UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________



Amendment No. 1 to

FORM 10-Q/A

_______________



|T | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended June 30, 2011



| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from to .



NextMart, Inc.

(Exact name of registrant as specified
in Charter)



|DELAWARE                                                               |  | 000-26347             |  | 410985135                        
|---------------------------------------------------------------------- |  | --------------------- |  | ---------------------------------
|(State or other jurisdiction of
        incorporation or organization) |  | (Commission File No.) |  | (IRS Employee Identification No.)

Oriental Plaza Bldg. W3, Twelfth Floor

1 East Chang’an Avenue, Dongcheng District

Beijing, 100738 PRC

(Address of Principal Executive
Offices)

_______________



+86 (0)10 8518 9669



(Issuer Telephone number)

_______________



(Former Name or Former Address if Changed
Since Last Report)



Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes       No



Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).  Yes [X] No



Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “accelerated
filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):



Large Accelerated Filer	Accelerated Filer 



Non-Accelerated Filer		Smaller Reporting
Company [X]



Indicate by check mark whether the registrant is a shell company
as defined in Rule 12b-2 of the Exchange Act.



Yes [X] No



Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date. There were 336,835,541 shares of common stock outstanding as of August
15, 2011.

1





EXPLANATORY NOTE



The Company filed its Form 10-Q for the quarterly period ended June
30, 2011 with the Securities and Exchange Commission on August 22, 2011 (“Form 10-Q”). This Amendment No 1 to the Form
10-Q is filed in to include the Subsequent Event contain in footnote 12 to our unaudited financial statements.



Except to the extent expressly set forth herein, this amended Form
10-Q speaks as of the filing date of the original Form 10-Q and has not been updated to reflect events occurring subsequent to
the original filing date other than those required to reflect the effects of the comments received by the Staff. Accordingly, this
amended Form 10-Q should be read in conjunction with our filings made with the Securities and Exchange Commission.





NEXTMART, INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE

QUARTERLY PERIOD ENDED June 30, 2011





Table of Contents



INDEX



|                                                                       |                                                             
|---------------------------------------------------------------------- | ------------------------------------------------------------
|PART I FINANCIAL INFORMATION                                           | 2                                                           
|                                                                       |                                                             
|Item 1.                                                                |                                                             
|                                                                       |                                                             
|Item 2.                                                                |                                                             
|Item 3.    Quantitative and Qualitative Disclosures About Market Risk. | Quantitative and Qualitative Disclosures About Market Risks.
|Item 4.                                                                |                                                             
|                                                                       |                                                             
|PART II OTHER INFORMATION                                              | 21                                                          
|                                                                       |                                                             
|Item 5.                                                                |                                                             
|                                                                       |                                                             
|Signature                                                              |                                                             
|                                                                       |                                                             
|                                                                       |                                                             
|                                                                       |                                                             
|                                                                       |                                                             
|                                                                       |                                                             
|                                                                       |                                                             
|                                                                       |                                                             
|                                                                       |                                                             
|                                                                       |                                                             





















2





PART I   FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



|NEXTMART, INC. AND SUBSIDIARIES                                                                                                                                                   
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|CONSOLIDATED BALANCE SHEETS                                                                                                                                                       
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|ASSETS                                                                                                                                                                            
|CURRENT ASSETS:                                                                                                                                                                   
|Cash and cash equivalents                                                                                                                                                         
|Other receivables, net of allowance for doubtful accounts                                                                                                                         
|Marketable securities                                                                                                                                                             
|Current assets held for sale                                                                                                                                                      
|Total Current Assets                                                                                                                                                              
|                                                                                                                                                                                  
|Long-term assets held for sale                                                                                                                                                    
|Property, plant and equipment, net                                                                                                                                                
|TOTAL ASSETS                                                                                                                                                                      
|                                                                                                                                                                                  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                             
|CURRENT LIABILITIES:                                                                                                                                                              
|Other payables and accrued expenses                                                                                                                                               
|Amount due to stockholders                                                                                                                                                        
|Amount due to related parties                                                                                                                                                     
|Current liabilities held for sale                                                                                                                                                 
|Total Current Liabilities                                                                                                                                                         
|                                                                                                                                                                                  
|Convertible notes                                                                                                                                                                 
|TOTAL LIABILITIES                                                                                                                                                                 
|                                                                                                                                                                                  
|STOCKHOLDERS' DEFICIT                                                                                                                                                             
|Preferred stock; authorized 250,000,000 shares, par value US$0.01; none issued                                                                                                    
|Common stock; authorized 750,000,000 shares, par value US$0.01; issued and outstanding 336,835,541 and 268,204,734 shares as of June 30, 2011 and September 30, 2010, respectively
|Reserved to be issued 53,029 shares                                                                                                                                               
|Subscription receivable                                                                                                                                                           
|Additional paid-in capital                                                                                                                                                        
|Accumulated deficit                                                                                                                                                               
|Accumulated other comprehensive loss-Unrealized loss on    marketable securities                                                                                                  
|Accumulated other comprehensive loss-Other                                                                                                                                        
|TOTAL STOCKHOLDERS’ DEFICIT                                                                                                                                                       
|TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                                                       



