NextMart Inc. - Annual Report: 2008 (Form 10-K)

PART I

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2008.

Commission File Number: 000-26347

NextMart, Inc.

(Name of small business issuer as specified in its charter)




DELAWARE		410985135
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)




Oriental Plaza Bldg. W3, Twelfth Floor 1 East Chang’an Avenue, Dongcheng District Beijing, 100738 PRC		100738
(Address of principal executive offices)		(Zip Code)

Issuer’s telephone number +86 (0)10 8518 9669

Securities Registered under Section 12(b) of the Exchange Act: None

Securities Registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.01 per share

(Title of class)

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. o

Check whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o

Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B contained herein this form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. . o

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

o Yes [X] No

State Registrant’s revenues for its most recent fiscal year: $2,939,932

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within the past 60 days:

$ 3,610,311 based on closing price of $0.04 on December 31, 2008

State the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.

90,204,734 common shares issued and outstanding as of December 31, 2008.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business Disclosure Format (Check one):

Yes o No pr

TABLE OF CONTENTS




	Page
PART I		4
Item 1. Description of Business		4
Item 1A. Risk Factors		11
Item 2. Properties		22
Item 3. Legal Proceedings		22
Item 4. Submissions of Matters to a Vote of Security Holder		22
PART II		23
Item 5. Market for Common Equity and Related Shareholder Matters		23
Item 6. Management Discussion and Analysis		24
Item 7. Financial Statements		27
Item 8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure		49
Item 8A. Controls and Procedures		49
Item 8B. Other Information		49
PART III		50
Item 9. Directors and Executive Officers of the Registrant		50
Item 10. Executive Compensation		52
Item 11. Security Ownership of Certain Beneficial Owners and Management		53
Item 12. Certain Relationships and Related Transactions		55
Item 13. Exhibits		55
Item 14. Principal Accountant Fees and Services		58
SIGNATURES		59
EXHIBIT 14.1
EXHIBIT 21
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

FORWARD LOOKING INFORMATION

This annual report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. 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 statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. 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 and VIEs, including: Beijing Trans Global Logistics, Naixiu Exhibition (Beijing) Co. Ltd.

PART I

Item 1. Description of Business

Overview

Our operations are divided into two principal divisions: the Transactional Services division and the Marketing & Information Services division. Our Transactional Services division has been our main business and is located in China. The business entails the wholesale distribution and direct sales enterprise of predominantly women’s fashion apparel. In this regard, in April 2007, we began to operate primarily as an outsourced brand management and production center for foreign apparel brands mainly in the women’s apparel industry through William Brand Administer Co. Ltd., (“William Brand”) our core operating subsidiary. William Brand contracts with apparel manufacturers and wholesalers, predominately in the United States, to manage the full apparel design, production and export operations. This business accounts for approximately 91% of our total revenues for the fiscal year ended September 30, 2008.

The Transactional Services division generates revenue mainly through logistics services provided in the women’s fashion industry. The Marketing & Information Services division generates revenue through the provision of business information services/products such as digital E-Magazines, sale of advertising, and media consulting services.

We created our existing business through the ongoing acquisition of various entities and assets. In September 2005, we acquired Sun New Media Group Limited in a reverse acquisition transaction. Since that time, we completed other acquisitions that have enabled us to serve the apparel, handheld electronics verticals and beverage verticals. During the first half of calendar 2007, we re-focused our business operation by divesting our interests in the handheld electronic and beverage vertical markets and concentrated on the development our business in the women’s apparel vertical market.

We were originally incorporated under the laws of Minnesota in 1972 and were previously known as SE Global Equity. In September 2005, we 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. The acquisition was treated as a reverse acquisition for accounting purposes, and we adopted the September 30 fiscal year of the “accounting acquirer” Sun New Media Group Limited. In February 2006, we changed our fiscal year-end date from September 30th to March 31st.

In May 2007, we reincorporated into the State of Delaware and changed our name to NextMart, Inc. On October 10, 2007, we changed our fiscal year end from March 31 to September 30.

Background

The People's Republic of China ("China") has experienced rapid economic growth over the past decade. China’s central bank estimates that economic growth for 2009 can exceed eight percent, after a number of years of growth exceeding 20 percent. Furthermore, China’s entry into the World Trade Organization, accompanied by a proliferation of private businesses and an increase in the number of foreign multinational companies in China, has led to increased market liberalization and competition. In this competitive environment, companies in China are increasingly recognizing the need for improved methods of doing business.

As a result of economic growth and liberalization, the number of business entities operating in China has increased significantly. These new businesses are competing in an economy traditionally dominated by state owned or controlled enterprises at one end and serviced by millions of small local businesses on the

other end. These dynamics have generally led to a very stratified market with inefficient systems for channel marketing, sales and distribution. A significant opportunity exists to leverage internet-based technologies to create direct sales channels and efficient distribution networks across Mainland China. The opportunity is particularly salient in industries characterized by multiple-layers of fragmented distribution systems like the apparel industry.

NextMart’s 2009 Business Strategy

In fiscal 2009 we plan to continue with the development of financial services and venture investment strategy previously announced by us on May 22, 2008 (see our Form 8-K of May 22, 2008). In this regard, we will seek to acquire equity stakes or establish other arrangements in high margin business(es) located in China. In order to accomplish our strategy, we will attempt to leverage the experience of our affiliates, our available cash albeit limited, and our common stock to acquire business interest(s) in high growth sectors of the Chinese economy. In addition, we may seek to raise funds for such acquisitions or arrangements. As this time, we can not predict the exact combination of efforts required to achieve our strategy. As of the date of this report, we are in the process of formulating our plan, and have not entered into any formal agreements regarding any of the forgoing. It is conceivable that we may enter into merger, share exchange, direct investment, consulting, joint venture, or licensing agreements or a combination thereof, with targeted companies. If we are required to issue our common stock in connection with our strategy, it is likely that significant dilution will result to existing shareholders. Moreover, as a result of one or more such transactions, a change of control of our company may result due to the issuance of our common stock.

Prior to fiscal year 2008, we had planned to develop an integrated online-offline direct sales platform for the ladies' apparel sector in China. 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 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, as indicated above, we determined to change our business focus.

In fiscal year 2009, we plan to aggressively pursue this strategy while seeking to divest the William Brand’s women apparel business. Our plans to adopt a new business strategy in financial advisory/direct investment will be subject to formal agreements with numerous parties, certain asset valuations, fairness opinions, and various approvals including, but not limited to, shareholder approval, debt holder approval, auditor approval, and other regulatory approval. Moreover, even if it is able to meet the various requirements and regulations indicated above, we can not predict whether we will be successful with our new business initiatives or whether they will generate profitable operations.

NextMart’s Venture Investment Business in 2009

We believe that in the pursuit of our new business strategy in the financial advisory and venture investment business, we can draw on the experience and success of our affiliates in the financial services industry to identify and execute high value business investments in the Chinese market. We intend to initially target investments in bio-medical and clean energy related businesses, both high growth sectors of the Chinese economy. These companies could be either state owned or privately held. The exact nature and extent of our proposed investment in these industries is not know at this time. We expect to receive strong support in its advisory and investment business from both Sun Media Investment Holdings Ltd. (“Sun Media”), our largest shareholder, and Sun Media’s related investment firm, Redrock Capital Group Ltd., a British Virgin Island company located in Beijing (“Redrock”), to source and identify investment opportunities.

Plans for NextMart’s Existing Apparel Business

As mentioned above, in fiscal year 2008 we were unable to advance our proposed development of the women’s apparel business which includes the William Brand operations. Going forward, we believe that a number of factors will continue to adversely impact the William Brand business, most notably the overall economic malaise projected for the United States for calendar 2009 and beyond. We also believe that the business in its current form will not generate sufficient value to attract investor interest in our company due to its limited operating margins which have been adversely impacted by the devaluation of the US Dollars compared to the Yuan. Therefore, during fiscal year 2009, we plan to divest of our William Brand women’s apparel business. As of the date of this report, we have not finalized the manner of such divestiture, however, we are considering the transfer of the William Brand subsidiary to its original owners in exchange for the common stock previously issued to such owners. Any such transaction will be subject to approval of the board of directors, a fairness evaluation, and approval from our existing shareholders and debtholders. We can not predict whether will be successful in divesting of the William Brand operations.

By divesting of the William Brand Co business and focusing on high value business acquisitions in the bio-medical and/or clean energy sectors, we hope to minimize our capital costs while maximizing shareholder value. We believe that our new 2009 business strategy will allow us to capitalize on the business strengths and competitive advantages of the Chinese market to maximize shareholder value and reestablish our ability to raise funds for our continued business development.

Competition

Presently, a substantial portion of our existing business involves the offline apparel market. In our core apparel market, we face competition from large-scale apparel groups such as Li & Fung, HK Yida Apparel Co. Ltd, PPG Apparel Co. and smaller apparel manufacturers, design centers and distributors that service foreign brand clients. Many of these competitors have longer histories and larger client bases than we do. In the online space, we expect to face competition from B2B and B2C e-commerce providers that sell fashion and apparel products. Some of these competitors may be horizontal service providers such as Alibaba.com, Hui Cong, Taobao.com and Global Sources. Some others may be apparel specialists such as Li & Fung Online.

In the media and information sector, the main competitors in the industry continue to be state-owned media groups, industry associations, and government agencies. In the private sector, our principal competitor is Hui Cong, an information services and business search company focused on the domestic market. We face indirect competition from Global Sources, a group of business information service companies that are primarily focused on the import-export marketplace.

We also face competition from traditional advertising media, such as newspapers, magazines, yellow pages, billboards and other forms of outdoor media, television and radio. Most large companies in China allocate and will likely continue to allocate the bulk of their marketing budgets to traditional advertising media and only a small portion of their budgets to online marketing. If these companies do not devote a larger portion of their marketing budgets to online marketing services provided by us, or if our existing customers reduce the amount they spend on online marketing, our results of operations and future growth prospects could be adversely affected.

In our proposed new business strategy, we also expect to face competition from other investment type companies located in China and elsewhere, particularly in the United States. These companies seek attractive investment opportunities similar to our proposed strategy.

Most of our existing and potential competitors have significantly greater financial resources than we do. They also have longer operating histories and more experience in attracting and retaining users and managing customers than we do. They may use their experience and resources to compete with us in a variety of ways, including by competing more heavily for users, customers, distributors and networks of third-party websites, investing more heavily in research and development and making acquisitions.

Proprietary Rights

We regard our intellectual property rights, such as copyrights, trademarks, trade secrets, practices and tools, as important to the success of our business. To protect our intellectual property rights, we intend to rely on a combination of trademark and copyright law, trade secret protection, confidentiality agreements and other contractual arrangements with our employees, affiliates, clients, strategic partners, acquisition targets and others. Effective trademark, copyright and trade secret protection may not be available in every country in which we intend to offer our services, and the steps we take to protect our intellectual property rights may not be adequate. Third parties may infringe or misappropriate our intellectual property rights or we may not be able to detect unauthorized use and take appropriate steps to enforce our rights. In addition, other parties may assert infringement claims against us. Such claims, regardless of merit, could result in the expenditure of significant financial and managerial resources. Future patents may limit our ability to use processes covered by such patents or expose us to claims of patent infringement or otherwise require us to obtain related licenses. Such licenses may not be available on acceptable terms. The failure to obtain such licenses on acceptable terms could have a negative effect on our businesses.

Governmental Regulation

All transporting service in China are government-controlled networks. The transporting industry in China operates under a legal regime that consists of the State Council, which is the highest authority of the executive branch of the Chinese central government, and the various ministries and agencies under its leadership. These ministries and agencies mainly include:



	•		the Ministry of Culture;

	•		the Ministry of Information Industry;

	•		the State Press and Publications Administration;

	•		the State Copyright Bureau;

	•		the State Administration for Industry and Commerce;

	•		the Ministry of Public Security; and

	•		the Bureau of State Secrecy.

The State Council and these ministries and agencies have issued a series of rules that regulate a number of different substantive areas of our proposed businesses. We believe we have all necessary governmental approvals to conduct our interactive marketing and sales services businesses.

In compliance with China's foreign investment restrictions on the media industry and other laws and regulations, we conduct all our media services in China via the following significant domestic Variable Interest Entities (“VIEs”):

· Beijing Trans Global Logistics, a Chinese company doing 80% of it’s business with us by contract and engaged in trading. It is 80% owned by Qiong Zhou, 10% owned by Yong Li and 10% owned by Mianchun Wang, Qiong Zhou is a non-executive employees of the Company.

· Naixiu Exhibition (Beijing) Co. Ltd, a Chinese company that is controlled by contract with us and owned 50% by Li Yong and 50% by Wang Jinghchun. Li Yong and Wang Jingchun are non-executive employees of the Company.

The capital investment in these VIEs is funded by us and transferred to the VIEs under contractual agreements between us (or our non- Chinese subsidiary) and the Chinese employees who own the VIEs. As of September 30, 2008, the total amount of capital investment that we transferred to the VIEs listed above was US$1,126,638. Under various contractual agreements, employee shareholders of the VIEs are required to transfer their ownership in these entities to our subsidiaries in China when permitted by Chinese laws and regulations or to our designees at any time for the outstanding amount of injected capital investment, and all voting rights of the VIEs are assigned to us. We have the power to appoint all directors and senior management personnel of the VIEs. Through our wholly-owned subsidiaries in China, we have also entered into exclusive technical agreements and other service agreements with the VIEs, under which these subsidiaries provide technical services.

Employees

As of September 30, 2008, we had 44 employees. Of our employees, 8 were in management; 19 in finance and legal & administration; 5 in business development and research & development and 12 in sales and marketing.

Disclosure Regarding Forward Looking and Cautionary Statements.

Forward Looking Statements. Certain of the statements contained in this Annual Report on Form 10-KSB includes "forward looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). All statements other than statements of historical facts included in this Form 10-KSB regarding the Company's financial position, business strategy, and plans and objectives of management for future operations and capital expenditures, and other matters, are forward looking statements. These forward-looking statements are based upon management's expectations of future events. Although we believe the expectations reflected in such forward looking statements are reasonable, there can be no assurances that such expectations will prove to be correct. Additional statements concerning important factors that could cause actual results to differ materially from our expectations ("Cautionary Statements") are disclosed below in the Cautionary Statements section and elsewhere in this Form 10-KSB. All written and oral forward looking statements

attributable to us or persons acting on our behalf subsequent to the date of this Form 10-KSB are expressly qualified in their entirety by the Cautionary Statements.

Cautionary Statements. Certain risks and uncertainties are inherent in the Company's business. In addition to other information contained in this Form 10-KSB, the following Cautionary Statements should be considered when evaluating the forward looking statements contained in this Form 10-KSB:

Risks Related to Our Existing Businesses and New Business Strategy

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

As announced in May 2008 and discussed elsewhere herein, we changed our business strategy and focus towards the financial advisory and investment businesses. We also intend to divest ourselves of the William Brand business and assets. This divestiture of assets and operations contributed significantly to our operations for the 2008 and 2007 fiscal years. In light of these changes, one should consider the future prospects of our new business endeavors keeping in mind the risks and uncertainties experienced by companies of this nature. These factors should be considered particularly in view of our limited cash resources, and overall market conditions. As a result, it will be difficult if not impossible for us to predict future revenues and operating expenses with a great deal of certainty. We may not be successful in our future endeavors. Although not exhaustive, some of the other risks and uncertainties of our new business strategy relate to our ability to:

· source and identify potential investment targets;

· perform sufficient due diligence on potential targets;

· reach favorable agreements on potential targets;

· respond to competitive market conditions;

· respond to changes in our regulatory environment;

· manage risks associated with our strategy;

· maintain effective control of our costs and expenses;

· raise sufficient capital to sustain and expand our business;

· attract, retain and motivate qualified personnel; and

· upgrade technology, if necessary.

If we are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected.

Our strategy of acquiring businesses, assets and technologies may fail.

As part of our new business strategy, we intend to pursue selective strategic acquisitions or other arrangements with businesses, assets and technologies. This strategy involves many uncertainties and risks, including:

· potential ongoing financial obligations and unforeseen or hidden liabilities;

· failure to achieve intended objectives, benefits or revenue-enhancing opportunities;

· costs and difficulties of integrating acquired businesses and managing a larger business; and

· diversion of resources and management attention.

Our failure to address these risks successfully may have a material adverse effect on our financial condition and results of operations. Any such acquisition may require a significant amount of capital investment, which would decrease the amount of cash available for working capital or capital expenditures. In addition, if we use our equity securities to pay for acquisitions, we may dilute the value of our common stock. If we borrow funds to finance acquisitions, such debt instruments may contain restrictive covenants that could, among other things, restrict us from distributing dividends. Such acquisitions may also generate significant amortization expense related to intangible assets.

We have no agreements for our new business endeavors and we have not established standards for such transactions.

We have no arrangement, agreement or understanding with respect to entering into a transaction with any targeted company or opportunity. We can not provide assurances that we will be successful in identifying and evaluating suitable companies or business opportunities or in concluding a business transaction. Our management has not yet identified any particular business for our evaluation, other than an intent to initially target investments in bio-medical and clean energy related businesses, both high growth sectors of the Chinese economy. There is no assurance that we will be able to negotiate any type of agreement on terms favorable to us. We have not established a specific length of operating history or a specified level of earnings, assets, net worth or other criteria which we will require a target business opportunity to have achieved, and without which we would not consider a business transaction in any form with such business opportunity.

Although we intend to leverage available assets, our assets may be insufficient to attract companies or business opportunities that are successful or poised for success. Accordingly, we may have no option other than to enter into a variety of agreements with a business having no significant operating history or with operating losses, limited assets, negative net worth or other negative characteristics.

We likely will need additional capital.

