed at the balance sheet date. Revenue and expenses are translated at weighted average rates of exchange during the year and stockholders’ equity accounts and capital asset accounts are translated by using historical exchange rates. Any translation gain or loss incurred is reported in the consolidated statement of operations. In this period, we used 6.83606.83603 RMB per USD for the weighted average rate, and we used 6.82826.8086 RMB per USD as the balance sheet date rate (December 31, 2009)(June 30, 2010).

Income taxes

The Company follows the liability method of accounting for income taxes in accordance withwithASC No. 740(formerly SFAS No. 109 (ASC No. 740)109). Under this method, future tax assets and liabilities are recognized for the future tax consequences attributableattributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Future tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. The tax loss arising from PRC can be carried forward for five years. Agreed tax losses by respective local tax authorities can be offset against future taxable profits of the respective companies. A valuation allowance is provided for deferred tax assets if it is more likely than not that the Company will not realize the future benefit, or if the future deductibility is uncertain.

Stock-based compensation

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 (ASC No. 505) and the conclusions reached by the Emerging Issues Task Force in Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services” (“EITF 96-18”). Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.

Related Parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions.  Parties are also considered to be related if they are subject to common control or common significant influence.

Deferred Charges

Payments made for future expenses were amortized over the life of service received.

.

Convertible Notes and Notes Issued with Stock Warrants

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The Company accounts for convertible notes and notes issued with stock warrants in accordance with ASC 470-20 (formerly APB No. 14,14), Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants. The proceeds from the issuance of convertible notes are allocated between the debt and the equity. The Company booksbooked a discount on convertible notes for the conversion feature of the notes and warrants and amortizesis amortizing the discount over the life of the debt.

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Reclassification

The comparative figures have been reclassified to conform to current period presentation.

NOTE 2 – MARKETABLE SECURITIES

Marketable securities are considered as available for sale and are recorded at market value. The marketable securities are summarized as follow:

The 3,000 shares of common stock at December 31, 2009 reflectsJune 30, 2010 reflect a 20 for 1 reverse split of the issued and outstanding common stock of the issuer.

NOTE 3 – PROPERTY, PLANT AND EQUIPMENT

The following is a summary of property and equipment, at cost, less accumulated depreciation:

Property and equipment is summarized as follows:

Amortization for three months ended December 31, 2009June 30, 2010 was $195$0 compared with three months ended December 31, 2008 $50,433,June 30, 2009 $40,195, respectively. Amortization for nine months ended June 30, 2010 was $195 compared with nine months ended June 30, 2009 of $120,441, respectively. The difference between the 2010 and 2009 periods is due to the sale of certain office

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equipment owned by the Company on March 3, 2010.

NOTE 4 - CONVERTIBLE NOTES, WARRANTS AND STOCK OPTIONS

On March 22, 2007, we executed a subscription agreement with certain accredited investors, including Professional Offshore Opportunity Fund Ltd, pursuant to which we agreed to issue a principal amount worth $1,500,000 in senior convertible promissory notes and warrants to purchase shares of our common stock. The notes were issued with “Class A” warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $1.00 per share and “Class B” warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $1.50 per share.  Upon exercise of any Class A or Class B warrant, the respective warrantholderwarrant holder will receive a “Class C” warrant to purchase that number of shares for which such Class A warrant or Class B warrant is exercised at an exercise price of $2.00 per share. The Class A and Class B warrants expire five years from the issue date. The financing was closed on March 29, 2007.The2007 .The aggregate gross proceeds from the sale of the notes and warrants was $1,500,000.  The convertible notes were due and payable three years from the date of issuance. We prepaid all interest due under the convertible notes through the issuance of 1.5 million shares of our common stock.  The notes were initially convertible into our common shares at a conversion price of $1.00 per share.  After the occurrence of an event of default under the notes, the conversion price adjusts to eighty percent (80%) of the volume weighted average price of our common shares for the five trading days prior to a conversion date.

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On February 6, 2009, we closed a Convertible Debt Settlement Agreement with these accredited investors (“Settlement Agreement”) pursuant to which we have re-purchased all of the outstanding senior convertible notes. We also amended the Warrants to remove any registration rights and purchase price reset provisions, among other changes. As additional consideration, limited mutual releases were given by the parties. In exchange for canceling the notes and underlying agreements, we agreed to pay back the principal amount of the Notes ($1,500,000), and $610,126 in interest and default penalties. We paid $250,000 of the $1,500,000 in the principal amount at closing, and are obligated to pay $250,000 every 90 days from closing until the principal is paid in full. In addition to the payment made at closing, we also made a paymentprincipal payments of $250,000and $150,000 during fiscal 2009. During fiscal 2010, we made $100,000, $ 250,000, $165,000 and $250,000 on the obligation due in July, October and December 2009, respectively.$67,000 i n principal payments. We also agreed to pay interest and penalties of $6 10,126$610,126 within 90 days from the closing. Payment of the stated amount may be in the form of common shares of CEC Unet Plc. (AIM: CECU) which we held on the agreement date or if the shares of CECU were not trading on the AIM Market, then in cash or cash equivalents. We disposed our holdings of CECU shares in the Hua HuiCIGE transaction. As such, we are now required to pay the interest and penalty amount due in cash or cash equivalents. As the date of this report, as mentioned above, we made payments of $750,000$982,000 in principal to date, and we have not made any payments on the interest and default penalty amount..amount. We are in default of our obligations to these investors. It is possible the investorinvestors could initiate litigation against us which cause us to incur additional costs and expenses.Theexpenses. The balance of $1.36approximately $1.13 million which is due to these investors is included in other payables.

On March 9, 2009, we completed a Subscription Agreement with Redrock Capital Venture Ltd (“Redrock”), a BVI company, under which we issued up to $1,500,000 of our senior convertible notes (“Senior Notes”) to Redrock. On April 15, 2009, Redrock converted the $1,250,000 Senior Note into 83,333,333 shares of our common stock. We also issued Redrock 2,500,000 shares of our common stock as prepaid interest for the $1,250,000 Senior Note. On June 17, 2009, we received a notice of conversion from Redrock converting the $250,000 Senior Note into 16,666,667 shares of our common stock at a conversion price is $0.015 per share. On June 23, 2009, we issued 17,166,667 shares of our common stock to Redrock Capital Venture Limited. The amount represents 16,666,667 shares of our common stock issuable on conversion of the $250,000 Senior Note and 500,000 shares of our common stock issuable as prepaid interest on the Senior Note.