See notes to consolidated
financial statements

3







|NEXTMART, INC. AND SUBSIDIARIES                                          |  
|------------------------------------------------------------------------ | -
|CONSOLIDATED STATEMENTS
        OF OPERATIONS
        (UNAUDITED)        |  
|                                                                         |  
|                                                                         |  
|                                                                         |  
|Sales                                                                    | $
|Cost of sales                                                            |  
|Gross margin                                                             |  
|Operating expenses                                                       |  
|General and administrative expenses                                      |  
|Depreciation and amortization                                            |  
|Consulting and professional fees                                         |  
|                                                                         |  
|Operating loss                                                           |  
|Other income (expense)                                                   |  
|Amortization of discount on convertible note                             |  
|Interest expense                                                         |  
|Other expense                                                            |  
|Loss from marketable securities                                          |  
|Gain on disposal of fixed assets                                         |  
|Exchange gain of foreign currency transaction                            |  
|                                                                         |  
|Loss from continuing operations before income tax expense                |  
|Income tax expense                                                       |  
|Loss from continuing operations                                          |  
|Impairment loss of assets held for sale                                  |  
|Loss from held for sale operations                                       |  
|Net Loss                                                                 |  
|Other comprehensive income (loss)                                        |  
|Foreign currency translation adjustment                                  |  
|Unrealized gain (loss)                                                   |  
|Total comprehensive loss                                                 | $
|                                                                         |  
|Weighted average number of common shares outstanding – basic and diluted |  
|Loss per share                                                           |  
|Continuing operations – basic and diluted                                | $
|Held for sale operations – basic and diluted                             | $
|Continuing operations and held for sale operations – basic and diluted   | $
|                                                                         |  

See notes to consolidated financial statements

4









|NEXTMART, INC. AND SUBSIDIARIES                                                    |  
|---------------------------------------------------------------------------------- | -
|CONSOLIDATED STATEMENTS OF CASH FLOWS
        (UNAUDITED)                          |  
|                                                                                   |  
|                                                                                   |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                              |  
|Continuing Operations                                                              |  
|Net loss                                                                           | $
|Depreciation and amortization                                                      |  
|Loss from marketable securities                                                    |  
|Interest expense                                                                   |  
|Gain on disposal of fixed assets                                                   |  
|Amortization of discount on convertible notes                                      |  
|Held for sale operations                                                           |  
|Change in operating assets and liabilities                                         |  
|Other receivables                                                                  |  
|Accounts payable, other payables and accruals                                      |  
|Net Cash Used in Operating Activities from continuing operations                   |  
|                                                                                   |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                               |  
|Purchase of property and equipment                                                 |  
|Amounts collected (due) from related party                                         |  
|Net Cash Provided by (Used in) Investing Activities from continuing operations     |  
|                                                                                   |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                               |  
|Payments to original convertible notes holders                                     |  
|Amounts due to shareholders                                                        |  
|Amounts due to related parties                                                     |  
|Unregistered sales of common shares                                                |  
|Issued convertible notes                                                           |  
|Net Cash Provided by Financing Activities from continuing operations               |  
|                                                                                   |  
|Effect of exchange rate fluctuations on cash and cash equivalents                  |  
|Net increase (decrease) in cash and cash equivalents from continuing operations    |  
|Net increase /(decrease) in cash and cash equivalents from discontinued operations |  
|Net decrease in cash and cash equivalents                                          |  
|                                                                                   |  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                   |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                         | $
|Supplemental disclosure of cash flow information                                   |  
|Interest Paid                                                                      | $
|Income Taxes Paid                                                                  | $
|                                                                                   |  

See notes to consolidated
financial statementsNEXTMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2011





NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Nature of Operations



NextMart, Inc. (herein referred to as “NextMart”,
“we” or the “Company”) was originally incorporated under the laws of Minnesota in 1972 and was previously
known as SE Global Equity. In September 2005, the Company acquired 100% of the issued and outstanding share capital of Sun New
Media Group Limited and changed the company name to Sun New Media, Inc. In May 2007, the Company reincorporated into the State
of Delaware and changed our name to NextMart, Inc.



On March 3, 2010, the Company entered into
a transaction termination agreement with Beijing Hua Hui Hengye Investment Lt. (“Hua Hui”), wherein both companies
agreed to terminate and rescind the subscription and asset sale agreement previously entered into by the parties on August 1, 2009
(the “Original Agreement”). All considerations received by each party under the Original Agreement were returned to
the issuing party.



On March 31, 2010, NextMart entered into an
asset exchange and subscription agreement with Ms. Wang Yihan (“Ms. Wang”) and Beijing Chinese Art Exposition's Media
Co., Ltd. (“CIGE”), a leading Chinese art services, events media company located in Beijing, China. Ms. Wang is the
sole shareholder of CIGE. The agreement was effective March 31, 2010 and was amended on May 10, 2010. Under the amended agreement
NextMart agreed to sell directly to Ms. Wang the following assets (“Transferred Assets”) (See Note 13): 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 Cancer Institute
of China Ltd (a BVI registered company) and its wholly owned subsidiary China Cancer Institute Beijing Ltd. (a PRC registered company).The net assets being sold do not include the subsidiaries’ cash, office furniture and equipment, and third party creditor’s
rights and third party debts, which shall remain as the subsidiaries’ property and 5) any other net assets and liabilities
belonging to NextMart, with the exception of its 3,000 shares of China Grand Resorts Inc. common stock and its remaining liability
under the convertible bond settlement agreement.



In exchange for the Transferred Assets, Ms.
Wang agreed to transfer to NextMart certain land use 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. Land use right, or land ownership may be renewed at the expiration of the initial term and 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 use rights for adequate real estate property within the 24 month period, she is obligated to provide NextMart with common
stock of a publicly traded company acceptable to NextMart of equivalent amount.

5









On June 22, 2010, the Company entered into
an asset acquisition agreement (the “Acquisition Agreement”) with CIGE and its sole owner and director Ms. Wang, who
is also NextMart’s Chairman and CEO. Under the terms of the Acquisition Agreement, NextMart is going to acquire from CIGE
the below described Assets for an agreed price of $750,000 (the “Consideration”). NextMart paid the Consideration by
issuing 75,000,000 shares of its common stock to Ms. Wang. As a result of this transaction, Ms. Wang became NextMart’s second
largest shareholder with a 27.96% ownership of the Company.

Under the terms of the Acquisition Agreement, NextMart acquired
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" magazine 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, NextMart shall have the right to buy those exhibitions and “Gallery Guide” brand name for the price
of $1 each from CIGE.