We likely will need additional capital in the future. These funds may be required to meet the financing terms of any projected investment or acquisition, and other working capital needs. The timing and amount of its capital requirements will depend on a number of factors, including the terms of any acquisition, our operational results, the need for other expenditures, and competitive pressures. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of our then-existing stockholders likely will be reduced significantly. The Company cannot make assurances that any financing will be available on terms favorable to us or at all. If adequate funds are not available on acceptable terms, our ability to fund our business strategy, ongoing operations, take advantage of unanticipated opportunities, or otherwise respond to competitive pressures could be significantly limited. Our business, financial condition and results of operations will be harmed by such limitations.

Potential results of seeking other investment and business opportunities.

As a result of our new business strategy, we are seeking to acquire other investment opportunities by a variety of agreements or arrangements or a combination thereof. However, at this time, we have no plan, proposal, agreement, understanding or arrangement to acquire or merge with any specific business or company other than an intent to initially target investments in bio-medical and clean energy related businesses, both high growth sectors of the Chinese economy. In the event we make an investment in a third party company or otherwise acquire a business opportunity, a change of control of our company may result. The change of control may occur through the issuance of our common stock to the owners of the acquired company or the company itself which may be significant. Generally, the amount of stock issued in such a transaction may result in significant dilution to existing shareholders. In addition, it is conceivable that the officers and directors of the acquired company may replace part or all of our existing officers and directors.

The Investment Company Act of 1940 creates a situation wherein we would be required to register and could be required to incur substantial additional costs and expenses.

We are presently subject to regulation under the Securities Exchange Act of 1934 Act, and our management believes that we will not be subject to regulation under the Investment Company Act of 1940 with respect to our proposed business strategy, insofar as we do not anticipate engaging in the business of investing or trading in securities.

However, in the event we do engage in one or more business combinations that results in us holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act of 1940. In such event, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs. We have not obtained nor do we intend to seek a formal determination from the Securities and Exchange Commission as to our status under the Investment Company Act of 1940 and, consequently, any violation of such Act would subject us to material adverse consequences.

With respect to our existing marketing and information service business, we face significant competition and may suffer from a loss of users and customers as a result.

We have faced and continue to face significant competition in our interactive marketing and sales services business, particularly from other companies that seek to provide online marketing services. Our main competitors include Sohu.com, Alibaba.com, Tom Online, Beijing Media in China and Next Media Group in Hong Kong. Many of these competitors have significantly greater financial resources than we do. They also have longer operating histories and more experience in attracting and retaining users and managing customers than we do. They may use their experience and resources to compete with us in a variety of ways, including by competing more heavily for users, customers, distributors and networks of third-party websites, investing more heavily in research and development and making acquisitions.

We also face competition from traditional advertising media, such as newspapers, magazines, yellow pages, billboards and other forms of outdoor media, television and radio. Most large companies in China allocate, and will likely continue to allocate, the bulk of their marketing budgets to traditional advertising media and only a small portion of their budgets to online marketing. If these companies do not devote a larger portion of their marketing budgets to online marketing services provided by us, or if our existing customers reduce the amount they spend on online marketing, our results of operations and future growth prospects could be adversely affected.

If we fail to continue to innovate and provide relevant services, we may not be able to generate sufficient user traffic levels to remain competitive.

We will be required to invest significant resources in research and development to enhance our marketing and information services and introduce additional high quality services to attract and retain consumers. However, given our limited available capital, it is unlikely that we will be able to invest any resources in this manner, which will have a material adverse impact on this segment of our business. Moreover, if we are unable to anticipate consumer preferences or industry changes, or if we are unable to modify our services on a timely basis, we may lose consumers and customers. Our operating results would also suffer if we can not provide timely innovations in response to the needs of our consumers and customers.

If we fail to keep up with rapid technological changes, our future success may be adversely affected.

The online marketing industry is subject to rapid technological changes. Our future success will depend on our ability to respond to rapidly changing technologies, adapt our services to evolving industry standards and improve the performance and reliability of our services. Our failure to adapt to such changes could harm our business. New marketing media could also adversely affect us. For example, the number of people accessing the Internet through devices other than personal computers, including mobile telephones and hand-held devices, has increased in recent years. If we are slow to develop products and technologies that are more compatible with non-PC communications devices, we may not be successful in capturing a significant share of this increasingly important market for media and other services. In addition, the widespread adoption of new Internet, networking or telecommunications technologies or other technological changes could require substantial expenditures to modify or adapt our products, services or infrastructure. If we fail to keep up with rapid technological changes to remain competitive in our rapidly evolving industry, our future success may be adversely affected.

We rely on highly skilled personnel and if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to grow effectively.

Our performance and future success depends on the talents and efforts of highly skilled individuals. We will need to continue to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization. Competition in our industry for qualified employees is intense. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing employees.

As competition in our industry intensifies, it may be more difficult for us to hire, motivate and retain highly skilled personnel. If we do not succeed in attracting additional highly skilled personnel or retaining or motivating our existing personnel, we may be unable to grow effectively.

Interruption or failure of our information technology and communications systems could impair our ability to effectively provide our products and services, which could damage our reputation and harm our operating results.

Our ability to provide our Marketing & Information services depends on the continuing operation of our information technology and communications systems. Any damage to or failure of our systems could interrupt our service. Service interruptions could reduce our revenues and profits, and damage our brand if our system is perceived to be unreliable. Our systems are vulnerable to damage or interruption as a result of terrorist attacks, war, earthquakes, floods, fires, power loss, telecommunications failures, computer viruses,

interruptions in access to our websites through the use of “denial of service” or similar attacks, hacking or other attempts to harm our systems, and similar events. Our servers, which are hosted at third-party Internet data centers, are also vulnerable to break-ins, sabotage and vandalism. Some of our systems are not fully redundant, and our disaster recovery planning does not account for all possible scenarios. The occurrence of a natural disaster or a closure of an Internet data center by a third-party provider without adequate notice could result in lengthy service interruptions.

Our business could be adversely affected if our software contains bugs.

Our Marketing & Information systems, including our websites, and other software applications and products, could contain undetected errors or “bugs” that could adversely affect their performance. We regularly update and enhance our websites and our other online systems and introduce new versions of our software products and applications. The occurrence of errors in any of these may cause us to lose market share, damage our reputation and brand name, and materially and adversely affect our business.

Concerns about the security of electronic commerce transactions and confidentiality of information on the Internet may reduce use of our network and impede our growth.

A significant barrier to electronic commerce and communications over the Internet in general has been public concern over security and privacy, including the transmission of confidential information. If these concerns are not adequately addressed, they may inhibit the growth of the Internet and other online services generally, especially as a means of conducting commercial transactions. If a well-publicized Internet breach of security were to occur, general Internet usage could decline, which could reduce traffic to our destination websites and impede our growth.

Our success depends on the continuing efforts of our senior management team and other key personnel and our business may be harmed if we lose their services.

Our future success depends heavily upon the continuing services of the members of our senior management team, in particular Dr. Bruno Wu, our chairman. If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and our business may be disrupted and our financial condition and results of operations may be materially and adversely affected. Competition for senior management and key personnel is intense, the pool of qualified candidates is very limited, and we may not be able to retain the services of our senior executives or key personnel, or attract and retain high-quality senior executives or key personnel in the future.

In addition, if any member of our senior management team or any of our other key personnel joins a competitor or forms a competing company, we may lose customers, distributors, know-how and key professionals and staff members. Each of our executive

officers and key employees has entered into an employment agreement with us, which contains confidentiality and non-competition provisions. If any disputes arise between any of our senior executives or key personnel and us, we cannot assure you the extent to which any of these agreements may be enforced.

We have limited business insurance coverage.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products. We do not have any business liability or disruption insurance coverage for our operations in China. Any business disruption, litigation or natural disaster may result in our incurring substantial costs and the diversion of our resources.

Fluctuation and impairment of marketable securities will materially impact our net income

We own securities in a number of public companies. These marketable securities are carried at fair market value, fluctuation of market price of those securities could adversely impact net income and earnings per share.

Any change of the indefinite status of any of our intangible assets may require us to record additional amortization expenses

Some of our intangible assets are characterized as indefinite intangible assets and therefore are not required to be amortized. Any changes of the conditions upon which we based categorization of these intangible assets as indefinite will likely require us to amortize these intangible assets over their economic life. Such additional amortization cost could adversely impact our net income and earnings per share.

Risks Related to Our Corporate Structure

Chinese laws and regulations governing our businesses and the validity of certain of our contractual arrangements are uncertain. If we are found to be in violation, we could be subject to sanctions. In addition, changes in such Chinese laws and regulations may materially and adversely affect our business.

Although we are a Delaware corporation, all of our operations and employees are located in China. As such, there are substantial uncertainties regarding the interpretation and application of Chinese laws and regulations, including, but not limited to, the laws and regulations governing our business, or the enforcement and performance of our contractual arrangements with certain of our affiliated Chinese entities. We are considered foreign persons or foreign invested enterprises under Chinese law. As a result, we are subject to Chinese law limitations on foreign ownership of Internet and advertising companies. These laws and regulations are relatively new and may be subject

to change, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.

The Chinese government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the interpretation of existing or new Chinese laws or regulations on our businesses. We cannot assure you that our current ownership and operating structure would not be found in violation of any current or future Chinese laws or regulations. As a result, we may be subject to sanctions, including fines, and could be required to restructure our operations or cease to provide certain services. Any of these or similar actions could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect our business, financial condition and results of operations.

Our corporate actions are substantially controlled by our principal shareholders and affiliated entities.

As of September 30, 2008, our principal shareholders and their affiliated entities own approximately 17.08% of our outstanding common stock. These shareholders, acting individually or as a group, could exert substantial influence over matters such as electing directors and approving mergers or other business combination transactions. This concentration of ownership may also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our common stock. These actions may be taken even if they are opposed by our other shareholders.

There are certain inter-locking relationships and potential conflicts of interest with our Chairman, His Spouse, and a Significant Shareholder.

Dr. Bruno Wu, our Chairman, is also the Chairman and Director of Sun Media Investment Holdings Limited (“SMIH”), one of our significant shareholders. Dr. Wu’s wife is the majority shareholder of SMIH. We also have entered into several transactions involving SMIH or entities controlled by SMIH, including a recent transaction with Her Village Co., Ltd. In addition, the parties may enter into future arrangements, including modifications to existing agreements, which have not been determined at this time. Although our management believes that each of these past transactions were entered into in our best interests (and for future transactions our management will endeavor at all times to maintain our best interests in any such transaction(s)), they were not the product of any arm’s length negotiations between the parties, nor did we obtain an independent

fairness opinion with respect to these transactions. Therefore, conflicts of interest between such parties and us have existed in the past and may continue in the future and may have an adverse impact on our business.

Our officers and directors may allocate their time and efforts to other businesses thereby causing conflicts of interest in their determination as to whether or not to present business opportunities to the Company and as to how much time to devote to our affairs.

Our officers and directors, including Dr. Wu, are not required to commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and other businesses. All of our executive officers are engaged in several other business endeavours and are not obligated to contribute any specific number of hours to our affairs. If our executive officers’ other business affairs require them to devote more substantial amounts of time to such affairs, it could have a negative impact on our financial condition, results of operations and future business prospects.

We intend to protect our interests in having these officers and directors remain part of the Company and prioritize their time and resources in such a way that will benefit interests, although no assurances thereof can be given.

Our officers and directors may become aware of business opportunities which may be appropriate for presentation to us as well as the other entities to which they owe fiduciary duties. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. The Company intends to protect its interests in having these officers and directors remain part of the Company and prioritize their time and resources in such a way that will benefit the Company, although no assurances thereof can be given.

Risks Related to Doing Business in China

Adverse changes in economic and political policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business.

As our interactive Marketing & Information services business expands, we expect an increasing portion of our business operations to be conducted in China. Accordingly, our results of operations, financial condition and prospects are subject to a significant degree to economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While China’s economy has experienced significant growth in the past 20 years, growth has been uneven across different regions and among various

economic sectors of China. The Chinese government has implemented various measures to encourage economic development and guide the allocation of resources. Some of these measures benefit the overall Chinese economy, but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by governmental control over capital investments or changes in tax regulations that may be applicable to us. Since early 2004, the Chinese government has implemented certain measures to control the pace of economic growth. Such measures may cause a decrease in the level of economic activity in China, which in turn could adversely affect our results of operations and financial condition.

Our subsidiaries and affiliates are subject to restrictions on paying dividends and making other payments to us.

Our operations are conducted through contractual arrangements between our wholly owned subsidiaries and operating entities located in China. As such, we expect to increasingly rely on dividends payments from our subsidiaries who in turn receive their revenues through the affiliated operating entities in China. However, Chinese regulations currently permit payment of dividends only out of accumulated profits, as determined in accordance with Chinese accounting standards and regulations. Our subsidiaries and affiliated entities in China are also required to set aside a portion of their after-tax profits according to Chinese accounting standards and regulations for certain reserve funds. The Chinese government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of China. We may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency. Furthermore, if our subsidiaries or affiliated entities in China incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If either ourselves or our subsidiaries are unable to receive all of the revenues from our operations through these contractual or dividend arrangements, we may be unable to fund our overhead of our non-Chinese entities or declare dividends on our common stock.

Uncertainties with respect to the Chinese legal system could adversely affect us.

We conduct a substantial and increasing portion of our business through subsidiaries and affiliated entities based in China. Our operations in China are governed by Chinese laws and regulations. Our subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to wholly foreign-owned enterprises. The China legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedent value.

Since 1979, Chinese legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently-enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In

particular, because these laws and regulations are relatively new, and because of the limited published decisions and their non-binding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the Chinese legal system is based in part on governmental policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

We may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us or our management.

We conduct all of our operations in China and all of our assets are located in China. In addition, all of our senior executive officers reside within China. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China on our senior executive officers, including matters arising under U.S. federal securities laws or applicable state securities laws. Moreover, our Chinese counsel has advised us that China does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts.

Governmental control of currency conversion may affect the value of your investment.

The Chinese government imposes controls on the conversion of RMB to foreign currencies and, in certain cases, the remittance of currencies out of China. As our domestic sales operations expand, we expect to derive an increasing percentage of our revenues in RMB. Under our current structure, we expect our income will be primarily derived from dividend payments from our Chinese subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our Chinese subsidiaries and our affiliated entities to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing Chinese foreign exchange regulations, payments of current account items, including profit distributions, interest and principal payments on outstanding notes (including our recently completed convertible note financing) and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the People's Republic of China State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate government authorities is required when RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The Chinese government at its discretion also may restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our common stock.

Fluctuation in the value of RMB may have a material adverse effect on your investment.

The value of RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. On July 21, 2005, the Chinese government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of foreign currencies. This change in policy has resulted in an approximately 7.9% appreciation of the RMB against the U.S. dollar. While the international reaction to the RMB revaluation has generally been positive, there remains significant international pressure on the Chinese government to adopt a more flexible currency policy, which could result in a further and significant appreciation of the RMB against the U.S. dollar. As our interactive marketing and sales services business continues to grow, a greater portion of our revenues and costs will be denominated in RMB, while a significant portion of our financial assets may be denominated in U.S. dollars. We expect to rely significantly on dividends and other fees paid to us by our subsidiaries and affiliated entities in China. Any significant revaluation of RMB may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, our common stock in U.S. dollars. For example, an appreciation of RMB against the U.S. dollar would make any new RMB denominated investments or expenditures more costly to us, to the extent that we need to convert U.S. dollars into RMB for such purposes.

We may not be able to consolidate the financial results of some of our affiliated companies or such consolidation could materially adversely affect our operating results and financial condition.

For Chinese regulatory reasons, all of our operations are conducted through contractual arrangements with China operating companies which for accounting purposes currently are considered variable interest entities (“VIE’s”) of us. We are considered the primary beneficiary of such entities, and as such, are required to consolidate their respective financial results in our consolidated financial statements. In the event that in the future a company we hold as a VIE would no longer meet the definition of a VIE, or we are deemed not to be the primary beneficiary for any reason, we would not be able to consolidate line by line that entity’s financial results in our consolidated financial statements. Also, in the future it is possible that other companies, due to contractual obligations, may become our VIE and thus we would be the primary beneficiary. In such an event, we would be required to include that entity’s financial results in our consolidated financial statements. If such entity’s financial results were negative, this could have a corresponding negative impact on our operating results.

We may lose control over our VIE entities which could materially adversely affect our operating results and financial condition.

As mentioned elsewhere herein, under Chinese law, we are not allowed to own the Chinese operating entities. Instead, through our subsidiaries, we have contractual arrangement with the Chinese operating entities pursuant to which we receive a substantial portion of the operating revenues of these Chinese companies. If these Chinese companies fail to uphold the operating agreement or if for any reason, these arrangements are deemed unenforceable, we would lose control over such entities which would cause a material adverse impact on our business and operations.

We face risks related to health epidemics and other outbreaks.

Our business could be adversely affected by the effects of SARS or another epidemic or outbreak. China reported a number of cases of SARS in April 2004. Any prolonged recurrence of SARS or other adverse public health developments in China may have a material adverse effect on our business operations. For instance, health or other governmental regulations adopted in response may require temporary closure of Internet cafes, which is one of the avenues where users could access our websites, or of our offices. Such closures would severely disrupt our business operations and adversely affect our results of operations. We have not adopted any written preventive measures or contingency plans to combat any future outbreak of SARS or any other epidemic.

Rapidly developing Chinese tax laws could negatively affect our businesses.

On March 16 2007, the Chinese government produced a new set of revised tax laws. In these tax laws, income tax for companies located in China was reduced from 33% to 25%, resulting in a corresponding increase in net income for our Chinese company. However, given China’s rapidly changing tax laws and the difference between national tax policy and local tax policy, we could and likely will be exposed to other fluctuations in income associated with these taxes, including but not limited to business taxes, VAT, income taxes, and other taxes.

Risks Related to Our Common Stock

There has been only a limited public market for our common stock to date.

To date, there has been only a limited public market for our common stock on the Over-the-Counter Bulletin Board. Our common stock is currently not listed on any exchange. If an active trading market for our common stock does not develop, the market price and liquidity of our common stock will be materially and adversely affected.

The market price for our common stock may be volatile.

