NXMR NextMart Inc (CE)

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

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We assessed our derivative liabilities pursuant to EITF BO. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Management has determined that we do not have derivative liabilities as of the filing date of this report.

11. DISCONTINUED OPERATION

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 ownership to eight domestic VIEs and six subsidiaries. The consideration of this deal was $1 in cash.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our Financial Statements and the notes thereto presented in “Item 1 — Financial Statements.” The matters discussed in this report on Form 10-QSB include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements contained in this Form 10-QSB that are not statements of historical fact may be deemed to be forward-looking statements. Words such as “may”, “will”, “expect”, “believe”, “anticipate”, “intend”, “could”, “plan”, “estimate” or “continue” or similar words are intended to identify forward-looking statements, although not all forward-looking statements are identified by those words. While forward-looking statements are sometimes presented with numerical specificity, they are based on current expectations and various assumptions made by management regarding future circumstances over which we may have little or no control. These statements are inherently predictive, speculative and subject to risk and uncertainties, and it should not be assumed that they will prove to be correct. A number of important factors, including those identified under the caption “ Risk Factors ” in our Transitional Report on Form 10-KSB for the period ended September 30, 2007 as filed with the Securities and Exchange Commission, as well as factors discussed elsewhere in this Form 10-QSB, could cause our actual results to differ materially from those in forward-looking statements or forward-looking financial information. Actual results may differ from forward-looking results for a number of reasons, including market acceptance of our services, adverse market conditions affecting the Internet sector, retention of major clients, competitive factors, failure to keep pace with changing technologies and failure to protect our intellectual property. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated or projected. These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

Our principal focus is our business-to-business brand and apparel production management business in Shanghai, China. Our goal is to develop China’s largest online shopping community for wholesale distribution and retail shopping in the apparel and ladies’ fashion industry. During the last 12 to 16 months,  we have developed a smaller organizational structure centered around William Brand Administer Co., Ltd (“Williams Brand”) , our key ladies’ apparel subsidiary and transactional service provider.  We continue to explore the restructuring of this main business as indicated in our May 22, 2008 Form 8-K. These plans may include divesting part or all of our existing apparel operations and/or merging the company with a new business that could potentially enhance shareholder's value.  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.  

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 Williams Brand,  our wholly-owned subsidiary in the women’s apparel vertical. William Brand contracts with apparel manufacturers and wholesalers, predominately in the United States, to manage the full apparel design, production and export operations. 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.

Results of Operations

Three Months Ended June 30, 2008 compared with the Three Months Ended June 30, 2007

Revenue . Our revenue for the three months ended June 30, 2008 was $1.64 million compared with $1.78 million for the comparable three month period in 2007.  The decrease in revenues for the 2008 period of $0.14 million (or 7.9%) from the prior period is attributable to  our shift in business focus to the women’s apparel industry coupled with the negative impact of US economic conditions on our women’s apparel business. Of the total revenue for the 2008 period, 100% were derived from our Transactional Services. This compares with the 2007 period, wherein 97.5% were derived from our Transactional Services and the remaining 2.5% from our Marketing and Information Services.

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Costs of Revenue. Costs of revenue for the three months ended June 30, 2008 were $1.28 million compared with $1.39 million for the comparable three month period in 2007. The decrease of costs for the 2008 period of $0.11 million (or 7.9%) from the prior period is attributable to a reduction in revenues for the 2007 period.  Costs of revenue include women’s apparel cost and service buying cost. During the 2008 period, Transactional Services costs accounted for 100% of the total costs or approximately $1.28 million compared with the 2007 period, wherein Transactional Services costs were 99.9% of the total costs or approximately $1.39 million.

Operating Expenses. Total operating expenses for the three months ended June 30, 2008 were $1.25 million compared with $1.33 million for the comparable three month period in 2007. The decrease for the 2008 period of $0.08 million (or 6.0%) from the prior period is due mainly to a reductions in depreciation and amortization during the 2008 period.  

Loss from Continuing Operations. Loss from continuing operations for the three months ended June 30, 2008 was $1.40 million compared with a net of loss of $1.13 million for the comparable 2007 period.  The increase for the 2008 period of $0.27 million (or 23.9%) from the prior period is due to loss on disposal of marketable securities.

Net Loss.  Net loss for the three months ended June 30, 2008 was $1.16 million compared with a net loss of $1.18 million for the comparable 2007 period.

Comprehensive Loss. Comprehensive loss for the 2008 period was $2.42 million compared with a loss of $1.19 million for the comparable 2007 period.  

