Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☐
No
☒
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
As of December 31, 2018, 630,829,862 shares
of the issuer's Common Stock were outstanding
The aggregate market value of the voting
Common Stock held by non-affiliates on September 31, 2018 was $756,996 using the closing price of $0.0012.
PART I
Item 1. Description of Business
Overview
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. In February 2006, we changed our fiscal
year-end date from September 30 to March 31.
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.
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.
During fiscal year 2008, we had planned to develop an integrated
online-offline direct sales platform for the ladies' apparel sector in China. However, during this time, 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 the economic
malaise that affected the United States, our principal market. Accordingly, we were unable to meet our projected operating results
and milestones for the various periods. The lack of operating results in turn keyed a price decline of our common stock. 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 we have previously reported, we determined
to change our business focus initially attempting to focus on the financial advisory/direct investments and we have since redirected
this focus towards to the art-related industry in China.
In September 2008, consistent with our re-direction, we
determined to divest ourselves of the William Brand’s women apparel business and other non-material businesses. In
keeping that intent, on August 1, 2009, we entered into a subscription and asset sale agreement with Beijing Hua Hui Hengye
Investment Lt. (“Hua Hui”), an unaffiliated PRC company. Under the terms of the agreement, we received from Hua
Hui the commercial income rights to 10,000 square meters the Huadun Changde International Hotel located in the city of
Changde in China’s Hunan Province (“Project”), which was under construction. Hua Hui was responsible for
all costs and expenses incurred in constructing the Project. Commercial income rights included the right to receive any and
all income and proceeds derived from the commercial use of the Project in any capacity. As consideration, we agreed to issue
to Hua Hui 250,000,000 shares of our common stock. As additional consideration, we also transferred to Hua Hui certain
non-performing or discontinued assets, none of which were our core business or material assets. However, on March 3, 2010,
the Company entered into a transaction termination agreement with Hua Hui wherein both companies agreed to terminate and
rescind the subscription and asset sale agreement previously entered into by the parties on August 1, 2009. All
considerations received by each party under the Original agreement were returned to the issuing party.
On March 31, 2010, we entered into an Asset Exchange and Subscription
Agreement with Ms. Wang Yihan and Beijing Chinese Art Exposition's Media Co., Ltd. (“CIGE”), a leading Chinese art
services, events and media company located in Beijing, China. Ms. Wang is the sole shareholder of CIGE. The agreement was effective
on March 31, 2010 and was amended on May 10. Under the amended agreement NextMart agreed to sell directly to Ms. Wang the following
assets (“Transferred Assets”) (See Note 13): 1) 100% of the shares of William Brand Administer Ltd, a BVI registered
company and a wholly owned subsidiary of NextMart; 100% of the shares of Credit Network 114 Limited, a BVI registered company and
a wholly owned subsidiary of NextMart; 2) 100% of NextMart’s 60% shareholdings in Wuxi Sun Network Technology Ltd., a PRC
registered company; 3) 100% of NextMart’s 80% shareholdings in Naixiu Exhibition Ltd., a PRC registered company; 4) the net
assets of NextMart’s 100% owned subsidiary Cancer Institute of China Ltd (a BVI registered company) and its 100% owned subsidiary
China Cancer Institute Beijing Ltd. (a PRC registered company)
.
The
net assets being sold do not include the subsidiaries cash, office furniture and equipment, and third party creditor’s rights
and third party debts, which shall remain the subsidiaries’ property and 5) any other net assets and liabilities belonging
to NextMart, with the exception of its 3,000 shares of China Grand Resorts Inc. common stock and its remaining liability under
the convertible bond settlement agreement. On that same date, Ms. Wang was appointed our Chairman and Chief Executive Officer.
As consideration for the transfer of the above described assets,
Ms. Wang agreed to transfer to NextMart certain land use rights for commercial real estate property within 24 months from date
of the amended agreement. The value of the land use rights will be determined by an appraisal conducted by a licensed third party
appraiser acceptable to both parties. In the PRC, there is no private land ownership. Rather, land in the PRC is owned by the government
and cannot be sold to any individual or entity. The government grants or allocates landholders a “land use right,”
which is sometimes referred to informally as land ownership. Land use rights are granted for specific purposes and for limited
periods. Each period may be renewed at the expiration of the initial and any subsequent terms. Granted land use rights are transferable
and may be used as security for borrowings and other obligations.