The market price for our common stock may be volatile and subject to wide fluctuations in response to factors including the following:

· actual or anticipated fluctuations in our quarterly operating results;

· changes in financial estimates by securities research analysts, if any;

· conditions in the China consumer goods and online marketing markets;

· changes in the economic performance or market valuations of other U.S. public companies with substantial operations in China;

· announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments;

· addition or departure of key personnel;

· fluctuations of exchange rates between RMB and the U.S. dollar;

· intellectual property litigation; and

· general economic or political conditions in China.

In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our Common stock.

We will need additional capital, and the sale of additional common stock or other equity securities could result in additional dilution to our shareholders.

We expect to require additional cash resources to fund our operations, as well as investments or acquisitions which we may decide to pursue. To satisfy our cash requirements, we may seek to sell additional equity or debt securities (in addition to our recently completed financing or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

Substantial future sales or the perception of sales of our common stock in the public market could cause the price of our common stock to decline.

Sales of our common stock in the public market or the perception that these sales could occur, could cause the market price of our common stock to decline. As of December 31, 2008, approximately 50,160,579 shares, or 55.6% of our outstanding shares can be freely transferable without restriction or additional registration under the Securities Act of 1933, as amended, or are subject to a pending registration statement. The remaining common stock outstanding as of such date will be available for sale, subject to volume and other restrictions as applicable under Rule 144 under the Securities Act.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

We are subject to reporting obligations under the U.S. securities laws. The Securities and Exchange Commission, or the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such company’s internal controls over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal controls over financial reporting. In addition, an independent registered public accounting firm must attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting.

These requirements first apply to our annual report on Form 10-KSB for the fiscal year ending September 30, 2008. Our management may conclude that our internal controls over our financial reporting are not effective. Moreover, even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may still decline to attest to our management’s assessment or may issue a report that is qualified if they are not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We are a young company with limited accounting personnel and other resources with which to address our internal controls and procedures. If we fail to timely achieve and maintain the adequacy of our internal controls, we may not be able to conclude that we have effective internal controls over financial reporting at a reasonable assurance level. Moreover, effective internal controls over financial reporting are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our common stock. Furthermore, we anticipate that we will incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.

We will incur increased costs as a result of being a public company.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by SEC has required changes in corporate governance practices of public companies. We expect these new rules and regulations to increase our legal, accounting and financial compliance costs and make certain corporate activities more time-consuming and costly. In addition, we will incur additional costs associated with our public company reporting requirements. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

There is a limited public float of our common stock, which can result in increased volatility in our stock price and prevent the realization of a profit on resale of the Company’s common stock

There is a limited public float of our common stock. The term “public float” refers to shares freely and actively tradable on the Over-the-Counter Bulletin Board System and not owned by officers, directors or affiliates, as defined under the Securities Act. Due to our relatively small public float and the limited trading volume of our common stock, purchases and sales of relatively small amounts of our common stock can have a disproportionate effect on the market price for our common stock. As a result, the market price of our common stock can have increased volatility which may affect a stockholder’s ability to sell our shares in a timely manner.

Our common stock is subject to restrictions on sales by broker-dealers and penny stock rules, which may be detrimental to investors.

Our common stock is subject to Rules 15g-1 through 15g-9 under the Securities Exchange Act of 1934, which imposes certain sales practice requirements on broker-dealers who sell our common stock to persons other than established customers and “accredited investors” (as defined in Rule 501(c) of the Securities Exchange Act). For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to the sale. This rule adversely affects the ability of broker-dealers to sell our common stock and purchasers of our common stock to sell their shares of our common stock.

Additionally, our common stock is subject to SEC regulations applicable to “penny stock.” Penny stock includes any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions. The regulations require that prior to any non-exempt buy/sell transaction in a penny stock, a disclosure schedule proscribed by the SEC relating to the penny stock market must be delivered by a broker-dealer to the purchaser of such penny stock. This disclosure must include the amount of commissions payable to both the broker-dealer and the registered representative and current price

quotations for our common stock. The regulations also require that monthly statements be sent to holders of penny stock that disclose recent price information for the penny stock and information of the limited market for penny stocks. These requirements adversely affect the market liquidity of our common stock.

When we account for employee share options using the fair value method, such accounting treatment could significantly reduce our net income.

On December 16, 2004, the Financial Accounting Standards Board (“FASB”), issued FASB Statement No. 123(R), Share-Based Payment, which requires a public company to recognize as an expense, the fair value of stock options and other share-based compensation to employees at the first fiscal year that begins on or after June 15, 2005. Currently, we record share-based compensation to the extent that the fair value of the shares on the date of grant exceeds the exercise price of the option. We recognize compensation expense over the related vesting periods. For the periods after December 31, 2005, we could have ongoing accounting charges significantly greater than those we would have recorded under our current method of accounting for share options. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Critical Accounting Policies for a more detailed presentation of accounting for share-based compensation plans.

Item 2. Properties

The majority of our operations are in China, where we have leased offices in Beijing. Our Beijing office consists of 8,740 square feet. The lease extends for a period of two years terminating on July 31, 2008. Our annual rent is $192,569. 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.

Item 3. Legal Proceedings

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

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

None

Part II.

Item 5. Market for Common Equity and Related Shareholder Matters

We effected our initial public offering of our common stock on June 14, 1999. Our common stock is quoted on the OTC Bulletin Board under the symbol “NXMR.” There is an absence of an established trading market for the Company's common stock, as the market is limited, sporadic, and highly volatile. The absence of an active market may have an effect upon the high and low price as reported. The following table sets forth the high and low closing sales price of our common stock as reported on OTC Bulletin Board for the periods indicated:



	High	Low
Fiscal 2005 (October 1, 2004 to September 30, 2005)
First Quarter	$ 1.90	$ 1.40
Second Quarter	$ 5.10	$ 1.24
Third Quarter	$ 4.88	$ 2.82
Fourth Quarter	$ 4.20	$ 2.84

Fiscal 2006 (October 1, 2005 to March 31, 2006)
First Quarter	$ 4.15	$ 3.00
Second Quarter	$ 4.35	$ 3.60

Fiscal 2007 (April 1, 2006 to March 31, 2007)
First Quarter	$ 6.28	$ 3.61
Second Quarter	$ 4.37	$ 2.68
Third Quarter	$ 2.70	$ 0.66
Fourth Quarter	$ 0.91	$0.47

Fiscal 2007 (April 1, 2007 to September 30, 2007)
First Quarter	$0.48	$0.28
Second Quarter	$0.54	$0.25

Fiscal 2008 (October 1, 2007 to September 30, 2008)
First Quarter	$0.24	$0.12
Second Quarter	$0.14	$0.05
Third Quarter	$0.08	$0.04


Fourth Quarter	$0.06	$0.03
Fiscal 2009 (October 1, 2008 to September 30, 2009)
First Quarter	$0.04	$0.02

The quotations above reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

On December 31, 2008, the last reported sale price for our common stock on the OTC Bulletin Board was $0.04 per share.

As of December 31, 2008, there were 444 record holders of our common stock.

Dividend Policy

We have never paid any cash dividends and do not anticipate paying cash dividends in the foreseeable future.

Securities Authorized For Issuance Under Equity Compensation Plans.

For Securities Authorized For Issuance Under Equity Compensation Plans as required under Item 201 of Regulation S-B, please refer to the table in Part III-Item 13.

Recent Sales of Securities

On October 24 2007, we issued a total of 99,996 shares to Barron Partners L.P. (“Barron”) to satisfy a cashless exercise of 100,000 Class D Warrants held by Barron.

On November 20 2007, we issued a total of 3,491,379 shares to our CEO Mr. Huiliang Ren according to the Supplementary Agreement of the Shares Purchase Agreement made by and between the Company and Mr. Ren.

Item 6 Management Discussion and Analysis

Overview

Our operations are divided into two principal divisions: the Transactional Services division and the Marketing & Information Services division. The Transactional Services division generates revenue mainly through logistics services provided in the women’s fashion industry, principally through our subsidiary William Brand. The Marketing & Information Services division generates revenue through the provision of business information services/products such as digital E-Magazines, sale of advertising, and media consulting services. As mentioned below, during fiscal year ended September 30, 2008, Transactional Services division represented 92% of total income and the Marketing & Information Services division represented the balance.

As of the date of this report, we continue to be engaged in our above described businesses, and we have not undertaken any formal steps to restructure our business. Our proposed restructuring will be subject to raising additional funds, negotiating and formalizing agreements with numerous third parties, certain asset valuations, fairness opinions, and various approvals including, but not limited to, shareholder approval, debt holder approval, auditor approval, and other regulatory approval. We remind investors that even if we are able to meet the various requirements and regulations indicated above, we can not predict when we will commence such restructuring, if any, and if commenced, whether we will be successful with these efforts.

Due to our intent to divest the business and assets of William Brand, we have classified the assets attendant to that business as Held for Sale in our Consolidated Audited Balance Sheet as of September 30, 2008 included herein.

Results of Operations

Fiscal Year Ended September 30, 2008 compared with Fiscal Year Ended September 30, 2007

The following discussion reflects our results from operations for the fiscal year ended September 30, 2008 (12 months) compared with the fiscal year ended September 30, 2007 (12 months). Please note that our Consolidated Statement of Operations do not reflect results for the twelve month period ended September 30, 2007. These results were obtained by (i) deducting the appropriate line item in the statement of operations for six month period ended September 30, 2006 from the similar line item in the statement of operations for the twelve month period ended March 31, 2007, and (ii) adding those results to the appropriate line item in the statement of operations for six month period ended September 30, 2007.

We reported total revenue of $2.9 million for the fiscal year ended September 30, 2008 with a net loss of $8.7 million, or $(0.10) per share outstanding. The results include an impairment loss of $2.27 million for the intangibles relating to certain digital publishing rights and other intangible assets and a loss of marketable securities of $0.43 million, and a loss from operations of business hold for sale of $2.5 million for the fiscal year ended September 30, 2008

Revenue. The Company recognized $2.9 million in revenue for the fiscal year ended September 30, 2008 compared to $1.7 million for the fiscal year ended September 30, 2007. The increase in revenues for fiscal year 2008 of $1.2 million (or 70.6%) from the fiscal year 2007 is attributable to our Transactional Services due to the increased demand for our services. Of the total revenue for the 2008 period, 92% were derived from our Transactional Services and the remaining 8% from our Marketing and Information

Services. This compares with the 2007 period where 100% of revenues were derived from our Transactional Services.

Costs of Revenue. Cost of revenue for the fiscal year ended September 30, 2008 was $2.4 million compared to $1.1 million for the fiscal year ended September 30, 2007. The increase of costs for fiscal year 2008 of $1.3 million (or 118%) from the fiscal year 2007 is attributable to an increase in revenues for the fiscal year 2008. Costs of revenue include Transactional Services cost and service buying cost. Of the total cost for the 2008 period, Transactional Services costs accounted for 99.9%, the remaining 0.1% was attributable to the Marketing & Information Services. For the 2007 period, Transactional Services costs represented 100% of the total costs.

Operating Expenses. Total operating expenses for the fiscal year ended September 30, 2008 were $6.5 million compared with $47.6 million for the fiscal year ended September 30, 2007. Operating expenses include principally general and administrative, stock based compensation, depreciation and amortization, consulting and professional fees, impairment loss on marketable securities, and impairment loss on intangible assets. The decrease for the fiscal year 2008 of $41.1 million (or 86.3%) from the fiscal year 2007 is due mainly to an impairment losses recorded for the 2007 fiscal year end period in the amount of $25.3 million for the intangibles and goodwill, stock based compensation, along with reductions in office overhead, depreciation and amortization, and consulting and professional fees which occurred during the 2008 fiscal year end period.

Other Income (Loss). We experienced a loss of $0.94 million during the 2008 year end period, which includes a loss on marketable securities of $0.43 million, interest expense of $0.32 million, and amortization of discount on notes of $0.22 million. During the 2007 period, we had a loss of $0.9 million, which were impairment losses on convertible notes and interest expenses of $0.8 million.

Loss from continuing operations. Loss from continuing operations for the fiscal year ended September 30, 2008 was $6.8 million compared with a loss of $47.9 million for the fiscal year ended September 30, 2007. The decrease for the fiscal year 2008 of $41.1 million (or 86%) from the fiscal year 2007 is due to the reasons discussed above.

Income (Loss) from operations of business to hold for sale. During fiscal 2009, we plan to divest the operation of William Brand Ltd. In this regard, we have re-classified this business to hold for sale. For the fiscal year ended September 30, 2008, the Loss from the operation of William Brand Ltd is $2.5 million. For the fiscal year ended September, 2007, the loss from the operation of William Brand Ltd is $0.4 million.

Income (Loss) from discontinued operations. The income from discontinued operations for the fiscal year ended September 30, 2008 is $0.6 million. The loss from discontinued operations for the fiscal year ended September 30, 2007 is $35 million

Net Loss. Net loss for the fiscal year ended September 30, 2008 is $8.7 million compared with a loss of $48 million for the fiscal year ended September 30, 2007. The decrease for the fiscal year 2008 of $39.3 million (or 82%) from the fiscal year 2007 is due to the reasons discussed above..

Liquidity and Capital Resources. As of September 30, 2008, we had approximately $0.43 million in cash and cash equivalents and $1 million in marketable securities.

Off-Balance Sheet Arrangement

As of September 30, 2008, we do not have any off-balance sheet arrangements.

Capital Expenditure Commitments

We had no material capital expenditures for the period ended September 30, 2008.

Recent Accounting Pronouncements

In February 2007, the FASB issued FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115, effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, Fair Value Measurements. No entity is permitted to apply the Statement retrospectively to fiscal years preceding the effective date unless the entity chooses early adoption. The choice to adopt early should be made after issuance of the Statement but within 120 days of the beginning of the fiscal year of adoption, provided the entity has not yet issued financial statements, including required notes to those financial statements, for any interim period of the fiscal year of adoption. This Statement permits application to eligible items existing at the effective date (or early adoption date).The Company does not expect the adoption of FAS 159 to have a material impact on its consolidated results of operations and financial condition.

In September 2006, the FASB issued FAS 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans. For an employer with publicly traded equity securities, the requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006.

For an employer without publicly traded equity securities, the requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after June 15, 2007.

The requirement to measure plan assets and benefit obligations as of the date of the employer's fiscal year-end statement of financial position (paragraphs 5, 6, and 9) is effective for fiscal years ending after December 15, 2008.

Earlier application is permitted if for all of an employer's benefit plans. The Company

does not expect the adoption of FAS 158 to have a material impact on its consolidated results of operations and financial condition.

In September 2006, the FASB issued FAS 157, Fair Value Measurements, effective for fiscal years beginning after November 15, 2007, and all interim periods within those fiscal years. Earlier application is permitted if the entity has not yet issued interim or annual financial statements for that fiscal year.

The Company does not expect the adoption of FAS 157 to have a material impact on its consolidated results of operations and financial condition.

In June 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109. Effective for fiscal years beginning after December 15, 2006. Earlier application is permitted if the entity has not yet issued interim or annual financial statements for that fiscal year.

The adoption of FIN 48 has not had a material impact on the Company’s consolidated results of operations and financial condition.

Critical Accounting Policies and Estimates

Our audited financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles (“GAAP”) used in the United States. In preparing financial statements, management has made certain estimates and assumptions that affected the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions were made consistent with standard accounting policies and practices. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.

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

Basis of Consolidation and Presentation

Interpretation No.46R consolidation of Variable Interest Entities, FIN 46R, an Interpretation of Accounting Research Bulletin No.51. FIN 46R requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIEs or is entitled to receive a majority of the VIE’s residual returns. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

We have the following significant domestic VIEs:

· Beijing Trans Global Logistics, a Chinese company 80% by us by contract and engaged in trading. It is 80% owned by Qiong Zhou, 10% owned by Yong Li and 10% owned by Mianchun Wang, Qiong Zhou is a non-executive employees of the Company.

· Naixiu Exhibition (Beijing) Co. Ltd, a Chinese company that is controlled by us and owned 50% Li Yong and 50% by Wang Jinghchun. Li Yong and Wang Jingchun are non-executive employees of the Company.

The capital investment in these VIEs is funded by the Company and transferred to the VIEs via contractual agreements between the Company (or its non-China subsidiary) and the Chinese employees who own the VIEs. As of September 30, 2008, the total amount of capital investment that was transferred to the VIEs listed above was US$1,126,638. Under various contractual agreements, employee shareholders of the VIEs are required to transfer their ownership in these entities to our subsidiaries in China when permitted by Chinese laws and regulations or to our designees at any time for the outstanding amount of injected capital investment, and all voting rights of the VIEs are assigned to us. We have the power to appoint all directors and senior management personnel of the VIEs. Through our wholly-owned subsidiaries in China, we have also entered into exclusive technical agreements and other service agreements with the VIEs, under which these subsidiaries provide technical services.

Revenue recognition

We generate revenue through the provision of marketing, information, and transactional services. The Company recognizes revenues from transaction and information services in accordance with Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” when all of the following conditions exist: persuasive evidence of an arrangement exists in the form of an accepted purchase order; delivery has occurred, based on shipping terms, or services have been rendered; the Company’s price to the buyer is fixed or determinable, as documented on the accepted purchase order; and collectibility is reasonably assured.

The Transactional Services include primarily the apparel vertical business and electronic components business. We recognize revenue for the transactional business when the goods have been shipped or delivered and a purchase order exists. The Marketing and

Information Services includes newspaper and magazine business and marketing consulting services. The Company recognizes revenue for the Marketing and Information Services when the services have been rendered.

Trade receivables and allowances for Doubtful Accounts

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

Goodwill and intangible assets, net

Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of the Company’s acquisitions of interests in its subsidiaries and VIEs. Under Statement of Financial Accounting Standards, FAS No.142, Goodwill and Other Intangible Assets, FAS 142, goodwill is no longer amortized, but tested for impairment upon first adoption and annually, thereafter, or more frequently if events or changes in circumstances indicate that it might be impaired. The Company assesses goodwill for impairment periodically in accordance with SFAS 142.