WarrantsOn March 26, 2010, we completed a Convertible Debt Settlement Agreement with Beijing Hua Hui Hengye Investment Lt. (“Hua Hui”) to convert RMB 2,255,000 (approximately $329,866 USD) in outstanding loans due to Hua Hui into a convertible promissory note with a principal amount of $331,199 as of June 30, 2010 and will due in 18 months since issued date. The convertible promissory as effective as of March 3, 2010 and has the following features:

At December 31, 2009, as discussed above,

·

The Convertible Note is subordinate to an outstanding Convertible Debt Settlement Agreement and is senior to all other current and future indebtedness of the Company.

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·

If the Company had 3,000,000 warrants outstanding.has not affected a “Qualified Funding” (as defined below) prior to August 31, 2011, then the entire Principal Amount will be due and payable on August 31, 2011 (the "Maturity Date").  

·

If the Company has effected a Qualified Funding prior to August 31, 2011, then (i) an amount equal to the Qualified Funding will be due and payable within five (5) working days from the closing of the funding, and (ii) any unpaid Principal Amount will be due and payable on the Maturity Date.

·

A Qualified Funding means any debt or equity funding received by the Borrower (after deducting all fees),

·

excluding however, any funding provided by Redrock Capital Group and Redrock Capital Ventures, Ltd., or any of their respective subsidiaries.

·

Except for default interest, interest on the unpaid balance accrues at the rate of 6% payable on the Maturity Date,

·

Hua Hui at its option may convert the Convertible Note to common stock of the Company at a conversion price of $0.11

·

If there is a default in the payment after a Qualified Funding, then default interest will accrue on the amount of the Qualified Funding a rate of one percent (1%) per day until paid.

The interest of the three months and nine months ended June 30, 2010 is $ 4,880 and $ 6,398, respectively.

NOTE 5 - OTHER PAYABLES AND ACCRUALS

Other payables and accruals are summarized as follows:

Other payables represent $1.36 millionare amounts due to the creditorsinvestors who originally held our convertible notes and the balance represents(See Note 4. -Convertible Notes, Warrants And Stock Options), professional fees, and other office expenses.

NOTE 6 — COMMITMENTS AND CONTINGENCIES

Commitments

We have entered intoAs of March 2010, the Company terminated its office lease without penalty. Since the termination of its office lease, the Company maintains an office under an oral arrangement with its shareholder Sun Media Investment Holdings Limited. The arrangement is month to month, on a building lease for our office locatedrent free basis. As a result the Company currently has no capital commitments in Beijing. The term of the lease is from September 27, 2007 to July 31, 2011. The lease expense for the three months ended December 31, 2009 amounted to $7,917. Future minimum lease payments under the operating lease agreements at December 31, 2009 were as follows:this regard.

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NOTE 7 -AMOUNTS DUE TO STOCKHOLDERS

The amounts due stockholders are summarized as follows:

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The amounts due to Redrock Capital Venture Limited are due on demand and bear no interest. Due to the termination of the Hua Hui transaction, the amounts due to Hua Hui have been reclassified as convertible notes on March 3, 2010 (See Note 4. -Convertible Notes, Warrants And Stock Options).

NOTE 8 -AMOUNTS DUE TO RELATED PARTIES

The amounts due related parties are summarized as follows:

The amounts $ 77,000 and $ 165,000 due to Redrock Thinktank (Group) Limited and Wu Bruno, respectively are due on demand after one-year and bear an annual interest of 5%. The amounts due to Beijing Hua Hui Hengye InvestmentRedrock Thinktank (Group) Limited are due on demand and bear interest atMr Wu Bruno Zheng were mainly used to pay the prevailing rate charged by the PRC Central Bank on the payment date.convertible notes investors in 2010 (see NOTE 4CONVERTIBLE NOTES, WARRANTS AND STOCK OPTIONS).

NOTE 8—9- HELD FOR SALE OPERATIONS

In connection with the CIGE and Ms. Wang Yihan transaction of March 31 2010, and which was subsequently amended on May 10, 2010, NextMart has agreed to transfer to CIGE the following assets: 1) 100% of the shares of William Brand Administer Ltd, a BVI registered company and a wholly owned subsidiary of NextMart; 100% of the shares of Credit Network 114 Limited, a BVI registered company and a wholly owned subsidiary of NextMart; 2) 100% of NextMart’s 60% shareholdings in Wuxi Sun Network Technology Ltd., a PRC registered company; 3) 100% of NextMart’s 80% shareholdings in Naixiu Exhibition Ltd., a PRC registered company; 4) the net assets of NextMart’s 100% owned subsidiary Sun New Media Group Ltd. (a BVI registered company) and its 100% owned subsidiary China Cancer Institute Ltd. (a PRC registered company) and 5) certain other miscellaneous non material assets. These assets excluded cash in all the subsidiaries certain office furniture a nd equipment and certain other securities. (“Transferred Assets”)

These assets and liabilities had previously been sold to Beijing Hua Hui Investment Ltd. under a subscription and asset sale agreement signed on August 1, 2009 (see the Company’s Form 8-K filing dated August 4, 2009), and which arrangement was subsequently rescinded on March 3, 2010. All considerations were returned to the delivering party. NextMart accounted for the termination by adding the sum value of the assets originally sold to Hua Hui back on to the Company's balance sheet and canceling the shares issued to Hua Hui such that the company's share count will not include the shares issued to Hua Hui.

Consequently, the following assets and liabilities, which reflect these businesses, have been segregated and included in assets and liabilities of held for sale operations, as appropriate, in the consolidated balance sheet as of June 30, 2010:

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Moreover, the following income and expense items, attendant to these subsidiaries, have been segregated and included in income (loss) from held for sale operations, as appropriate, in the consolidated income statement for the three months and nine months ended June 30, 2010 and 2009.

