UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________  FORM 10-Q _______________  TQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the quarterly period ended December 31, 2010   [   ]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)  DELAWARE000-26347410985135(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      o 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). o 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 o Accelerated Filer o Non-Accelerated Filer o 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.  1     [  ] 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 February 10, 2011.                 2


NEXTMART, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED December 31, 2010   Table of Contents  INDEX  PagePART I FINANCIAL INFORMATIONItem 1.Financial Statements4Item 2.Management Discussion and Analysis of Financial Condition and Results of Operations.13Item 3.Quantitative and Qualitative Disclosures About Market Risk.19Item 4.Controls and Procedures.19PART II OTHER INFORMATION19Item 6.Exhibits.19Signatures.20      3     PART I   FINANCIAL INFORMATION  ITEM 1. FINANCIAL STATEMENTS  NEXTMART, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDecember 31,   2010September 30,
2010(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents$15,047$12,912Marketable securities600900Current assets held for sale981,701981,699Total Current Assets997,348995,511Property, plant and equipment, net651-Long-term assets held for sale379,596379,596TOTAL ASSETS$1,377,595$1,375,107LIABILITIES AND STOCKHOLDERS' DEFICITCURRENT LIABILITIES:Other payables and accrued expenses$672,519$1,139,803Amount due to stockholders146,502145,562Amount due to related parties668,065795,996Current liabilities held for sale1,255,5871,251,470Total Current Liabilities2,742,6733,332,831Convertible notes, net of discount301,760283,873Total Liabilities3,044,4333,616,704STOCKHOLDERS' DEFICITPreferred 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; 336,835,541,and 268,204,734 shares issued and outstanding at December 31and September 30, 2010, respectively3,368,3552,682,047Reserved to be issued 53,029 shares530530Subscription receivable(750,000)(750,000)Additional paid-in capital96,160,63496,160,949Accumulated deficit(100,526,804)(100,423,447)Accumulated other comprehensive loss-Unrealized loss on marketable securities(119,400)(119,100)Accumulated other comprehensive income-foreign currency fluctuation199,847207,424Total stockholders' Deficit(1,666,838)(2,241,597)TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT$1,377,595$1,375,107 See notes to consolidated financial statements.  4      NEXTMART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)Three Months Ended  December 31,20102009Operating expensesGeneral and administrative expenses$12,156$39,570Depreciation and amortization-195Consulting and professional fees72,57938,28084,73578,045Loss from operations(84,735)(78,045)Other expenseOther expense(136)-Amortization of discount on convertible note(13,493)-Interest expense(4,992)(4,315)(18,621)(4,315)Loss from operations before income tax expense(103,356)(82,360)Income tax expense--Net Loss(103,356)(82,360)Other comprehensive lossForeign currency translation adjustment(7,578)(806)Unrealized gain (loss)on investment120(11,520)Total comprehensive loss$(110,814)$(94,686)Weighted average number of common shares outstanding  basic and diluted301,774,150443,204,734Loss per share- basic and diluted$(0.000)$(0.000) See notes to consolidated financial statements.              5       NEXTMART, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)  Three Months Ended December 31,20102009CASH FLOWS FROM OPERATING ACTIVITIES:Net Loss$(103,356)$(82,360)Adjustments to reconcile net loss to net cash used in operating activitiesDepreciation and amortization-195Amortization of discount on convertible notes13,493-Change in operating assets and liabilitiesAccounts receivable & other receivables-14Other payable and accrued expenses32,698(29,465)Net Cash Used In Operating Activities(57,165)(111,616)CASH FLOWS FROM INVESTING ACTIVITIES :Acquisition of property and equipment(651)-Collection (payments) of amounts due from related party-44,011Net Cash (Used In) Provided By Investing Activities(651)44,011CASH FLOWS FROM FINANCING ACTIVITIES :Payments to original convertible notes holders(499,983)(350,000)Loans from stockholders-419,470Amounts due to related parties(127,932)2,226Unregistered sales of common shares686,308-Net Cash Provided By Financing Activities58,39371,696Effect of exchange rate fluctuations on cash and cash equivalents1,558(5,108)Net increase (decrease) in cash and cash equivalents2,135(1,017)CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD12,91234,958CASH AND CASH EQUIVALENTS AT END OF PERIOD$15,047$33,941Supplemental disclosure of cash flows informationInterest Paid$-$-Income Taxes Paid$-$-  See notes to consolidated financial statements.    6        NEXTMART, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  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.  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.   7     As a result, NextMarts planned business operations for 2011 will consists 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 December 31, 2010, 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 September 30, 2010, no advertising space has yet to be allocated to NextMart.  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 accounts of the Company and its subsidiaries named Cancer Institute of China Ltd. and China Cancer Institute Beijing Ltd. All significant inter-company accounts and transactions have been eliminated. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of consolidated financial position as of December 31, 2010, and consolidated results of operations, and cash flows for the three month periods ended December 31, 2010 and 2009, 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.  8      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, accounts receivable, accounts payable, marketable securities, 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.  Recently Issued Accounting Pronouncements    Accounting standards that have been issued or proposed by FASB recently are not applicable to the Company.   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:      9      YearsComputer3   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:  December 31
2010September 31
2010RMB exchange rate at December 31, 2010 and September 30, 2010,6.611806.82820Average RMB exchange rate for the three months ended December 31, 2010 and 2009,,6.667026.83603HKD exchange rate at December 31, 2010 and September 30, 2010,7.783207.7504Average HKD exchange rate for the three months ended December 31, 2010 and 2009,,7.754107.75165  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.  Deferred Charges  Payments made for future expenses were amortized over the life of service received.  Convertible Notes and Notes Issued with Stock Warrants  10      The Company accounts for convertible notes and notes issued with stock warrants in accordance with ASC 470-20, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants. The proceeds from the issuance of convertible notes are allocated between the debt and the equity. The Company booked a discount on convertible notes for the conversion feature of the notes and warrants and is amortizing the discount over the life of the debt.    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:  December 31, 2010September 30, 2010Number of sharesAmountNumber of sharesAmountUS $US $CHINA GRAND RESORTS, INC AT COST3,000120,0003,000120,000Unrealized loss(111,400)(111,100)Net balance600900    NOTE 3  PROPERTY AND EQUIPMENT  The following is a summary of property and equipment, at cost, less accumulated depreciation:  Property and equipment is summarized as follows:  December 31, 2010September 30, 2010US$US$CostComputer651-Less: accumulated amortization--Net651-  Depreciation for three months ended December 31, 2010 and 2009 was $0 and $0, respectively.    NOTE 4 - OTHER PAYABLES AND ACCRUALS  Other payables and accruals are summarized as follows: December 31, 2010September 30, 2010US$US$Other payables- payable to the creditors who originally held our convertible notes628,1431,128,126  11      Accrued interest expenses for convertible notes16,87611,677Accruals27,500-672,5191,139,803   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 (See Note 14), 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. We are in default of the Settlement Agreement as of September 30, 2010.  In October 2010, the Company made another $1,000 in principal payments. 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 is extended to March 1, 2011. As of December 31, 2010 the Company has paid the $499,983 principal amount in full and the remaining outstanding balance is $ 628,143.   NOTE 5 -AMOUNTS DUE TO STOCKHOLDERS  The amounts due stockholders are summarized as follows: December 31, 2010September 30, 2010US$US$Redrock Capital Venture Limited146,502145,562146,502145,562  The amounts due to Redrock Capital Venture Limited are due on demand and bear no interest.  NOTE 6 CONVERTIBLE NOTES  On March 26, 2010, we completed a Convertible Debt Settlement Agreement with Hua Hui to convert RMB 2,255,000 (approximately $329,866) outstanding loans due to Hua Hui into a convertible promissory note with a principal amount of RMB 2,255,000  12     (approximately $341,057 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 $13,493 for the three months ended December 31, 2010. The interest expense on the convertible note for the three months ended December 31, 2010 is $4,992.  Convertible note as of December 31, 2010 consists of the following:  December 31,
2010September 30, 2010US$US$Face amount of convertible note payable341,057336,663Discount representing the beneficial conversion feature(79,185)(79,185)Accumulated amortization of discount39,88826,395301,760283,873  NOTE 7 STOCKHOLDERS EQUITY  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 Assets (See Note 9) 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 on July 8, 2010. As a result of this transaction, Ms. Wang is NextMarts second largest shareholder with a 27.96% ownership of the company. As of December 31, 2010, subscription receivable of $750,000 was recognized due to the Company did not receive the assets from CIGE.  On October 24, 2010, the Company entered into a subscription agreement with 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. On October 25, 2010 the Company received the funds from Mr.Yang Lin. The shares were issued to Mr. Yang Lin on November 17, 2010. After the transaction, Mr. Yang Lin owns 16.67% of the total issued and outstanding shares of the Company. Mr. Yang Lin used personal funds to acquire the shares of common stock.  On October 28, 2010, the Company entered into a subscription agreement 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 $149,793 or equivalent amount in RMB as determined by the Bank of China foreign exchange rate. The shares were issued to Mr. Xu Baiqun on November 17, 2010.  