The Company applies the criteria specified in SFAS No.141, Business Combinations to determine whether an intangible asset should be recognized separately from goodwill. Intangible assets acquired through business acquisitions are recognized as assets separate from goodwill if they satisfy either the contractual-legal or separability criterion. Per SFAS 142, intangible assets with definite lives are amortized over their estimated useful life and reviewed for impairment in accordance with SFAS No.144, accounting for the Impairment or Disposal of Long-lived Assets. The Company reviews the amortization methods and estimated useful lives of intangible assets at least annually or when events or changes in circumstances indicate that it might be impaired. The recoverability of an intangible asset to be held and used is evaluated by comparing the carrying amount of the intangible asset to its future net undiscounted cash flows. If the intangible asset is considered to be impaired, the impairment loss is measured as the amount by which the carrying amount of the intangible asset exceeds the fair value of the intangible asset, calculated using a discounted future cash flow analysis. The Company uses estimates and judgments in its impairment tests, and if different estimates or judgments had been utilized, the timing or the amount of the impairment charges could be different.

Impairment of Long-lived Assets

The Company assets the carrying value of long-lived assets in accordance with SFAS No.144, accounting for the Impairment or Disposal of Long-lived Assets. Factors considered important which could trigger this review include significant decrease in operating results, significant changes in its use of assets, competitive factors and the strategy of it 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 may not be recoverable based on as assessment of future undiscounted 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 FASB No. 130, “Reporting Comprehensive Income (Loss). The components of comprehensive loss for the Company include currency translation adjustments and unrealized loss on marketable securities.

Foreign currency transactions

The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 52, “Foreign Currency Translation,” since the functional currency of the Company is Renminbi, the foreign currency financial statements of the Company’s subsidiaries are re-measured into U.S. dollars. Monetary assets and liabilities are re-measured 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 re-measurement gain or loss incurred is reported in the consolidated statement of operations. In 2008, 7.0927RMB per USD was the weighted average rate, and 6.8183 RMB per USD was the rate at September 30, 2008.

Marketable securities

The Company accounts for investments in marketable securities under Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities. Marketable equity securities are held as available for sale and are reported at fair value any unrealized gains and losses are included in accumulated other comprehensive income or loss within stockholders’ equity. The treatment of a

decline in the fair value of an individual security is based on whether the decline is other-than-temporary. Significant judgment is required to assess whether the impairment is other-than-temporary, particularly for marketable equity securities that provide limited public information. Our judgment of whether impairment is other-than-temporary is based on an assessment of factors including our ability and intent to hold the individual security, severity of the impairment, expected duration of the impairment and forecasted recovery of fair value. Changes in the estimates and assumptions could affect our judgment of whether an identified impairment should be recorded as an unrealized loss in the equity section of our consolidated balance sheets or as a realized loss in the consolidated statements of operations.

Stock-based compensation

Effective January 1, 2006, the company adopted SFAS No. 123 (revised 2004), “Share Based Payment,” (“SFAS No. 123(R)”) which revises SFAS No. 123 and supersedes APB 25. SFAS No. 123(R) requires that all share-based payments to employees be recognized in the financial statements based on their fair values at the date of grant. The calculated fair value is recognized as expense (net of any capitalization) over the requisite service period, net of estimated forfeitures, using the straight-line method under SFAS No. 123(R). The Company considers many factors when estimating expected forfeitures, including types of awards, employee class and historical experience. The statement was adopted using the modified prospective method of application which requires compensation expense to be recognized in the financial statements for all unvested stock options beginning in the quarter of adoption. There were no unvested stock options at the beginning of this reporting period therefore no compensation expense was recognized in the period. No adjustments to prior periods have been made as a result of adopting SFAS No. 123(R).

As at September 30, 2005 the Company elected to account for stock-based employee compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, (“APB No. 25”) and comply with the disclosure provisions of SFAS No. 123 as amended by SFAS No. 148. During the period from September 18, 2005 to September 30, 2005, no stock-based employee compensation arrangements have been effected and accordingly no disclosure of pro forma information is required. In accordance with SFAS No. 123 the Company applies the fair value method using the Black-Scholes option-pricing model in accounting for options granted to consultants.

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

earlier of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.

Item 7. Financial Statements

Financial Statements

NextMart, Inc.

Consolidated Financial Statements

Period from October 1, 2007 to September 30, 2008

(Expressed In United States Dollars)

Table of Contents




>Report of Independent Registered Public Accounting Firm	29
>Consolidated Balance Sheet	30
>Consolidated Statement of Operations	31
>Consolidated Statement of Changes in Stockholders’ Equity	32
>Consolidated Statement of Cash Flows	34
>Notes to Consolidated Financial Statements	35

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

NextMart Inc.

We have audited the accompanying consolidated balance sheet of NextMart Inc (the “Company”) as of September 30, 2008 and the related consolidated statement of operations, changes in stockholders’ equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2008 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Bernstein & Pinchuk, LLP

New York, New York

January 13, 2009



NEXTMART INC. (f/k/a Sun New Media Inc.)
CONSOLIDATED BALANCE SHEETS
	September 30,
	2008	2007
	US$	US$
ASSETS
Current Assets
Cash and cash equivalents	433,702	206,142
Accounts receivable, net of provision for doubtful debts $33,723	913,042	1,125,772
Other current assets	367,606	2,556,067
Inventories	-	46,618
Marketable securities	1,018,554	4,225,158
Amounts due from stockholders	946,890	421,452
Amounts due from related parties	-	472,287
Current assets of discontinued operations	-	329,050
Assets held for sale	4,090,043	6,746,443

Total current assets	7,769,837	16,128,989
Goodwill and intangible assets	205,685	2,796,575
Deferred charges	1,816,667	2,348,667
Other long-term assets	1,731,401	-
Assets of discontinued operations	-	459,589
Plant and equipment, net	293,869	929,939
	11,817,459	22,663,759

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	222,312	655,624
Other payables and accruals	2,360,990	1,744,163
Amounts due to related parties	599,197	197,255
Amounts due to stockholders	429,571	-
Current liabilities of discontinued operations	-	932,379
Liabilities held for sale	16,067	158,296
		-
Total current liabilities	3,628,137	3,687,717

Minority interest	909,398	1,060,408
Convertible notes	1,500,000	1,500,000
Discount on convertible notes and warrants	(500,379)	(717,679)
STOCKHOLDERS’ EQUITY
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, 90,257,763 shares (2008) and 87,093,170 shares (2007)	902,047	870,932


Reserved to be issued, 53,029 shares (2008) and 20,000 shares (2007)	530	200
Additional paid in capital	95,337,626	94,978,414
Accumulated other comprehensive (loss) income:
Foreign currency translation adjustments	(304,504)	47,149
Unrealized Loss	(2,161,519)	-
Accumulated deficit	(87,493,877)	(78,763,382)
Total stockholders’ equity	6,280,303	17,133,313
	11,817,459	22,663,759



NEXTMART INC. (f/k/a Sun New Media Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
	Audited	Audited	Unaudited	Audited
	Year Ended September 30,	Six Months Ended September 30,	Six Months Ended September 30,	Year Ended March 31,
	2008	2007	2006	2007
	US$	US$	US$	US$
Revenues	2,939,932	530,373	-	1,170,987
Costs of revenue	2,403,546	367,981	-	725,998
Gross Margin	536,386	162,392	-	444,989

Operating Expenses
General and administrative expenses	1,822,951	1,608,181	1,352,637	2,340,363
Stock Based Compensation Costs	453,879	-	(3,810,550)	3,194,450
Marketing and sales	123,161	48,814	-	35,162
Depreciation and amortization	490,119	719,060	654,330	887,004
Consulting and professional fees	595,399	462,078	924,011	1,473,793
Provision for doubtful debts	759,553	32,132	-	-
Impairment loss on Marketable Securities	-	10,659,375	-	-
Impairment loss on intangible assets	2,269,589	16,369,092	-	8,946,994
	6,514,651	29,898,732	(879,572)	16,877,766
Operating income (loss) before other income (expense), income tax expense, minority interest and discontinued operations	(5,978,265 )	(29,736,340 )	879,572	(16,432,777 )

Other Income (expense)
Interest income	1,937	6,772	22,734	-
Amortization of discount on


convertible notes	(222,473 )	(74,833)	(2,570,634)	(2,570,634)
Interest expense	(318,000)	(78,000)	(76,911)	36,744
Other income (expense)	87,500	248,958	4,412,046	3,369,141
Impairment loss on convertible notes	(57,816)	(62,989)	-	-
Gain (loss) on marketable securities	(429,009)	-	-	-
	(937,861)	39,908	1,787,235	835,251
Income (loss) from continuing operations before income tax expense and minority interest	(6,916,126)	(29,696,432)	2,666,807	(15,597,526)

Income tax expense	3,362	-	-	89,387
Income (loss) from continuing operations before minority interest	(6,919,488)	(29,696,432)	2,666,807	(15,686,913)

Minority interest	151,009	(89,091)	86,914	35,295
Income (loss) from continuing operations	(6,768,479)	(29,785,523)	2,753,721	(15,651,618)

Loss from discontinued operations
Income (loss) from operations of entities held for sale	(2,514,170)	(731,246)	773,596	1,068,372
Income (loss) from discontinued operations	552,154	(3,323,446)	14,742,871	(16,859,744)
NET INCOME (LOSS)	(8,730,495)	(33,840,215)	18,270,188	(31,442,990)

Other comprehensive income (loss)	(1,809,866)	(23,884)	(17,605)	(4,600,523)
Comprehensive income (loss)	(10,540,361)	(33,864,099)	18,252,583	(36,043,513)

Basic net income (loss) per share from


continuing operation	(0.08)	(0.34)	0.03	(0.16)
Shares used in computing basic loss per share	89,986,872	87,113,203	102,922,000	100,416,024
Diluted net income (loss) per share from continuing operation	(0.08)	(0.34)	0.03	(0.16)
Shares used in computing diluted loss per share	89,986,872	87,113,203	105,807,000	100,157,061
Basic net income (loss) per share from discontinued operations and entities held for sale	(0.02)	(0.05)	0.15	(0.16)
Diluted net income (loss) per share from discontinued operations and entities held for sale	(0.02)	(0.05)	0.15	(0.16)



NEXTMART INC. (f/k/a Sun New Media Inc.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the year ended September 30, 2008
	Common Shares				Additional		Foreign	Unrealized loss
							currency
							currency
	Issued		Reserved & to be issued		paid in		translation	on marketable
	No. of shares	Amounts	No. of shares	Amounts	capital	Deficit	adjustments	securities	Total
		US$		US$	US$	US$	US$	US$	US$

Balance - March 31, 2007	93,193,184	931,931	20,000	200	104,107,979	(44,923,167)	(87,824)	(4,510,778)	55,518,341
Issuance of stocks for warrants exercised	599,986	6,001			(6,001)				-
Issuance of warrants detached to convertible notes									-
Collection of stocks from shareholders	(13,600,000)	(136,000)			(9,367,530)				(9,503,530)
Contribution of agreement of related parties deal					312,966				312,966
Issuance of specific agreement	6,900,000	69,000			(69,000)				-
Net loss for the period						(33,840,215)			(33,840,215)
Translation loss							134,973		134,973
Unrealized loss on marketable securities								4,510,778	4,510,778

Balance - September 30, 2007	87,093,170	870,932	20,000	200	94,978,414	(78,763,382)	47,149	-	17,133,313
Issuance of stocks for warrants exercised	99,996	1,000			(1,000)				-
Stock based compensation	3,491,379	34,914			418,965				453,879


Cancelled shares	(479,843)	(4,799)			4,799				-
Disposal of subsidiaries					(63,222)				(63,222)
Issuance of stocks reserved			33,029	330	(330)				-
Net loss for the period						(8,730,495)			(8,730,495)
Translation loss							(351,653)		(351,653)
Unrealized loss on marketable securities								(2,161,519)	(2,161,519)

Balance - September 30, 2008	90,204,702	902,047	53,029	530	95,337,626	(87,493,877)	(304,504)	(2,161,519)	6,280,303



NEXTMART INC. (f/k/a Sun New Media Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS	Audited	Audited	Unaudited	Audited
	October 1, 2007	April 1, 2007	April 1, 2006	April 1, 2006
	to September 30, 2008	to September 30, 2007	to September 30, 2006	to March 31, 2007
	US$	US$	US$	US$
Cash flows from operating activities
Net income (loss) for the period	(8,730,495)	(33,840,215)	18,270,188	(31,442,990)
Adjustments to reconcile net income (loss) to net cash used in operating activities;			-	-
Depreciation and amortization	490,119	719,060	654,330	887,004
Impairment loss on intangible assets	2,269,589	16,369,092	-	8,946,994
Minority interest	151,009	(89,091)	86,914	35,295
Income tax	(3,362)			(89,387)
Gain on disposal of non-core assets	-	-	-	3,369,141
Impairment loss on discount of warrants	57,816	62,989	-	-
Stock-based compensation	453,879	-	(3,810,550)	3,194,450
Interest Expenses	318,000	78,000	76,911	36,744
Amortization of discount on notes	222,473	74,833	2,570,634	2,570,634
Impairment loss on marketable securities		10,659,375	-	-
Provision for doubtful debts		(58,019)	-	-
Expenses incurred on issuance of common stocks	-	-	149,987	(874,931)

Changes in operating assets and liabilities:
Accounts receivable	470,895	(147,808)	-	(929,234)
Other debtor, deposits and prepayments	3,195,745	(123,484)	(2,346,958)	6,689,275
Inventories	50,050	-
Amounts due from related parties	186,409	(122,820)	230,458	(61,309)
Amounts due from stockholders	115,608	(358,355)	(134,066)	100,244
Accounts payable	254,230	459,338	41,378	(130,573)
Other payables and accruals	350,802	578,580	1,745,645	(5,363,329)
Amounts due to related parties	10,272	115,445	(461,181)	(338,079)
Net cash used in operating activities	(136,961)	(5,623,080)	17,073,690	(13,400,051)

Cash flows from investing activities


Proceeds from sale of plant and equipment	513,132	1,215,745	466,762	-
Purchase of plant and equipment	(18,081)	(526,161)	-	(906,009)
Sale of Marketable Securities	36,868	3,277,754	-	-
Cash (used in)/ acquired in business combination, net	-	-	(1,849,910)	(1,849,910)
Investment in affiliates	-	-	-	(245,369)
Disposal of subsidiary companies, net	-	245,369	23,138	23,138
Net cash used in investing activities	531,919	4,212,707	(1,360,010)	(2,978,150)

Cash flows from financing activities
Issuance of common stock	-	-	9,079,250	9,584,973
Proceeds from convertible note	-	-	(874,931)	1,500,000
Repayment of factoring loans	-	-	(57,337)	(37,703)
Minority interest, net		300,135	-	-
Net cash provided by financing activities	-	300,135	8,146,982	11,047,270
Net effect of exchange rate fluctuation on cash	(44,688)	(119,229)	(100,558)	29,927
Net increase (decrease) in cash and cash equivalents on discontinued operations	63,729	(1,534,908)	(21,874,997)	7,737,988
Net increase (decrease) in cash and cash equivalents on operations hold for sale	(186,439)	731,246	(773,596)	(1,068,372)
Net increase in cash and cash equivalents	227,560	(2,033,129)	1,111,511	1,368,612
Cash and cash equivalents, beginning of the period	206,142	2,239,271	870,659	870,659
Cash and cash equivalents, end of the period	433,702	206,142	1,982,170	2,239,271

Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	-	-	-	-
Cash paid for income taxes	3,362	-	-	89,387

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the fiscal year ended September 30, 2008

NOTE 1 —NATURE OF OPERATIONS AND BASIS OF PRESENTATION

We operate mainly in the ladies' apparel industry where we derive the bulk of our revenue by acting as an outsourced brand management and production center for foreign apparel brands through our Shanghai-based apparel subsidiary, William Brand Administer Co. Ltd ("William Brand"). We also possess a portfolio of media and marketing assets that we are leveraging to expand into the online brand management and e-commerce sectors for ladies' apparel products. We have supporting operations in the handheld electronics sector. The Company is divided into two principal divisions: the Transactional Services Division, which represents the business of William Brand, and the Marketing & Information Services Division.

Our activities are based predominantly in People’s Republic of China (“PRC”). Our principal operating subsidiaries include the following:

· Sun New Media Group Limited;

· William Brand Administer Limited; and

· Beijing Trans Global Logistics.

NOTE 2 —SUMMARY OF THE COMPANY’S SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation and Presentation

The consolidated financial statements include the accounts of the Company, its subsidiaries and variable interest entities, or VIEs for which the Company is the primary beneficiary. All significant inter-company accounts and transactions have been eliminated. Investments in entities in which the Company can exercise significant influence, but which are less than majority owned and not otherwise controlled by the Company, are accounted for under the equity method. The Company has adopted FASB Interpretation No.46R consolidation of Variable Interest Entities, FIN 46R, an Interpretation of Accounting Research Bulletin No.51. FIN 46R requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIEs or is entitled to receive a majority of the VIE’s residual returns. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

We have the following significant domestic VIEs:

· Beijing Trans Global Logistics, a PRC company doing 80% of it’s business with us by contract and engaged in trading. It is 80% owned by Qiong Zhou, 10% owned by Yong Li and 10% owned by Mianchun Wang, Qiong Zhou is a non-executive employees of the Company.

· Naixiu Exhibition (Beijing) Co. Ltd, a PRC company that is controlled by contract with us and owned 50% by Li Yong and 50% by Wang Jinghchun. Li Yong and Wang Jingchun are non-executive employees of the Company.

The capital investment in these VIEs is funded by the Company and transferred to the VIEs via contractual agreements between the Company (or its non-PRC subsidiary) and the PRC employees who own the VIEs. As of September 30, 2008, the total amount of capital investment that was transferred to the VIEs listed above was US$1,126,638. Under various contractual agreements, employee shareholders of the VIEs are required to transfer their ownership in these entities to our subsidiaries in China when permitted by PRC laws and regulations or to our designees at any time for the outstanding amount of injected capital investment, and all voting rights of the VIEs are assigned to us. We have the power to appoint all directors and senior management personnel of the VIEs. Through our wholly-owned subsidiaries in China, we have also entered into exclusive technical agreements and other service agreements with the VIEs, under which these subsidiaries provide technical services.