Nine Months Ended June 30, 2008 compared with the Nine Months Ended June 30, 2007

Revenue . Our revenue for the Nine months ended June 30, 2008 was $4.32 million compared with $6.24 million for the comparable nine month period in 2007.  The decrease in revenues for the 2008 period of $1.92 million (or 30.8%) from the prior period is attributable to our shift in business focus to the women’s apparel industry coupled with the negative impact of US economic conditions on our women’s apparel business. Of the total revenue for the 2008 period, 95.9% were derived from our Transactional Services and the remaining 4.1% from our Marketing and Information Services. This compares with the 2007 period, wherein 79.2% were derived from our Transactional Services and the remaining 20.8% from our Marketing and Information Services.

Costs of Revenue. Costs of revenue for the nine months ended June 30, 2008 were $3.5 million compared with $4.62 million for the comparable nine month period in 2007. The decrease in costs for the 2008 period of $1.12 million (or 24.2%) from the prior period is attributable to a reduction in revenues for the 2008 period.  Costs of revenue include women’s apparel cost and service buying cost. During the 2008 period, Transactional Services costs accounted for 100% of the total costs or $3.5 million compared with the 2007 period, wherein Transactional Services costs were 91% of the total costs or approximately $4.21 million.

Operating Expenses. Total operating expenses for the nine months ended June 30, 2008 were $2.47 million compared with $19.72 million for the comparable nine month period in 2007. The significant decrease for the 2008 period of $17.25 million (or 87.5%) from the prior period is due mainly to an impairment loss recorded during the 2007 period in the amount of $8.95 million for the intangibles and goodwill and approximately $7.01 million in stock based compensation in 2007, along with a reductions in office overhead, depreciation and amortization, bad debt provision, and consulting and professional fees which occurred during the 2008 period.  

Loss from Continuing Operations. Loss from continuing operations for the nine months ended June 30, 2008 was $2.41 million compared with a loss of $19.98 million for the comparable 2007 period.  The decrease for the 2008 period of $17.57 million (or 87.9%) from the prior period is due to the reasons discussed above.

Net loss.  Net loss for the nine months ended June 30, 2008 was $2.22 million compared with a net loss of $50,87 million for the comparable 2007 period.  The decrease of $48,65 million (or 95.6%) from the prior period is principally due to the reasons discussed above.  

Comprehensive Loss. Comprehensive loss for the 2008 period was $4.74 million compared with a loss of $50.88 million for the comparable 2007 period.  

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Liquidity and Capital Resources

As of June 30, 2008, we had $7.73 million in working capital, of which $0.39 million consisted of cash on hand.  

As indicated in our May 22, 2008 Form 8-K, we are exploring ways to restructure our operations in order to enhance shareholder value and achieve greater operating efficiencies. During the next 12 months, we believe that we will meet our ongoing operational requirements through some combination of the following; improvement of operating results from existing businesses, raising additional debt or equity capital, loans from major shareholders, continued reductions in overhead, and the acquisition of revenue generating assets or business.  As of the date of this report, we do not have formal agreements concerning any of the foregoing, and we can not predict whether we will be successful in our efforts. Our projected capital raising efforts will be through additional private placements of our equity securities, proceeds received from the exercise of outstanding warrants and options, and, if available on satisfactory terms, debt financing. Due to the current price of our common stock, any common stock based financing may create significant dilution to the then existing shareholders. In addition, in order to conserve capital and to provide incentives for our employees and service providers, it is conceivable that we may issue stock for services in the future which also may create additional dilution to shareholders.

Off-Balance Sheet Arrangements

As of June 30, 2008, we had no off-balance sheet arrangements.

Capital Expenditure Commitments

As at June 30, 2008, we had no outstanding commitments for capital expenditures.

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Critical Accounting Policies and Estimates

Our unaudited financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles 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.

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 collectability 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 recognize revenue for the Marketing and Information Services when the services have been rendered.

Trade receivables  and allowance 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 assesses 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

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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.

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

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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 3. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. The Company is evaluating its disclosure controls in light of compliance with SOX 404 in its next annual report, and if necessary, will make any changes needed to comply with SOX 404.

Changes in internal control over Financial Reporting

There has been no significant change in our internal control over financial reporting during the quarter ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1. Legal Proceedings

None.

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

None

Item 3. Defaults Upon Senior Securities.

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. 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 are in default under the terms of such agreement. We are currently in negotiations with the Selling Shareholders in an effort to remedy the situation.

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

None.

Item 5. Other Information.

None

Item 6. Exhibits

None

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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