After the transaction, Mr. Xu Baiqun owns 4.45% of the total issued and outstanding shares of the Company. On October 25, 2010 the Company received the funds from Mr. Xu Baiqun.   13     The cash fund received was mainly used to repay portion of the borrowings from Mr. Wu Bruno (See Note 8) and the principal liabilities due to the creditors who originally held our convertible notes (See Note 4).    NOTE 8  RELATED PARTIES TRANSACTIONS  We have the following transactions with related parties during the period ended December 31, 2010.   The amounts due to related parties are summarized as follows: December 31, 2010September 30, 2010US$US$Redrock Thinktank (Group) Limited180,342173,190Wu Bruno Zheng485,503620,581China Grand Resort, Inc.2,2202,225668,065795,996  The amounts $180,342 and $485,503 as of December 31, 2010 due to Redrock Thinktank (Group) Limited and Wu Bruno, respectively are due on demand after one-year and bear a free interest. The amounts due to Redrock Thinktank (Group) Limited and Mr. Wu Bruno Zheng were mainly used to make payments to investors who originally held our convertible notes.  NOTE 9 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 December 31, 2010:  December 31, 2010September 30, 2010ASSETSCash and cash equivalents$529,690$529,688Account receivables, net of allowance for doubtful accounts127,518127,518Other receivables324,493324,493  14      Current Assets of Held for Sales Operation$981,701$981,699Property, plant and equipment, net379,596379,596Non-Current Assets of Held for Sales Operation$379,596$379,596LIABILITIESAccounts payable$657,981$657,981Other payables and accrued expenses413,239409,122Amount due to related parties1,8971,897Advance from customers383,512383,512Minority interests(201,042)(201,042)Total Liabilities$1,255,587$1,251,470    NOTE 10 GOING CONCERN AND MANAGEMENT PLAN  The Companys consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of December 31, 2010, the Company had an accumulated deficit totaling $100,526,804 and its current liabilities exceeded its current assets by $1,745,325, 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-month period of Fiscal Year 2011 is estimated at approximately $2 million. Management is hopeful that the above actions will allow the Company to continue its operations through the current fiscal year.   NOTE 11SUBSEQUENT EVENTS Management has considered all events occurring through the date the financial statements have been issued, and has determined that there are no such events that are material to the financial statements, or all such material events have been fully disclosed.  15     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  On October 24, 2010, the Company entered into a subscription agreement with 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. On October 25, 2010 the Company received the funds from Mr.Yang Lin. The shares were issued to Mr. Yang Lin on November 17, 2010. After the transaction, Mr. Yang Lin owns 16.67% of the total issued and outstanding shares of the Company. Mr. Yang Lin used personal funds to acquire the shares of common stock.  On October 28, 2010, the Company entered into a subscription agreement 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 $149,793or 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. On October 25, 2010 the Company received the funds from Mr. Xu Baiqun.   16      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 can not 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 can not predict with certainty whether we will be successful in our re-structuring efforts and the exact combination of efforts required to achieve success.  Results of Operations  Three Months Ended December 31, 2010 compared with Three Months Ended December 31, 2009  The following discussion reflects our results from operations for the three months ended December 31, 2010 compared with the three months ended December 31, 2009. Although there are no revenues from luxury sales for the 2010 period, we will continue to maintain the luxury sales business for the foreseeable future, however, it is not expected to be a significant focus of future business efforts.   Operating Expenses. Our operating expenses (which includes general and administrative expenses, depreciation and amortization and consulting and professional fees) for the three months ended December 31, 2010 and 2009 were $84,735 and $78,045, respectively. General and administrative expenses were $12,156 for the three months ended December 31, 2010, a decrease of $27,414 or 69% from $39,570 for the comparable period in 2009.  The decrease was due to reduced salaries and related expenses at our corporate office due to our scaled down operations. Depreciation and amortization were $0 and $195, for the three months ended December 31, 2010 and 2009, respectively.  Consulting and professional fees were $72,579 for the three months ended December 31, 2010, an increase of $34,299 or 90% from $38,280 for the comparable period in 2009.  Other Expense. For the three months ended December 31, 2010, we had interest expenses of $4,992 compared with interest expense of $4,315 for the comparable period in 2009. We had an amortization on convertible notes of $13,493 and the other expense of $136 for the three months ended December 31, 2010and did not have the similar charges of the comparable period in 2009.  Loss from operations. We had an operating loss from operations of $84,735 for the three months ended December 31, 2010 compared with an operating loss of $78,045 for the comparable period in 2009. The decrease was due to the factors discussed above.   