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.

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.

Business combinations

We are creating this business through the ongoing acquisition of various entities and assets. The Company accounts for its business combinations using the purchase method of accounting in line with FASB141. This method requires that the acquisition cost be allocated to the assets and liabilities the Company acquired based on their fair value.

Pursuant to FAB-141, the Company recognizes intangible assets separate from goodwill if they meet one of two criteria—the contractual-legal criterion or the separability criterion. The Company makes estimates and judgments in determining the fair value of the acquired assets and liabilities, based on independent appraisal reports for material purchases as well as its experience with similar assets and liabilities in similar industries. If different judgments or assumptions were used, the amounts assigned to the individual acquired assets or liabilities could be materially different. When considering whether an acquired assets group constitutes a business, the Company used the criteria defined by EITF 98-3 determining Whether a Non-monetary Transaction Involves Receipt of Productive Assets or of a Business.

Goodwill and intangible assets, net

Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of the Company’s acquisitions of interests in its subsidiaries. Under Statement of Financial Accounting Standards, FAS No.142, Goodwill and Other Intangible Assets, FAS 142, goodwill is no longer amortized, but tested for impairment upon first adoption and annually, thereafter, or more frequently if events or changes in circumstances indicate that it might be impaired. The Company assesses goodwill for impairment periodically in accordance with SFAS 142.

Impairment of Long-lived Assets

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 FASB No. 130, “Reporting Comprehensive Income (Loss). The comprehensive loss for the Company includes currency translation adjustments and unrealized loss on marketable securities.

Inventories

Inventories are stated at the lower of cost (first-in, first out method) or market. Certain inventory goods purchased are subject to spoilage within a short period of time while in possession of the Company. Inventory costs do not exceed net realizable value.

Plant and equipment

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




		Years
Furniture, fixtures and equipment		3 – 10
Motor vehicles		5 – 10
Leasehold buildings and improvements		5 – 40

Revenue recognition

We generate revenue through the provision of marketing & information services, and transactional services. The Company recognizes revenues from transaction and marketing & information services in accordance with Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” when all of the following conditions exist: persuasive evidence of an arrangement exists in the form of an accepted purchase order; delivery has occurred, based on shipping terms, or services have been rendered; the Company’s price

to the buyer is fixed or determinable, as documented on the accepted purchase order; and collectibility is reasonably assured.

The Transactional Services business primarily includes activity from the apparel vertical and electronics components business. We recognize revenue for the transactional business when the goods have been shipped or delivered and purchase order exists. The Marketing and Information Services includes the newspaper and magazine business and marketing consulting services. The Company recognizes revenue for the Marketing and Information Services when the services have been rendered.

Cost of revenues

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

Trade receivables and allowances for Doubtful Accounts

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

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

Foreign currency transactions

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 re-measurement gain or loss incurred is reported in the consolidated statement of operations. In 2008, we used 7.0927 RMB per U.S. USD for the weighted average rate, and we used 6.8183 RMB per USD as the balance sheet date rate (September 30, 2008).

Income taxes

The Company follows the liability method of accounting for income taxes in accordance with SFAS No. 109. 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.

Stock-based compensation

Effective January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), “Share Based Payment,” (“SFASNo.123(R)”) which revises SFAS No. 123 and supersedes APB 25. SFAS No. 123(R) requires that all share-based payments to employees be recognized in the financial statements based on their fair values at the date of grant. The calculated fair value is recognized as expense (net of any capitalization) over the requisite service period, net of estimated forfeitures, using the straight-line method under SFAS No. 123(R). The Company considers many factors when estimating expected forfeitures, including types of awards, employee class and historical experience. The statement was adopted using the modified prospective method of application which requires compensation expenses to be recognized in the financial statements for all unvested stock options beginning in the quarter of adoption. There were no unvested stock options at the beginning of this reporting period therefore no compensation expense was recognized in the period. No adjustments to prior periods have been made as a result of adopting SFAS No. 123(R).

148. During the period from September 18, 2005 to September 30, 2005, no stock-based employee compensation arrangements have been effected and accordingly no disclosure of pro forma information is required. In accordance with SFAS No. 123 the Company applies the fair value method using the Black-Scholes option-pricing model in accounting for options granted to consultants.

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 Expenses

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

Convertible Notes and Notes Issued with Stock Warrants

The Company accounts for convertible notes and notes issued with stock warrants in accordance with APB No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants. The proceeds from the issuance of convertible notes are allocated between the debt and the equity. The Company books a discount on convertible notes for the conversion feature of the notes and warrants and amortizes the discount over the life of the debt.

Segment Information

The Company accounts for segment information in accordance to FASB 131, Disclosures about Segments of an Enterprise and Related Information. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate

resources and in assessing performance. The Company’s operations segments include Transactional Services and Marketing Services.

NOTE 3 — BUSINESS ACQUISITIONS

Pursuant to FAS 141, paragraph 6, exchange transactions in which the consideration given is cash are measured by the amount of cash paid. However, if the consideration given is not in the form of cash (that is, in the form of non-cash assets, liabilities incurred, or equity interests issued), measurement is based on the fair value of the consideration given or the fair value of the asset (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable.

The current businesses of the Company were acquired when we had a very short history of operating and stock performance. At the time of completion of the following acquisitions, the Company’s common stock was traded on the Over-the-Counter Bulletin Board (OTCBB) with a high volatility in both volume and price. Therefore, management decided to use the discounted fair market value of the shares issued to measure our consideration when consideration was not in the form of cash.

NOTE 4 — ACCOUNT RECEIVABLE

As of September 30, 2008, we had the amount of $913,042, net of allowance for doubtful accounts in the amount of $33,723, for account receivable, compared with $1,125,772 in 2007. We wrote off the amount of $295,751 for the year ended September 30, 2008 as long term non-collection.

NOTE 5 — OTHER RECEIVABLES, PREPAYMENTS AND DEPOSITS

Other receivables, prepayments and deposits are summarized as follow:



	September 30,
	2008	2007
	US$	US$

Other receivables	54,882	1,181,147
Advance to vendors	306,436	226,908
Prepaid consideration for acquisitions	-	1,000,000
Prepaid administrative expenses	6,288	148,012



		367,606		2,556,067

We wrote off the amount of $463,802 for the year ended September 30, 2008 as long term non-collection.

NOTE 6 — MARKETABLE SECURITIES



	September 30, 2008		September 30, 2007
	Number of shares	Amount	Number of shares	Amount
CEC Unet Pte	16,821,254	2,562,469	22,633,233	3,703,283
Asia Premium TV Inc	239,201	617,604	104,375	521,875
Unrealized loss		(2,161,519)		-
Net balance		1,018,554		4,225,158

The Company holds 1,009,275 shares of CEC Unet Pte. (AIM: CECU) in escrow which will be transferred to Arum Island Ltd, an unaffiliated third party, when these shares are free from restriction as a consulting fee.

The Company holds 4,000,000 shares of CECU in escrow which will be transferred to Professional Offshore Opportunity Fund Ltd when these shares are free from restriction under a consulting agreement with the Company.

The Company holds 139,201 shares of Asia Premium TV Inc (OTC BB: ATVG) for the benefit of Wuxi Guangxin Movie and Carton Ltd, who is the minority shareholder of Wuxi Sun Network Technology Ltd.

On January 23, 2008, Evenstar Master Fund SPC (“Evanstar”) subscribed convertible bonds of CEC Unet LPC in the amount of US$10,000,000. In connection with this transaction, on April 29, 2008, the Company entered into an agreement with Evenstar, on behalf of CECU, to lend to Evenstar 10,821,254 ordinary shares of CEC Unet PLC (AIM:CECU). Evenstar has the legal and beneficial title to these shares until the redemption date of convertible bonds. (see Note 8)

NOTE 7 — GOODWILL AND INTANGIBLE ASSETS, NET

The following table summarizes goodwill from the Company’s acquisitions:



	September 30, 2008	September 30, 2007


Beijing CEAC	180,763	180,763
Accumulated amortization	(62,137)	(45,191)


Impairment loss	(118,626)	(67,786)
	-	67,786

During the year ended September 30, 2008, we realized impairment loss on goodwill as the amount of $50,840.

The following table summarizes intangible assets:



		September 30, 2008	September 30, 2007


License		24,150,000	24,150,000
Database		2,499,999	2,499,999
Technology		2,366,703	2,366,703
Partnership agreement license		1,056,122	1,056,122
		30,072,824	30,072,824
Less:	Accumulated amortization	(1,040,198)	(718,897)
	Impairment loss	(28,831,832)	(26,613,083)
	Currency translation difference	4,891	(12,055)
		205,685	2,728,789

The above intangible assets have original estimated useful lives as follow and are amortized accordingly:




Non-compete agreements and customer relationship		3 years
Partnership agreements and license		3 years

During the year ended September 30, 2008, we realized impairment loss on intangible assets as the amount of $2,218,749.

NOTE 8 — OTHER LONG-TERM ASSETS

On January 23, 2008, Evenstar Master Fund SPC (“Evanstar”) purchased convertible bonds of CEC Unet LPC in the amount of US$10,000,000. In connection with this transaction, on April 29, 2008, the Company entered into an agreement with Evenstar, on behalf of CECU, to lend to Evenstar 10,821,254 ordinary shares of CEC Unet PLC (AIM:CECU). Evenstar has the legal and beneficial title to these shares until the redemption date of convertible bonds. The value of 10,821,254 ordinary shares of CECU was $1,731,401. The term was five years since we signed the agreement.

NOTE 9 — PLANT AND EQUIPMENT, NET

Plant and equipment is summarized as follows:


	Audited	Audited
	September 30 2008	September 30 2007
	US$	US$
Cost
Motor vehicles	60,438	116,261
Leasehold building and improvements	-	21
Furniture, fixtures and equipment	138,860	376,437
Buildings	-	431,369
Computer Software	293,327	266,042
	492,625	1,190,130
Less: accumulated depreciation	198,756	260,191

	293,869	929,939

NOTE 10 — OTHER PAYABLES AND ACCRUALS

Other payables and accruals are summarized as follows:



	September 30, 2008	September 30, 2007
	US$	US$

Other payable	1,576,083	989,240
Accruals	384,095	479,238
Prepayment from customers	373,869	87,719
Taxes payable	26,943	187,966

Total:	2,360,990	1,744,163

Other payables mainly include $1.5 million for professional fee, other deposit, and other office expenses. Included in accrued operating expenses are business tax and VAT.

NOTE 11 — CONVERTIBLE NOTES, WARRANTS AND STOCK OPTIONS

On March 22, 2007, we executed a subscription agreement with certain accredited investors pursuant to which we agreed to issue a principal amount worth $1,500,000 in senior convertible promissory notes and warrants to purchase shares of our common stock. The 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 are 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 “Interest Shares”). The notes are 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 shall be adjusted to eighty percent (80%)

of the volume weighted average price of our common shares for the five trading days prior to a conversion date.

Commencing on the fifteenth month of the issuance, we must make a payment of one-twenty first (1/21) of the principal amount of each note, either in cash or by conversion of such amount into our common shares. If, on the payment date, the market price for our common shares is equal to or greater than $1.00 per share, we may make this payment in our common shares at the then existing conversion rate. However, if, on the payment date, either (i) the market price for our common shares are less than $1.00 per share or (ii) the Registration Statement covering the common stock underlying the notes and warrants is not effective, then our must make this payment in cash in an amount equal to 135% of the Principal Amount component of the Monthly Amount. Subject to certain terms and conditions set forth therein, the notes are redeemable by us at a rate of 120% to 150% of the outstanding principal amount of the notes plus interest.

The notes are being issued with Class A warrants to purchase up to 1,500,000 shares of our common stock at an exercise price of $1.00 per share and Class B warrants to purchase up to 1,500,000 shares of our common stock at an exercise price of $1.50 per share. Upon exercise of any Class A or Class B warrant, the respective warrant holder will receive a Class C warrant to purchase that number of shares for which such Class A warrant or Class B warrant is exercised at an exercise price of $2.00 per share. Accordingly, if the Class A and Class B warrants are exercised in full, we will issue Class C warrants to purchase 3,000,000 shares of our common stock.

In accordance with the guidelines set forth in APB No. 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants, ”,EITF Issue No. 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios” and EITF Issue No. 00-27, “Application of issue No. 98-5 to Certain Convertible Instruments,” the Company has determined that the above rights were issued with beneficial conversion feature. The value of the rights was calculated at the date of issue using the Black-Scholes pricing model, limited by the face amount of the note, and was booked as a discount to the convertible note. Upon conversion of all or a portion of the note, the proportional share of unamortized discount will be charged an interest expense.

On February 1, 2007, we and Barron Partners LLP (“Barron”) entered into a supplementary agreement (the “Supplementary Agreement”) to modify the terms of their original stock purchase agreement (the “Agreement”) dated December 31, 2005.

As of the date immediately prior to the Supplementary Agreement, Barron possessed the following series of warrants to purchase our stock (the “Warrants”):

- Warrant “A” for 1,500,000 common shares at $2.04 exercise price

- Warrant “B” for 1,500,000 common shares at $2.80 exercise price

- Warrant “C” for 4,000,000 common shares at $3.60 exercise price

- Warrant “D” for 3,445,977 common shares at $4.80 exercise price

- Warrant “E” for 1,100,000 common shares at $2.10 exercise price

Following the Supplementary Agreement, only 3 million of the original 11,545,977 million unexercised warrants remain, and Barron has agreed to limit selling of the shares underlying the warrants to 10% per month for the first 10 months following the date of the agreement.

Specifically, the Company and Barron made the following amendments to the Warrants held by Barron:

1. Exercise Price. The exercise price per share for 1,100,000 “E” Warrants and 900,000 “D” Warrants was reduced to $0.80. (collectively, “$0.80” Warrants).

2. Exercise Price. The exercise price per share for 1,000,000 “D” Warrants was reduced to $0.00001.(“$0.00001” Warrants).

3. Exercise of Warrants.

a) Barron can exercise up to 10% of the “$0.80” Warrants in each 30 day period for the first 10 months following the date of this amendment, provided that the market price of the common stock is below $1.25 for the 30 days period proceeding the exercise date. After ten months from the date of this agreement OR if the market stock price is above $1.25 Barron can exercise the “$0.80” Warrants without limitation.

b) Barron can exercise up to 10% of the “$0.00001” Warrants in each 30 day period for the first 10 months following the date of this amendment. These amounts shall be cumulative. For example if Barron does not exercise any “$0.00001” Warrants in the first 30 day period, Barron may exercise up to 200,000 “$0.00001” Warrants in the second thirty day period.

4. Call provisions. Call provisions have been cancelled on all warrants.

5. Termination. All remaining warrants except for the warrants addressed above in Sections 1 and 2 have been terminated.

During the fiscal year ended September 30, 2008, warrants for 99,996 shares were exercised under a cashless provision.

Stock-based compensation

The Company’s stock option program is a long-term retention program that is intended to attract, retain and incentivize talented employees, and to align stockholder and employee interests. The Company currently grants options pursuant to the 1) 2001 Stock Option Plan, 2) 2004 Stock Option Plan, and 3) 2006 Stock Option Plan.

2001 Stock Option Plan

Effective October 10, 2001, the Company awarded a total of 2,150,000 non-qualified options at a price of $1.14 pre stock split ($0.57 post stock split) under the 2001 Plan to certain employees, officers, directors and consultants of the Company and selected subsidiaries. Of these options, 940,000 were deemed to be a modification of options granted under the original Plan and as such are subject to variable accounting in accordance with the provisions of the Financial Accounting Standards Board Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation — An Interpretation of APB Opinion No. 25” (“FIN 44”). As of March 31, 2007, there were no stock options that were subject to variable accounting.

2004 Stock Option Plan

Effective January 22, 2004, the Company adopted the 2004 Stock Option Plan (the “2004 Plan”) allowing for the awarding of options to acquire shares of common stock.

2006 Stock Option Plan

In April 2006, the 2006 Stock Option Plan (the 2006 Plan) was approved by the Company’s Board of Directors. The purpose of the 2006 Plan is to reward employees, officers and directors and consultants and advisors to the Company who are expected to contribute to the growth and success of the Company. The 2006 Plan provides for the award of options to purchase shares of the Company’s common stock. Stock options granted under the 2006 Plan may be either incentive stock options or nonqualified stock options.

During the three months ended September 30, 2006, the Company granted 283,230 options to directors and 1,200,000 to the Company’s Chief Financial Officer. No stock awards were granted during the three months ended September 30, 2006.

During the three months ended December 31, 2006, the Company repurchased 226,584 options from directors at zero consideration, and a corresponding gain of $537,000 was recognized by the Company to offset the original expense. No stock awards were granted during the three months ended December 31, 2006.

During the three months ended March 31, 2007, the Company cancelled 1,200,000 options from the Company’s former Chief Financial Officer, and a corresponding gain of $768,000 was recognized by the Company to offset the original expense.

Stock Compensation

Effective January 1, 2006, the Company adopted SFAS 123R. See Note 2 for a description of the Company’s adoption of SFAS 123R. The fair value of stock-based compensation awards was determined using the Black-Scholes option pricing model, which is consistent with the valuation techniques previously utilized for options in footnote disclosures required under SFAS 123, as amended by FASB Statement No.148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” The determination of the fair value of stock-based compensation awards on the date of the grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including the expected volatility of the Company’s stock price over the term of the awards, actual and projected employee stock option exercise behaviors, our risk-free interest rate and expected dividends.