In the event Ms. Wang fails to provide land use rights for adequate
real estate property within the 24 month period, she is obligated to provide NextMart with common stock of a publicly traded company
acceptable to NextMart.
On June 22, 2010, the Company entered into an asset acquisition
agreement (the “Acquisition Agreement”) with CIGE and Ms. Wang Yihan. Under the terms of the Acquisition Agreement,
NextMart is going to acquire from CIGE the below described assets for an agreed price of $750,000 (the “Consideration”).
NextMart agreed to pay the Consideration by issuing to Ms. Wang 75,000,000 shares of its common stock. As a result of this transaction,
Ms. Wang will become NextMart’s second largest shareholder with a 27.96% ownership of the company. Under the terms of the
Acquisition Agreement, CIGE sold to NextMart the following assets (the “Assets”): 1) ownership of CIGE’s 10,000
member consumer database, 2) exclusive ownership of all advertising space for every art exhibition event held by CIGE in greater
China (including Hong Kong and Macao, and Taiwan) for the next 30 years, and 3) exclusive ownership of the "Gallery Guide"
brand name and all gross revenues generated by the magazine publication for the next 30 years, including but not limited to advertising
revenue and sponsorship revenue. The agreement further provides that if for any reason or under any circumstance during the next
30 years CIGE ceases holding any of its exhibitions or ceases publishing the Gallery Guide, NXMR shall have the right to buy those
exhibitions and “Gallery Guide” brand name for the price of $1 each from CIGE.
As a result, NextMart’s planned business operations for
2011 consisted of 1) art event and art media direct marketing, and 2) the design and marketing of art-themed products lines
for existing luxury and high-end goods and services, and art themed real estate developments.
On June 22, 2010, NextMart also entered into a strategic
cooperative agreement (“Strategic Agreement”) with its shareholder Sun Media Investment Holdings Ltd.
(“SMIH”) and with Redrock Land Investment Ltd. (“Redrock Land”), an affiliate of the Company’s
major shareholder Redrock Capital Venture Ltd. (“Redrock”). Under the Redrock Land Strategic Agreement, Redrock
Land will provide NextMart a $1,000,000 interest free, unsecured loan in 12 months. The loan is due on demand any time after
the first anniversary of this agreement. As of September 30, 2010, the loan has not been provided to the Company. Redrock
Land also has agreed that within the next 24 months, it will partner with NextMart on three of its real estate development
projects that will be art related. For each such project, NextMart will act as the project’s concept, marketing, and
sales consultant. Redrock Land is a BVI registered company engaged in land investment and development in China and it
typically co-invests with real estate developers to acquire land and launch development projects. As part of its cooperation
with NextMart, Redrock Land will secure land and developing partners for three art related developments for which NextMart
will provide consulting service to the developers. Under the Strategic Agreements, SMIH has agreed to provide NextMart with
approximately $6,000,000 worth of advertising space over the next five years in various media outlets owned by it or its
affiliates. The $6,000,000 worth of advertising space will be allocated to NextMart such that every year for 5 succeeding
years. NextMart will have access to $1,200,000 in advertising space in various print magazines and online websites and
e-magazines owned by SMIH or its affiliates each year. Such advertising space will be subject to availability and market
prices, and the Company intends to limit the use of the advertising space to market its Artslux products.
Our Current Business Strategy
Going forward, our business operations will include: 1) art
event and art media direct marketing; and 2) design and marketing of art-themed products lines created for existing luxury and
high-end goods and brands and art themed real estate developments.
Competition and Market Data
In our proposed art business strategy, we will face competition
from other companies located in China that are more established with more financial resources. However, we believe that we can
compete in the market due to the uniqueness of our product marketing method and activities. Although many of the products are offered
elsewhere by individual providers, there is no centralized channel to offer all of the products proposed by our company.
Proprietary Rights
As of the date of this Report, we do not have our own intellectual
property rights.
Employees
As
of September 30, 2018, the Company has no employees.