As a result, NextMart’s planned business
operations for the next 12-monhts will consist of 1) the sale of marketing solutions through 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.



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



Under the Strategic Agreements, Redrock
Land will provide NextMart a $1,000,000 interest free, unsecured loan in 12 months. Any amounts loaned will be due on demand any
time after the first anniversary of the loan. As of June 30, 2011, the loan has not been provided to the Company. Redrock Land
also agreed that within the next 24 months, it will partner with NextMart on three of its real estate development projects that
are art related.  For each such project, NextMart will act as the project’s concept, marketing, and sales consultant.
Redrock Land is a BVI registered company engaged in land investment and development in China and it typically co-invests with real
estate developers to acquire land and launch development projects. As part of its cooperation with NextMart, Redrock Land will
secure land and developing partners for three art related developments for which NextMart will provide consulting service to the
developers. Under the Strategic Agreements, 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. The $6,000,000 worth of advertising 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 each year. Such advertising
space will be subject to availability and market prices, and the Company intends to limit the use of the advertising space to market
its Artslux products. As of June 30, 2011, no advertising space has yet to be allocated to NextMart.

6









Basis of Consolidation and Presentation



The consolidated
financial statements of the Company have been prepared in accordance with the accounting principles generallyaccepted in
the United States of America (“U.S. GAAP”). The consolidated financial statements include the financial statements
of the Company and its subsidiaries named Cancer Institute of China Ltd. and China Cancer Institute Beijing Ltd. All significant
inter-company balance and transactions have been eliminated in consolidation.



The consolidated interim financial information
as of June 30, 2011 and for the three-month periods and nine-month periods ended June 30, 2011 and 2010 have been prepared without
audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  Certain
information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with
U.S. GAAP have not been included. The interim consolidated financial information should be read in conjunction with the Financial
Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended September
30, 2010, previously filed with the SEC.



In the opinion of management, all adjustments
(which include normal recurring adjustments) necessary to present a fair statement of consolidated financial position as of June
30, 2011, and consolidated results of operations, and cash flows for the three month and nine month periods ended June 30, 2011
and 2010, 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.



Fair Value Measurements



The Company applies the provisions of ASC Subtopic
820-10, Fair Value Measurements, for fair value measurements of financial assets and financial liabilities and for fair value measurements
of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC Subtopic 820-10 also establishes
a framework for measuring fair value and expands disclosures about fair value measurements.





ASC Subtopic 820-10 defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date.  When determining the fair value measurements for assets and liabilities required or permitted to
be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers
assumptions that market participants would use when pricing the asset or liability.

7











ASC Subtopic 820-10 establishes a fair value
hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value. ASC Subtopic 820-10 establishes three levels of inputs that may be used to measure fair value.  The hierarchy
gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)
and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the
fair value hierarchy are as follows:



Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 inputs are inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for the
asset or liability.



The level in the fair value hierarchy within which a fair value
measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.



The Company’s financial instruments consist of cash, other
receivables, marketable securities, other payables, amounts due to related parties and amounts due to shareholders.  Other
receivables carried at estimated net realizable values net of provisions for uncollectible amounts. Uncollectible accounts are
charged off when determined to be unrecoverable. Marketable securities are carried at market value with any unrealized gain or
loss is recorded in comprehensive income or loss. The carrying values of the remaining financial instruments reflected in these
financial statements approximate their fair values due to the short-term maturity of the instruments.



Financial Instruments



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



Impairment of Long-lived Assets



The Company assesses the carrying value of
long-lived assets in accordance with ASC No. 360, 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 charge to
record the assets at fair value may be recorded. Impairment is measured based on fair values utilizing estimated discounted cash
flow, published thirty-party sources, and third-party offers.



Comprehensive Income (Loss)



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

8











Earnings (Loss) Per Share



Basic earnings (loss) per share 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 earnings (loss) per share is considered anti-dilutive and not included
in the statement of operations.



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:

|         |  | Years | 
|-------- |  | ----- | 
|Computer |  | 3     | 



Convertible Note



The Company accounts for convertible note in accordance with ASC
470-20, Debt with Conversion and Other Options. The Company booked a discount on convertible note for the conversion feature of
the note and is amortizing the discount over the life of the convertible note.



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 ASC No. 830, “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.



The exchange rates applied are as follows:

|                                                                             |         |        
|---------------------------------------------------------------------------- | ------- | -------
|RMB exchange rate at June 30, 2011 and September 30, 2010,                   | 6.46300 | 6.69810
|Average RMB exchange rate for the three months ended June 30, 2011 and 2010, | 6.53160 | 6.82135
|Average RMB exchange rate for the nine months ended June 30, 2011 and 2010,  | 6.55960 | 6.81760
|HKD exchange rate at June 30, 2011 and September 30, 2010,                   | 7.78320 | 7.75820
|Average HKD exchange rate for the three months ended June 30, 2011 and 2010, | 7.78190 | 7.76666
|Average HKD exchange rate for the nine months ended June 30, 2011 and 2010,  | 7.77730 | 7.76370



9









Income Taxes



The Company follows the liability method of
accounting for income taxes in accordance with ASC No. 740. Under this method, future tax assets and liabilities are recognized
for the future tax consequences attributable 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.



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.



Recently Issued Accounting Pronouncements



In May 2011, the FASB issued ASU No. 2011-04,
“’ Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which
is not expected to have a material impact on the consolidated financial statements upon adoption.



In June 2011, the FASB issued ASU No. 2011-05,
“Presentation of Comprehensive Income”. Under the amendments in this ASU, an entity has two options for presenting
its total comprehensive income: to present total comprehensive income and its components along with the components of net income
in a single continuous statement, or in two separate but consecutive statements. The amendments in this ASU are required to be
applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15,
2011, with early adoption permitted. The Company intends to conform to the new presentation required in this ASU beginning with
its Form 10-Q for the three months ended March 31, 2012.