On November 20, 2007, we issued 3,491,379 to Mr. Ren Huiliang who is CEO of NextMart Inc. and William Brand Ltd pursuant to a supplementary agreement (the “Supplementary Agreement”) which we entered into with Mr. Ren on September 28, 2007. The Supplementary Agreement was a revision to the original terms and conditions of the Sales and Purchase Agreement (the “Sales and Purchase Agreement”) by which we purchased 100% of William Brand Administer Co., Ltd from Mr. Ren. Specifically, the Supplementary Agreement modifies the payment schedule by which we will compensate Mr. Ren for William Brand’s attainment of certain revenue and profit guarantees, and his own contribution to the Company.

The assumptions used to value stock-based compensation awards for the six months ended September 30, 2008 are as follows:




	For the year ended September 30, 2008
	US$’000
Expected term (in years)	3.5-3.9
Expected volatility	69.7%-70%
Risk-free interest rate	4.85%-4.77%


Expected dividend yield	0

The expected term represents the average of the expiration period and the vesting term. Expected volatility is based on the weekly closing prices of the Company’s stock after the reverse takeover on September 18, 2005. The risk-free rate is based on US Treasury zero-coupon issues with remaining terms similar to the expected term on the stock-based awards. The Company does not anticipate paying any cash dividends in the foreseeable future. Forfeitures are estimated at the time of the grant and revised in subsequent periods if actual forfeitures differ from estimates. The Company uses historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest.

Stock based compensation recognized on the Company’s Condensed Consolidated Statement of Operations for the Fiscal year ended September 30, 2008 is $453,879.

The following table sets forth the summary of option activity under the Company’s stock option programs as of for the Fiscal year ended September 30, 2008:



	Options Outstanding	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life
		US$	Years
Balance, September 18, 2005	977,000	0.382
Revere stock split adjustment	(488,500)	0.382
Balance, September 30, 2005	488,500)	0.765
Exercise of stock options	(43,000)
March 31, 2006	445,500	0.741
Exercise	(339,000)	0.74
Granted	1,483,230	3.20
Cancelled	(1,426,584)	3.18
March 31, 2007	163,146	1.89	6.53
September 30, 2008	163,146	1.89	5.03
Vested options as of September 30, 2008	163,146	1.89	5.03

NOTE 12— INCOME TAXES

The Company is incorporated in the state of Delaware, United States and has operations in the PRC. The Company has incurred net accumulated operating losses and current operating losses for income tax purposes. The Company believes that it is more likely

than not that these net accumulated operating losses will not be utilized in the future. Therefore, the Company has provided full valuation allowance for the deferred tax assets arising from the losses at these locations as of September 30, 2008.

The components of income before income taxes are as follows:




		Audited
		September 30, 2008
		US$
Loss in China operations		(8,328,754)

Loss before taxes		(8,530,183)
Income taxes subject to China operations		3,362
Effective tax rate for China operations		25%

Pursuant to the PRC Income Tax Laws, the Company’s subsidiaries and VIEs are generally subject to Enterprise Income Taxes, EIT, at a statutory rate of 25%. Some of these subsidiaries and VIEs qualify as new technology enterprises which, under the PRC income tax laws, are subject to a preferential tax rate of 15%. In addition, some of the Company’s subsidiaries are Foreign Investment Enterprises. Under PRC Income Tax Laws, they are entitled to either a three-year tax exemption followed by three years with a 50% reduction in the tax rate, commencing the first operating year, or a two-year tax exemption followed by three years with a 50% reduction in the tax rate, commencing the first profitable year. The VIEs are wholly owned by the Company’s employees and controlled by the Company through various contractual agreements. To the extent that these VIEs have undistributed after-tax net income, the Company must pay taxes on behalf of its employees when dividends are distributed from these local entities in the future. The dividend tax rate is 20%. The income tax expenses for the year ended September 30, 2008 as the amount of $3,362 was from the operating in our VIEs Beijing Trans Global Logistics and Naixiu Exhibition (Beijing) Co. Ltd.

NOTE 13 — COMMITMENTS AND CONTINGENCIES

Commitments

The Company leases office premises for its operations in the PRC (Beijing). Rental expenses under operating lease for the fiscal year ended September 30, 2008 was US$44,542. The office lease agreement will be due until July 31, 2009.



		As of September 30, 2008



For the year ended September 30, 2009	$	30,593
For the year ended September 30, 2010		30,593

	$	61,186

NOTE 14 —STOCKHOLDERS’ EQUITY

On May 2, 2007, we completed our reincorporation in Delaware. In conjunction with the reincorporation, we modified our Articles of Incorporation in regard to the total number of authorized shares. Pursuant to our revised Articles of Incorporation, the total number of shares of all classes which we shall have authority to issue is One Billion (1,000,000,000) consisting of Seven Hundred Fifty Million (750,000,000) shares of Common Stock, par value $0.01 per share and Two Hundred Fifty Million (250,000,000) shares of Preferred Stock, par value $0.01 per share.

On October 23, 2007, we issued a total of 99,996 shares to Barron Partners L.P. (“Barrons”) to satisfy a cashless exercise of 100,000 Class D Warrants held by Barron.

On November 20, 2007, the Company issued 3,491,379 shares to Mr. Ren Huiliang, our CEO, as stock based compensation.

On March 11, 2008, the Company cancelled 479,843 shares.

NOTE 15 — RELATED PARTIES TRANSACTIONS

We have the following transactions with related parties during the year ended September 30, 2008.

On April 29, 2008, the Company entered into an agreement with Evenstar Master Fund SPC, on behalf of CECU, to lend to Evenstar 10,821,254 ordinary shares CEC Unet PLC (AIM:CECU) (“the Shares”) currently held by the Company. The Shares represent 32% of the capital stock held by the Company in CEC Unet PLC (or “CECU”). Dr. Bruno Wu, the Chairman of the Company is also one of the directors of the Board in CECU.

NOTE 16 — OPERATING RISKS

Credit risk

The accounts receivable and cash and bank balances represent the Company’s maximum exposure to credit risk. No other financial assets carry a significant exposure to credit risk. The Company has written off $3.1 million of bad debt primarily driven by the

discontinuation of the beverage operations and a prudent provision for marketing service revenue. Except for the above mentioned, the Company has no significant concentration of credit risk. Cash is placed with reputable financial institutions.

NOTE 17 — OPERATIONS HELD FOR SALE

In 2009 we plan to completely divest the William Brand Co. business. Our William Brand Ltd. business operations and cash flows for the six months ended September 30, 2007, the six months ended September 30, 2006, and the Year ended March 31, 2007 have been reflected as held for sale in the accompanying consolidated financials.

The following Assets and Liabilities have been segregated and included in assets and liabilities of hold for sale, as appropriate in the consolidated balance sheet as of September 30, 2008 and 2007:



	September 30,2008	September 30,2007
Cash and bank	47,045	233,484
Accounts receivable-net	1,631,618	2,171,961
Due from shareholders	680,763	-
Prepayments	-	2,169,731
Property plant and equipment - net	1,307,013	1,324,061
Intangible assets-net and goodwill	423,603	847,207
Assets of held for sale operation	4,090,043	6,746,443

Account payables	9,058	-
Other payables	3,296	4,245
Accrued expenses	3,713	154,051
Liabilities of held for sale operations	16,067	158,296

The following income and expense items have been segregated and included in income from discontinued operations, as appropriate, in the consolidated income statement for the year ended September 30, 2008, six months ended September 30, 2007 and 2006, and for the year ended March 31, 2007:



	Year ended September 30, 2008	Six months ended September 30, 2007	Six months ended September 30, 2006	Year ended March 31, 2007
Net sales	3,384,374	2,952,273	2,985,339	6,285,591
Cost of sales	3,175,443	2,335,933	1,968,586	4,466,922
Gross profit	208,931	616,340	1,016,753	1,818,669
General and administrative	1,471	399	1,098	2,618
Bad debt provision	481,059	-	-	-
Depreciation and amortization	440,651	501,166	242,059	748,908


Impairment -- intangible	1,800,000	847,207		0
Income(Loss) from operation	(2,514,250)	(732,432)	773,596	1,067,143
			-
Interest income	80	1,186	-	1,229
Net income (loss) from operation	(2,514,170)	(731,246)	773,596	1,068,372

NOTE 18 — DISCONTINUED OPERATIONS

On June 30, 2008, we entered into an agreement with China Internet Broadcasting Limited, a company incorporated under the laws of the British Virgin Islands, to transfer 100% of our interest in eight domestic VIEs and six subsidiaries. The consideration of this deal was $1 in cash.

The following assets and liabilities have been segregated and included in assets and liabilities of discontinued operations, as appropriate, in the consolidated balance sheet as of September 30, 2007:



	September 30,2007
Cash and bank	43,137
Accounts receivable-net	166,667
Other receivable, prepayments, and deposit	119,246
Property plant and equipment - net	459,589
Intangible assets-net and goodwill	-
Assets of discontinued operations	788,639

Account payables	1,113
Other payables	230,063
Accrued expenses	95,932
Advance from customer	73,561
Minority interest	531,670
Liabilities of discontinued operations	932,379

The following income and expense items have been segregated and included in income (loss) from discontinued operations, as appropriate, in the consolidated income statement for the year ended September 30, 2008, six months ended September 30, 2007 and 2006, and for the year ended March 31, 2007:



	Year ended September 30, 2008	Six months ended September 30, 2007	Six months ended September 30, 2006	Year ended March 31, 2007
Net sales	136,201	42,860	12,001,321	13,836,562
Cost of sales	81,037	7,131	643,029	1,230,248


Gross profit	55,164	35,729	11,358,292	12,606,314
General and administrative	138,973	269,369	2,111,927	4,076,826
Marketing and sales	1,384	45,587	110,174	219,579
Bad debt provision	-	25,888	-	3,187,138
Depreciation and amortization	80,978	57,675	417,749	1,080,471
Impairment on intangible assets	-	1,681,831	-	224,676
Income(Loss) from operations	(166,171)	(2,044,621)	8,718,442	3,817,624
			-
Interest income (expenses)	224	326	(7,256)	(14,058)
Other income (expenses)	718,101	154,182	6,747,651	(20,130,218)
Loss from marketable securities	-	(1,433,333)	-	-
Income tax	-	-	182,869	-
Minority interest	-	-	(533,097)	(533,092)

Net income (loss) from discontinued operations	552,154	(3,323,446)	14,742,871	(16,859,744)

NOTE 19 — EARNINGS PER SHARE

The following data show the amounts used in computing income per share and the effect on income and the weighted average number of shares of dilutive potential common stock for the six months ended September 30, 2007 and 2006, the year ended March 31, 2007 and September 30, 2008.



	For the Year Ended				For the Six Months Ended
	September 30, 2008		March 31, 2007		September 30, 2007		September 30, 2006
Income (loss) from continuing operation available to common shareholders (Numerator)	$	(6,768,479)	$	(15,651,618)	$	(29,785,523)	$	2,753,721
Income (loss) from discontinued operation and entities held for sale available to common shareholders (Numerator)		(1,962,016)		(15,791,372)		(4,054,692)		15,516,467

Weighted average number of		89,986,872		100,416,024		87,113,203		102,922,000
common shares outstanding used in
earnings per share during the
period (Denominator)

Weighted average


number of common shares outstanding used in diluted earnings per share during the period (Denominator)			89,986,872				100,157,061				87,113,203				105,807,000

NOTE 20 — SUBSEQUENT EVENTS

None.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

During the two fiscal years ended September 30, 2008, we have not filed any Current Report on Form 8-K reporting any change in accountants in which there was a reported disagreement or event on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

Item 8A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Internal Controls Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting

principles and includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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 or procedures may deteriorate.

In making its assessment, our management, including the Chief Executive Officer and Chief Financial Officer, used the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. We have not identified any material weaknesses in our internal controls over financial reporting as of the end of the fiscal year ended September 30, 2008.

There were no changes in our internal controls over financial reporting during the fourth quarter of the fiscal year ended September 30, 2008 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

This annual report on Form 10-KSB for the fiscal year ended September 30, 2008 does not include an auditor attestation report on our internal controls over financial reporting inasmuch as no attestation report was required under the rules of the Securities and Exchange Commission applicable to us as in effect at that time..

Item 8A(T). Controls and Procedures

Not Applicable.

Item 8B. Other Information

None.

PART III

Item 9. Directors and Executive Officers of the Registrant

Directors and Executive Officers of the Registrant

The following table sets forth as of December 31, 2008 the names of all our directors and executive officers, their positions and the date the position was first held. Our By-Laws provide for the categorization of Directors as Class I, Class II and Class III Directors and serve staggered terms in accordance with the schedule below, or until their successors are elected or appointed and qualified, or their prior resignation or termination.

· Class I Directors: we have no Class I Directors.

· Class II Directors: Ren Huiliang and Chen Zhaobin, whose term ends at the annual meeting of stockholders in 2008

· Class III Directors: Bruno Zheng Wu, and Mr. Tao Kan, whose term ends at the annual meeting of stockholders in 2009



Name	Age	Position	Date Position First Held
Bruno Zheng Wu	41	Chairman and Director	Sept. 12, 2005
Ren Huiliang	52	Vice Chairman, President, Chief Executive Officer and Acting Chief Financial Officer, and Director	February 26, 2007
Chen Zhaobin	52	Director	January 22, 2007
Yu Huiyang	27	Director	October 31, 2008
Tao Kan	50	Director	January 3, 2008

Dr. Bruno Wu, Chairman and Director. Dr. Bruno Wu is the Co-founder and Executive Chairman of Sun Media Investment Holdings (“SMIH”), one of the leading private media groups in China and one of our significant shareholders. Prior to SMIH, Dr. Wu was the Chief Operating Officer from June 1998 to February 1999 of ATV, one of the two free-to-air networks in Hong Kong. From 2001 to 2002, Dr. Wu was also the Co-chairman of SINA Corporation, a Chinese internet media company. Dr. Wu received his Diploma of Studies in French Civilization from the University of Savoie, France in 1987, and graduated with a Bachelor of Science in Business Administration-Finance from Culver-Stockton College in Missouri in 1990. He later received his Master of Arts in International Affairs from Washington University, Missouri in 1993, and in 2001, he received his Ph.D. from the International Politics Department of College of Law, Fudan University, Shanghai, China.

Ren Huiliang, Vice-Chairman, President, and Chief Executive Officer, Acting Chief Financial Officer, and Director. Mr. ‘William’ Ren Huiliang is the founder, CEO and head designer of William Brand, a Shanghai-based woman’s apparel production and

brand management company. Over the past 10 years, Mr. Ren has built William Brand into a profitable enterprise that primarily helps US brands outsource their apparel design and production processes to China. Mr. Ren acts as the Chief Executive Officer of NextMart and our William Brand subsidiary. In such capacity, he oversees all apparel design, production and export operations and manages a staff of approximately 20 employees.

Mr. Chen Zhaobin, Director. Mr. Chen is the Chairman and Chief Executive Officer of CEC Unet PLC. (AIM: CECU), a consumer and mobile media company and affiliate of SMIH. Prior to joining Sun 3C, Mr. Chen served as Vice Chairman and President of China Mobile (HK) Ltd, the publicly listed vehicle of China Mobile, the world’s largest mobile operator. Mr. Chen served as China Mobile's (HK) Vice Chairman and President from 1996-1999. From 2001 to 2005, Mr. Chen served as Executive Director and President of APT Satellite Holding Limited (NYSE:ATS).

Mr. Tao Kan, Director. Mr. Tao Kan (''Kan Tao'' according to English word order), a seasoned investor with extensive experience in corporate management, serve as a director on January 3, 2008. Mr. Tao has nearly 30 years of corporate experience in China's business sectors. Since 2004, he has served as the Managing Director of Shanghai North Huaqing Industrial Construction Development Ltd., a leading real estate development company. Prior to that, he served as Chairman and President of Huaxin Investment Group Ltd (2001-2004), as Chairman and Managing Director of Shanghai Residential Property Co. (1999- 2001), and as Vice President of Shanghai Zhuzong Group Corp. (1980-1999).

Mr. Yu Huiyang, Director. Mr. Yu Huiyang has been self-employed as a consultant in brand marketing in China since 2005. From 2003 to 2005, Mr. Yu served as sales manager for Germany Vaillant Group.

Family Relationships

Our directors and executive officers are not related by blood, marriage or adoption.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities and Exchange Act of 1934 requires our officers and directors and persons who beneficially own more than 10% of the Company’s common stock (collectively, “Reporting Persons”) to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Reporting Persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

We believe that all Reporting Persons complied with all applicable reporting requirements, except for certain late and delinquent Form 3/4 filings and 13D filings for Mr. Bruno Wu, Ms. Lan Yang, Sun Media Investment Holdings and Panpac Tech Strategic Ltd. We plan to put in place an enhanced compliance program to notify and assist all officers, directors, and major shareholders with their filings.

Code of Ethics

We have adopted a code of ethics that applies to all of our executive officers and employees, including our Chief Executive Officer and our Chief Financial Officer. A copy of our code of ethics was filed as an exhibit to our Form 10-KSB for the transition period from October 1, 2005 to March 31, 2006 filed with the SEC on June 30, 2006. It also is available on our website at http://corporate.nextmart.net. We also undertake to provide any person with a copy of our code of ethics

Nominees to the Board of Directors.

There have been no material changes to the procedures by which security holders may recommend nominees to the small business issuer's board of directors

Corporate Governance

As of September 30, 2008, we do not have a nominating, compensation nor audit committee or committees performing similar functions nor a written nominating, compensation of audit committee charter due to the small size of the Board of Directors. As a result, the entire Board of Directors reviewed executive compensation and audit decisions. The Board of Directors have determined that it does not have an audit committee expert on its Board of Directors and given our financial condition we do not anticipate seeking a financial expert in the near future.. Additionally, we do not currently have any specific or minimum criteria for the election of nominees to our Board of Directors nor do we have any process or procedure for evaluating such nominees. There were no material changes to the procedures by which security holders may recommend nominees to the small business issuer's board of directors.

Item 10. Executive Compensation

Summary of Compensation of Executive Officers

The following table sets forth certain summary information with respect to the compensation paid to our chief executive officer, former chief financial officers, and former chief accounting officer for the last two fiscal years ended September 30, 2008 and September 30 2007, respectively. Other than as listed below, the Company had no executive officers serving in such capacity at September 30, 2008 whose total compensation exceeded $100,000. The board of directors agreed to cancel compensation package paid for directors on April 1, 2007.