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NOTE 10- GOING CONCERN AND MANAGEMENT PLAN

The Company’s consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of December 31, 2009,June 30, 2010, the Company had an accumulated deficit totaling $96,469,377$96,576,316 and its current liabilities exceeded its current assets by $2,222,152. The Company suffered significant loss is due to the disposal of subsidiaries in 2009.$608,213. In view of the matters described above, the appropriateness of the going concern basis is dependent upon continuing operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

In September 2008, due to market conditions, the Company determined to divest itself of the William Brand Administer Ltd’s women apparel business and other non-material businesses. In keeping that intent, on August 1, 2009, as mentioned above, we entered into a subscription and asset sale agreement (the “Agreement”) with Beijing Hua Hui Hengye Investment Lt. (“Hua Hui”). Pursuant to the Agreement, the Company divest itself of William Brand Administer Ltd’s women apparel business, Beijing Niceshow Exhibition Limited, Wuxi Sun Network Technology Ltd., and transferred other non-material assets to Hua Hui in exchange for obtaining the commercial income rights to 10,000 square meters the Huadun Changde International Hotel (“Hotel”) located in the city of Changde in China’s Hunan Province (“Project”), which is currently under construction.

As a result of the transactionCompany’s recent transactions with Hua Hui,CIGE and Wang Yihan, as amended, its future business strategy is art event and art media direct marketing, direct sales of art products and art-themed luxury goods, and providing marketing and sales for art related real estate development projects. The Company plans to leverage the Company’s new business goal is to develop a network of upscale, private member health clubsart event and art media advertising and marketing channels acquired in the PRC.Acquisition Agreement to offer unique art related marketing and advertising services targeting China’s wealthiest consumers.  

The Company also entered into a strategic cooperative agreement (“Strategic Agreement”) with its shareholder Sun Media Investment Holdings Ltd. (“SMIH”) and with Redrock Land Investment Ltd. (“Redrock Land”), an affiliate of the Company major shareholder Redrock Capital Venture Ltd. (“Redrock”). Redrock Land has agreed to provide NextMart a $1,000,000 interest free loan due on demand after one year. SMIH has agreed to provide NextMart with approximately $6,000,000 worth of advertising space over the next five years in various media outlets owned by it or its affiliates.

In addition to its arrangement with Redrock Land, the Company is actively pursuing additional funding and arrangements with third parties and potential strategic partners in an effort to fund its ongoing working capital requirements. The Company’s working capital requirements for the next 12 month is estimated at approximately $5.3$1.5 million. Management is hopeful that the above actions will allow the Company to continue its operations through the current fiscal year.

NOTE 11- SUBSEQUENT EVENT

On July 8, 2010, the Company issued to Ms. Wang Yihan 75,000,000 shares of its common stock in fulfillment of its obligation under the Acquisition Agreement.

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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This quarterly reportQuarterly Report on Form 10Q10-Q contains forward-looking statements. These"forward-looking statements" within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended (the " Securities Act ") and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the " Exchange Act "). Such statements relate to, future events oramong other things, our future plans of operations, business strategy, operating results and financial performance. In some cases, you can identify forward-looking statementsposition and are often, though not always, indicated by terminologywords or phrases such as “may”, “will”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”"anticipate," "estimate," "plan," "project," "outlook," "continuing," "ongoing," "expect," "believe," "intend," and similar words or “continue” or the negative of these terms or other comparable terminology.phrases. These forward-looking statements include statements other than historical information or statements of current condition,

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but instead represent only our belief regarding future events, many of which by their nature are inherently uncertain and outside of our control. Important factors that could cause actual results to differ materially from forward-looking statements include, but are not limited to, those described in the section titled “Risk Factors”"Risk Factors" previously disclosed in our Annual Report on Form 10-K for the periodyear ended September 30, 2009. Although2008:

Our short operating history and rapidly evolving business makes it difficult for us to accurately forecast revenues and expenses;

Our business model is largely untested;

 Our need for additional capital (and concomitant dilution effect);

Certain risks also exist with respect to our newly developed and developing art themed product and services and  marketing business. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we believe thatassess the expectations reflectedimpact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in theany forward-looking statements. We undertake no obligation to update or revise any forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performancein this Report to reflect any new events or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any change in conditions or circumstances. All of the forward-looking statements to conformin this Report are expressly qualified by these statements to actual results.

cautionary statements.

Our financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. In this annual report, unless otherwise specified, all dollar amounts are expressed in United States Dollars.

As used in this annualquarter report, the terms “we”, “us”, “our”, and “NXMR” mean NextMart, Inc. and its wholly-owned subsidiariessubsidiaries.

Overview

Prior to fiscal year 2008, we had planned to develop an integrated online-offline direct sales platform for the ladies' apparel sector in China involving William Brand Administer Co. Ltd. However, our business and business strategy were adversely impacted in a material manner due to the appreciation of the Chinese currency (yuan)(Yuan) against the US dollar (which resulted in US consumers paying higher prices for products manufactured in China), coupled with an already weak US retail market. Accordingly, we were unable to meet our projected operating results and milestones for the various periods. The lack of operating results adversely impacted our stock price during the applicable periods. Due to the depressed price of our common stock together with the overall world-wide financial market turmoil, we were unable to raise the necessary funds to support our expansion strategy. Consequently in May 2008, we determined to change our business focus initially attemptingat tempting to focu sfocus on the financial advisory/direct investments, and thereafter, redirecting this focus towards the healthcare industry in China.

As a result ofAfter our transaction with Hua Hui in August 2009, our new business strategy iswas to develop a network of upscale, private member health clubs in the PRC. ThisPRC, however as noted above, on March 3, 2009 the Company and Hua Hui rescinded the transaction.

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As a result of our recent transaction with CIGE and Wang Yihan, as amended, its future business strategy is art event and art media direct marketing, direct sales of art products and art-themed luxury goods, and marketing and sales for art related real estate development projects. (Please refer to a detailed description of our proposed business contained in our Form 8-K filing dated June 23, 2010, as amended on July 1, 2010). It intends to capitalize on its CIGE relationship as well as the experience, brand recognition, and resource integration capacities of its major shareholders, including Ms. Wang Yihan, Redrock Capital Venture, Ltd., and Sun Media Investment Holdings Limited. We began developing our business in March 2010 when Ms. Wang became the Company’s Chairman and CEO and soon thereafter, the Company launched its “Artslux” branded products.