Item 1A. Risk Factors
Risks Related to Our New Business
There is substantial doubt about our ability to continue
as a going concern.
Our independent public accounting firm has issued an opinion
on our consolidated financial statements that states that the consolidated financial statements were prepared assuming we will
continue as a going concern and further states that our recurring losses from operations, stockholders’ deficit and inability
to generate sufficient cash flow to meet our obligations and sustain our operations raise substantial doubt about our ability to
continue as a going concern. Our plans concerning these matters are discussed in “Liquidity and Capital Resources”
of the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form
10-K and Note 15 to the accompanying audited consolidated financial statements. Our future is dependent on our ability to execute
our plans successfully or otherwise address these matters. If we fail to do so for any reason, we would not be able to continue
as a going concern and could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code.
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 Greater China region, especially in the mainland. 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.
Risks Related to Doing Business in China
The PRC laws and regulations governing the Company’s
current business operations are sometimes vague and uncertain. Any changes in such PRC laws and regulations may have a material
and adverse effect on the Company’s business.
There are substantial uncertainties regarding the interpretation
and application of PRC laws and regulations, including but not limited to the laws and regulations governing our business, or
the enforcement and performance of our arrangements with customers in the event of the imposition of statutory liens, death, bankruptcy
and criminal proceedings. We and any future subsidiaries are considered foreign persons or foreign funded enterprises under PRC
laws, and as a result, we are required to comply with PRC laws and regulations. These laws and regulations are sometimes vague
and may be subject to future changes, 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. We cannot predict
what effect the interpretation of existing or new PRC laws or regulations may have on our businesses.
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.
Item 1B. Unresolved SEC Comments
Not applicable.
Item 2. Properties
Our premises are located at 224 Datura Street, West
Palm Beach, Florida, 33401 USA.
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 Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities.
As
of May, 2007, our common stock was quoted on the Over the Counter Bulletin Board under the symbol “NXMR” and we
had 439 shareholders of record as of March 21, 2012.
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
As of the date of this report, we do not have any securities
authorized for issuance under any equity compensation plans and we do not have any equity compensation plans.
Sales of Unregistered Securities
None
Repurchase of Equity Securities
We did not repurchase any securities within the fiscal year
ended September 30, 2018.
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The information in this discussion contains
forward-looking statements that are subject to risks and uncertainties, and which speak only as of the date of this annual
report. No one should place strong or undue reliance on any forward looking statements. The
Company’s actual results or actions may differ materially from these forward-looking statements for many reasons,
including the risks described in Item 1A and elsewhere in this annual report. This Item should be read in
conjunction with the financial statements and related notes and with the understanding that the Company’s actual future
results may be materially different from what is currently expected or projected by the Company.
Overview
Prior to fiscal year 2008, we had planned to develop an integrated
online-offline direct sales platform for the ladies' apparel sector in China involving William Brand Administer Co. Ltd. However,
our business and business strategy were adversely impacted in a material manner due to the appreciation of the Chinese currency
(Yuan) against the US dollar (which resulted in US consumers paying higher prices for products manufactured in China), coupled
with an already weak US retail market. Accordingly, we were unable to meet our projected operating results and milestones for the
various periods. The lack of operating results adversely impacted our stock price during the applicable periods. Due to the depressed
price of our common stock together with the overall world-wide financial market turmoil, we were unable to raise the necessary
funds to support our expansion strategy. Consequently in May 2008, we determined to change our business focus initially attempting
to focus on the financial advisory/direct investments, and thereafter, redirecting this focus towards the healthcare industry in
China. Following our transaction with Hua Hui in August 2009, our business strategy was to develop a network of upscale, private
member health clubs in the PRC. However as noted above, on March 3, 2009 the Company and Hua Hui rescinded the transaction.
As a result of our recent transaction with CIGE and Ms. Wang
Yihan, as amended, our future business strategy is art event and art media direct marketing, direct sales of art products and art-themed
luxury goods, and marketing and sales for art related real estate development projects. (Please refer to a detailed description
of our proposed business contained in our Form 8-K filing dated June 23, 2010, as amended on July 1, 2010). As mentioned herein,
we intend to capitalize on our CIGE relationship as well as the experience, brand recognition, and resource integration capacities
of our major shareholders, including Ms. Wang, Redrock Capital Venture, Ltd., and Sun Media Investment Holdings Limited. We will
begin developing our business in 2011 by launching the “Artslux” branded products.