10









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:



|                                 | June 30, 2011    | September 30, 2010
|-------------------------------- | ---------------- | ------------------
|                                 | Number of shares | Amount            
|                                 |                  | US $              
|                                 | (Unaudited)      |                   
|                                 |                  |                   
|CHINA GRAND RESORTS, INC AT COST | 3,000            | 120,000           
|Unrealized loss                  |                  | -                 
|Realized loss                    |                  | (120,000)         
|Net balance                      |                  | -                 



Due to the fact that the market for China Grand
Resorts, Inc common stock on the Over the Counter Bulletin Board has been limited or non-existent for a significant period of time,
management determined to recognize an impairment loss on marketable securities of $120,000 in the second quarter of 2011.



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:



|                               |               |                   
|------------------------------ | ------------- | ------------------
|                               | June 30, 2011 | September 30, 2010
|                               | US$           | US$               
|                               | (Unaudited)   |                   
|Computer                       | 664           | -                 
|Less: accumulated amortization | 104           | -                 
|Net                            | 560           | -                 



Amortization for three month ended June 30, 2011 and 2010 was $52
and nil respectively, respectively. Amortization for nine month ended June 30, 2011 and 2010 was $104 and $195, respectively.





11









NOTE 4 - CONVERTIBLE NOTES



On March 26, 2010, we completed a Convertible
Debt Settlement Agreement with Hua Hui to convert RMB 2,255,000 (approximately $330,000) outstanding loans due to Hua Hui into
a convertible promissory note with a principal amount of RMB 2,255,000 (approximately $341,000 as of December 31, 2010) and will
due on September 3, 2011. The convertible promissory is effective as of March 3, 2010 and has the following features:



·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.

·If the Company 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 RMB0.11

·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.



As the market price
of the common shares was higher than the conversion price at the date of issuance, the company recognized a
beneficial conversion feature as a discount to the convertible note. The beneficial conversion feature discount needs to be amortized
using the effective interest method over the life of the convertible note of 18 months. The Company credited $79,185 to additional
paid-in capital and debited the same amount to the discount to the convertible note on March 26, 2010. The amortization of discount
on convertible notes was $13,773 for the three months ended June 30, 2011. The interest expense on the convertible note for the
three months ended June 30, 2011 is $5,247. The amortization of discount on convertible notes was $40,918 for the nine months ended
June 30, 2011. The interest expense on the convertible note for the nine months end June 30, 2011 was $15,374.



Convertible note as of June 30, 2011 consists
of the following:



|                                                        |  | June 30,
        2011 |         |   |  | September 30, 2010
|------------------------------------------------------- |  | --------------------- | ------- | - |  | ------------------
|                                                        |  | US$                   |         |   |  | US$               
|                                                        |  | (Unaudited)           |         |   |  |                   
|Face amount of convertible note payable                 |  |                       | 348,908 |   |  |                   
|Discount representing the beneficial conversion feature |  |                       | (79,185 | ) |  |                   
|Accumulated amortization of discount                    |  |                       | 67,314  |   |  |                   
|                                                        |  |                       | 337,037 |   |  |                   
|                                                        |  |                       |         |   |  |                   



12













NOTE 5 - OTHER PAYABLES AND ACCRUALS



Other payables and accruals are summarized as follows:

|                                                                                           |  |               |  |                    | 
|------------------------------------------------------------------------------------------ |  | ------------- |  | ------------------ | 
|                                                                                           |  | June 30, 2011 |  | September 30, 2010
|                                                                                           |  | US$           |  | US$                | 
|                                                                                           |  | (Unaudited)   |  |                    | 
|Other payables- payable to the creditors who originally held our
        convertible notes |  | 628,143       |  | 1,128,126          | 
|Accrued interest expenses for convertible notes                                            |  | 27,645        |  | 11,677             | 
|China Grand Resort, Inc.                                                                   |  | 2,218         |  | -                  | 
|                                                                                           |  | 658,006       |  | 1,139,803          | 
|                                                                                           |  |               |  |                    | 



On March 22, 2007, NextMart Inc. executed a
subscription agreement with certain accredited investors, including Professional Offshore Opportunity Fund Ltd, pursuant to the
subscription agreement, the Company 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 financing was closed on March 29, 2007. The aggregate gross proceeds from
the sale of the notes and warrants were $1,500,000.  The convertible notes were due 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.



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. Under the Settlement Agreement, in exchange for canceling the senior convertible
promissory notes and underlying agreements, we agreed to pay back the principal amount of the notes of $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 made
principal payments of $250,000 and $150,000 during fiscal year 2009. We also agreed to pay interest and penalties of $610,126 within
90 days from the closing. Payment of the interest and penalties of $610,126 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.



During fiscal year 2010, we made $100,000,
$250,000, $165,000 and $67,000 in principal payments. As we disposed our holdings of CECU shares in the CIGE transaction, we are
now required to pay the $610,126 of interest and penalty due in cash or cash equivalents. As of September 30, 2010, we made payments
of $982,000 in principal and have not paid any interest and default penalties. As of September 30, 2010, the remaining balance
of the note is $1,128,126 which includes principal of $518,000 and interest and default penalties of $610,126.

13









On October 22, 2010, an amendment to convertible
debt settlement agreement was made. Pursuant to such amendment, the Company was required to pay $500,000 no later than 5 business
days following the execution of the amendment and the payment for the remaining balance of $627,126 was due March 1, 2011. As of
June 30, 2011, the Company has paid the $499,983 principal amount in full and the remaining outstanding balance is $ 628,143. Management
plans to resolve this issue in next few months.