Going forward, our business operations will include:

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art event and art media direct marketing;

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design and marketing of art-themed products lines created for existing luxury and high-end goods and brands and art themed real estate developments,

Art Event And Art Media Direct Marketing

NextMart plans to leverage the art event and art media advertising and marketing channels acquired from CIGE to offer unique art related marketing and advertising services targeting China’s wealthy consumers. Prospective clients will include any luxury brand goods and/or services companies targeting China’s sophisticated and wealthy classes. In addition, we expect to provide marketing channels for its Artslux branded products. Client advertisers will be provided with a detailed description of services and a budget for its specialized advertising or marketing program. The program may include brand consulting, direct mail pieces and advertising space in our art events and/or our media advertising channels which will be tailored to meet the specific needs of each client. For our services, we will charge a negotiated fee dependent on the parameters of the marketing effort. We intend to use the following art related advert ising and marketing channels:

-The 10,000 member CIGE Consumer Database,

-All advertising rights forChina International Gallery Exposition,

-All advertising rights forGREEN Exhibition,

-All advertising rights toGallery Guide Magazine, and

-$1,200,000 in advertising space in various print magazines and online websites and e-magazines owned by SMIH or its affiliates for five consecutive years.

We expect that the total costs for the company’s direct advertising and marketing will be approximately $250,000 for the first year of operations. Of the $250,000 amount, $190,000 is allocated to selling expenses including marketing and logistics for services, and $60,000 is allocated to general and administrative expenses including rent, salaries, office expenses, and miscellaneous expenses.

Art Themed Products and Services Design and Development

The Company will use Oxas Beijing Limited to operate its art-themed product and services modeldivision. Under the brand name of “Artslux”, the Company plans to leverage its shareholder resources to form partnerships with the world’s most recognized artists and Chinese and international high-end luxury goods providers, financial institutions, and real estate developers to create and design value added art themed products and services for existing product lines. Art products and services that the Company is planning to create and design include:

1. Art Branded High-End and Luxury Goods

The company has already begun to develop art themed wines and spirits by creating limited edition artist labels that would be printed for select high-end wines and spirits. We also plan to create watches, cigar boxes, jewelry, furniture, electronics, etc. designed by famous artists or featuring their artworks. We have already partnered with Chinese artist Cheng Yifei and Chateau Pey La Tour to produce and launch a limited edition artist collection of Chateau Pey La Tour. It is estimated that the total costs for the company’s product sales division will be rolled out in two phases. Phase oneapproximately $270,000 for the next 12 months of operations. Of the $270,000 amount, $80,000 is allocated to establish private member health clubs that offer specialized health servicescost of sales which includes artist licensing and productsdesign fees, $190,000 is allocated to its members. These clubs would provide first class preventativeselling and recovery care using the most modern methods

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general expenses including marketing and products. logistics, support staff, among other items.

2. Financial Institution Products and Services

We plan to develop this club concept in cooperation with top tier membership clubs and health care services companies specializing in preventative and recovery care. We intend to establish our own independent locations, as well as partner with China’s most elite members clubs to embed our Demao Tang concept and related products into these existing operations. Revenues from the planned clubs would be derived from the sale of memberships to its clubs and the sale of private label and third party healthbegin developing art themed products and services withinfor major financial institution. The products and services could include credit cards for high-net individual customers, art themed luxury goods as special gifts for high value clients, art themed luxury goods for loyalty rewards programs and for sale in product catalogues. While the clubs. Ph ase two involvescompany expects to begin producing such products and services sometime in the direct sales for Demao Tang branded health products. Thesenext 12 months, the company at this time has not yet engaged in serious negotiations with any parties, and we are therefore still unsure of the costs that will be associated with such products would include certain types of supplements and herbal and homeopathetic medicines as well as general health and anti-aging products designed to restore and maintain health and well-being. We intend to private label. The Company will continue to maintain the consulting services for the foreseeable future, although it will not devote significant attention to this business. These consulting services related to investment, merger and acquisition services. During the three months ended December 31, 2009, we had no revenues from the consulting services.

3. Art Branded Real Estate

NextMart is offering unique art based real estate consulting, marketing, and sales services to real estate developers in China under its brand “Artslux”. We remind investors thatplan to leverage our plans to re-focus our business to participateart industry know-how, reputation in the health club industryart community, and extensive art related marketing and sales channels to assist developers to successfully develop art-themed real estate developments. Under our model, NextMart will act as strategic advisor to real estate developers to create unique development concepts centered on art facilities and artistic communities. Art themed real estate development projects would include artist living/work spaces, galleries, exhibition spaces, multi-function art galleries, museums, auction houses and other facilities. The Company is currently in China, specifically cancer treatment are subjectfinal status negotiations with certain real estate developers and local governments to substantial risksproduce and uncertainties.art development just outside Beijing. We have not made substantial progresstarget to close the deal sometime in reaching our objectives. We can not predict whether wethe fourth quarte r of fiscal 2010. The Company estimates that the total costs for its art themed real estate development business will be successful in identifying, selecting and investing in business, technologies, or treatments that will prove successful in our new business efforts. Our effortsapproximately $300,000 for the next 12 months of operations. Of the $300,000 amount, $90,000 will be subjectallocated to our abilitycost of sales which includes government lobbying, and professional services fees for feasibility reports and concept designers, and $210,000 is allocated to raise additional funds (which in turn will cause dilution to existing stockholders), formal agreementsG&A such as selling costs, rent, and salaries, among other costs.

For the next 12 months of its “Artslux Branded” art themed products and services design and development business, NextMart expects that the total costs associated with numerous parties, and various approvals.  Therefore, we can not predict with certainty whether wethe business will be successful in our re-structuring effortsapproximately $570,000. Of the $570,000 amount, $170,000 will be allocated to cost of sales, which includes design and the exact combination of efforts requireddevelopment costs, third party outsourcing costs, etc, while $400,000 will be attributed to achieve success.G&A.

Results of Operations       

The following discussion relates to our existing internet and marketing consulting businesses. We provide internet based marketing and web-site development services to other companies in China. The discussions below exclude the results of operations of our businesses held for sale discussed elsewhere herein, except for the (Loss) Income from held for sale operations discussion below.