Going forward, our business operations will include: art event
and art media direct marketing; design and marketing of art-themed products lines created for existing luxury and high-end goods
and brands and art themed real estate developments.
We remind investors that our plans to re-focus our business
to participate in the art and high-end industry in China are subject to substantial risks and uncertainties. We have not made substantial
progress in reaching our objectives. We can not predict whether we will be successful in identifying, selecting and investing in
business, technologies, or treatments that will prove successful in our new business efforts. Our efforts will be subject to our
ability to raise additional funds (which in turn will cause dilution to existing stockholders), formal agreements with numerous
parties, and various approvals. Therefore, we can not predict with certainty whether we will be successful in our re-structuring
efforts and the exact combination of efforts required to achieve success.
Item 7A. Quantitative And Qualitative Disclosures About
Market Risk
Not Applicable
Item 8. Financial Statements and Supplementary Data
Reference is made to the Index to the audited consolidated financial
statements on Page F-1 for our audited consolidated financial statements and notes thereto and supplementary schedules.
Item 9. Changes In and Disagreements with Accountings on
Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange
Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms,
and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15 under the Exchange Act, our management,
including our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation
of our disclosure controls and procedures as of September 30, 2018. Based on that evaluation, we concluded that, because
of the material weaknesses described below, as of September 30, 2018, our disclosure controls and procedures were not effective.
Management’s Annual Report on Internal Control over
Financial Reporting
Management is responsible for establishing and maintaining adequate
internal control over financial reporting for the Company. Internal control over financial reporting refers to the process designed
by, or under the supervision of, our chief executive officer and chief financial officer, and effected by our Board of Directors,
management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the
preparation of financial statements for external purposes in accordance with U.S. GAAP, and includes those policies and procedures
that:
- pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of our assets;
- provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures
are being made only in accordance with the authorization of our management and directors; and
- provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Management conducted an evaluation of the effectiveness of
our internal control over financial reporting as of September 30, 2018 based on the framework set forth in the report entitled
Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on the evaluation, management concluded that our internal control over financial reporting as of September 30, 2018 was not effective.
Management identified the following material weaknesses as of September 30, 2018:
- Lack of Internal Audit Function - We lack qualified resources
to perform our internal audit functions properly. In addition, we have not yet fully developed the scope and effectiveness of
our internal audit function.
- Insufficient U.S. GAAP Accounting Skills and Experience
- We found that our accounting staff lacked sufficient accounting skills and experience necessary to fulfill our public
reporting obligations according to U.S. GAAP and the SEC’s rules and regulations.
At the present time, we are currently developing our art related
business. Thus, our current operations and financial transactions are limited. At such time as business develops, we intend to
hire additional personnel with sufficient US GAAP Accounting Skills and Experience to fulfill our public reporting obligations
according to U.S. GAAP and the SEC’s rules and regulations. In addition, as the Company’s business develops, it also
will begin searching and negotiating with several qualified candidates to serve as the audit committee members so as to establish
an audit committee within the Board of Directors of the Company.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
and procedures may deteriorate.
Management remains committed to improving its internal control
over financial reporting and will continue to work to put effective controls in place.
Because the Company is a smaller reporting company, this annual
report does not include an attestation report of our registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our registered public accounting firm.
Changes in Internal Control over Financial Reporting
Other than described above, there were no changes in our
internal controls over financial reporting during our fiscal year ended September 30, 2018 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Notes to the Financial Statements
For the year ended September 30, 2018
1. LEGAL
STATUS AND OPERATIONS
NextMart,
Inc. (the Company) was originally incorporated under the laws of Minnesota in 1972 and was previously known as SE Global Equity.
In September 2005, the Company acquired 100% share capital of Sun New Media Group Limited and changed its name to Sun New Media,
Inc. In May 2007, the Company reincorporated into the State of Delaware and changed its name to NextMart, Inc.