NOTE 6 -AMOUNTS DUE TO STOCKHOLDERS



The amounts due stockholders are summarized as follows:

|                                | June 30, 2011 | September 30, 2010
|------------------------------- | ------------- | ------------------
|                                | US$           | US$               
|                                | (Unaudited)   |                   
|Redrock Capital Venture Limited | 148,522       | 145,562           
|                                | 148,522       | 145,562           



The amounts due to Redrock Capital Venture Limited are due on demand
and bear no interest.



NOTE 7 – LOSS PER SHARE



ASC 260 “Earnings Per Share,” requires
dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted
EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

14









The following table presents a reconciliation of basic and diluted
net loss per share:



|The three months ended            June 30, 2011       June 30, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Numerator used in basic net loss per share:                    Net loss from continuing operation    $ (47,246)       $ (53,044)   Net loss from held for sale operation    $ -       $ -   Shares (denominator):                            Weighted average common shares outstanding         336,835,541          193,204,734    Weighted average common shares outstanding used in computing diluted loss per                         ordinary share          336,835,541          193,204,734    Loss per share from continuing operations-basic and diluted    $ (0.0001)       $ (0.0003)   Loss per share held for sale operations – basic and diluted    $ -      $ -   Continuing operations and held for sale operations – basic and diluted   $ (0.0001)       $  (0.0003)                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|The nine months ended            June 30, 2011       June 30, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Numerator used in basic net loss per share:                    Net loss from continuing operation    $ (315,256)       $ (216,416)   Net loss from held for sale operation    $ -       $ (6,022,874)   Shares (denominator):                            Weighted average common shares outstanding         325,481,180          350,373,852    Weighted average common shares outstanding used in computing diluted loss per                         ordinary share          325,481,180          350,373,852    Loss per share from continuing operations-basic and diluted    $ (0.0010)       $ (0.0006)   Loss per share held for sale operations – basic and diluted    $ -      $ (0.0172)   Continuing operations and held for sale operations – basic and diluted   $ (0.0010)       $  (0.0178)



15







NOTE 8 -AMOUNTS DUE TO RELATED PARTIES



We have received loans from time to time
fromRedrock Thinktank (Group) Limited and Mr. Bruno Wu, who are affiliates. The following reflects
the transactions with these related parties during the period ended June 30, 2011.





The amounts due to related parties are summarized
as follows:

|                                  |  | June 30, 2011 |  | September 30, 2010
|--------------------------------- |  | ------------- |  | ------------------
|                                  |  | US$           |  | US$               
|                                  |  | (Unaudited)   |  |                   
|Redrock Thinktank (Group) Limited |  | 180,342       |  | 173,190           
|Wu Bruno Zheng                    |  | 583,334       |  | 620,581           
|China Grand Resort, Inc.          |  | -             |  | 2,225             
|                                  |  | 763,676       |  | 795,996           



The amounts $180,342 and $583,334 as of June
30, 2011 due to Redrock Thinktank (Group) Limited and Mr. Wu, respectively are due on demand after one-year from the loan date
and bear a free interest. The amounts due to Redrock Thinktank (Group) Limited and Mr. Wu were mainly used to make payments to
investors who originally held our convertible notes.



NOTE 9 — COMMITMENTS AND CONTINGENCIES



Commitments



We have entered into a building lease for our
office located in Beijing. The lease is from September 27, 2010 to July 31, 2011. The leasing period has been extended for
one year, from August 1, 2011 to July 31, 2012, with annual rental $33,200. The lease expense for the nine months ended June 30,
2011 amounted to $24,900. Future minimum lease payments under non-cancellable operating lease agreements at June 30, 2011 were
as follows:



|                            |   |       
|--------------------------- | - | ------
|Period ending September 30, |   | Amount
|2011                        | $ | 8,300 
|2012                        |   | 27,667
|Total                       | $ | 35,967



16









NOTE 10-ASSETS AND
LIABILITIES HELD FOR SALE



In connection with
the CIGE and Ms. Wang Yihan transaction effective on March 31, 2010, which was subsequently amended on May 10, 2010, NextMart 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 Cancer Institute of China Ltd (a BVI registered company) and its 100% owned subsidiary China
Cancer Institute Beijing Ltd. (a PRC registered company).The net assets being sold do not
include the subsidiaries cash, office furniture and equipment, and third party creditor’s rights and third party debts, which
shall remain the subsidiary’s property and 5) any other net assets and liabilities belonging to NextMart, with the exception
of its 3,000 shares of China Grand Resorts Inc. common stock and its remaining liability under the convertible bond settlement
agreement.



These assets and liabilities had previously
been sold to Beijing Hua Hui Investment Ltd. under a subscription and asset sale agreement dated 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, 2011:

|                                                            |   |               |   | 
|----------------------------------------------------------- | - | ------------- | - | 
|                                                            |   | June 30, 2011 |   | 
|                                                            |   | (Unaudited)   |   | 
|ASSETS                                                      |   |               |   | 
|Cash and cash equivalents                                   | $ | 529,692       | $ | 
|Account receivables, net of allowance for doubtful accounts |   | 127,518       |   | 
|Other receivables                                           |   | 324,493       |   | 
|Current Assets of Held for Sales Operation                  | $ | 981,703       | $ | 
|                                                            |   |               |   | 
|Property, plant and equipment, net                          |   | 379,596       |   | 
|Non-Current Assets of Held for Sales Operation              | $ | 379,596       | $ | 
|                                                            |   |               |   | 
|LIABILITIES                                                 |   |               |   | 
|Accounts payable                                            | $ | 657,981       | $ | 
|Other payables and accrued expenses                         |   | 415,378       |   | 
|Amount due to related parties                               |   | 1,897         |   | 
|Advance from customers                                      |   | 383,512       |   | 
|Minority interests                                          |   | (201,042)     |   | 
|Total Liabilities                                           | $ | 1,257,726     | $ | 
|                                                            |   |               |   | 
|                                                            |   |               |   | 



17







NOTE 11- 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 June 30, 2011, the Company had an
accumulated deficit totaling $100,738,703 and its current liabilities exceeded its current assets by $1,816,411. In addition, the
Company was in default of the amendment to the Convertible Debt Settlement Agreement (See Note 4). 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.