Three Months Ended December 31, 2009June 30, 2010 compared with Three Months Ended December 31, 2008June 30, 2009

The following discussion reflects our results from operationsSales and Cost of Sales.Our sales for the three months ended December 31,June 30, 2009 compared withwas $57,215. These sales from the three months ended December 31, 2008. Although there are no revenues from consulting services for the 2009 period, we will continue to maintain the consulting services business for the foreseeable future, however, it is not expected to be a significant focus of future business efforts.

Revenues. During the three months ended December 31, 2009 and 2008, we had revenues of $0 and $41,637, respectively. The  revenues for the 2008 period were primarily due to the operation of consulting service business. We had nodid not have any similar revenues for the 2009comparable period from our consulting business due to the reduction of clients’ demands for this period.in 2010.

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Cost of Sales.Gross Margin. Our cost of revenuesales for the three months ended December 31,June 30, 2009 and 2008was $18,593. This was primarily due to the operation of consulting service business. The costs of sales for the 2009 period were $0 and $2,082, respectively. Costdue to the operation of Sales represents a portion of the personnel cost of the consulting service business.

Gross Margin.Operating Expenses. As a result of the foregoing, our gross marginsOperating expenses which include general and administrative expenses, consulting and professional fees, and depreciation and amortization, for the three months ended December 31, 2009 and 2008 were $0 and $39,555, respectively.

Operating Expenses. Our operating expenses (which includes general and administrative expenses, depreciation and amortization and consulting and professional fees)June 30, 2010 totaled $48,215, a decrease of $ 184,584 or 79% from $232,799 for the three months ended December 31,corresponding 2009 and 2008 were $78,045 and $109,115, respectively.period. General and administrative expenses were $39,570$20,955 for the three months ended December 31, 2009,2010 period, a decrease of $48,846$153,254 or 55.25%88% from $88,416for$174,209 for the 20082009 comparable period. The decrease for the 2009 period wasis due to reduced head count and related salaries and related expenses at our corporate office due to our scaled down operations.office. Depreciation and amortization were $195totaled $0 and $50,433,$40,195 for the 2010 period and 2009 and 2008 periods,period, respectively. The decrease is due to reduction in amortization resulting from the 2009disposition of intangible assets. Consulting and professional fees for the 2010 period totaled $27,260, an increase of $8,865 or 48% from $18,395 for the comparable period in depreciation and amortization2009. The increase reflects higher legal fees i n connection with launching our new art based business.

Operating Loss. We had an operating loss of $48,215 for the 20092010 period reflects our reduced asset base which was disposedcompared with an operating loss of $194,177 for

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the comparable period in 2009. The decrease of $145,962 or 75% from the Hua Hui transaction.prior period is because of the factors discussed above.

Other Income (Expense)(Expense). We had an Interest expense of $4,880 for the 2010 period compared with an interest expense of $290,000 for the comparable period in 2009. For the 2009 period, we had interest expensepenalty of $4,315 compared with interest expense of $65,000 for the comparable period in 2008. The interest expense for 2009 period was due to the accrued expense to the loan from Hua Hui, and the interest expense for 2008 period was due to interest paid to the convertible notes holders. We had an amortization oncancelling convertible notes of $35,741 for the 2008 period$ 610,168 and we did not have a similar charge of the comparable 2009 period.these items in 2010.

Loss from operations. We had an operating loss from operations of $78,045 for the three months ended December 31, 2009 compared with an operating loss of $109,115 for the comparable period in 2008. The decrease was due to the factors discussed above.

Loss from continuing operations before income tax expense.operations. Our loss from continuing operations for the three months ended December 31,June 30, 2010 and 2009 was $53,044 and 2008 was $82,360 and $210,033$1,094,345, respectively. The difference wasreason of the differences is due to the reasons discussed above.

Loss from discontinuedheld for sale operations. We had aOur loss from discontinuedheld for sale operations for the three months ended December 31, 2008June 30, 2009 was $64,189.

Net loss. We had a net loss of $1,027,098 attributable to$53,044 for the divestiture2010 period compared with a net loss of William Brand’s women apparel business and other non-material businesses. We did not have a similar loss$1,158,534 for the comparable 2009 period.period in 2009.

Other Comprehensive LossIncome (Loss). We had a foreign currency translation adjustment loss of $806$1,971 for the 20092010 period compared with a translation loss of $81,109$149,101 for the comparable period in 2008.2009. The difference is due to the value of the US dollar in comparison to the RMB and HK dollar. In 2009 and 2008,2010, we had an unrealized gain of $420 compared with a loss of $ 11,520 and loss of $416,209 respectively, due to$9,568 for the change of the fair value of the marketable securities held during the period.comparable period in 2009.

Total Comprehensive Losscomprehensive loss.

For the three months ended December 31, 2009,June 30, 2010, we had a comprehensive loss of $94,686$54,595 compared with a comprehensive loss of $1,734,449$1,298,067 for the comparable period in 2008.2009 for the reasons discussed above.

Nine Months Ended June 30, 2010 compared with Nine Months Ended June 30, 2009

Sales. Our sales for the nine months ended June 30, 2009 was $98,852. These sales were primarily due to the operation of consulting service business. We did not have any similar revenues for the comparable period in 2010.

Cost of sales. Our cost of sales for the nine months ended June 30, 2009 was $20,675. This was primarily due to the operation of consulting service business. The decrease is in line with the drop in sales.

Gross Margin. As a result of the foregoing, our gross margin for the nine months ended June 30, 2001 and 2009 was $0 and $78,177 respectively.

Operating Expenses. Operating expenses which included general and administrative expenses, consulting and professional fees, and depreciation and amortization, for the nine months ended June 30, 2010 totaled $203,690, a decrease of $ 415,747 or 76% from $619,437 for the corresponding 2009 period. General and administrative expenses were $92,113 for the 2010 period, a decrease of $ 294,001 or 76% from $386,114 for the 2009 comparable period. The decrease is due to reduced headcount and related salaries and expenses at our corporate office due to our scaled down operations.. Depreciation and amortization totaled $195 and $120,441 for the 2010 period and 2009 period. The decrease is due to reduction in amortization resulting from the disposition of intangible assets. Consulting and professional fees for the 2010 period totaled $111,382, a decrease of $1,500 or 1% from $112,882 for the comparable period in 2009. The decrease reflects lo wer consulting fees in the first and second quarters of the year due to the scaled down operations during such periods.  