On March 31, 2010,
the Company entered into an asset exchange and subscription agreement with Ms. Wang Yihan (“Ms. Wang”) and Beijing
Chinese Art Exposition's Media Co., Ltd. (“CIGE”), a leading Chinese art services, events media company located in
Beijing, China. In exchange for the Transferred Assets, Ms. Wang agreed to transfer to NextMart certain land use rights for commercial
real estate property within 24 months from date of the amended agreement.
On June 22, 2010, the Company entered into an asset acquisition agreement (the “Acquisition Agreement”) with CIGE
and its sole owner and director Ms. Wang, who is also NextMart’s Chairman and CEO. Under the terms of the Acquisition Agreement,
NextMart is going to acquire from CIGE the below described Assets for an agreed price of $750,000 (the “Consideration”).
NextMart paid the Consideration by issuing 75,000,000 shares of its common stock to Ms. Wang. As a result of this transaction,
Ms. Wang became NextMart’s second largest shareholder with a 27.96% ownership of the Company.
Under the terms of the Acquisition Agreement, NextMart acquired the following assets:
1) ownership of CIGE’s 10,000 member consumer database,
2) exclusive ownership of all advertising space for every art exhibition event held by CIGE in greater China (including Hong Kong
and Macao, and Taiwan) for the next 30 years, and
3)
exclusive ownership of the "Gallery Guide" magazine brand name and all gross revenues generated by the magazine publication
for the next 30 years, including but not limited to advertising revenue and sponsorship revenue.
2. BASIS
OF PREPARATION
2.1 Statement
of compliance
The accompanying financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America and pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC") on a going concern.
2.2 Accounting
Convention
These financial statements have
been prepared on the basis of 'historical cost convention using accrual basis of accounting except as otherwise stated in the respective
accounting policies notes.
Going
concern
The accompanying unaudited financial
statements have been prepared on the assumption that the Company will continue as a going concern. The Company historically has
experienced significant losses and negative cash flows from operations. Further, the Company does not have a revolving credit facility
with any financial institution. These factors raise substantial doubt about the Company’s ability to continue as a going
concern.
The ability of the Company to continue as a going concern is dependent on raising additional capital, negotiating adequate financing
arrangements and on achieving sufficiently profitable operations. The financial statements do not include any adjustments relating
to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
2.3 Critical
accounting estimates and judgements
The
preparation of financial statements in conformity with the approved accounting standards require management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in
which the estimates are revised if the revision affects only that period, or in the period of the revision and future periods.
The
areas involving higher degree of judgment and complexity, or areas where assumptions and estimates made by the management are
significant to the financial statements are as follows:
i) Equipment
- estimated useful life of property, plant and equipment (note - 3.8)
ii) Provision
for doubtful debts (note - 3.4)
iii) Provision
for income tax (note - 3.1)
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1
Income tax
The tax expense for the year comprises
of income tax, and is recognized in the statement of earnings. The income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the balance sheet date. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate
on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is accounted
for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying
amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable
profit. Deferred income tax liabilities are recognised for all taxable temporary differences and deferred income tax assets are
recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences
and unused tax losses can be utilized. Deferred income tax is calculated at the rates that are expected to apply to the period
when the differences are expected to be reversed.
3.2 Trade
and other payables
Liabilities for trade and other
amounts payable are carried at cost, which is the fair value of the consideration to be paid in future for goods and services received,
whether or not billed to the Company.
3.3 Provisions
A provision is recognized in the
financial statements when the Company has a legal or constructive obligation as a result of past events and it is probable that
an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made
of the amount of obligation.
3.4 Accounts
Receivable
Accounts receivable are non-interest
bearing obligations due under normal course of business. The management reviews accounts receivable on a monthly basis to determine
if any receivables will be potentially uncollectible. Historical bad debts and current economic trends are used in evaluating the
allowance for doubtful accounts. The Company includes any accounts receivable balances that are determined to be uncollectible
in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written
off against the allowance. Based on the information available, the Company believes its allowance for doubtful accounts as of period
ended is adequate.