As a result of the Company’s recent transactions
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 providing marketing and sales for art related real estate development projects. The
Company plans to leverage the art event and art media advertising and marketing channels acquired in the 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
months is estimated at approximately $2 million. Management is hopeful that the above actions will allow the Company to continue
its operations through such period.





NOTE 12- SUBSEQUENT EVENT



On July 20, 2011, NextMart Inc. (the “Company”)
entered into an acquisition transaction wherein its subsidiary AuKeSaSi (Beijing) Art Market Consulting Company acquired 100% of
Beijing Gaolaiqi Culture Communications Co. Ltd. (“BGCC”) which has RMB 3 million in registered capital in
exchange for 368,941,292 shares of the Company at a price of US$0.00125 per share. BGCC was 52% held by Ms. Zhu Yun and 48%
held by Liaoning Chengde Trading Co. Ltd. (“LCT”). Of the 368,941,292 Company shares, 191,849,472 will
be transferred to Ms. Zhu Yun and 177,091,820 will be transferred to LCT totaling 100% of BGCC and its registered capital.
The Company assumed the control of BGCC and its capital immediately upon the transaction.





18





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



Forward-Looking Statements

This quarterly report on Form 10Q contains
forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”,
“plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”
or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include
statements other than historical information or statements of current condition, 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” previously disclosed in our Annual Report on Form 10-K for the period ended September
30, 2010. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual
results.



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 annual report, the terms “we”,
“us”, “our”, and “NXMR” mean NextMart, Inc. and its wholly-owned subsidiaries



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) 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 attempting to focus on the financial advisory/direct investments, and thereafter, redirecting this focus towards the
healthcare industry in China. Following our transaction with Hua Hui in August 2009, our business strategy was to develop a network
of upscale, private member health clubs in the PRC. However as noted above, on March 3, 2009 the Company and Hua Hui rescinded
the transaction.



As a result of our recent transaction with
CIGE and Ms. Wang Yihan, as amended, our 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). As mentioned herein, we intend to capitalize on our CIGE relationship as well as the experience, brand recognition, and
resource integration capacities of our major shareholders, including Ms. Wang, Redrock Capital Venture, Ltd., and Sun Media Investment
Holdings Limited. We will begin developing our business in 2011 by launching the “Artslux” branded products.



Going forward, our business operations will
include: art event and art media direct marketing; design and marketing of art-themed products lines created for existing luxury
and high-end goods and brands and art themed real estate developments

19









On or about October
25, 2010, the Company completed a transactionwith Mr. Yang Lin under which the Company agreed to issue to Mr. Yang Lin
53,651,553 shares of its common stock at a price of $0.01 per share or a total of $536,516. The shares were issued to Mr. Yang
Lin on November 17, 2010. After the transaction, Mr. Yang Lin owns 15.93% of the total issued and outstanding shares of the Company.
On October 28, 2010, the Company completed a transaction with Mr. Xu Baiqun under which the Company
agreed to issue to Mr. Xu Baiqun 14,979,254 shares of its common stock at a price of $0.01 per share which is a total of $149,793
or equivalent amount in RMB as determined by the Bank of China foreign exchange rate. The shares were issued to Mr. Xu Baiqun on
November 17, 2010.After the transaction, Mr. Xu Baiqun owns 4.45% of the total issued and outstanding shares of the Company.



We remind investors that our plans to re-focus
our business to participate in the art and high-end industry in China are subject to substantial risks and uncertainties. We have
not made substantial progress in reaching our objectives. We cannot predict whether we will be successful in identifying, selecting
and investing in business, technologies, or treatments that will prove successful in our new business efforts. Our efforts will
be subject to our ability to raise additional funds (which in turn will cause dilution to existing stockholders), formal agreements
with numerous parties, and various approvals. Therefore, we cannot predict with certainty whether we will be successful in our
re-structuring efforts and the exact combination of efforts required to achieve success.



Basis of Consolidation and Presentation



The consolidated financial statements of the
Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S.
GAAP”). The consolidated financial statements include the financial statements of the Company and its subsidiaries named
Cancer Institute of China Ltd. and China Cancer Institute Beijing Ltd. All significant inter-company balance and transactions have
been eliminated in consolidation.



The consolidated interim financial information
as of June 30, 2011 and for the three-month periods and nine-month periods ended June 30, 2011 and 2010 have been prepared without
audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  Certain
information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with
U.S. GAAP have not been included. The interim consolidated financial information should be read in conjunction with the Financial
Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended September
30, 2010, previously filed with the SEC.



In the opinion of management, all adjustments
(which include normal recurring adjustments) necessary to present a fair statement of consolidated financial position as of June
30, 2011, and consolidated results of operations, and cash flows for the three month and nine month periods ended June 30, 2011
and 2010, 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.



Results of Operations



Three Months Ended June 30, 2011 compared
with Three Months Ended June 30, 2010



The following discussion relates to our results
from operations of existing internet and marketing consulting businesses for the three months ended June 30, 2011.



Operating Expenses. Operating expenses
which include general and administrative expenses, consulting and professional fees, and depreciation and amortization, for the
three months ended June 30, 2011 totaled $28,226, a decrease of $ 19,989 or 41% from $48,215 for the comparable period in 2010.
General and administrative expenses were $16,932 for the 2011 period, a decrease of $4,023 or 19% from $20,955 for the comparable
period in 2010. The decrease is due to reduced head count and related salaries and expenses at our corporate office. The increase
is due to office equipment depreciation which was purchased in 2010. Consulting and professional fees for three months ended June
30, 2011 period totaled $11,242, a decrease of $16,018 or 59% from $27,260 for the comparable period in 2010. The decrease reflects
our scaled down operations.

20









Other Income (Expense). We had an Interest
expense of $5,247 for the three months ended June 30, 2011 compared with an interest expense of $4,880 for the comparable period
in 2010. We had an amortization on convertible notes of $13,773 for the three months ended June 30, 2011 and did not have similar
charges of the comparable period in 2010.



Loss from continuing operations. Our
loss from continuing operations for the three months ended June 30, 2011 and 2010 was $47,246 and $53,044, respectively. The difference
was due to the reasons discussed above.



Net loss. We had a net loss of $47,246
for the 2011 period compared with a net loss of $53,044 for the comparable period in 2010.



Other Comprehensive Income (Loss). We
had a foreign currency translation adjustment loss of $9,282 for the three months ended June 30, 2011 compared with a loss of $1,971
for the comparable period in 2010. The difference is due to the value of the US dollar in comparison to the RMB and HK dollar.
In 2010, we had an unrealized gain on marketable securities of $420 for the comparable period in 2010, but no such issue in 2011.



Total comprehensive loss. For the three
months ended June 30, 2011, we had a comprehensive loss of $56,528 compared with a comprehensive loss of $54,595 for the comparable
period in 2010 for the reasons discussed above.



Nine Months Ended June 30, 2011 compared with Nine Months
Ended June 30, 2010



The following discussion relates to our results
from operations of existing internet and marketing consulting businesses for the nine months ended June 30, 2011.



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, 2011 totaled $138,827, a decrease of $ 64,863 or 32% from $203,690 for the comparable period in 2010.
General and administrative expenses were $41,648 for the nine months ended June 30, 2011, a decrease of $50,465 or 55% from $92,113
for the 2010 comparable period. The decrease is due to reduced headcount and related salaries and expenses at our corporate office
due to our scaled down operations. Consulting and professional fees were $97,075 for the nine months ended June 30, 2011, a decrease
of $14,307 or 13% from $111,382 for the comparable period in 2010. The decrease reflects lower consulting fees due to the scaled
down operations during such periods.



Other Income (Expense). We had an interest
expense of $15,374 for the 2011 period compared with an interest expense of $11,424 for the comparable period in 2010. For the
convertible notes, Conversion price is set by the agreement, not fair value at the agreement date. We need to consider the fair
value as of agreement date because if the conversion price is lower than the market price, the convertible note has a beneficial
conversion feature which need to be recognized and amortized over the term of the convertible notes. We had an amortization on
convertible notes of $40,918 for the nine months ended June 30, 2011 compared with the similar charges of $1,518 for the comparable
period in 2010. For the marketable securities of China Grand Resorts, Inc. has been closed from November 22, 2010, the securities
was possibly not be recovered and we recognized loss during this period. We had a loss from marketable securities of $120,000 and
the other expense of $137 for the nine months ended June 30, 2011 and did not have similar charges of the comparable period in
2010.



Loss from continuing operations. Our
loss from continuing operations for the nine months ended June 30, 2011 and 2010 was $315,256 and $216,416, respectively. The difference
is due to the reasons discussed above.



Loss from held for sale operations.
We had a loss from operation held for sales of $352,368 for the nine months ended June 30, 2010 and did not have the similar charges
of the comparable period in 2011. We had an impairment loss of assets held for sale of $5,670,506 for the nine months ended June
30, 2010. We did not have similar charges for the comparable period in 2011.



Net loss. We had a net loss of $315,256
for the nine months ended June 30, 2011 compared with a net loss of $6,239,290 for the comparable period in 2010.

21











Other Comprehensive Income (Loss). We
had a foreign currency translation adjustment loss of $21,533 for the nine months ended June 30, 2011 compared with a translation
gain of $8,597 for the comparable period in 2010. The difference is due to the value of the US dollar in comparison to the RMB
and HK dollar. We had an unrealized gain of $119,100 for the nine months ended June 30, 2011 as a result of the recognition of
the loss of marketable securities held during the period and an unrealized loss of $11,100 for the nine months ended June 30, 2010
from the change of the fair value of the marketable securities held during the period.



Total comprehensive loss. For the nine
months ended June 30, 2011, we had a comprehensive loss of $217,689 compared with a comprehensive loss of $6,241,793 for the comparable
period in 2010 for the reasons discussed above.



Liquidity and Capital Resources



We have financed our operations primarily through
cash generated from equity infusions, operating activities and a mixture of short and long-term loans for affiliated and non-affiliated
parties.



The following table summarizes our cash flows for the nine months
ended June 30, 2011 and 2010:



|                                                                                 |   | Unaudited                 
|-------------------------------------------------------------------------------- | - | --------------------------
|                                                                                 |   | Nine Months Ended June 30,
|                                                                                 |   | 2011                      
|Net cash use in operating activities from continuing operations                  | $ | (139,394)                 
|Net cash provided by (used in) investing activities from continuing operations   |   | (665)                     
|Net cash provided by financing activities from continuing operations             |   | 154,004                   
|Net effect of exchange rate changes on consolidation                             |   | (387)                     
|                                                                                 |   |                           
|Net decrease in cash and cash equivalents from continuing operations             |   | 13,558                    
|Net (decrease)increase in cash and cash equivalents from discontinued operations |   | -                         
|Cash and cash equivalents at beginning of period                                 |   | 12,912                    
|Cash and cash equivalents at end of period                                       |   | 26,470                    

As of June 30, 2011, we had total assets of
$1,391,675, total liabilities of $3,164,967 and working capital deficit of $1,816,411



On October 22, 2010, we made an amendment to
convertible debt settlement agreement. Pursuant to such amendment, the Company was required to pay $500,000 no later than 5 business
days following the execution of the amendment, and the payment for the remaining balance of $627,126 was due March 1, 2011. As
of June 30, 2011 the Company has paid the $499,983 principal amount in full and the remaining outstanding balance is $628,143.



We continue to experience significant losses
from operations. We are uncertain as to when we will achieve profitable operations. We have an immediate need for capital to conduct
our ongoing operations and to advance the planned venture investment strategy. Our independent auditors included an explanatory
paragraph in their report on the accompanying consolidated financial statements regarding concerns about our ability to continue
as a going concern. As of June 30, 2011, we had working capital deficiency of $1,816,411; we had a net loss of $315,256 for the
nine months ended June 30, 2011. These conditions raise substantial doubt about the Company’s ability to continue as a going
concern.

22









We expect that the total costs for the Company’s
branded Artslux products and services will be approximately $250,000 for the aspect of the operations during the 12-months period
from June 30, 2011. Of the $250,000 amount, it is estimated that $190,000 will be allocated to cost of sales and $60,000 will be
allocated to G&A for expenses including marketing and logistics for services, rent, salaries, office expenses, and miscellaneous
expenses. The Company expects that a substantial portion of the required costs will be funded by the Redrock Land loan.



We expect that the total costs for the ArtChina
art related marketing and product design business will be approximately $820,000 for this aspect of the operations during the next
12-month period. Of the $820,000 amount, $360,000 will be allocated to cost of sales which includes government lobbying, and professional
services fees for feasibility reports and concept designer, $460,000 will be allocated to selling expenses including marketing
and sales, and 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
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 its business using funds from the Redrock Land
loan, and from revenues generated from other business to the extent that such revenues are available.



We cannot 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 or 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 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 services in the future which also may create significant dilution to existing stockholders.



Contractual Obligations



The majority of our operations are in China,
where we have leased an office in Beijing. Our Beijing office consists of 90 square meters. The lease extends for a period of one
year terminating on July 31, 2012. Our yearly rent is $33,200. We believe that our existing facilities are adequate to meet our
current requirements, and that future growth can be accommodated by leasing additional or alternative space.



New Accounting Pronouncements



In May 2011, the FASB issued ASU No. 2011-04, “’ Amendments
to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is not expected to have
a material impact on the consolidated financial statements upon adoption.



In June 2011, the FASB issued ASU No. 2011-05, “Presentation
of Comprehensive Income”. Under the amendments in this ASU, an entity has two options for presenting its total comprehensive
income: to present total comprehensive income and its components along with the components of net income in a single continuous
statement, or in two separate but consecutive statements. The amendments in this ASU are required to be applied retrospectively
and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption
permitted. The Company intends to conform to the new presentation required in this ASU beginning with its Form 10-Q for the three
months ended March 31, 2012.



23









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, 2010. 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 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



We account for income taxes under the provisions
of 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, 2010. 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 using the balance sheet
liability method at the effective rate applicable in China in our consolidated statements of operations and comprehensive income.





ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISKS



Not applicable

24









ITEM 4. CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls and Procedures



We maintain disclosure controls and procedures
(as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be
disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s
rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.



As required by Rule 13a-15 under the Exchange
Act, our management, including our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the
design and operation of our disclosure controls and procedures as of June 30, 2011.  On our Annual Report on Form 10-K
for the fiscal year ended September 30, 2010, we reported these material weaknesses which continue to be material weakness as of
June 30, 2011. Based on that evaluation, we concluded that, because of the material weaknesses described below, as of June 30,
2011, our disclosure controls and procedures were ineffective.



Management’s Annual Report on Internal Control over
Financial Reporting



Management is responsible for establishing
and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refers
to the process designed by, or under the supervision of, our chief executive officer and chief financial officer, and effected
by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of our
financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP, and includes
those policies and procedures that:



pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our
assets;

provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and
directors; and

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



Management conducted an evaluation of the effectiveness
of our internal control over financial reporting as of June 30, 2011 based on the framework set forth in the report entitled Internal
Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation,
management concluded that our internal control over financial reporting as of June 30, 2011 was not effective. Management identified
the following material weaknesses as of June 30, 2011:



Lack
of Internal Audit Function - We lack qualified resources to perform our internal audit functions properly. In addition, we have
not yet fully developed the scope and effectiveness of our internal audit function.



Insufficient
U.S. GAAP Accounting Skills and Experience - We found that our accounting staff lacked sufficient accounting skills and experience
necessary to fulfill our public reporting obligations according to U.S. GAAP and the SEC’s rules and regulations.



At the present time, we are currently developing
our art related business. Thus, our current operations and financial transactions are limited. At such time as business develops,
we intend to hire additional personnel with sufficient US GAAP Accounting Skills and Experience to fulfill our public reporting
obligations according to U.S. GAAP and the SEC’s rules and regulations. In addition, as the Company’s business develops,
it also will begin searching and negotiating with several qualified candidates to serve as the audit committee members so as to
establish an audit committee within the Board of Directors of the Company.



25









Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate.



Management remains committed to improving its
internal control over financial reporting and will continue to work to put effective controls in place.



Because the Company is a smaller reporting company, this annual
report does not include an attestation report of our registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our registered public accounting firm.



Changes in Internal Control over Financial Reporting



Other than described above there were no changes in our internal
controls over financial reporting during the nine months ended June 30, 2011 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.





PART II - OTHER INFORMATION





ITEM 5. EXHIBITS AND REPORTS OF FORM 8-K.



(a) Exhibits



31.1 Certification of Chief Executive Officer 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







26





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.







|                         |                |                                           
|------------------------ | -------------- | ------------------------------------------
|                         | NextMart, Inc.
|Date: September 15, 2011 |                | /s/ Wang Yihan                            
|                         |                | Wang Yihan                                
|                         |                | Chief Executive Officer                   
|                         |                |                                           
|Date: September 15, 2011 | By:            | /s/ Carla Zhou                            
|                         |                | Carla Zhou
        Chief Financial Officer