Operating Loss. We had an operating loss of $203,690 for the 2010 period compared with an operating loss of $541,260 for the comparable period in 2008. The decrease from prior period is due to the factors discussed above.

Other Income (Expense). We had gain on disposal of fixed assets of $165 and exchange gain of $51 during the 2010 period. We did not have similar items for the comparable period in 2009. We had an interest expense of $12,942 for the 2010 period compared with an interest expense of $420,000 for the comparable period in 2009. For the 2009 period, we had penalty of cancelling convertible notes of $ 610,313, and change in fair value of CN & warrants option of $562,895 and we did not have these items in nine months ended by June 30, 2010.

Loss from continuing operations. Our loss from continuing operations for the nine months ended June 30, 2010 and 2009 was $5,886,922 and $2,134,468, respectively. The difference is due to the reasons discussed above.

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Loss from held for sale operations. We had impairment loss of assets held for sale of $5,670,506 and  a loss from held for sale operations of $352,368 for the nine months ended June 30, 2010 compared with loss of $580,978 from held for sale operations for the nine months ended June 30, 2009.

Net loss. We had a net loss of $6,239,290 for the 2010 period compared with a net loss of $2,715,446 for the comparable period in 2009.

Other Comprehensive Income (Loss). Our foreign currency translation adjustment for the nine months ended June 30, 2010 and 2009 were $8,558 and$(147,222). The difference is due to the value of the US dollar in comparison to the RMB and HK dollar. Our unrealized loss for the nine months ended June 30, 2010 and 2009 were $11,100 and $447,306 respectfully.

Total comprehensive loss. For the nine months ended June 30, 2010, we had a comprehensive loss of $6,241,793 compared with a comprehensive loss of $3,309,974 for the comparable period in 2009 for the reasons discussed above.

Liquidity and Capital Resources.Resources

We have financed our operations primarily through cash generated from equity investments, operating activities and a mixture of short and long-term loans from affiliates (some of which have been converted to equity)for affiliated and non-affiliates.non-affiliated parties.

The following table summarizes our cash flows for the threenine months ended December 31, 2009June 30, 2010 and 2008:2009:

15The net cash used in operating activities forthe nine months ended June 30, 2010 was $(248,691), compared with net cash used in operating activities of $(176,888) for the nine months ended June 30, 2009. The difference is due to the assets stripping occurred during the nine months ended June 30, 2010.

The net cash used in investing activities for the nine month ended June 30, 2010 was $49,072, compared with net cash provided by investing activities of $(68,322) for the nine month ended June 30, 2009. The decrease of $19,250 is primarily caused by the loans from the related parties in the 2010 period.

The net cash provided by financing activities for the nine month ended June 30, 2010 was $170,339, compared with net cash provided by financing activities of $382,309 for the nine month ended June 30, 2009. The difference of $211,970 is mainly due to the high payments to original convertible notes holders.The effect of the exchange rate on cash was a loss of $3,386 for the nine months ended June 30, 2010, compared with a loss of $144,034 for the nine months ended June 30, 2009. The difference is due to reduction in foreign currency transactions.

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The difference between the closing balance of cash and cash equivalents for the nine months ended June 30, 2010 and 2009 is due to the reasons mentioned above.

As of December 31, 2009,June 30, 2010, we had total assets of $55,118,$3,809,593, total liabilities of $2,270,123$4,083,006 and a working capital deficit of $2,222,152.$(608,213)

On February 6, 2009,March 26, 2010, with an effective date of March 3, 2010, we closedcompleted a Convertible Debt Settlement Agreement with Beijing Hua Hui Hengye Investment Lt. (“Hua Hui”) to convert RMB 2,255,000 (approximately $329,866 USD) in outstanding loans due to Hua Hui into a group of private investors (“Settlement Agreement”) pursuant to which we re-purchased $1,500,000 of our outstanding senior convertible notes. Under the Settlement Agreement, in exchange for canceling the Notes and certain underlying agreements, we agreed to re-pay thepromissory note with a principal amount of $331,199 as of June 30, 2010. The issued notes were due on demand and accrue interest at the Notes ($1,500,000), and $610,126 in interest and default penalties. We paid $250,000rate of the $1,500,000 in the principal amount at closing, and were obligated to pay $250,000 every 90 days from closing6% per annum until the principal is paid in full. To date, we have paid $ 750,000 to the investors in principal and have not made any interest and default penalty payments.paid.

We continue to experience significant losses from operations. We are uncertain as to when weexpect that the total costs for the company’s direct advertising and marketing will achieve profitable operations. We have an immediate need for capital to conduct our ongoing operations and to advance the planned venture investment strategy. In our audited financial statements for fiscal year ended September 30, 2009, our auditors have expressed an opinion about our recurring losses from operations; stockholders’ deficit and inability to generate sufficient cash flow to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern.

Our capital budgetbe approximately $1,000,000 for the next 12 months of operations. Of the $1,000,000 amount, it is as follows:

O$610,000estimated that $400,000 will be allocated to cost of sales and $600,000 will be allocated to G&A for our executive offices expenditures, which includes $250,000 inexpenses including marketing and logistics for services, rent, salaries, office expenses, and related costs of non health club and hotel personnel, $250,000 in professional fees, $100,000 in executive office rent, and $10,000 in miscellaneous office expenditures.   

O$2.75 million for costs related to furniture, fixtures, and related items with respect to our rooms at the Hotel.    

O1.3 million, of which $1 million represents start up costs related to the openingexpenses. The Company expects that a substantial portion of the Hunan Club atrequired costs will funded by the HotelRedrock Land loan. We expect that revenues from our marketing efforts will commence in the fourth fiscal quarter of 2010, and $0.3 million represents operational coststhat such revenues, along with the Redrock Land loan, will enable the Company to fund this aspect of the Hunan Clubits operations for 12 months.

O$630,000 for start up and operational costs for three embedded clubs which we project to open during the next 12 month (at approximately $213,000 per club.months.