3.5
Contingent liabilities
A contingent liability is disclosed
when the Company has a possible obligation as a result of past events, the existence of which will be confirmed only by the occurrence
or non-occurrence, of one or more uncertain future events, not wholly within the control of the Company; or when the Company has
a present legal or constructive obligation, that arises from past events, but it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient
reliability.
3.6
Financial liabilities
Financial liabilities are recognized
when the Company becomes party to the contractual provision of the instruments and the Company loses control of the contractual
right that comprise the financial liability when the obligation specified in the contract is discharged, cancelled or expired.
The Company classifies its financial liabilities in two categories: at fair value through profit or loss and financial liabilities
measured at amortized cost. The classification depends on the purpose for which the financial liabilities were incurred. Management
determines the classification of its financial liabilities at initial recognition.
(a) Financial
liabilities at fair value through profit or loss
Financial liabilities at fair
value through profit or loss are financial liabilities held for trading. A financial liability is classified in this category if
incurred principally for the purpose of trading or payment in the short-term. Derivatives (if any) are also categorized as held
for trading unless they are designated as hedges.
(b) Financial
liabilities measured at amortized cost
These are non-derivative financial
liabilities with fixed or determinable payments that are not quoted in an active market. These are recognized initially at fair
value, net of transaction costs incurred and are subsequently stated at amortized cost; any difference between the proceeds (net
of transaction costs) and the redemption value is recognized in the profit and loss account.
3.6.1 Derivative
financial instruments and hedge accounting
Derivatives are recognised initially
at fair value, any directly attributable transaction costs are recognised in profit or loss as they are incurred. Subsequent to
initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in profit and loss account.
The Company also holds derivative financial instruments to hedge its foreign currency exposures. Embedded derivatives are separated
from the host contract and accounted for separately if certain criteria are met.
(a) Fair
value hedge
Derivatives which are designated
and qualify as fair value hedge, changes in the fair value of such derivatives are recorded in the profit and loss account, together
with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
(b) Cash
flow hedges
When a derivative is designated
as cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive
income and accumulated in the hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognised
immediately in profit or loss.
The amount accumulated in equity
is retained in other comprehensive income and reclassified to profit or loss in the same period or periods during which the hedged
item affects profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the
designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected
to occur, then the amount accumulated in equity is reclassified to profit or loss.
3.7
Property, plant and equipment
All
equipments are stated at cost less accumulated depreciation and impairment loss. The cost of fixed assets includes its
purchase price, import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to
its working condition and location for its intended use.
Depreciation
on additions to property, plant and equipment is charged, using straight line method, on pro rata basis from the month in
which the relevant asset is acquired or capitalized, up to the month in which the asset is disposed off. Impairment loss, if
any, or its reversal, is also charged to income for the year. Where an impairment loss is recognized, the depreciation charge
is adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value, over its
estimated useful life.
Maintenance and normal repair
costs are expensed out as and when incurred. Major renewals and improvements are capitalized and assets so replaced, if any are
retired.
Gains and losses on disposal of
fixed assets, if any, are recognized in statement of profit and loss.
3.8
Cash and cash equivalents
Cash and cash equivalents include
cash in hand and deposits held at call with banks. For the purpose of the statement of cash flows, cash and cash equivalents bank
balances and short term highly liquid investments subject to an insignificant risk of changes in value and with maturities of less
than three months.
3.9
Revenue recognition
The Company’s revenues are
derived principally from utilizing new technology in the medical alarm industry to provide 24-hour personal response monitoring
services and related products to subscribers with medical or age-related conditions. The Company recognizes revenue when it is
realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence
of an arrangement that the services have been rendered to the customer, the sales price is fixed or determinable, and collectability
is reasonably assured.
All revenues from subscription arrangements are recognized ratably over the term of such arrangements. The excess of amounts received
over the income recognized is recorded as deferred revenue on the consolidated balance sheet.
3.10 Functional
and presentation currency
Items included in the financial
statements are measured using the currency of the primary economic environment in which the Company operates. The financial statements
are presented in US (Dollars) which is the Company's presentation currency. All financial information presented in US Dollars has
been rounded to the nearest dollar unless otherwise stated.
3.11 Foreign
currency transactions
Foreign currency transactions
are translated into the functional currency using the exchange rate prevailing on the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated into functional currency using the exchange rate prevailing at
the statement of financial position date. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates are recognized in the profit and loss account.
3.12 Contingencies
The
assessment of the contingencies inherently involves the exercise of significant judgment as the outcome of the future events
cannot be predicted with certainty. The Company, based on the availability of the latest information, estimates the value of
contingent assets and liabilities, which may differ on the occurrence / non-occurrence of the uncertain future
event(s).
4 Cash
This represents cash in hand
and cash deposited in bank accounts (current) by the Company.
5 Accounts Receivables
|
Opening balance
|
|
$
|
4,442
|
|
|
Net movement during the period
|
|
|
557
|
|
|
|
|
|
4,999
|
|
|
Less: Provision
|
|
|
–
|
|
|
Account Receivable - Net
|
|
$
|
4,999
|
|
6 Current assets held for
Sale
|
Opening balance
|
|
$
|
1,101,901
|
|
|
Net movement during the period
|
|
|
(126,396
|
)
|
|
|
|
$
|
975,505
|
|
7 Long term assets held
for Sale
|
Opening balance
|
|
$
|
140,116
|
|
|
Net movement during the period
|
|
|
(25,991
|
)
|
|
|
|
$
|
114,125
|
|
8 Property, plant and equipment
|
Cost
|
|
|
|
|
|
Opening balance
|
|
$
|
3,571
|
|
|
Net movement during the period
|
|
|
–
|
|
|
|
|
|
3,571
|
|
|
Accumulated Depreciation
|
|
|
|
|
|
Opening balance
|
|
|
(2,096
|
)
|
|
Net movement during the period
|
|
|
(360
|
)
|
|
|
|
|
(2,456
|
)
|
|
|
|
|
|
|
|
Closing Book Value
|
|
$
|
1,115
|
|
9 Other payables and accrued
expenses
|
Opening balance
|
|
$
|
663,041
|
|
|
Net movement during the period
|
|
|
(26,126
|
)
|
|
|
|
$
|
636,914
|
|
10 Amount due to Stockholders
|
Opening balance
|
|
$
|
140,132
|
|
|
Net movement during the period
|
|
|
(16,074
|
)
|
|
|
|
$
|
124,058
|
|
|
|
10.1
|
This includes amount due to Redrock Capital Venture Limited repayable on demand and bears no interest.
|
11 Amount due to related
parties
|
Opening balance
|
|
$
|
594,351
|
|
|
Net movement during the period
|
|
|
(68,176
|
)
|
|
|
|
$
|
526,175
|
|
|
|
11.1
|
This includes amount due to Redrock Thinktank (Group) Limited
and Mr. Wu, repayable on demand after one-year from the loan date and bear a free interest. The amounts were mainly used to make
payments to investors who originally held convertible notes of the Company.
|
12 Current liabilities held
for sale
|
Opening balance
|
|
$
|
1,257,726
|
|
|
Net movement during the period
|
|
|
–
|
|
|
|
|
$
|
1,257,726
|
|
13 Convertible notes - net
of discount
|
Opening balance
|
|
$
|
636,972
|
|
|
Net movement during the period
|
|
|
63,385
|
|
|
|
|
$
|
700,356
|
|
|
|
13.1
|
On March 26, 2010, we completed a Convertible Debt Settlement
Agreement with Hua Hui to convert RMB 2,255,000 (approximately $330,000) outstanding loans due to Hua Hui into a convertible promissory
note with a principal amount of RMB 2,255,000 (approximately $341,000 as of December 31, 2010).
|
14 Assets and Liabilities
- Held for sale
In connection with the CIGE and Ms. Wang Yihan transaction effective on March 31, 2010, which was subsequently amended on
May 10, 2010, NextMart agreed to transfer to CIGE certain assets and liabilities. These have been segregated and included
in assets and liabilities of held for sale operations, as appropriate, in the balance sheet:
15 Contingencies and Commitments
From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course
of business. As at the end of current reporting period, there were no pending or threatened lawsuits that could reasonably
be expected to have a material effect on the results of operations and there are no proceedings in which any directors, officers
or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to the
Company’s interest.