SUMMARY COMPENSATION


Name and principal position	Year	Salary	Bonus	Stock awards	Option awards	Non-equity incentive plan compensation	Nonqualified deferred compensation earnings	All other compensation	Total
		($)	($)	($)	($)	($)	($)	($)	($)

(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)
Dr. Bruno Wu-Chairman and Former CEO (1)	2008	-0-	-0-	-0-	-0-	-0-	-0-	-0-	0
	2007	-0-	-0-	-0-	-0-	-0-	-0-	-0-	-0-
Ren Huiliang President, Chief Executive Officer, and Acting Chief Financial Officer (2)	2008			453,879
	2007
Jeffery Li- Former CFO (3)	2007	16,000							16,000

(1) On October 1, 2006, we entered into a one-year employment contract with Dr. Bruno Wu to serve as our Chief Executive Officer. Pursuant to the agreement, Dr. Wu received a monthly salary of $27,277 until he resigned in this capacity in February 2007. In February 2007, the company entered into an agreement Dr. Wu to serve as our Chairman. Pursuant to this agreement, Dr. Wu does not receive compensation for his services to the Company.

(2) Mr. Ren Huiliang has served as our Vice Chairman, Chief Executive Officer and Acting Chief Financial Officer since February 26, 2007 to the date of this report. On November 20, 2007, the Company issued 3,491,379 shares to Mr. Ren Huiliang, our CEO, as stock based compensation. The shares were value at $0.04 per share.

(3) On April 1, 2007, we entered into a one-year employment agreement with Jeffery Zhen Li, our former Chief Financial Officer. Pursuant to the agreement, Mr. Li received a base salary of $48,000 per annum and employee stock options to purchase 200,000 of our shares at $0.01 per share during a term of 10 years. Mr. Li received actual compensation of $16,000 in 2007 on a pro-rata basis. These options have not been exercised. Mr. Li resigned on July 23, 2007.

Outstanding Equity Awards at Fiscal year End September 30, 2008

As of September 30, 2008, we had no outstanding option awards or equity awards for our executive officers.

Compensation of Directors

Except as stated herein, no compensation was paid to any of our directors for their services during the fiscal period ended September 30, 2008. Effective January 1, 2007, we adopted a compensation program for the independent members of our Board of Directors. According to the compensation package, our independent Board members are entitled to annual compensation of $24,000, paid in monthly installments until June 30, 2007. The Company is in the process of making these payments.

The following table sets forth director compensation for the 12 month period ended September 30, 2008 in accordance with the Board compensation plans listed above. The Company did not pay any compensation to the directors other than that which is listed in the table below.



Name of Director	Fees earned or paid in cash ($) annually	All Other Compensation($)	Total ($)
Bruno Zheng Wu	-0-	-0-	-0-
Yu Huiyang	-0-	-0-	-0-
Chen Zhaobin	-0-	-0-	-0-
Ren Huiliang	-0-	453,879	453,879
Tao Kan	-0-	-0-	-0-
	-0-	-0-	-0-

Item 11. Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of September 30, 2008, certain information with respect to the beneficial ownership of our common stock by each shareholder known by us to be the beneficial owner of more than five percent (5%) of our common stock, and by each of our current directors and executive officers.

Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.

Unless otherwise indicated, the address for each Beneficial Owner shall be NextMart Inc., Oriental Plaza Bldg. W3, Twelfth Floor, 1 East Chang’an Avenue, Dongcheng District Beijing, 100738



Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership(1)	Percentage of Class(1)
Bruno Wu (2)	11,921,526	13.21	%
Yang Lan (3)	11,921,526	13.21	%
Ren Huiliang(4)	3,491,379	3.87	%
Telperion Ltd. PO Box 882 GT Georgetown, Grand Cayman Cayman Islands BWI (5)	7,400,000	8.20	%
Panpac Tech Strategic Limited (“PTS”) 50 Raffles Place #29-00 Singapore Land Tower Singapore 048623 (6)(7)	8,624,606	9.56	%
Sun Media Investment Holdings Limited (“SMIH”) P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands (7)(8)	11,741,526	13.00	%
Directors and Officers as a Group (9)	15,412,905	17.08	%

(1)

Based on 90,257,763 shares outstanding of common stock issued and outstanding as of December 31, 2008. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.

(2)

Represents 11,921,526 shares held indirectly through Dr. Wu’s spouse, Ms. Yang Lan. Ms. Yang owns 11,921,526 indirectly through her controlling stock ownership of Sun Media Investment Holdings (“SMIH”), and 180,000 shares directly in her own name. Dr. Wu is the Chairman and a Director of SMIH, but has no ownership of SMIH. Dr. Wu disclaims ownership of all such shares.

(3)

Ms. Yang is the spouse of Dr. Bruno Wu, our Chairman. Ms. Yang owns 11,921,526 indirectly through her controlling ownership of Sun Media Investment Holdings (“SMIH”) and 180,000 shares directly in her own name.

(4)

Mr. Ren Huiliang is an officer and director of our company.

(5)

The principal beneficial owner of Telperion Ltd is Cayman International Corporate & Marine Services Ltd whose address is PO Box 882 GT, Georgetown, Grand Cayman, Cayman Islands BWI.

(6)

The sole shareholder of Panpac is The Lexicon Group, Ltd ("TLG") (formerly “Sun Business Network Ltd.”), whose address is 371 Beach Road #03-18 Keypoint Singapore 199597. TLG is a public company traded on the Singapore Stock Exchange (SIN:523).

(7)

Pursuant to a Pooling Agreement (“the Agreement”) between TLG, Sun Media Investment (“SMIH”), and us dated March 31, 2007, both SMIH and TLG agreed to place 6.9 million shares of their respective holdings in the Company into escrow until at least June 30, 2008, As a result of the Agreement, all 13.8 million shares collectively held by SMIH and TLG will not be transferable by either party unless there is first an amendment to the Agreement.

(8)

Ms. Yang, the spouse of Dr. Bruno Wu, is a controlling person of this shareholder.

(9)

Represents 11,741,526 shares held indirectly by Dr. Bruno Wu, and 3,491,379 shares held by Ren Huiliang.

Item 12. Transactions with related persons, promoters and certain control persons

Other than disclosed below or elsewhere herein, since the last fiscal year, we were not involved in any transaction in which a “related person” as defined in Item 404 of Regulation SB where the amount involved exceeded $120,000. In addition, the following also describes transactions required under Item 404 of Regulation SB.

As disclosed below, we have entered into several agreements with Sun Media Investment Holdings Limited (“SMIH’’), a significant shareholder of us, and other affiliated entities. Dr. Bruno Wu, our Chairman, also is the Chairman of SMIH, and Mr. Wu's wife, is the majority shareholder of SMIH. As a result of Dr. Wu's and his wife's respective roles in both companies and the ownership interest of SMIH in us, these agreements cannot be considered arm's length transactions. See section entitled Cautionary Statements in Item 1. Description of Business for certain risks related to these various transactions.

We believe that in each such instance, the transactions were commercially reasonable and no less favorable to us than we could have obtained from an unaffiliated third party on an arm’s length basis.

In October 2005, we issued 50 million shares of our common stock to SMIH in consideration for the outstanding shares of Sun New Media Group Limited ("SNMG") (the “Reverse Acquisition Transaction’’). Mr. Bruno Wu and John Zongyang Li were directors and officers of SMIH and became our directors and officers at the close of the transaction pursuant to the terms of that agreement. In conjunction with the Reverse Acquisition Transaction, Capital Alliance Group, Inc. (“CAG”) sold to SMIH 500,000 shares of our common stock (pre stock split) for an aggregate purchase price of $450,000. In addition, CAG entered into a management agreement with us on close of the Reverse

Acquisition Transaction and we issued 250,000 shares of our common stock to CAG as compensation for its performance under this management agreement.

SMIH previously owned approximately 2.0% of The Lexicon Group Ltd (“TLG’’) (formerly “Sun Business Network Ltd.”). Our former director and CEO, Mr. Ricky Ang, at one point owned 4.1% of TLG and served concurrently as the Executive Vice-Chairman & Managing Director of TLG. On November 21, 2005, we entered into two agreements with TLG. Pursuant to the first agreement, we issued 1,156,303 shares of our common stock in exchange for a group of property holdings in Beijing and 53,000,000 common shares of Asia Premium Television Group, Inc (OTCBB:ATVG). Under the second agreement, we issued 13,800,000 shares of our common stock, 50% issued upon closing and the remaining 50% within 30 days of receipt of the audited accounts of the on-line publishing business purchased from TLG, if such audited statement reflect $2,415,000 in profit-after-tax for the period ended December 31, 2006. SNMD also entered into a Shares Swap Agreement with TLG. Under the terms of the Shares Swap Agreement, TLG issued 150 million TLG shares in exchange for 5,042,017 shares of our common stock. All agreements with TLG were completed on April 20, 2006. TLG is currently our largest shareholder with 16,188,384 shares, held through its wholly-owned subsidiary Panpac Tech Strategic Limited.

On December 6, 2005, we entered into an agreement with SMIH which provided for the issuance of 2,008,929 shares of our common stock in exchange for 75,000,000 ordinary shares of TLG or approximately 10.15% of the then existing issued share capital of TLG. We terminated this agreement with SMIH on March 31, 2006 and no shares were exchanged between the parties.

On February 15, 2006, we acquired Sun New Media Holdings Ltd. (“SMH’’) from SMIH. We paid US$1.00 to SMIH in exchange for 100% of the outstanding shares of SMH. SMH has a 51% stake in Compass Multi-media Ltd, a 85% stake in Sun 365 Multi-Media Holdings Limited and a 30% stake in Global Woman Multimedia Co Limited.

On April 20, 2006, we entered into an agreement with SMIH for the purchase of various assets, including real estate, automobiles, office equipment and program rights as well as 48,629,331 shares in Asia Premium Television Group (OTCBB:ATVG) for an aggregate consideration of US $3,442,587 which is to be satisfied by the issuance of 860,647 shares of our common stock.

On June 30, 2006, we entered into a Sale and Purchase Agreement with Sun 3C Media Plc (“Sun 3C”)(formerly Sun TV Shop, PLC., now CEC Unet PLC.), a related party of Sun Media Investment Holdings (“SMIH”) and a company listed on the Alternative Investment Market of the United Kingdom, to sell certain non-core assets in exchange for 33,642,508 shares in Sun 3C. This transaction was subsequently completed on July 6, 2006. The entirety of our 33,642,508 shares in Sun 3C were held in escrow from July

2006 to October 2007, when 50% (16,821,254) of the 33,642,508 were released. The other 50% (16,821,254) of the 33,642,508 are still in escrow but will be released at the end of January 2009. The release of the shares was and is pursuant to an escrow agreement by and among various parties including Sun 3C Media and us. According to the escrow agreement, our shares can be released subject to the orderly market arrangements in place, which state that any decision to sell these ordinary shares within 12 months of their release must be approved by Blue Oar Securities Plc, our agent.

On July 21, 2006, we completed our acquisition of Credit Network 114 Ltd., a company incorporated in the British Virgin Islands, pursuant to a Sale and Purchase Agreement between the Company and SMIH dated June 14, 2006 (the “Credit 114 Purchase Agreement”). We paid SMIH an aggregate cash consideration of $2.5 million in four equal payments of $625,000. The first installment was made within 10 days of the completion of the agreement, and the remaining payments were made 30, 60 and 90 days after the completion of the agreement, respectively. On June 14, 2006, we signed a Supplementary Agreement with SMIH to acquire search engine technology and additional on-line business media content. This agreement carried no additional consideration from the Credit 114 Purchase Agreement.

On September 3, 2006, pursuant to the Sale and Purchase agreement (the “SMIH Purchase Agreement”) dated April 20, 2006 between us and SMIH, we acquired a real estate property, automobiles, program rights and 46,629,331 shares in Asia Premium Television Group, Inc. (“Asia Premium”)(OTCBB:ATVG). The consideration paid by us for the acquisition was satisfied through the issuance of 850,647 shares of our common stock.

At the time of entering into the agreement on April 20, 2006, our common stock was traded on OTCBB with limited liquidity and short term trading history, while Asia Premium Television Group. Inc. has been traded on the OTCBB, for a comparably longer time, therefore management decided to use the discounted fair market value of the shares issued to measure our consideration (the Company stock) paid.

On September 30, 2006, pursuant to a Sale and Purchase agreement (the “Purchase Agreement”) dated June 8, 2006, by and between China Focus Channel Development Co. Ltd (“Focus”), a subsidiary of Sun New Media, Inc. (the “Company”), and Mr. Ren Huiliang (the “Seller”), we, through Focus, acquired 100% of the issued and outstanding shares of William Brand Administer Limited and its subsidiary William Textiles Limited (collectively, “William Brand.”) The consideration for the acquisition is 4,655,172 shares of our common stock. We agreed to issue the shares to the Seller in four installments: the first installment of 1,163,793 shares will be issued within thirty days of the closing of the transaction; the remaining shares will be issued in three equal installments at the end of each of the next three years, subject to William Brand’s attainment of revenue and profit guarantees in each year. William Brand must achieve a minimum of US $15 million of revenue in year one, US $17.5 million in year two, and US $20 million in year three.

William Brand must also generate minimum after-tax profits of US $3 million, US $3.5 million, and US $4 million in years one, two and three, respectively.

In November 2006, we impaired the intangible assets and goodwill in China Focus Channel Development Co. Ltd. which was acquired pursuant to a Sale and Purchase agreement (the “Focus Purchase Agreement”) dated November 22, 2005 with Yang Qi, Mao Quan Yi and Wu Bing Wei (collectively, the “Sellers”). We recorded an impairment loss of $32.5 million. We also redeemed 14.9 million shares of the Company paid as consideration for the acquisition, pursuant to an agreement by and between us and the Sellers in November 2006. The cost was determined to be the fair value of the shares at that time. The cost was recorded as a reduction of paid in capital and additional paid in capital; no gain or loss (after impairment) was recorded.

On March 21, 2007, we entered into agreement with the Sun Culture Foundation, a Hong Kong-based non-profit organization founded by Yang Lan, the spouse of our Chairman Dr. Bruno Wu, to acquire 7.6 million shares of our common stock held by Sun Culture in exchange for 20 million shares of stock in CEC Unit (AIM: CECU), held by us. The transaction was completed in July 2007, and we have since cancelled all of 7.6 million Company shares that were returned to us.

On March 22, 2007, we executed subscription agreements with five accredited investors (the “Selling Stockholders”) for the purchase of an aggregate of $1,500,000 of our senior convertible promissory notes (“Notes”) and Class A, Class B, and Class C common stock purchase warrants. The Class A warrants enable the purchase of up to 1,500,000 shares of our common stock at an exercise price of $1.00 per share, and the Class B warrants enable the purchase of up to 1,500,000 shares of our common stock at an exercise price of $1.50 per share. Upon exercise of any Class A or Class B warrant, the respective warrant holder will receive a Class C warrant to purchase that number of shares for which such Class A warrant or Class B warrant is exercised at an exercise price of $2.00 per share. On March 28, 2007, we completed the transaction (the “Issuance Date”). The Notes rank senior to all of our current and future indebtedness. The principal amount of the Notes is $1,500,000. The principal amount of the Notes if not converted or redeemed is due and payable on March 28, 2010. The Notes are initially convertible into our common shares at a conversion price of $1.00 per share. If an event of default occurs under the Notes (as described below), the conversion price shall be adjusted to eighty percent (80%) of the volume weighted average price of our common shares for the five trading days prior to a conversion date (“Adjusted Conversion Price”). Commencing on the fifteenth month from the Issuance Date, we are obligated to make a payment of one-twenty first (1/21) of the principal amount of each Note, either in cash or by conversion of such amount into our common shares. If, on the payment date, the market price for our common shares are equal to or above $1.00 per share, we may make this payment in our common shares at the then existing conversion rate. However, if, on the payment date, either (i) the market price for our common shares are less than $1.00 per share or (ii) the Registration Statement covering the common stock underlying the notes and

warrants is not effective, then we must make this payment in cash in an amount equal to 135% of the principal amount component. Subject to certain terms and conditions set forth therein, we may redeem the Notes at a rate of 120% to 150% of the outstanding principal amount of the notes plus interest. Certain mandatory and optional conversion rights exist subject to certain conditions as described in the subscription agreements. At closing, we paid the Selling Stockholders a total of 1,500,000 shares of our common stock as full consideration of all interest due under the Notes. We were unable to complete our registration rights covenants in the agreement with the Selling Stockholders. As a result, we could be in default under the terms of such agreement. We are currently in negotiations with the Selling Shareholders in an effort to remedy the situation.

On March 26, 2007, we divested certain non-core assets including $545,897 (2006: $574,485) worth of debt, owed to us by The Lexicon Group, Ltd ("TLG")(formerly "Sun Business Network Ltd")(made as advances by the Company to TLG) and our entire 16% stake, equal to 150 million shares of stock, in The Lexicon Group (“TLG”)(formerly “Sun Business Network Ltd.”), a Singaporean publishing company traded on the Singaporean Stock Exchange, to Maxi Surplus Ltd, another Singapore company. The Company received 20 million shares in CEC Unit Plc in exchange for the se assets. As a result of the transaction, the Company ceased to be a shareholder of TLG and was no longer due $545,897 (2006: $574,485) of debt from TLG.

On April 9, 2007, we entered into agreement with SMIH to sell certain non-core assets in exchange for a total consideration of $4.15 million dollars. The assets to be sold were: Two real estate properties in Beijing; a 30% investment stake in Global Woman Multimedia Co. Ltd; and 100% of the share capital of Lifestyle Magazines Publishing Co. Ltd. According to the terms of the agreement, SMIH will satisfy the $4.15 million consideration by transferring to us 1 million shares of Validian Corp. (OTCBB:VLDI) (“Validian’) and (ii) a promissory note of Validian in favor of SMIH with a principal amount of $500,000; and by returning to us 6 million of our common shares held by SMIH. As of the date of this filing, we have not yet completed this transaction. However, we have already received and further cancelled the 6 million shares returned to us from SMIH.