We expect that the total costs for the company’s product and services design and development division will be approximately $570,000 over the next 12 months of operations. Of the $570,000 amount, it is estimated that $170,000 will be allocated to cost of sales, which includes mainly design and development costs and third party outsourcing costs, etc, while $400,000 will be attributed to G&A for marketing, staff, rent, among other items. The Company expectsplans to generateinitially fund a portion of the required expenses through the Redrock Land loan, with the remainder of the required capital for the business expected to come from a combination of revenues from the operationoperations and from a planned round of the Project, which is expectedfundraising from third parties. We expect to occurundertake a fundraising effort in the first calendar quarter of calendar year 2011. Thereafter,At the Company believes that revenues from the Project will be sufficient to support our new business model.

We anticipate raising capital through additional private placements of our equity securities, and, if available on satisfactory terms, debt financing. Presently,current time, we have no arrangement or understanding withcommitments from any third party regarding the raising of required capital. It is conceivable that funding of all or partin respect of the budget required above may come from either or both Hua Hui, our largest shareholder, or Redrock Capital Venture Limited, a controlling stockholder. However, we do not have any agreements, arrangements or commitments with or guarantees from either partyproposed fundraising effort. We expect to provide funding to us. We can not provide assurances that we will be successful in our efforts to enhance our liquidity. If we are unable to raise sufficient funds to meet our cash requirements as described above, we may be required to curtail, suspend, or discontinue our current and/or proposed operations. Our inability to raise additional funds as described above may forced us to restructure, file for bankruptcy, sell assets o r cease operations,  any of which could adversely impact our business and business strategy, and the value of our capital stock. Due to the current price of our common stock, any common stock based financing, including transactions with affiliates which may entail the equity conversion of existing loans, will create significant dilution to the then existing stockholders. In addition, in order to conserve capital and to provide incentives for our employees and service providers, it is conceivable that we may issue stock for servicesgenerate sales in the future which also may create significant dilution to existing stockholders.

Contractual Obligations

Virtually allfourth quarter of our operations are in China, where we have leased an office in Beijing. Our Beijing office consists of 963 square feet. The lease periodis from September 27, 2007 to July 31, 2011.. Our annual rent is $32,467. At December 31, 2009, the total future commitments for minimum rentals payment are $24,350 for fiscal 2010.

16We expect that the total costs for the ArtChina art related marketing and product design business will be approximately $1,570,000 for the next 12 months of operations. Of the $1,570,000 amount, $570,000 will be allocated to cost of sales which includes government lobbying, and professional services fees for feasibility reports and concept designer, $300,000 will be allocated to selling expenses including marketing and sales, and $700,000 will be allocated for general and administrative expenses including rent, and salaries, among other costs. The Company expects the required capital for this business to come from a planned round of fundraising from third parties which we expect to undertake in the fourth quarter of 2010 or first calendar quarter of 2011. At the current time, we have no commitments from any third party in respect of the proposed fundraising effort. Prior to such fundraising, the Company may develop the initial aspects of i ts business using funds from the Redrock Land loan, and from revenues generated from other business to the extent that such revenues are available.

NextMart reminds investors that its plans to develop its business as described herein will be subject to numerous risks and uncertainties, including its ability to raise the necessary capital to implement its business plan. Presently, the Company has no arrangement with any third party, other than as disclosed herein, to provide any capital to the Company. Its new business also will be subject to formal agreements with numerous parties, asset valuations, fairness opinions, and various approvals including, but not limited to regulatory approval. The Company also reminds investors that even if it is able to meet the various requirements and regulations indicated above, it cannot predict whether it will be successful with its new business initiatives.

Contractual Obligations

On June 22, 2010, NextMart Inc. (“NextMart” or the “Company”) entered into an asset acquisition agreement (the “Acquisition Agreement”) with Beijing Chinese Art Exposition Media Co. Ltd (“CIGE), a Chinese art exhibition and media company, and Ms. Wang Yihan, the sole owner and director of CIGE who is also our Chairman and CEO. Under the terms of the Acquisition Agreement, NextMart acquired from CIGE the below described Assets for an agreed price of $750,000 (the “Consideration”). NextMart is obligated to pay the Consideration by issuing to Ms. Wang Yihan 75,000,000 shares of its common stock. As a result of this transaction, Ms. Wang will become NextMart’s second largest

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shareholder with a 27.96% ownership of the company. The effective date of the transaction is July 1, 2010.

New Accounting Pronouncements

In September 2006,October 2009, the FASBFinancial Accounting Standards Board (FASB) issued Statementamended revenue recognition guidance for arrangements with multiple deliverables (ASU No. 157, Fair Value Measurement (FAS 157)2009-13) (ASC No. 820)605). WhileThe new guidance eliminates the residual method of revenue recognition and allows the use of management’s best estimate of selling price for individual elements of an arrangement when vendor specific objective evidence (VSOE), vendor objective evidence (VOE) or third-party evidence (TPE) is unavailable. For the Company, this statement does not require new fair value measurements, it provides guidance on applying fair value and expands required disclosures.  FAS 157 is effective for all new or materially modified arrangements entered into on or after January 1, 2011 with earlier application permitted as of the beginning of a fiscal year. Full retrospective application of the new guidance is optional. The Company beginning in the first quarteris currently assessing its implementation of fiscal 2009.  This pronouncement shouldthis new guidance, but does not haveexpect a material impact on our financial statements.

In February 2008, the FASB issued “Effective Date of FASB Statement No.157” FASB Staff Position (FSP) No. 157-2 (FSP No. 157-2).  FSP No.157-2 delays the effective date of SFAS No. 157 until fiscal years beginning after November 15, 2008, for fair value measurements of non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually).

In February 2007, the FASB issued Statement No. 159 (ASC No. 825), The Fair Value Option for Financial Assets and Financial Liabilities (FAS 159).  The statement, which is expected to expand fair value measurement, permits entities to choose to measure many financial instruments and certain others items at fair value.  FAS 159 is effective for us beginning in the first quarter of 2009.  This pronouncement should not have a material impact on our financial statements.

In March 2008, the FASB issued SFAS No. 161 (ASC No. 815), “Disclosures about Derivative Instruments and Hedging Activities.”  The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows.  It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.  We do not expect the adoption of SFAS No.161 to have a material impact on our financial statements.

In December 2007, FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007) (“SFAS 141R”) (ASC No. 805), “Business Combinations”, which applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in an acquiree and the goodwill acquired. The Company will apply SFAS 141R to any business combinations subsequent to adoption.

In April 2009, the FASB issued FASB Staff Position Financial Accounting Standard 141R-1 (“FSP FAS 141R-1”), “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies.” FSP FAS 141R-1 amends SFAS 141R to require that an acquirer recognize at fair value, at the acquisition date, an asset acquired or a liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period. If the acquisition-date fair value of such an asset acquired or liability assumed cannot be determined, the acquirer should apply the provisions of SFAS 5, “Accounting for Contingencies”, to determine whether the contingency should be recognized at the acquisition date or after such date. FSP FAS 141R-1 is effective for business combinations whose acquisition date is on or after the first report ing period beginning after December 15, 2008. The Company does not anticipate the adoption of this FSP will have a material impact on the Company’s Consolidated Financial Statements.

In December 2008,October 2009, the FASB issued FASB Staff Position FAS 132(R)-1 (“FSP FAS 132(R)-1”)guidance which amends the scope of existing software revenue recognition accounting (ASU No. 2009-14) (ASC No. 715), “Employers’ Disclosures about Postretirement Benefit Plan Assets.” The FSP expands985). Tangible products containing software components and non-software components that function together to deliver the disclosure requirements about plan assetsproduct’s essential functionality would be scoped out of the accounting guidance on software and accounted for defined benefit pension plans and postretirement plans. FSP FAS 132(R)-1based on other appropriate revenue recognition guidance. For the Company, this guidance is effective for all new or materially modified arrangements entered into on or after January 1, 2011 with earlier application permitted as of the beginning of a fiscal years ending after December 15, 2009,year. Full retrospective application of the new guidance is optional. This guidance must be adopted in the same period that the Company adopts the amended accounting for disclosures about plan assets.arrangements with multiple deliverables described in the preceding paragraph. The Company is currently assessing its implementation of this new guidance, but does not anticipate the adoption of this FSP will haveexpect a material impact on the Company’s Consolidated Financial Statements.

In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 (ASC No. 825)and APB 28-1 (“FSP FAS 107-1 and APB 28-1”), “Interim Disclosures about Fair Value of Financial Instruments.” The FSP amends SFAS 107, “Disclosure about Fair Value of Financial Instruments,” and Accounting Principles Board Opinion No. 28, “Interim Financial Reporting,” to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP FAS 107-1 and APB 28-1 is effective for interim reporting periods ending after June 15, 2009in the second quarter of 2009. The Company does not currently believe that adopting this FSP will have a material impact on the Company’s Consolidated Financial Statements.

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 In April 2009, the FASB issued FASB Staff Position No. FSP FAS 115-2 (ASC No. 320)and FAS 124-2 (ASC No. 958) (“FSP FAS 115-2 and FAS 124-2”), ”Recognition and Presentation of Other-Than-Temporary Impairments.” The FSP amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. FSP FAS 115-2 and FAS 124-2 is effective for interim and annual reporting periods ending after June 15, 2009.  The Company does not currently believe that adopting this FSP will have a material impact on the Company’s Consolidated Financial Statements.

In April 2009, the FASB issued FASB Staff Position No. FAS 157-4 (ASC No. 820) ("FSP FAS 157-4"), “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” The FSP provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, “Fair Value Measurements”, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009.  The Company does not currently believe that adopting this FSP will have a material impact on the Company’s Consolidated Financial Statements.

Off-Balance Sheet Commitments and Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as stockholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Application of Critical Accounting Policies

Our significant accounting policies are described in Note 1 to our audited consolidated financial statements previously included in our Annual Report on Form 10-K for the year ended September 30, 2009. We prepare our financial statements in conformity with U.S. GAAP, which requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the financial reporting period.

Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We consider the policies discussed below to be critical to an understanding of our financial statements as their application places the most significant demand on our management’s judgment.

Revenue Recognition

We generate revenue through consulting services and recognize such revenues from consulting services in accordance with Staff Accounting Bulletin (“SAB”) No. 104 (ASC No. 605), “Revenue Recognition,” when all of the following conditions exist: persuasive evidence of an arrangement exists in the form of providing consulting services; or services have been rendered; the Company’s consulting fee received from the clients is fixed or determinable pursuant to the terms of the consulting agreement and these amounts appear to be collectible.

Income Taxes

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We account for income taxes under the provisions of SFAS No. 109 (ASC No. 740), "Accounting for Income Taxes," as described in Note 8 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the period ended September 30, 2009. We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of their recorded amount, an adjustment to our deferred tax assets would increase our income in the period such determination was made. Likewise, if we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to our deferred tax assets would be charged to our income in the period such determination is made. We record income tax expense on our taxable income usingusi ng the balance sheet liability met hodmethod at the effective rate applicable in China in our consolidated statements of operations and comprehensive income.

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Item 3.  Quantitative and Qualitative Disclosures about Market Risks

Not applicable

Item 4.3. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we undertook an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934, Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that such disclosure controls and procedures were effective to ensure (a) that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (b) that information required to be disclosed is accumulated and communicated to management to allow timely decisions regardingregar ding disclosure.

There were no changes in our internal controls over financial reporting during the three month ended December 31, 2009June 30, 2010 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are not aware of any pending legal proceedings against us. We may in future be party to litigation arising in the course of our business. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources.

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

None

Item 3. Defaults Upon Senior Securities.

None

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

None

Item 5. Other Information.

In its amended Form 8-K filed on July 1, 2010, NextMart disclosed its strategic cooperative agreement (“Strategic Agreement”) with its shareholder Sun Media Investment Holdings Ltd. (“SMIH”) and with Redrock Land Investment Ltd. (“Redrock Land”), an affiliate of the Company major shareholder Redrock Capital Venture Ltd. (“Redrock”). As disclosed in the stated Form 8-K, we stated that the $1,000,000 unsecured loan to be provided to NextMart by Redrock Land would have bear interest at the rate of five percent (5%) per annum, among other terms. It was also disclosed that Redrock Land was a PRC registered company.

The following corrects the prior disclosure;

(i) The loan will not bear interest at 5%, rather it will be interest free, and

(ii) Redrock Land is not a PRC company, rather it is a BVI company.

Item 6. Exhibits and Reports of Form 8-K.

(a) Exhibits

31.1 Certification of Chief Executive OfficerCertifications pursuant to Section 302 of Sarbanes Oxley Act of 2002

31.2 Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002

32.1 Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002

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SIGNATURES

 SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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