Loss from operations before income tax expense. Our loss from operations for the three months ended December 31, 2010 and 2009 was $103,356 and $82,360 respectively. The difference was due to the reasons discussed above.  Other Comprehensive Loss. We had a foreign currency translation adjustment loss of $7,578 for the three months ended December 31, 2010 compared with a translation loss of $806 for the comparable period in 2009. 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 $ 120 and unrealized loss of $11,520 for the three months ended December 31, 2010 and 2009, respectively, due to the change of the fair value of the marketable securities held during the period.  Total Comprehensive Loss For the three months ended December 31, 2010, we had a comprehensive loss of $110,814 compared with a comprehensive loss of $94,686 for the comparable period in 2009.  Liquidity and Capital Resources.  We have financed our operations primarily through cash generated from equity investments, operating activities and a mixture of short and long-term loans from affiliates (some of which have been converted to equity) and non-affiliates.  The following table summarizes our cash flows for the three months ended December 31, 2010 and 2009:  For the Three Months Ended December 31,20102009US $US $  17      Net cash used in operating activities(57,165)(111,616)Net cash (used in) provided by investing activities(651)44,011Net cash provided by financing activities58,39371,696Net effect of exchange rate fluctuations on cash and cash equivalents1,558(5,108)Net increase/(decrease) in cash and cash equivalents2,135(1,017)Cash and cash equivalents at beginning of period12,91234,958Cash and cash equivalents at end of period15,04733,941   As of December 31, 2010, we had total assets of $1,377,595, total liabilities of $3,044,433 and a working capital deficit of $1,745,325.   In October 2010, the Company made $1,000 in principal payments for the notes payable to creditors who used to held the Companys convertible notes (See Note 4). 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 is extended to March 1, 2011. As of December 31, 2010 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 December 31, 2010, we had working capital deficiency of $1,745,325; we had a net loss of $103,356 for the three months ended December 31, 2010. These conditions raise substantial doubt about the Companys ability to continue as a going concern.  We expect that the total costs for the Companys branded Artslux products and services will be approximately $250,000 for the operation in the 12-months period of fiscal 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 revenues from our marketing efforts will commence in the second quarter of 2011, and that such revenues, along with the Redrock Land loan, will enable the Company to fund this aspect of its operations for the remaining 9 months.  We expect that the total costs for the companys product and services design and development division will be approximately $570,000 for the operation in the 12-months period of fiscal 2011. Of the $570,000 amount, it is estimated that $170,000 will be allocated to cost of sales, which includes mainly design and development costs and third party outsourcing costs, etc, while $400,000 will be attributed to G&A for marketing, staff, rent, among other items. The Company plans to initially fund a portion of the required expenses through the Redrock Land loan, with the remainder of the required capital for the business expected to come from a combination of revenues from operations and from a planned round of fundraising from third parties. We expect to undertake a fundraising effort in the second calendar quarter of 2011. At the current time, we have no commitments from any third party in respect of the proposed fundraising effort.  We expect that the total costs for the ArtChina art related marketing and product design business will be approximately $820,000 for the operations in the 12-month period of fiscal 2011. 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 second 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.  18     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 three years terminating on July 31, 2011. Our monthly 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  Accounting standards that have been issued or proposed by FASB recently are not applicable to the Company.  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  19      Not applicable  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 December 31, 2010.  Based on that evaluation, we concluded that, because of the material weaknesses described below, as of December 31, 2010, our disclosure controls and procedures were not effective.  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 December 31, 2010 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 December 31, 2010 was not effective. Management identified the following material weaknesses as of December 31, 2010:  ·    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.  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.   20     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 three months ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.   PART II - OTHER INFORMATION   ITEM 6. 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       21     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: February 22, 2011/s/ Wang YihanWang Yihan
Chief Executive OfficerDate: February 22, 2011By:/s/ Carla ZhouCarla Zhou
Chief Financial Officer                    22