On April 11, 2007, we entered into a partnership agreement with Her Village Co. Ltd (‘Her Village’), a related party of Sun Media Investment Holdings (SMIH), one of our significant shareholders, for certain exclusive marketing access within Her Village’s multimedia products — namely, its e-magazines. Her Village is a wholly-owned subsidiary of Yang Lan Studio Ltd., which is 100% owned and controlled by Ms. Yang Lan, the spouse of our Chairman Dr. Bruno Wu. As part of the agreement, we agreed to pay for the production of Her Village’s online multimedia products at cost, approximately $180,000 per annum and receive the revenues generated from the sale of such products, subject to the payment of a 10% sales commission to her Village on all transactions generated by Her Village.

On April 27, 2007, we issued 6.9 million shares of our common stock to Panpac Tech Strategic Limited, a wholly-owned subsidiary of The Lexicon Group Ltd (“TLG”)(formerly “Sun Business Network Ltd.”) to satisfy a contractual obligation to TLG relating to a Sale and Purchase Agreement (“the Agreement”) between the parties dated November 21, 2005. In the original Sale and Purchase Agreement, we purchased certain assets, including various on-line publishing rights, from TLG for an aggregate consideration of the issuance of 13.8 million of our shares. The consideration was to be satisfied in two installments of 6.9 million shares. The first installment of 6.9 million shares was issued upon the completion of the deal. The second installment of 6.9 million shares remained subject to a profit guarantee for the acquired business of PAT $2,415,000 by December 2006.

In July 2006, we sold part of the acquired business to Sun TV Shop Plc (now “Sun 3C Plc”)(AIM:SCCC) for a gain in excess of $2,415,000, satisfied in Sun 3C stock. We determined this gain to satisfy TLG’s profit guarantee of $2,415,000 and proceeded with the second share issuance of 6.9 million shares, pursuant to the original Agreement between TLG and us. The agreement is incorporated by reference in our Form 8-K filed on November 23, 2005. We further disclosed that these 6.9 million NextMart shares issued to TLG would be held in escrow, along with 6.9 million NextMart shares contributed by Sun Media Investment Holdings until at least June 30, 2008, pursuant to a Pooling Agreement between TLG, Sun Media Investment, and us dated March 31, 2007.

On July 6, 2007, we completed the cancellation of 28,500,000 million our own shares that were returned to us under the following three separate agreements.

a November 21, 2006 agreement with the sellers of Focus Channel Development Co. Ltd, that returned 14,900,000 of our shares in exchange for certain rights under its existing management services agreement and $4.75 million in past due account receivables;

a March 26, 2007 agreement with Sun Culture Foundation that returned 7,600,000 of our shares in exchange for 20 million shares of CEC Unet (f.k.a. Sun 3C Media plc)(AIM:CECU) held by the Sun Culture Foundation

an April 9, 2007 agreement with Sun Media Investment Holdings that returned 6,000,000 of our shares in exchange for certain assets including two real estate properties in Beijing, a 30% stake in Global Woman Multimedia Co., Ltd., 100% of Lifestyle Magazines Publishing Co. Ltd..

On August 6, 2007, we entered into an agreement with Mr. Jiancai Zhou to acquire the Peeress clothing brand and the Peeress Design and Management Center (collectively, “Peeress”). Based in Shanghai, China, Peeress is an established women’s clothing brand with over 3,000 patented clothing designs. The consideration for the acquisition is $2.17 million of which $1 million is to be paid in cash and $1.17 million is to be paid with 5

million shares of Sun 3C Media Plc (AIM SCCC) held by us. We will satisfy $500,000 of the cash consideration and Sun Media Investment Holdings (“SMIH”), our largest shareholder, will satisfy the other $500,000 of the consideration on our behalf. As of the filing of this Report, this transaction has not been completed.

On August 6, 2007, we entered into an agreement with Sun Media Investment Holdings, our largest shareholder, to grant SMIH perpetual, non-exclusive usage rights to our reverse-auction purchasing software. The consideration for this licensing agreement is a $500,000 to be satisfied through a one-time cash payment. As of the filing of this Report, this transaction has not been completed.

On August 6, 2007, we entered into a strategic partnership agreement with Shanghai Guifuren Garment Co. Ltd (“Guifuren Garment”), a producer of urban women’s suits in Mainland China. According to the terms of agreement, NextMart will gain from Guifuren Garment usage rights to the Guifuren 2.0 mature urban professional women’s brand and access to 1/3 of Guifuren Garment’s sales space in nearly 60 retail stores in Mainland China. As consideration, NextMart will grant Guifuren a commission on its in-store sales of NextMart product. Guifuren Garment will provide the necessary logistics and inventory support to NextMart at no cost.

On August 7, 2007, we entered into an agreement with Her Shop Ltd., an affiliate of Sun Media Investment Holdings, our largest shareholder, to trade 99,629 shares of Asia Premium Television Group (OTC:ATVG) held by us for 231,939 shares of Broadcast International Inc. (OTC:BI) held by Her Shop Ltd. The approximate value of the transaction was $260,000, whereby the ATVG shares were valued at approximately $2.65 per share and the Broadcast International shares were valued at approximately $1.10 per share. The agreement is expected to close on or before September 1, 2007

On August 7, 2007, we entered into an agreement with Yang Lan Studio Ltd, an affiliate of Sun Media Investment Holdings, our largest shareholder, to sell certain non-core assets, including five used automobiles. The consideration for the agreement is $294,867.35 to be satisfied with 268,062 shares of Broadcast International (OTC BCST) valued at $1.10 per share.

On August 7, 2007, the Company, entered into a consulting agreement (“the agreement”) with Professional Offshore Opportunity Fund, Ltd. (“POOF”), a New York based investment fund, to retain POOF’s advisory services for locating potential complementary opportunities for acquisition by the Company. The term of the agreement terminates on August 7, 2017. The consideration of the transaction with POOF is 10,000,000 shares of Sun 3C Media (already renamed "CEC Unet Plc")(AIM:SCCC) common stock (the "Shares") held by the Company. The Shares carry an aggregate value of $2 million USD based on a per share price of $0.20 USD. The Shares are not in any way subject to rescission, repurchase, redemption, or cancellation in the event this Agreement is terminated for any reason.

On September 28, 2007, we entered into a supplementary agreement (the “Supplementary Agreement”) with Mr. Ren Huiliang, our current President and Chief Executive Officer, to revise the terms and conditions of the Sales and Purchase Agreement (the “Sales and Purchase Agreement”) by which we purchased 100% of William Brand Administer Co., Ltd from Mr. Ren. Specifically, the Supplementary Agreement modifies the payment schedule by which we will compensate Mr. Ren for William Brand’s attainment of certain revenue and profit guarantees.According to the Sales and Purchase Agreement, we purchased William Brand Administer Co. Ltd from Mr. Ren for an aggregate consideration of $18,620,688 USD to be satisfied through the issuance of 4,655,172 shares of our common stock (the “Consideration Shares”). For purposes of the transaction, each share was valued at $4.00 USD. The consideration shares were to be issued in four equal installments. The first installment was issued to Mr. Ren upon the closing of the acquisition on September 30, 2006; and the remaining three installments of 1,163,793 (totaling 3,491,379) of our shares were to be issued to Mr. Ren subject to attaining certain revenue and profit requirements from the operations of William Brand in the three fiscal years following the completion of the acquisition. These revenue and profit guarantees as stated in the original Sales and Purchase Agreement are as follows: Year 1; $15 million (revenues)/$3 million (profit), Year 2; $17.5 million (revenues)/$3.5 million (profit), and Year 3; $20 million (revenues) and $4 million (profit). All amounts are in US Dollars.Through the Supplementary Agreement, we and Mr. Ren agreed to modify the share payment schedule of the original Sales and Purchase Agreement such that the Company would issued the remaining 3,491,379 shares of NXMR common stock to Mr. Ren. At the time of this filing, these shares have already been issued to Mr. Ren. Despite the preissuance of shares to Mr. Ren, both parties agree that all guarantees made by Mr. Ren to the Company under the original Sales and Purchase Agreement, most notably the revenue and profit guarantees listed above, shall remain unchanged and in full effect.

Item 13 Exhibits

The Exhibit Table follows Item 14.

Item 14. Principal Accountant Fees and Services

Bernstein & Pinchuk LLP

During the fiscal years ended September 30, 2008 and September 30, 2007, Bernstein & Pinchuk LLP provided various audit, audit related and non-audit services to us as follows:

September 30, 2008

September 30, 2007

March 31, 2007


Audit Fees	$	120,000	$	155,000	$	250,000
Audit-Related Fees		-		-		-
Tax Fees		-		-		-
All Other Fees				10,000		-

	$	120,000	$	165,000	$	250,000

Item 13. Exhibits

Exhibit Number and Exhibit Title

INDEX TO EXHIBITS



Exhibit Number			Exhibit Title
2.1			Share Purchase Agreement dated July 21, 2005 by and between the Registrant and Sun Media Investment Holdings Limited to acquire Sun New Media Group Limited (incorporated by reference from our Current Report on Form 8-K filed on July 22, 2005)

2.2			Share Purchase Agreement dated November 21, 2005 by and between the Registrant and The Lexicon Group Ltd. (formerly “Sun Business Network Ltd.”) to acquire a group of property holdings in Beijing and shares of Asia Premium Television Group, Inc. (incorporated by reference from our Current Report on Form 8-K filed on November 23, 2005)

2.3			Share Swap Agreement by and between the Registrant and The Lexicon Group Ltd. (formerly “Sun Business Network Ltd.”) dated November 21, 2005 (incorporated by reference from our Current Report on Form 8-K filed on November 23, 2005)

2.4			Sale and Purchase Agreement by and between the Registrant, Yang Qi, Mao Quan Yi and Wu Bing Wei dated November 22, 2005 to acquire China Focus Channel Development (HK) Limited (incorporated by reference from our Current Report on Form 8-K filed on November 25, 2005)

2.5			Sale and Purchase Agreement by and between the Registrant and Sun Media Investment Holdings Ltd. Dated November 29, 2005 to acquire Sun New Media Holdings Ltd. (incorporated by reference from our Current Report on Form 8-K filed on December 1, 2005)

2.6			Sale and Purchase Agreement by and between the Registrant, Yan Hui, Lin Min and Luan Kezhou dated December 6, 2005 to acquire Telefaith Holdings Limited (incorporated by reference from our Current Report on Form 8-K filed on December 8, 2005)

2.7			Sale and Purchase Agreement dated December 6, 2005 by and between the Registrant and Sun Media Investment Holdings Limited to acquire shares of The Lexicon Group Ltd. (formerly “Sun Business Network Ltd.”) (incorporated by reference from our Current Report on Form 8-K filed on December 8, 2005)

2.8			Stock Purchase Agreement between Sun New Media Inc and Barron Partners LP dated December 31, 2005 (incorporated by reference from our Current Report on Form 8-K filed on January 6, 2006)

2.9			Share Purchase Agreement dated January 4, 2006 to acquire Magzone Asia Pte Ltd (incorporated by reference from our Current Report on Form 8-K filed on January 6, 2006)

2.10			Share Purchase Agreement dated February 13, 2006 by and between the Registrant and China Entertainment Sports Limited to acquire China Sport TV Productions Ltd (incorporated by reference from our Current Report on Form 8-K filed on February 17, 2006)


2.11			Share Purchase Agreement dated February 14, 2006 by and between the Registrant and United Home Limited to acquire Lifestyle Magazines Publishing Pte Ltd (incorporated by reference from our Current Report on Form 8-K filed on February 17, 2006)

2.12			Stock Purchase Agreement between Sun New Media Inc and Barron Partners LP dated March 6, 2006 (incorporated by reference from our Current Report on Form 8-K filed on March 9, 2006)

2.13			Termination Agreement dated March 31, 2006 by and between the Registrant and Sun Media Investment Holdings Limited relating to the Sale and Purchase Agreement dated December 6, 2005 by and between the Registrant and Sun Media Investment Holdings Limited to acquire shares of The Lexicon Group Ltd. (formerly “Sun Business Network Ltd.”) (incorporated by reference from our Current Report on Form 8-K filed on April 5, 2006)

2.14			Sale and Purchase Agreement dated April 20, 2006 by and between the Registrant and Kingston Capital Group Limited to divest Global American Investments Inc (incorporated by reference from our Current Report on Form 8-K filed on April 26, 2006)

2.15			Sale and Purchase Agreement dated April 20, 2006 by and between the Registrant and Sun Media Investment Holdings Limited to purchase various assets (incorporated by reference from our Current Report on Form 8-K filed on April 26, 2006)

2.16			Sales Purchase Agreement dated May 23, 2006 by and between the Registrant, its subsidiary, China Focus Channel Development Co. Ltd (“Focus”) and China Electronic Appliances Corporation (“CEAC”) and two individuals to purchase a 49% stake in Beijing Trans Global Logistics (“BTGL”) and its subsidiary from the two individuals and a 31% stake in BTGL from CEAC (incorporated by reference from our Current Report on Form 8-K filed on May 30, 2006)

2.17			Sale and Purchase Agreement dated June 8, 2006 by and between the Registrant, its subsidiary, Focus, and Mr Ren Huiliang to acquire William Brand Administer Limited and its subsidiary William Textiles Limited (incorporated by reference from our Current Report on Form 8-K filed on June 14, 2006)

2.18			Sale and Purchase Agreement dated June 14, 2006 by and between the Registrant and Sun Media Investment Holdings Limited to acquire Credit Network 114 Limited (incorporated by reference from our Current Report on Form 8-K filed on June 20, 2006)

2.19			Subscription Agreement between the Company and Certain Accredited Investors (incorporated by reference on Form 8-K filed with the SEC on March 23, 2007)

2.20			Form of Note between the Company and Certain Accredited Investors (incorporated by reference on Form 8-K filed with the SEC on March 23, 2007)

2.21			Form of Class A Warrant between the Company and Certain Accredited Investors (incorporated by reference on Form 8-K filed with the SEC on March 23, 2007)

2.22			Form of Class B Warrant between the Company and Certain Accredited Investors (incorporated by reference on Form 8-K filed with the SEC on March 23, 2007)


3.1			Certificate of Incorporation. (Incorporated by reference to Appendix C of the Company’s proxy statement pursuant to Schedule 14A of the Securities Act of 1933, as amended, for its annual meeting of stockholders for 2006, as filed with the SEC on June 12, 2006.)

3.2			Certificate of Merger under which NextMart, Inc., a wholly owned subsidiary of the registrant, was merged with and into the Company for the sole purpose of changing the Company’s name to NextMart, Inc. (Incorporated by reference in our Form 8-K filed on May 10, 2007)




3.3		Bylaws. (Incorporated by reference to Appendix B of the Company’s proxy statement pursuant to Schedule 14A of the Securities Act of 1933, as amended, for its annual meeting of stockholders for 2006, as filed with the SEC on June 12, 2006.)

3.4*		Updated Form Indemnification Agreement of Directors and Officers, following our reincorporation into the State of Delaware.

4.1		Pooling Agreement by and between dated September 18, 2005 among the Registrant, Fidelity Transfer Company, as Trustee, Sun Media Investment Holdings Ltd. And Capital Alliance Group Inc. (incorporated by reference from our Current Report on Form 8-K filed on September 22, 2005)

4.2		Supplementary Pooling Agreement dated December 23, 2005 among the Registrant, Fidelity Transfer Company, as Trustee, Sun Media Investment Holdings Ltd. And Capital Alliance Group Inc. (incorporated by reference from our Current Report on Form 8-K filed December 27, 2005)

4.3		Supplementary Pooling Agreement dated March 15, 2006 among the Registrant, Fidelity Transfer Company, as Trustee, Sun Media Investment Holdings Ltd. And Capital Alliance Group Inc. (incorporated by reference from our Current Report on Form 8-K filed March 21, 2006)

10.1		Finders Fee Agreement by and between the Registrant and Yu Hiyang and Beckford Finance SA dated July 21, 2005 (incorporated by reference from our Current Report on Form 8-K filed on July 22, 2005)

10.2		Stock Purchase Agreement by and between Capital Alliance and Sun Media dated July 21, 2005 (incorporated by reference from our Current Report on Form 8-K filed on July 22, 2005)

10.3		Management Agreement by and between the Registrant and Capital Alliance dated September 18, 2005 (incorporated by reference from our Current Report on Form 8-K filed on September 22, 2005)
10.4		Share Holding Agreement by between Capital Alliance, SE Global and Sun Media Investment Holdings Ltd. dated September 18, 2005 (incorporated by reference from our Current Report on Form 8-K filed on September 22, 2005)

10.5		Stock Purchase Agreement dated December 31, 2005 by and between Sun New Media Inc. and Barron Partners LP (incorporated by reference from our Current Report on Form 8-K filed on January 6, 2006)



14.1		Code of Ethics (incorporated by reference from our Annual Report on Form 10-KSB filed on June 30, 2006)

21*		Subsidiaries and VIEs of NextMart, Inc.

31.1*		Certificate of CEO as Required by Rule 13a-14(a)/15d-14

31.2*		Certificate of CFO as Required by Rule 13a-14(a)/15d-14

32.1*		Certificate of CEO as Required by Rule 13a-14(b) and Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code

32.2*		Certificate of CFO as Required by Rule 13a-14(b) and Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code



*		Filed herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




NEXTMART, INC.
By:		/s/ Ren Huiliang
		Mr. Ren Huiliang, Chief Executive Officer and Acting Chief Financial Officer
		Date: January 13, 2009

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.




By:	/s/ Bruno Wu Bruno Wu, Chairman Date: January 13, 2009	By:	/s/ Ren Huiliang Ren Huiliang, Director, Chief Executive Officer and Acting Chief Financial Officer Date: January 13, 2009

By:		By:	/s/ Yu Huiyang Yu Huiyang, Director Date: January 13, 2009

By: