**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**








**[
                X ]**
            **ANNUAL
                REPORT UNDER SECTION 13 0R 15(****d****)
                OF THE SECURITIES EXCHANGE ACT OF
                1934**





For
      the
      fiscal year ended  **May
      31, 2005**





**[   
                ]**
            **TRANSITION
                REPORT UNDER SECTION 13 0R 15(****d****)
                OF THE SECURITIES EXCHANGE ACT OF
                1934**





For
      the
      transition period from_____________ **** to
      _______________





Commission
      file number - 00051571








**NSM
                HOLDINGS, INC.**(Name
                of Small Business Issuer in its
                charter)








Incorporated
                in the State of Delaware
              (State
                or other jurisdiction of incorporation or organization)
            98-0425713
              (I.R.S.
                Employer Identification No.)Suite
                1106, 1200 West 73rdAvenue, Vancouver, British Columbia
              (Address
                of principal executive offices)
            V6P
                6G5
              (Zip
                Code)





Issuer’s
      telephone number: **(604)
      671-8780**








Securities
      registered pursuant to Section 12(b) of the Act:


**Title
                of each class**
            **Name
                of each exchange on which registered**None
            N/A








Securities
      registered pursuant to Section 12(g) of the Act:








**shares
                of common stock - $0.001 par value**(Title
                of Class)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the last 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**





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form, and no disclosure will be
      contained, to the best of 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. **[ 
      ]**




***Page
          - 1***





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


**[ 
      ] Yes [ X ] No**





State
      issuer’s revenues for its most recent fiscal year.   $20,590





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 price of such common equity, as of a specified date within the
      past 60 days: **$44,500
      as of October 12, 2005**





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





**Class**
            **Outstanding
                at October 12, 2005**shares
                of common stock - $0.001 par value
            3,445,000





Documents
      incorporated by reference: Exhibit 3.1 (Certificate of Incorporation), Exhibit
      3.2 (By-laws), Exhibit 3.3 (Certificate of Incorporation for Northern Star
      Distributors Ltd.), Exhibit 3.4 (Notice of Articles for Northern Star
      Distributors Ltd.), Exhibit 3.5 (Articles of Northern Star Distributors Ltd.),
      Exhibit 10.1 (Asset Purchase Agreement), and Exhibit 10.2 (Sublease) all filed
      as Exhibits to NSM’s registration statement on Form SB-2/A filed on April 12,
      2005.





Transitional
      Small Business Disclosure Format (Check one): **Yes [  ] No [ x ]**





***Page
          - 2***


**PART
      I**





**Item
      1.**  **Description
      of Business.**





**(a)**
            **Business
                Development**





NSM
      is a
      holding company incorporated under the laws of the State of Delaware on April
      8,
      2004, which operates
      through its wholly-owned subsidiary, Northern Star Distributors Ltd.





NSM
      is in
      the e-commerce business and provides products and services for model ship
      enthusiasts, offering its products and services to the internet consumer through
      its website www.northernstarmall.com.





NSM’s
      one
      subsidiary, Northern Star Distributors Ltd. (“ **Northern
      Star** ”),
      was
      incorporated under the laws of the Province of British Columbia on April 8,
      2004.





Neither
      NSM nor Northern Star have been involved in any bankruptcy, receivership or
      similar proceedings. There have been no material reclassifications, mergers,
      consolidations or purchases or sales of a significant amount of assets not
      in
      the ordinary course of NSM’s business.





**(b)**
            **Business
                of NSM**





NSM
      is in
      the e-commerce business and provides products and services for model ship
      enthusiasts, offering unique products to the internet consumer through its
      website www.northernstarmall.com. NSM operates through Northern Star. The
      website offers products and services for the model ship enthusiast, specifically
      wooden ship builders. The core products include model ship kits, micro tools,
      limited-edition prints, books and magazines based on the model ship genre.
      The
      website currently offers a host of marine themed products and memorabilia.
      The
      products are priced competitively, relative to NSM’s competitors, and offered
      through a website on a secure server offering privacy, ease of order and quick
      delivery. The website is fully functional and operational. Northern Star
      inventories a selection of its products and has arrangements with suppliers
      and
      manufacturers for others whereby certain suppliers will ship directly to the
      customer without having the item sent to NSM’s offices .





**Products
      and Services**





NSM
      will
      provide marine hobby products through its website. Currently the products
      offered through the website are:





!  **Model
      ship kits** :
      These
      products are from various manufacturers around the globe, with a focus on
      European kit suppliers.





!  **Micro
      tools** :
      NSM
      supplies tools such as Proxxon (similar to the Dremel brand and line), which
      specifically cater to model builders.





!  **Limited
      edition prints** :
      NSM
      sells nautical themed artwork created by Robin Brooks of the United Kingdom,
      including hand painted artwork of ships, and prints and
      lithographs.





NSM
      plans
      to provide a hobby website that provides specialty kits, marine antiquities,
      marine prints, and any other marine hobby items that will educate and target
      the
      sophisticated hobby market.





NSM
      strives to provide a level of customer service that gives a caring human element
      to any transaction that requires the customer to speak with NSM and potentially
      creates a long-term customer with each website visitor. NSM wants potential
      customers to perceive the website as a preferred source of unique maritime
      products packaged and delivered in a professional, authoritative and efficient
      manner.





NSM
      confirms that it has no major customers at this time.





**Distribution
      of Products and Services**





The
      main
      modes of distribution of NSM’s products are (1) NSM’s website, (2) strategic
      alliances, (3) direct wholesaling to retailers, and (4) the use of Ebay.com,
      all
      as described in more detail below:





***Page
          - 3***





**1)**  **northernstarmall.com
      Website**





For
      any
      early stage company it would be financially impossible for NSM to provide brick
      and mortar locations to all customers in all regions. Due to the specialty
      products that NSM provides and the diverse locations that customers live, very
      few cities would have enough customers to warrant a retail location. The nature
      of NSM’s products, the demographics of potential customers, and their need to
      source specific marine items makes e-commerce a very suitable mode of providing
      product information to NSM’s customers and promoting distribution and sales of
      NSM’s products.





The
      products and their detailed features are described in detail in the
      professionally designed www.northernstarmall.com website.
      The products are offered through a simple “point and click” interface and
      transaction secure website accepting the usual modes of secured credit card
      payments. Coupled with contact information, a privacy policy and a 100%
      satisfaction guarantee the website offers all the safety and ease of a
      professionally designed e-commerce website. NSM has adopted a policy of a
      24-hour turnaround period from receipt of order to shipping of the product
      through established couriers like FedEx and UPS. NSM plans to establish a
      customer service line via a toll-free phone line during business hours to answer
      customer queries.





**2)**  **Strategic
      Alliances**





NSM
      intends on developing strategic alliances to market its maritime products by
      taking advantage of museums and existing brick and mortar stores and leverage
      on
      its existing retail distribution channels. The Maritime Museum and the Model
      Ship Museum, both located in Vancouver, British Columbia, are two examples
      of
      successful relationships that have been developed. The previous management
      of
      NSM’s business established the relationships with both the museums in
      approximately 2002. Zuber Jamal believes that these relationships are successful
      because the standards of workmanship required and requested by the museums
      are
      very high and the museums have allowed NSM’s products to go on sale in their
      stores, which in turn provides a form of advertisement for NSM’s products. Mr.
      Jamal believes that nautical connoisseurs will be more apt to purchase from
      a
      company that carries this legitimacy. Currently, NSM does not have a formal
      agreement with any strategic alliance partner, including the
      museums.





Also,
      Mr.
      Jamal and NSM’s technical team are developing marketing strategies with various
      strategic sites on the internet that would drive traffic to www.northernstarmall.com .
      The
      relationships may be from reciprocal hyperlinks, banner ads or profiles on
      these
      sites. Currently, Mr. Jamal has identified some suitable strategic partners
      for
      its products and services but has yet to begin discussions or negotiations
      with
      these strategic partners.





**3)**  **Direct
      Wholesaling to Retailers**





NSM
      is
      presently meeting with retailers in the Vancouver, British Columbia marketplace
      and in the United States to have its products placed in retail environments.
      NSM
      is initially targeting hobby stores, marine museum shops, higher-end toy stores,
      and independent retailers. The margins on these sales for the kit products
      range
      from 10% to 50% with bulk orders demanding greater sales discounts.





**4)**  **eBay.com**





Zuber
      Jamal has concluded that eBay.com is a valid method by which to sell NSM’s
      products on a retail basis. NSM will set a floor or reserve price on any item
      and if the item is not sold, NSM will list it for sale on eBay.com. The reserve
      price will not be set at a lower that retail price quoted on NSM’s website. eBay
      will be used for inventory that is over one year old and has not moved off
      NSM’s
      shelves. Currently, NSM has no inventory that is more than one year old. In
      the
      past, NSM has also used eBay selectively for products that were not selling
      on
      the main site.





NSM’s
      revenues generated from business operations are derived from NSM’s website
      (30%), strategic alliances (5%), and direct wholesaling to retailers (60%),
      and
      eBay (5%).





NSM
      intends to negotiate distribution relationships with suppliers whereby NSM
      will
      negotiate a “drop shipment” arrangement with suppliers and manufacturers for
      other products whereby certain suppliers will ship directly to NSM’s customer
      without having the item sent to NSM’s offices, which in turn saves storage space
      and shipping costs.





**Market**





The
      target market for NSM’s products and services will be a customer base of mature
      consumers that desire the best quality marine products for their hobbies. The
      consumer will tend to be very educated in their body of knowledge of the genre,
      and usually know specifically what they are searching for. Also, NSM intends
      to
      target the potential market of museums, educational institutions, and the gift
      market. Finally, there is an entire demographic category that NSM also plans
      to
      address the radio controlled ship market.




***Page
          - 4***





Zuber
      Jamal believes that NSM’s website will attract a broad range of nationalities
      due to its broad variety of items and its common cross-cultural appeal. It
      is
      the intention of NSM to impart a sense of maritime history to the enthusiast
      in
      an educative and informative way through its website and its
      products.





NSM
      uses
      general information available via the internet, trade shows, business sources,
      business periodicals and the media to ascertain the size of the nautical hobby
      market. From the size of the suppliers that NSM uses and the number of suppliers
      NSM utilizes, Mr. Jamal estimates the size of the market NSM is targeting on
      a
      global basis is approximately $500 million.





**Principal
      Suppliers**





NSM
      is
      not dependent on any single supplier for its products. NSM’s products are
      supplied by a variety of manufactures and suppliers from Europe and the United
      States. Any relationship NSM has with its suppliers is strictly a
      supplier/purchaser relationship, which does not require a formal
      agreement.





**Competition**





The
      industry in which NSM operates is extremely competitive and always changing.
      Within the Internet marketplace, there are an enormous number of corporations
      that are competing for online users, advertising dollars, sponsorship fees
      and
      many other unique opportunities for revenue. Many of these potential competitors
      are likely to enjoy substantial competitive advantages, including:





(1)
            greater
                financial, technical and marketing resources that can be devoted
                to the
                development, promotion and sale of their
                services;


(2)
            easier
                and more access to capital;


(3)
            longer
                operating histories;


(4)
            greater
                name recognition and established corporate
                identity;


(5)
            larger
                user base; and


(6)
            developed
                websites.





More
      specifically, online participants focused on the e-commerce industry are growing
      and the services and products that they are offering continues to increase
      at a
      rapid rate. Suppliers, retailers, consumers and other industry participants
      do
      not rely solely on the use of the Internet to communicate and interact. There
      are many alternative and traditional means that will continue to provide
      competition to the utilization of the Internet for similar purposes. Zuber
      Jamal
      believes that competition will grow as the Internet usage increases and it
      becomes an easier and more efficient medium for the e-commerce industry
      participants to interact.





NSM
      will
      strive to obtain a competitive advantage by providing unique, quality products,
      privacy, secure mode of payment, and guaranteed product and service
      satisfaction. Zuber Jamal believes that NSM will have a competitive advantage
      for the following reasons:





1.
            The
                marine products that NSM is selling are designed and manufactured
                mostly
                in Europe, the home of centuries of marine history. This gives the
                products a level of authenticity.


2.
            The
                products are manufactured where the talent pool is very high but
                the costs
                can be 50% less than the costs of labor in North America.


3.
            Zuber
                Jamal has broad based business experience, including the North American
                and the Asian marketplaces.


4.
            www.northernstarmall.com
                is fully operational and ready to receive customer
                orders.


5.
            There
                is a 30-day money back guarantee on all products. Customers pay for
                shipping on purchases and returns. If returned, the item is checked
                for
                damage and replaced.


6.
            The
                first product offerings are already in inventory and ready to be
                shipped
                to customers.


7.
            There
                is a free NSM newsletter that visitors of the website may subscribe
                to for
                information.





NSM’s
      principal competitors are www.model-ships.com , www.shipslocker.com ,
      and www.handcraftedmodelships.com .
      As they
      are private corporations NSM is unable to ascertain the size of their market.
      As
      the competitors are private corporations with no requirement for financial
      disclosure, there is no way of quantifying and qualifying what position on
      a
      sale’s basis NSM is in relative to its competition.




***Page
          - 5***





**Government
      Controls and Regulations**





Currently,
      other than business and operations licenses applicable to most commercial
      ventures, NSM is not required to comply with any extraordinary regulations
      for
      its business operations. However, there can be no assurance that current or
      new
      laws or regulations will not, in the future, impose additional fees and taxes
      on
      NSM and its business operations. Any new laws or regulations relating to the
      Internet or any new interpretations of existing laws could have a negative
      impact on NSM’s business and add additional costs to NSM’s business
      operations.





Websites
      are not currently subject to direct federal laws or regulations applicable
      to
      access, content or commerce on the Internet. However, due to the increasing
      popularity and use of the Internet, it is possible that a number of laws and
      regulations may be adopted with respect to the Internet covering issues such
      as:





•
      user
      privacy


•
      freedom
      of expression


•
      pricing


•
      content
      and quality of products and services


•
      taxation


•
      advertising


•
      intellectual property rights


•
      information security





The
      adoption of any such laws or regulations might decrease the rate of growth
      of
      Internet use, which in turn could decrease the demand for NSM’s products and
      services, increase the cost of doing business, or in some other manner have
      a
      negative impact on NSM’s business, financial condition and operating results. In
      addition, applicability to the Internet of existing laws governing issues such
      as property ownership, copyrights and other intellectual property issues,
      taxation, libel, obscenity and personal privacy is uncertain. The vast majority
      of such laws were adopted prior to the advent of the Internet and related
      technologies and, as a result, do not contemplate or address the unique issues
      of the Internet and related technologies.





Additionally,
      in response to concerns regarding “spam” (unsolicited electronic messages),
“pop-up” web pages and other Internet advertising, the federal government and a
      number of states have adopted or proposed laws and regulations that would limit
      the use of unsolicited Internet advertisements. While a number of factors may
      prevent the effectiveness of such laws and regulations, the cumulative effect
      may be to limit the attractiveness of effecting sales on the Internet, thus
      reducing the value of NSM’s business operations.





Also,
      several telecommunications companies have petitioned the Federal Communications
      Commission to regulate Internet service providers and on-line service providers
      in a manner similar to long distance telephone carriers and to impose access
      fees on those companies. This could increase the cost of transmitting data
      over
      the Internet.





**Number
      of Total Employees and Number of Full Time Employees**





Currently,
      NSM has no employees and, has no intention to hire any employees or retain
      any
      third party independent contractors to provide services to NSM. However, as
      part
      of phase 2 of NSM’s proposed plan of operation, NSM plans to hire personnel for
      sales, marketing and customer service provided that NSM is able to raise the
      necessary working capital to implement phase 2 either through revenue generation
      from its business operations or from equity financing.





At
      present, NSM’s sole officer and director does not have an employment agreement
      with NSM. NSM presently does not have pension, health, annuity, insurance,
      stock
      options, profit sharing or similar benefit plans; however, NSM may adopt plans
      in the future. There are presently no personal benefits available to any
      employees.





**RISK
      FACTORS**





You
      should consider each of the following risk factors and the other information
      in
      this Annual Report, including NSM’s financial statements and the related notes,
      in evaluating NSM’s business and prospects. The risks and uncertainties
      described below are not the only ones that impact on NSM’s business. Additional
      risks and uncertainties not presently known to NSM or that NSM currently
      considers immaterial may also impair its business operations. If any of the
      following risks actually occur, NSM’s business and financial results could be
      harmed. Please consider the following risk factors before deciding to invest
      in
      NSM’s shares of common stock.





***Page
          - 6***





**Risks
      associated with NSM’s business and properties:**





**1.**  **NSM
      is an initial development stage company and may not be able to continue as
      a
      going concern and may not be able to raise additional
      financing.**





A
      note
      provided by NSM’s independent auditors in NSM’s financial statements for the
      period from inception, April 8, 2004, through May 31, 2005 contains an
      explanatory note that indicates that NSM is an initial development stage company
      and its ability to continue as a going concern is dependent on continued
      financial support from its shareholders, raising additional capital to fund
      future operations and ultimately to attain profitable operations. The
      explanatory note states that, because of such uncertainties, there may be a
      substantial doubt about NSM’s ability to continue as a going concern. This note
      may make it more difficult for NSM to raise additional equity or debt financing
      needed to run its business and is not viewed favorably by analysts or investors.
      NSM urges potential investors to review this report before making a decision
      to
      invest in NSM.





**2.**  **NSM
      lacks an operating history upon which to judge its current operations and has
      losses that it expects to continue into the future. If the losses continue
      NSM
      will have to suspend operations or cease operations.**





In
      deciding whether to purchase NSM’s shares of common stock, and the likelihood of
      NSM’s success, you should consider that NSM is relatively new to the internet
      marketplace and has no operating history upon which to judge its current
      operations. As a result, you will be unable to assess NSM’s future operating
      performance or its future financial results or condition by comparing these
      criteria against its past or present equivalents.





NSM
      was
      incorporated on April 8, 2004 and NSM has no significant operating history
      upon
      which an evaluation of its future success or failure can be made. NSM’s net loss
      since inception is $69,235. NSM’s ability to achieve and maintain profitability
      and positive cash flow is dependent upon its ability to generate revenues from
      its planned business operations and to reduce development costs.





Based
      upon current plans, NSM expects to incur up to $18,000 in operating losses
      over
      the next 12 to 18 months. This will happen because there are expenses associated
      with the development and operation of its website. NSM cannot guaranty that
      it
      will be successful in generating revenues in the future. Failure to generate
      revenues may cause NSM to go out of business.





**3.**  **NSM
      does not have sufficient funds to complete each phase of its proposed plan
      of
      operation and as a result may have to suspend operations.**





Each
      of
      the phases of NSM’s plan of operation is limited and restricted by the amount of
      working capital that NSM has and is able to raise from financings and generate
      from business operations. NSM currently does not have sufficient funds to
      complete each phase of its proposed plan of operation and NSM expects that
      it
      will not satisfy its cash requirements for the next 12 months. As a result,
      NSM
      may have to suspend or cease its operations on one or more phases of the
      proposed plan of operation. Until NSM is able to generate any consistent and
      significant revenue it may be required to raise additional funds by way of
      equity. At any phase, if NSM finds that it does not have adequate funds to
      complete a phase, it may have to suspend its operations and attempt to raise
      more money so it can proceed with its business operations. If NSM cannot raise
      the capital to proceed it may have to suspend operations until it has sufficient
      capital .





**4.**  **Failure
      to successfully compete in the e-commerce industry with established e-commerce
      companies may result in NSM’s inability to continue with its business
      operations.**





There
      are
      three prominent, established e-commerce companies that are competitors with
      NSM.
      Each of www.model-ships.com and www.shipslocker.com and www.handcraftedmodelships.com have
      been in business for at least four years. Each of the competitors are private
      companies and as a result it is difficult for NSM to determine its competitive
      position among these competitors. Based on feedback from NSM’s customers, Zuber
      Jamal thinks that NSM provides a wider range of products than its competitors.
      NSM expects competition in this market to increase significantly as new
      companies enter the market and current competitors expand their online services.





If
      NSM is
      unable to develop and introduce enhanced or new technology or services quickly
      enough to respond to market or user requirements or to comply with emerging
      industry standards, or if these services do not achieve market acceptance,
      NSM
      may not be able to compete effectively.




***Page
          - 7***





In
      addition, NSM’s competitors may develop content that is better than NSM’s or
      that achieves greater market acceptance. It is also possible that new
      competitors may emerge and acquire significant market share. Competitive
      pressures created by any one of these companies, or by NSM’s competitors
      collectively, could have a negative impact on NSM’s business, results of
      operations and financial condition and as a result, NSM may not be able to
      continue with its business operations.





**5.**  **NSM
      may not be able to develop and introduce enhanced or new products and services
      quickly enough to respond to market or user requirements or to comply with
      emerging industry standards and, as a result, NSM’s ability to operate and
      compete effectively may be affected negatively.**





The
      computer and Internet industries are characterized by rapidly changing
      technologies, frequent introductions of new products, services, and industry
      standards. NSM’s future success will depend on its ability to adapt to rapidly
      changing technologies by continually improving the performance features and
      reliability of NSM’s services, as well as, the development and maintenance of
      the Internet’s infrastructure to cope with this increased traffic. NSM’s future
      success will also depend in large part on its ability to develop and enhance
      NSM’s products and services. There are significant technical risks in the
      development of new or enhanced services, including the risk that NSM will be
      unable to effectively use new technologies, adapt its services to emerging
      industry standards, or develop, introduce and market new or enhanced products
      and services. Also, if NSM is unable to develop and introduce enhanced or new
      products and services quickly enough to respond to market or user requirements
      or to comply with emerging industry standards, or if these products and services
      do not achieve market acceptance, NSM may not be able to compete
      effectively.





**6.**  **Since
      NSM’s success depends upon the efforts of Zuber Jamal, the sole officer of NSM,
      and its ability to attract and retain key personnel, NSM’s failure to retain key
      personnel will negatively effect its business** **.**





NSM’s
      business is greatly dependent on the efforts of its CEO, Zuber Jamal, and on
      its
      ability to attract, motivate and retain key personnel and highly skilled
      technical employees. Currently, NSM does not have any employment agreement
      with
      Mr. Jamal and does not carry a key man life insurance policy on Mr. Jamal.
      Also,
      neither NSM nor Northern Star have any full time or part time employees at
      this
      time. The loss of Mr. Jamal could have a negative impact on NSM’s business,
      operating results and financial condition. Competition for qualified personnel
      is intense and NSM may not be able to hire or retain qualified personnel, which
      could also have a negative impact on NSM’s business.





Also,
      Mr.
      Jamal devotes only 20 hours per week to NSM’s operations, with the balance of
      the work week devoted to research for Microcap e-mail to al. Mr Jamal is
      employed by Microcap e-mail to al. to provide 20 hours of research per week.
      However, under the terms of employment with Microcap e-mail to al. Mr. Jamal
      has
      the discretion to work in any capacity he sees fit.





**7.**  **Since
      NSM relies on one provider to host its website, NSM’s technical systems could
      fail if this service is interrupted, which in turn would have a negative impact
      on NSM’s business** **.**





Although
      NSM has back up facilities for its computer systems, NSM relies on one provider
      to host its website, www.easyasphosting.com .
      In the
      past, the website host has not failed to provide services to NSM’s systems and
      website. However, if NSM’s website host failed to provide service to its
      systems, NSM would be unable to maintain website availability. Interruptions
      could result from natural disasters as well as power loss, telecommunications
      failure and similar events. NSM’s business depends on the efficient and
      uninterrupted operation of its computer and communications hardware systems.
      Any
      system interruptions that cause its website to be unavailable could materially
      adversely affect its business. NSM does not currently have a formal agreement
      with its website host, but rather a standard monthly recurring billing
      relationship. Furthermore, NSM will be depending on outside expertise to
      maintain and expand its website design and capabilities. There is no assurance
      that website consultants can be retained who will understand the needs of and
      have the solution for a desirable, user-friendly commercial
      website.





**8.**  **NSM’s
      business exposes NSM to potential product liability claims, and NSM may incur
      substantial expenses if NSM is subject to product liability claims or
      litigation, which could result in a negative impact on its
      business.**





Zuber
      Jamal believes that products for model ship enthusiasts involves a minimal
      inherent risk of product liability claims and associated adverse publicity.
      However, NSM may be held liable if any product it sells causes injury or is
      otherwise found unsuitable. Currently, NSM does not carry any product liability
      insurance or general business coverage. A product liability claim, regardless
      of
      its merit or eventual outcome, could result in significant legal defense costs.
      These costs would have the effect of increasing NSM’s expenses and diverting
      Zuber Jamal’s attention away from the operation of its business, and could harm
      NSM’s business.




***Page
          - 8***





**9.**  **NSM
      has no independent board members, which places NSM’s sole officer and director,
      Zuber Jamal, in a conflict of interest with respect to compliance with NSM’s
      Code of Ethics.**





As
      Mr.
      Jamal is NSM’s sole officer and director, and employee at this time, there is no
      independent director and no other compliance officer or employee to oversee
      compliance of NSM’s Code of Ethics. As a result, Mr. Jamal is in a conflict of
      interest when it comes to overseeing compliance of NSM’s Code of Ethics. See
“Exhibit 99.1 - Code of Ethics” for more details.





**Risks
      associated with NSM’s industry:**




10. Any
      new
      laws or regulations relating to the Internet or any new interpretations of
      existing laws could have a negative impact on NSM’s
      business.


Currently,
      other than business and operations licenses applicable to most commercial
      ventures, NSM is not required to obtain any governmental approval for its
      business operations. However, there can be no assurance that current or new
      laws
      or regulations will not, in the future, impose additional fees and taxes on
      NSM
      and its business operations. Additionally, in response to concerns regarding
      “spam” (unsolicited electronic messages), “pop-up” web pages and other Internet
      advertising, the federal government and a number of states have adopted or
      proposed laws and regulations that would limit the use of unsolicited Internet
      advertisements. While a number of factors may prevent the effectiveness of
      such
      laws and regulations, the cumulative effect may be to limit the attractiveness
      of effecting sales on the Internet, thus reducing the value of NSM’s business
      operations. Also, several telecommunications companies have petitioned the
      Federal Communications Commission to regulate Internet service providers and
      on-line service providers in a manner similar to long distance telephone
      carriers and to impose access fees on those companies. This could increase
      the
      cost of transmitting data over the Internet. Any new laws or regulations
      relating to the Internet or any new interpretations of existing laws could
      have
      a negative impact on NSM’s business and add additional costs to NSM’s business
      operations.





**11.**  **Security
      of online transactions via the Internet and any security breaches will have
      a
      negative impact on NSM’s business.**





The
      secure transmission of confidential information over public telecommunications
      facilities is a significant barrier to electronic commerce and communications
      on
      the Internet. Many factors may cause compromises or breaches of security systems
      used by NSM and other Internet sites to protect proprietary information. A
      compromise of security on the Internet would materially negatively affect the
      use of the Internet for commerce and communications. This in turn would
      negatively affect NSM’s business. Circumvention of NSM’s security measures could
      result in misappropriation of its proprietary information or cause interruptions
      of NSM’s operations. Protecting against the threat of such security breaches may
      require NSM to expend significant amounts of capital and other resources. There
      can be no assurance that NSM’s security measures will prevent security
      breaches .





**12.**  **NSM’s
      business will be adversely affected if the infrastructure of the Internet is
      unable to support demands placed on it by NSM’s business.**





The
      success of commercial use of the Internet depends in large part upon the
      development and maintenance of the Internet’s infrastructure, including the
      development of complementary products such as various broadband technologies.
      The number of users of the Internet and the amount of traffic on the Internet
      have grown significantly and are expected to continue to grow, placing greater
      demands on the Internet's infrastructure. This infrastructure may not be able
      to
      support the demands placed on it by this continued growth without its
      performance or reliability being decreased. Any outages or delays in services
      could lower the level of Internet usage. In addition, the infrastructure and
      complementary products and services necessary to make the Internet a viable
      commercial marketplace may not develop. If usage of the Internet is curtailed
      due to infrastructure constraints or lack of complementary products, NSM expects
      an adverse impact on its business and revenues. Even if such infrastructure
      and
      complementary products and services do develop, there can be no guarantee that
      the Internet will become a viable commercial marketplace for products and
      services such as those offered by NSM


***Page
          - 9***


**Risks
      associated with NSM and its subsidiary:**





**13.**  **No
      public market for the shares of common stock and as a result you may not be
      able
      to resell your shares.**


There
      is
      currently no public market for the shares of common stock of NSM. Therefore
      there is no central place, such as stock exchange or electronic trading system,
      to resell your shares. If you want to resell your shares, you will have to
      locate a buyer and negotiate your own sale. There can be no assurance that
      a
      liquid public market on a stock exchange or quotation system will develop,
      or be
      sustained. The lack of a liquid public market will reduce your ability to divest
      an investment in NSM.





**14.**  **NSM
      does not expect to pay dividends in the foreseeable
      future.**





NSM
      has
      never paid cash dividends on its shares of common stock and has no plans to
      do
      so in the foreseeable future. NSM intends to retain earnings, if any, to develop
      and expand its business.





**15.**  **“Penny
      Stock” rules may make buying or selling NSM’s shares of common stock difficult,
      and severely limit the market and liquidity of the shares of common
      stock.**





Trading
      in NSM’s shares of common stock is subject to certain regulations adopted by the
      SEC commonly known as the “penny stock” rules. If and when NSM’s shares of
      common stock are listed for trading, Zuber Jamal believes that trading will
      begin in the $1.00 per share range. If this is the case, then the shares will
      trigger and be subject to the “penny stock” rules. These rules govern how
      broker-dealers can deal with their clients and “penny stocks”. The additional
      burdens imposed upon broker-dealers by the “penny stock” rules may discourage
      broker-dealers from effecting transactions in NSM’s securities, which could
      severely limit their market price and liquidity of NSM’s securities. See “Penny
      Stock rules” on page 11 for more details.





**Item
      2.**  **Description
      of Property.**





NSM's
      sole assets consists of its 100% interest in Northern Star. Northern Star’s
      assets consist of its domain name www.northernstarmall.com ,
      its
      website, and the inventory it has in stock at this time.





NSM
      operates from its principal office at Suite 1106, 1200 West 73 rd Avenue,
      Vancouver, British Columbia, Canada. Since October 1, 2005, NSM leases the
      office space under a one year term lease at a rental rate of CDN$650 a month
      (approximately US$565/month). Zuber Jamal believes this office space is
      sufficient at this time. See “Exhibit 10.3 - Lease” for more
      details.





**Item
      3.**  **Legal
      Proceedings.**





NSM
      is
      not a party to any pending legal proceedings and, to the best of NSM’s
      knowledge, none of NSM’s property or assets are the subject of any pending legal
      proceedings





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders.**





No
      matter
      was submitted to a vote of security holders, through the solicitation of proxies
      or otherwise, during the fourth quarter of the fiscal year covered by this
      report.





**PART
      II**





**Item
      5.**  **Market
      for Common Equity and Related Stockholder Matters.**





**(a)**  **Market
      Information**





Currently,
      NSM’s shares of common stock are not listed for trading on any exchange or
      quotation service.




***Page
          - 10***





**(b)**  **Holders
      of Record**





There
      are
      approximately 27 holders of record of NSM’s shares of common stock.





**(c)**  **Dividends**





NSM
      has
      declared no dividends on its shares of common stock and is not subject to any
      restrictions that limit its ability to pay dividends on its shares of common
      stock. Dividends are declared at the sole discretion of NSM’s Board of
      Directors.





**(d)**  **Recent
      Sales of Unregistered Securities**





There
      have been no sales of unregistered securities within the last three years that
      would be required to be disclosed pursuant to Item 701 of Regulation S-B, except
      for the following:





On
      April
      16, 2004, NSM issued 2,500,000 restricted shares of common stock to Zuber Jamal,
      NSM’s sole director and officer, pursuant to Section 4(2) of the Securities Act
      of 1933. The restricted shares of common stock were issued in consideration
      of
      the services that were provided by Mr. Jamal in the formation of NSM and its
      business operations. NSM valued those services at $2,500. Mr. Jamal determined
      that the number of shares issued for the services was representative of an
      equity position of a sole director and officer in a development company. Mr.
      Jamal is a sophisticated investor, an officer and a director of NSM, and was
      in
      possession of all material information relating to NSM. Further, no commissions
      were paid to anyone in connection with the sale of the shares and no general
      solicitation was made to anyone.





On
      April
      23, 2004, NSM issued 500,000 restricted shares of common stock to Zuber Jamal
      pursuant to Section 4(2) of the Securities Act of 1933. NSM set the offering
      price for this offering at $0.05 per share. In determining this offering price,
      NSM’s sole director, Zuber Jamal, considered similar factors that were
      considered when determining the offering price of this offering, such as the
      offering price of NSM’s past and future offerings and what effect the offering
      price would have on the dilution of net tangible book value on future investors.
      Mr. Jamal determined that the offering price needed to be increased from the
      last offering price to ensure that the $0.05 offering would not be too dilutive
      in consideration of future offerings. NSM received $25,000 in subscription
      funds
      from Mr. Jamal as consideration for these shares. Mr. Jamal is a sophisticated
      investor, an officer and a director of NSM, and was in possession of all
      material information relating to NSM. Further, no commissions were paid to
      anyone in connection with the sale of the shares and no general solicitation
      was
      made to anyone.





On
      April
      30, 2004, NSM authorized the issuance of up to 750,000 shares of common stock
      at
      $0.10 to private investors for a total offering price of $75,000. NSM raised
      $44,500 from this offering, which was closed on September 30, 2004. The 445,000
      restricted shares of common stock were issued for investment purposes in a
      “private transaction”. NSM relied upon Section 4(2) of the Securities Act of
      1933 and Rule 903 of Regulation S. The offering was not a public offering and
      was not accompanied by any general advertisement or any general solicitation.
      Each subscriber had a pre-existing business relationship with the sole executive
      officer that allowed NSM to determine that (1) each subscriber met certain
      suitability standards and (2) had the level of knowledge and experience in
      finance to evaluate the merits and risks of the investment in the shares. NSM
      received from each subscriber a completed and signed subscription agreement
      containing certain representations and warranties, including, among others,
      that
      (a) the subscriber was not a U.S. person, (b) the subscriber subscribed for
      the
      shares for their own investment account and not on behalf of a U.S. person,
      and
      (c) there was no prearrangement for the sale of the shares with any buyer.
      No
      offer was made or accepted in the United States and the share certificates
      representing the shares have been legended with the applicable trading
      restrictions .





There
      are
      no outstanding options or warrants to purchase, or securities convertible into,
      shares of NSM’s common stock at this time.





**(e)**
            **Penny
                Stock Rules**





Trading
      in NSM’s shares of common stock is subject to the “penny stock” rules. The SEC
      has adopted regulations that generally define a penny stock to be any equity
      security that has a market price of less than $5.00 per share, subject to
      certain exceptions. These rules require that any broker-dealer who recommends
      NSM’s shares of common stock to persons other than prior customers and
      accredited investors, must, prior to the sale, make a special written
      suitability determination for the purchaser and receive the purchaser’s written
      agreement to execute the transaction. Unless an exception is available, the
      regulations require the delivery, prior to any transaction involving a penny
      stock, of a disclosure schedule explaining the penny stock market and the risks
      associated with trading in the penny stock market. In addition, broker-dealers
      must disclose commissions payable to both the broker-dealer and the registered
      representative and current quotations for the securities they offer. The
      additional burdens imposed upon broker-dealers by such requirements may
      discourage broker-dealers from effecting transactions in NSM’s shares of common
      stock, which could severely limit their market price and liquidity of NSM’s
      shares of common stock.




***Page
          - 11***





The
      “penny stock” rules also imposes additional sales practice requirements on
      broker/dealers who sell penny stock. These rules require a one page summary
      of
      certain essential items. The items include the risk of investing in penny stocks
      in both public offerings and secondary marketing; terms important in
      understanding of the function of the penny stock market, such as “bid” and
“offer” quotes, a dealers “spread” and broker/dealer compensation; the
      broker/dealer compensation, the broker/dealers duties to its customers,
      including the disclosures required by any other penny stock disclosure rules;
      the customers rights and remedies in causes of fraud in penny stock
      transactions; and, the NASD’s toll free telephone number and the central number
      of the North American Administrators Association, for information on the
      disciplinary history of broker/dealers and their associated
      persons.





**Item
      6.**  **Management’s
      Discussion and Analysis or Plan of Operation.**





THE
      FOLLOWING IS A DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS OF NSM
      HOLDINGS, INC. FOR THE
      FISCAL YEARS ENDED MAY
      31,
      2005 AND
      2004. THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
      FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE HEREIN.





**Overview**





NSM
      is a
      start-up, development stage company and has not yet generated or realized any
      significant revenues from its e-commerce business operations. During the last
      fiscal year, NSM focused its efforts on the e-commerce operations of its
      business, including the development of the Website its strategic alliances
      for
      marketing.





NSM’s
      auditors have provided an explanatory note in its financial statements that
      indicates that NSM is an initial development stage company and NSM’s ability to
      continue as a going concern is dependent on raising additional capital to fund
      future operations and ultimately to attain profitable operations. This means
      that NSM’s auditors believe there is substantial doubt that NSM can continue as
      an on-going business for the next twelve months unless NSM obtains additional
      capital to pay its bills. This is because NSM has not generated any significant
      revenues and no earnings are anticipated until NSM’s business operations become
      profitable.





NSM
      incurred net losses for the period from inception of April 8, 2004 to May 31,
      2004 and for the period from inception of April 8, 2004 to May 31, 2005 of
      $15,856 and $69,235 respectively.





To
      meet
      its need for cash, NSM will rely on the proceeds raised from its April 2004
      private placement, its September 2004 private placement, , its current
      registration statement, and from revenues generated from its business
      operations. These proceeds will be applied to (1) the development of NSM’s
      website www.northernstarmall.com (the
“ **Website** ”),
      (2)
      the development and delivery of its products and services, (3) the operation
      of
      its business, and (4) working capital. NSM cannot guaranty that these proceeds
      will be enough for it to stay in business and Zuber Jamal does not know how
      long
      NSM can satisfy its cash requirements. If NSM requires additional proceeds,
      NSM
      will have to find alternative sources, like a public offering, a private
      placement of securities, or loans from its sole officer or others. At the
      present time, NSM has a current registration statement and offering filed with
      the United States Securities and Exchange Commission. NSM has not made any
      arrangements to raise additional cash. If NSM needs additional cash and cannot
      raise it, NSM will either have to suspend operations until it does raise the
      cash, or cease operations entirely.





During
      the next 12 months, NSM has no current plan to (1) buy any specific additional
      plant or equipment, (2) conduct any significant research or development
      activities, or (3) to hire any employees.





NSM’s
      financial statements included in this annual report have been prepared without
      any adjustments that would be necessary if NSM becomes unable to continue as
      a
      going concern and would therefore be required to realize upon its assets and
      discharge its liabilities in other than the normal course of its business
      operations.





**Results
      of Operations**





Since
      inception, NSM’s business operations have been financed primarily from the
      proceeds of private placements. While NSM is currently generating some revenue,
      NSM does not anticipate earning significant revenues until it completes its
      plan
      of operation. There is no assurance that NSM will be able to complete its plan
      of operation.




***Page
          - 12***





During
      the period ended May 31, 2004, NSM completed a private placement in the amount
      of $25,000. A significant portion of the private placement funds was used to
      pay
      existing payables with the balance being spent on the preparation and filing
      of
      a registration statement. Also, in September 2004 NSM completed a $44,500
      financing through a private placement. There can be no assurances that
      additional equity or other financing will be available on terms acceptable
      to
      NSM.





**Revenue**





NSM
      did
      not earn any revenues during the fiscal year ended May 31, 2004, but did earn
      $20,590 in revenues during the fiscal year ended May 31, 2005. NSM’s auditors’
      report on its May 31, 2005 financial statements contained an explanatory
      paragraph that states that due to recurring losses since inception and negative
      cash flows substantial doubt exists as to NSM’s ability to continue as a going
      concern.




For
      the
      period from inception (April 8, 2004) to May 31, 2005, NSM realized $20,590
      in
      sales of its products. The concurrent cost of sales was $14,049, resulting
      in
      gross profit from operations of $6,541. During the same period, NSM incurred
      $75,776 in total expenses, as listed below under “Expenses”. Therefore, for the
      fiscal period ended May 31, 2005 NSM had total net loss of $69,235.




For
      the
      period from inception (April 8, 2004) to May 31, 2004, NSM realized $nil in
      sales of its products. During the same period, NSM incurred $15,856 in total
      expenses, as listed below under “Expenses”. Therefore, for the fiscal period
      ended May 31, 2004 NSM had total net loss of $15,856.





**Expenses**





NSM’s
      expenses increased to $59,920 or 378% from $15,856 for the year ended May 31,
      2004 to $75,776 for the year ended May 31, 2005. The increase was primarily
      due
      to approximately a $40,000 increase in professional fees, an $8,000 increase
      in
      consulting fees, a $7,000 increase in office and general expenses and a $3,000
      increase in management services. The increases were due to increased operations
      during the period and to a registration statement for a public offering.





NSM
      had
      cash of $27,321 at May 31, 2005. From inception to May 31, 2005, NSM had a
      loss
      of $69,235, including (a) office and general expenses of $7,990, which included
      rent of $3,479 and general administrative charges of $4,511; (b) professional
      fees of $52,288, which included legal fees of $29,888 for a private placement
      and the preparation of a registration statement, accounting fees of $6,200
      for
      preparation of the financial statements, and auditor’s fees of $16,200; (c)
      consulting fees of $8,458; (d) management service fees of $6,406, which included
      2,500,000 shares issued to the president in lieu of cash for services rendered
      with a fair value of $2,500, and $3,906 for management fee; and (e) amortization
      of $634 for the accumulated amortization on the Website.





NSM
      had
      no cash at May 31, 2004. From inception to May 31, 2004, NSM had a loss of
      $15,856, including (a) office and general expenses of $761, which included
      rent
      of $733 and general administrative charges of $28; (b) professional fees of
      $11,935, which included legal fees of $7,622 for NSM’s incorporation,
      organization, and the preparation of a registration statement, accounting fees
      for preparation of financial statements of $1,000, and auditor’s fees of $3,000;
      (c) consulting fees of $183; (d) management service fees of $2,977, which
      included 2,500,000 shares issued to the president in lieu of cash for services
      rendered with a fair value of $2,500.





**Liquidity
      and Financial Condition**





NSM
      had
      cash of $27,321 and working capital deficiency of $6,529 at May 31, 2005. During
      the period from inception (April 8, 2004) to May 31, 2005, NSM used $32,252
      in
      cash for operating activities. Cash used in operations was financed by the
      sale
      of common stock of $61,878. NSM has accumulated a deficit of $69,235 since
      inception and has a stockholder’s deficit of $4,857.





As
      of May
      31, 2005, NSM had assets recorded on its consolidated financial statements
      at
      $37,653 consisting of cash of $27,321, accounts receivable of $554, inventory
      of
      $8,106, property and equipment of $570, and an intangible asset relating to
      the
      Website domain name and Website development costs of $1,102. NSM’s liabilities
      on May 31, 2005 totaled $42,510, consisting of $30,297 in accounts payable
      and
      $11,019 in accrued liabilities. There are no material defaults or past due
      amounts for the accounts payable or accrued liabilities. Accounts payable and
      accrued liabilities have increased since May 31, 2004 due to costs associated
      with business operations, sale of products, and a registration
      statement.





As
      of May
      31, 2004, NSM’s total assets were $8,810 and its total liabilities were $22,166.
      As of May 31, 2005, NSM’s total assets were $37,653 and its total liabilities
      were $42,510. The increase in the assets was a direct result of an increase
      of
      $27,321 in cash, an increase of $765 in inventory, an increase of $554 in
      accounts receivable, an increase of $570 in property and equipment, and a
      decrease of $367 in intangible assets. The increase in total liabilities is
      a
      result of an increase of $26,969 in accounts payable and accrued liabilities,
      an
      increase of $717 due to a related party, and a decrease of $7,342 for a note
      payable. The increase in cash was a result of $44,500 raised in NSM’s September
      2004 private placement.




***Page
          - 13***





NSM
      has
      no contingencies or long-term commitments.





NSM
      has
      not attained profitable operations and is dependent upon obtaining financing
      to
      continue and to expand its existing business operations and to complete its
      plan
      of operation. For these reasons, NSM’s auditors stated in their report that they
      have substantial doubt that NSM will be able to continue as a going
      concern.





NSM’s
      future business activities are dependent upon its ability to obtain third party
      financing in the form of debt and equity and ultimately to generate future
      profitable e-commerce activity or revenue from its product and services. As
      of
      May 31, 2005, NSM has only generated $20,590 in revenues, and has experienced
      negative cash flow from its e-commerce activities. NSM may look to secure
      additional funds through future debt or equity financings. Such financings
      may
      not be available or may not be available on reasonable terms.





**Plan
      of Operations**





NSM
      has
      not had any significant revenues generated from its business operations since
      inception. Zuber Jamal expects that the revenues generated from its website
      for
      the next 12 months will not be enough for NSM’s required working capital. Until
      NSM is able to generate any consistent and significant revenue it may be
      required to raise additional funds by way of equity.





At
      any
      phase, if NSM finds that it does not have adequate funds to complete a phase,
      it
      may have to suspend its operations and attempt to raise more money so it can
      proceed with its business operations. If NSM cannot raise the capital to proceed
      it may have to suspend operations until it has sufficient capital.





NSM
      anticipates that it will require approximately $285,700 for additional
      organization costs for the next 12 months, including $250,000 for NSM’s plan of
      operations, as described below.





To
      become
      profitable and competitive, NSM needs to establish its Website as a
      comprehensive on-line shopping mall. To achieve this goal, Zuber Jamal has
      prepared the following phases for its plan of operation for the next 12
      months.





**Phase
      1 - Develop and populate Website (2 months)**





In
      Phase
      1, NSM plans to (1) upgrade and update the Website so that it is more visually
      appealing and technologically sound, (2) update its product line and visuals
      on
      the Website, and (3) implement a downloadable high resolution picture format
      for
      viewing its products. NSM has budgeted $50,000 for this phase and expects it
      to
      take two months to complete, with completion expected within the first two
      months of NSM’s plan of operation. Also in this phase, NSM will continue to
      maintain and populate the Website with new products and services.





**Phase
      2 - Implement marketing strategy (6 months)**





In
      Phase
      2, NSM plans to (1) hire personnel for sales, marketing and customer service,
      (2) create a marketing strategy for the Website and its products, (3) upgrade
      its newsletter, and (4) implement its marketing strategy on its target market,
      including international customers.





NSM’s
      marketing goals in this phase are to attract potential and repeat customers
      to
      the Website and have customers perceive the Website as a preferred source of
      unique maritime products that are packaged and delivered in a professional,
      authoritative and efficient manner.





NSM
      has
      budgeted $75,000 for this phase and expects it to take six months to complete
      with completion expected within the first six months of NSM’s plan of
      operation.





**Phase
      3 - Expand inventory and products (6 months)**





In
      Phase
      3, NSM plans to expand its product line to include more specialty kits, marine
      antiquities, marine prints, multimedia products, educational products, and
      radio-controlled products.




***Page
          - 14***





NSM’s
      expansion goals in this phase are to (1) expand its product line by 20 new
      products each year, (2) expand its business by offering products directly
      applicable to its retail model, and (3) position itself as an authority on
      the
      subject of marine based products and memorabilia and extend its product line
      to
      include other media such as antiquities, books and DVD’s.





NSM
      has
      budgeted $75,000 for this phase and expects it to take six months to complete,
      with completion expected within the second six months of NSM’s plan of
      operation.





**Phase
      4- Develop strategic alliances (4 months)**





In
      Phase
      4, NSM plans to develop and establish strategic alliances with (1) webmasters
      of
      various strategic sites on the Internet, (2) national retail chains, (3)
      museums, (4) educational institutions, (5) gift market, (6) product suppliers,
      and (7) national and international shipping companies.





NSM’s
      strategic alliance goals in this phase are to (1) create relationships with
      the
      strategic alliances to help attract traffic to the Website and to the reciprocal
      hyperlinks, banner ads or profiles on their sites, (2) assist in the marketing
      strategy,(3) capitalize on the extensive market reach of the strategic
      alliances, (4) help fill rates and provide inventory in an allotted processing
      time, and (5) develop customer service with timely and economical delivery
      of
      products to customers.





Currently,
      NSM has identified some suitable strategic partners for its products and
      services but has yet to finalize the terms of such a partnership. During this
      phase, NSM will identify more strategic partners and contact them to negotiate
      a
      strategic alliance.





NSM
      has
      budgeted $50,000 for this phase and expects it to take four months to complete,
      with completion expected within the final four months of NSM’s plan of
      operation





**Critical
      Accounting Policies**





NSM’s
      discussion and analysis of its financial condition and results of operations,
      including the discussion on liquidity and capital resources, are based upon
      its
      financial statements, which have been prepared in accordance with accounting
      principles generally accepted in the United States. The preparation of these
      financial statements requires Zuber Jamal to make estimates and judgements
      that
      affect the reported amounts of assets, liabilities, revenues and expenses,
      and
      related disclosure of contingent assets and liabilities. Actual results could
      differ from those estimates. Some unique factors that will affect these
      estimates include the continuation of NSM as a going concern, the collectibility
      of trade accounts receivable, and the valuation of inventory.





Also,
      any
      reasonable change in these factors listed above could impact NSM’s reported
      results, financial position and liquidity. For instance, if NSM is unable to
      continue as a going concern, it may be forced to liquidate its inventory on
      hand
      for less than cost resulting in negative impact on gross margin. Also, if NSM’s
      assumptions about the collectibility of trade accounts receivable differs from
      actual collections, this would have a negative impact on reported
      results.





On
      an on
      going basis, Mr. Jamal re-evaluates his estimates and judgments, including
      but
      not limited to, those related to revenue recognition and collectibility of
      accounts receivable. Critical accounting policies identified are as
      follows:





Revenue
      Recognition and Accounts Receivable





NSM
      recognizes revenue from the online sale of marine hobby products in accordance
      with Securities and Exchange Commission Staff Accounting Bulletin No. 104
“ *Revenue
      Recognition in Financial Statements* ”.
      Revenue consists of the sale of marine hobby products and is recognized only
      when the price is fixed or determinable, persuasive evidence of an arrangement
      exists, the product is shipped, and collectibility is reasonably
      assured.





Trade
      accounts receivable relate to the sale of marine hobby products. NSM sells
      to
      customers based on standard credit policies and regularly reviews accounts
      receivable for any bad debts. As of May 31, 2005, no allowance for doubtful
      accounts is considered necessary.





***Page
          - 15***


Website
      Development Costs





NSM
      recognizes the costs associated with developing a website in accordance with
      the
      American Institute of Certified Public Accountants (“AICPA”) Statement of
      Position (“SOP”) No. 98-1, “ *Accounting
      for the Costs of Computer Software Developed or Obtained for Internal
      Use* ”.
      Relating to website development costs the Company follows the guidance pursuant
      to the Emerging Issues Task Force (EITF) No. 002, “ *Accounting
      for Website Development Costs”* .





Costs
      associated with the website consist primarily of a domain name purchased from
      a
      third party, and web site design costs. These capitalized costs are amortized
      based on their estimated useful life over four years. Payroll and related costs
      have not been capitalized, as the amounts principally relate to maintenance.
      Internal costs related to the development of website content will be charged
      to
      operations as incurred.





Foreign
      Currency Transaction


The
      functional and reporting currency of both NSM and Northern Star is the United
      States dollar. Monetary assets and liabilities denominated in foreign currencies
      are translated to United States dollars in accordance with SFAS No. 52
“ *Foreign
      Currency Translation* ”
      using
      the exchange rate prevailing at the balance sheet date. Gains and losses arising
      on translation or settlement of foreign currency denominated transactions or
      balances are included in the determination of income. Foreign currency
      transactions are primarily undertaken in Canadian dollars. NSM has not, to
      the
      date of these financials statements, entered into derivative instruments to
      offset the impact of foreign currency fluctuations.





Going
      Concern Issue


The
      going
      concern basis of presentation assumes NSM will continue in operation throughout
      the next fiscal year and into the foreseeable future and will be able to realize
      its assets and discharge its liabilities and commitments in the normal course
      of
      business. Certain conditions currently exist that raise substantial doubt upon
      the validity of this assumption. The financial statements do not include any
      adjustments that might result from the outcome of the uncertainty.





Inventory


NSM
      values inventory at the lower of cost or market. Cost is determined on a first
      in, first out basis. Market is determined based on the net realizable value.
      NSM
      will write down inventory balances for estimated obsolescence or unmarketable
      inventory equal to the difference between the cost of inventory and the
      estimated market value based upon assumptions about future demand and market
      conditions. If actual market conditions are less favourable than those projected
      by management, additional inventory write-downs may be required.




**INTERNAL
      AND EXTERNAL SOURCES OF LIQUIDITY**





NSM
      has
      funded its operations principally from its April 2004 and September 2004
      non-public offering. NSM currently has an effective registration statement
      with
      which it is trying to raise up to $250,000 at $0.10 per share. NSM has not
      yet
      sold any of this public offering.





**INFLATION**





Zuber
      Jamal does not believe that inflation will have a material impact on NSM’s
      future operations





**UNCERTAINTIES
      RELATING TO FORWARD LOOKING STATEMENTS**





This
      Form
      10-KSB Annual Report contains “forward-looking statements” within the meaning of
      the Private Securities Litigation Reform Act of 1995. Certain information
      contained or incorporated by reference in this Annual Information Form,
      including the information set forth as to the future financial or operating
      performance of NSM, constitutes “forward-looking statements”. These statements
      may be identified by their use of words like “plans”, “expect”, “aim”,
“believe”, “projects”, “anticipate”, “intend”, “estimate”, “will”, “should”,
“could”, “contemplate”, “target”, “continue”, “budget”, “may”, “schedule”, and
      other similar expressions that indicate future events and trends and identify
      forward-looking statements. All statements, other than historical statements
      of
      fact, that address expectations or projections about the future, including
      statements about NSM’s strategy for growth, product development, market
      position, expenditures and financial results, are forward-looking
      statements.




***Page
          - 16***





Forward-looking
      statements in this Form 10-KSB include statements regarding (1) expectation
      that
      revenue will increase during fiscal 2005; (2) expectation participant base
      increasing; (3) expectation of future operating expenses increasing; (4)
      expectation that the development of NSM’s business will cause wages, marketing
      and promotional costs to increase; (5) expectation that working capital needs
      for fiscal 2005 will be funded through the equity capital markets and private
      financings; (6) expectation of future developments of content, features, and
      services to be provided on the website; and (7) expectation that inflation
      will
      not have a material impact on future operations. All forward-looking statements
      are made as of the date of filing of this Form 10-KSB and NSM disclaims any
      duty
      to update such statements.





Certain
      parts of this Form 10-KSB may contain “forward-looking statements” within the
      meaning of the Securities Exchange Act of 1934 based on current managements
      expectations. Actual results could differ materially from those in the forward
      looking statements due to a number of uncertainties including, but not limited
      to, those discussed in this section. Factors that could cause future results
      to
      differ from these expectations include general economic conditions, particularly
      related to demand the features and services offered on NSM’s website; changes in
      business direction or strategy; competitive factors (including competitors
      introducing superior services); pricing pressure (including competitors offering
      similar services at lower prices); inability to attract, develop or retain
      technical, consulting, managerial, agents, or independent contractors; and
      changes in participant’s tastes. As a result, the identification and
      interpretation of data and other information and their use in developing and
      selecting assumptions from and among reasonable alternatives requires the
      exercise of judgment. To the extent that the assumed events do not occur, the
      outcome may vary substantially from anticipated or projected results, and
      accordingly, no opinion is expressed on the achievability of those
      forward-looking statements. No assurance can be given that any of the
      assumptions relating to the forward-looking statements specified in the
      following information are accurate, and NSM assumes no obligation to update
      any
      such forward-looking statements.





NSM
      may,
      from time to time, make oral forward-looking statements. NSM strongly advises
      that the above paragraph and the risk factors described in this annual report
      and in NSM’s other documents filed with the United States Securities and
      Exchange Commission should be read for a description of certain factors that
      could cause the actual results of NSM to materially differ from those in the
      oral forward-looking statements. NSM disclaims any intention or obligation
      to
      update or revise any oral or written forward-looking statements whether as
      a
      result of new information, future events or otherwise.





**Item
      7.**  **Financial
      Statements**





See
      audited consolidated financial statements for the year ended May 31, 2005 and
      2004, and for the period from April 8, 2004 (date of inception) to May 31,
      2005
      attached as Exhibit A to this Form 10-KSB.





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





NSM’s
      principal independent accountant, Manning Elliot, Chartered Accountants, has
      not
      changed since the date of incorporation and there have been no disagreements
      with NSM’s principal independent accountant.





**Item
      8A.**  **Controls
      and Procedures.**





NSM
      maintains disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in NSM’s Securities Exchange Act of 1934
      reports is recorded, processed, summarized and reported within the time periods
      specified in the SEC’s rules and forms, and that such information is accumulated
      and communicated to NSM’s management, including its chief executive officer and
      chief financial officer, as appropriate, to allow timely decisions regarding
      required disclosure. Based on their most recent evaluation, which was completed
      within 90 days of the filing of this Form 10-KSB, NSM’s Chief Executive Officer
      and Chief Financial Officer believe NSM’s disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) are effective to ensure that
      information required to be disclosed by NSM in this report is accumulated and
      communicated to NSM’s management, including its principal executive officer and
      principal financial officer, as appropriate, to allow timely decisions regarding
      required disclosure. Based upon the foregoing, NSM’s chief executive officer and
      chief financial officer concluded that NSM’s disclosure controls and procedures
      are effective in connection with the filing of this Annual Report on Form 10-KSB
      for the year ended May 31, 2005.





There
      were no significant changes in NSM’s internal controls or other factors that
      could significantly affect these controls subsequent to the date of their
      evaluation, including any significant deficiencies or material weaknesses of
      internal controls that would require corrective action.





***Page
          - 17***











**Item
      8B.**  **Other
      Information.**





During
      the fourth quarter of the fiscal year covered by this Form 10-KSB, NSM had
      no
      information to be disclosed as required on a Form 8-K.





**PART
      III**





**Item
      9.**  **Directors,
      Executive Officers, Promoters and Control Persons; Compliance with Section
      16(a)
      of the Exchange Act.**





**(a)**  **Identify
      Directors and Executive Officers**





Each
      director of NSM or its subsidiaries holds office until (i) the next annual
      meeting of the stockholders, (ii) his successor has been elected and qualified,
      or (iii) the director resigns.





NSM’s
      and
      its subsidiaries’ management teams are listed below.





**Management
                Teams****Name
                of Directors and Officers**
            **NSM
                Holdings, Inc.**
            **Northern
                Star Distributors Ltd.**Zuber
                Jamal
            sole
                Director,
              CEO,
                President, CFO, Treasurer, Corporate Secretary
            sole
                Director,
              President
              Corporate
                Secretary





*Zuber
      Jamal* ●
      Mr.
      Jamal (35) has
      been
      NSM’s president and sole director since inception of NSM and is expected to hold
      those offices/positions until the next annual meeting of NSM’s stockholders.
      Since 1999 Mr. Jamal has been an associate of Microcap E-mail to. al, a venture
      capital firm. In 1991, Mr. Jamal obtained his Bachelor of Arts in Economics
      from
      the University of Western Ontario.





**(b)**  **Identify
      Significant Employees**





NSM
      currently does not have any significant employees.





**(c)**  **Family
      Relationships**





There
      are
      no family relationships among the directors, executive officers or persons
      nominated or chosen by NSM to become directors or executive
      officers.





**(d)**  **Involvement
      in Certain Legal Proceedings**





(1)
            No
                bankruptcy petition has been filed by or against any business of
                which any
                director was a general partner or executive officer either at the
                time of
                the bankruptcy or within two years prior to that
                time.





(2)
            No
                director has been convicted in a criminal proceeding and is not subject
                to
                a pending criminal proceeding (excluding traffic violations and other
                minor offences).





(3)
            No
                director has been subject to any order, judgement, or decree, not
                subsequently reversed, suspended or vacated, of any court of competent
                jurisdiction, permanently or temporarily enjoining, barring, suspending
                or
                otherwise limiting his involvement in any type of business, securities
                or
                banking activities.





(4)
            No
                director has been found by a court of competent jurisdiction (in
                a civil
                action), the Securities Exchange Commission or the Commodity Futures
                Trading Commission to have violated a federal or state securities
                or
                commodities law, that has not been reversed, suspended, or
                vacated.





**(e)**  **Compliance
      with Section 16(a) of the Exchange Act.**





All
      reports were filed with the SEC on a timely basis and NSM is not aware of any
      failures to file a required report during the period covered by this annual
      report.




***Page
          - 18***





**(f)**  **Audit
      Committee Financial Expert**





NSM
      has
      no financial expert. Management believes the cost related to retaining a
      financial expert at this time is prohibitive. Further, because of NSM’s limited
      operations, Zuber Jamal believes the services of a financial expert are not
      warranted.





**(g)**  **Identification
      of Audit Committee**





NSM
      does
      not have a separately-designated standing audit committee. Rather, Zuber Jamal
      performs the required functions of an audit committee. Mr. Jamal does not meet
      the independent requirements for an audit committee member. Mr. Jamal is
      responsible for: (1) selection and oversight of NSM’s independent accountant;
      (2) establishing procedures for the receipt, retention and treatment of
      complaints regarding accounting, internal controls and auditing matters; (3)
      establishing procedures for the confidential, anonymous submission by NSM’s
      employees of concerns regarding accounting and auditing matters; (4) engaging
      outside advisors; and, (5) funding for the outside auditory and any outside
      advisors engagement by the audit committee.





**(h)**  **Code
      of Ethics**





NSM
      has
      adopted a code of ethics that applies to all its executive officers and
      employees, including its CEO and CFO. See Exhibit 99.1 - Code of Ethics for
      more
      information. Also, NSM’s code of ethics has been posted on its website at www.northernstarmall.com .
      NSM
      undertakes to provide any person with a copy of its code of ethics free of
      charge. Please contact Zuber Jamal at 604-671-8780 to request a copy of NSM’s
      code of ethics. Management believes NSM’s code of ethics is reasonably designed
      to deter wrongdoing and promote honest and ethical conduct; provide full, fair,
      accurate, timely and understandable disclosure in public reports; comply with
      applicable laws; ensure prompt internal reporting of code violations; and
      provide accountability for adherence to the code.





**Item
      10. Executive Compensation.**





NSM
      paid
      no compensation to its named executive officers during its fiscal year ending
      May 31, 2005.





**SUMMARY
      COMPENSATION TABLE**





Long-term
                compensation***Annual
                compensation***
            **Awards**
            **Payouts**Name
                and principal position
              (a)
            Year
              (b)
            Salary
              ($)
              (c)
            Bonus
              ($)
              (d)
            Other
                annual compen-sation
              ($)
              (e)
            Restricted
                stock awards
              ($)
              (f)
            Securities
                underlying options/
              SARs
              (#)
              (g)
            LTIP
                Payouts
              ($)
              (h)
            All
                other compen-sation
              ($)
              (i)Zuber
                Jamal
              CEO
              April
                2004 - present
            2003
              2004
              2005
            n/a
              2,478
              2,500
            n/a
              nil
              nil
            n/a
              nil
              nil
            n/a
              nil
              nil
            n/a
              nil
              nil
            n/a
              nil
              nil
            n/a
              2,500[1]
              nil


[1] NSM
      issued 2,500,000 shares of common stock to Mr. Jamal for services valued at
      $2,500.





Since
      NSM’s inception, no stock options, stock appreciation rights, or long-term
      incentive plans have been granted, exercised or repriced.





Currently,
      there are no arrangements between NSM and any of its directors or between any
      of
      the subsidiaries and any of its directors whereby such directors are compensated
      for any services provided as directors.





There
      are
      no other employment agreements between NSM or the subsidiaries and any named
      executive officer, and there are no employment agreements or other compensating
      plans or arrangements with regard to any named executive officer which provide
      for specific compensation in the event of resignation, retirement, other
      termination of employment or from a change of control of NSM or from a change
      in
      a named executive officer’s responsibilities following a change in
      control.




***Page
          - 19***





There
      are
      no management agreements, plans or arrangements in which NSM compensates its
      sole officer with the exception that NSM has agreed to pay Mr. Jamal a
      management fee of $500 per month for operational expertise. If NSM is unable
      to
      pay Mr. Jamal this monthly fee on a timely manner, then Mr. Jamal has agreed
      that such fee can be accrued and paid at a later date, as NSM has done in the
      past with Mr. Jamal. Such a debt will be non-interest bearing, unsecured and
      have no specific terms of repayment. As of today, no fees are owed to Mr. Jamal
      and no fees have accrued.





Indemnification





The
      Delaware General Corporation Law permits indemnification of directors, officers,
      and employees of corporations under certain conditions subject to certain
      limitations. Part 6 of NSM’s By-laws provides that NSM may indemnify an officer
      or director who is made a party to any proceeding, including a law suit, because
      of his position, if he acted in good faith and in a manner he reasonably
      believed to be in NSM’s best interest and has satisfied the applicable standard
      of conduct required to be satisfied under the Delaware General Corporation
      Law.
      NSM may advance expenses incurred in defending a proceeding, but only upon
      receipt by NSM of an undertaking, by or on behalf of such director, officer,
      employee, or agent, to repay all amounts so advanced unless it will ultimately
      be determined that such person is entitled to be indemnified under the By-laws
      or otherwise. To the extent that the officer or director is successful on the
      merits in a proceeding as to which he is to be indemnified, NSM must indemnify
      him against all expenses incurred, including attorney’s fees. NSM will indemnify
      any such person seeking indemnification in connection with a proceeding
      initiated by such person only if such proceeding was specifically authorized
      by
      the board of directors of NSM. The indemnification is intended to be to the
      fullest extent permitted by the laws of the State of Delaware.





**Item
      11. Security Ownership of Certain Beneficial Holders and
      Management.**





**(a)**  **Security
      Ownership of Certain Beneficial Owners (more than 5%)**





The
      following table sets forth, as of the date of this annual report, the total
      number of shares of common stock owned beneficially by each of NSM’s directors,
      officers and key employees, individually and as a group, and the sole owner
      of
      5% or more of NSM’s total outstanding shares. The stockholder listed below has
      direct ownership of his shares and possesses sole voting and dispositive power
      with respect to the shares.





**(1)**
              **Title
                of Class**
            **(2)**
              **Name
                and Address of Beneficial Owner**
            **(3)**
              **Amount
                and Nature of Beneficial Owner**
            **(4)**
              **Percent**
              **of
                Class**[2]shares
                of
              common
                stock
            **Zuber
                Jamal**
              10941
                - 168 Street
              Surrey,
                British Columbia
              V4N
                5H6 Canada
            3,000,000
            87.10%


[1] The
      listed beneficial owner has no right to acquire any shares within 60 days of
      the
      date of this Form 10-KSB from options, warrants, rights, conversion privileges
      or similar obligations excepted as otherwise noted.


[2] Based
      on
      3,445,000 shares of common stock issued and outstanding as of October 12,
      2005.




**(b)**  **Security
      Ownership of Management**







**(1)**
              **Title
                of Class**
            **(2)**
              **Name
                and Address of Beneficial Owner**
            **(3)**
              **Amount
                and Nature of Beneficial Owner**
            **(4)**
              **Percent**
              **of
                Class**[2]shares
                of
              common
                stock
            **Zuber
                Jamal**
              10941
                - 168 Street
              Surrey,
                British Columbia
              V4N
                5H6 Canada
            3,000,000
            87.10%shares
                of
              common
                stock
            Directors
                and Executive Officers (as a group)
            3,000,000
            87.10%


[1] The
      listed beneficial owner has no right to acquire any shares within 60 days of
      the
      date of this Form 10-KSB from options, warrants, rights, conversion privileges
      or similar obligations excepted as otherwise noted.


[2] Based
      on
      3,445,000 shares of common stock issued and outstanding as of October 12,
      2005.








***Page
          - 20***





**(c)**  **Changes
      in Control**





NSM
      is
      not aware of any arrangement that may result in a change in control of
      NSM.





**Item
      12. Certain Relationships and Related Transactions.**





**(a)**  **Relationships
      with Insiders**





No
      member
      of management, executive officer or security holder has had any direct or
      indirect interest in any transaction to which NSM was a party to that exceeded
      $60,000 in total.





**(b)**  **Transactions
      with Promoters**





Zuber
      Jamal is the sole promoter of NSM. Mr. Jamal is the only person who has taken
      an
      initiative in founding and organizing NSM’s business. Mr. Jamal has not received
      anything of value from NSM, nor is Mr. Jamal entitled to receive anything of
      value from NSM, for services provided as a promoter.





**Item
      13. Exhibits**





**(a)**  **Index
      to and Description of Exhibits.**





**Exhibit**
            **Description**
            **Status****Exhibit
                A**
            Audited
                Financial Statements for the period ended May 31, 2005
            Included**3.1**
            Certificate
                of Incorporation for NSM Holdings, Inc., filed as an Exhibit to NSM’s
                registration statement on Form SB-2/A filed on April 12, 2005, and
                incorporated herein by reference.
            Filed**3.2**
            By-laws
                of NSM Holdings, Inc., filed as an Exhibit to NSM’s registration statement
                on Form SB-2/A filed on April 12, 2005, and incorporated herein by
                reference.
            Filed**3.3**
            Certificate
                of Incorporation for Northern Star Distributors Ltd., filed as an
                Exhibit
                to NSM’s registration statement on Form SB-2/A filed on April 12, 2005,
                and incorporated herein by reference.
            Filed**3.4**
            Notice
                of Articles for Northern Star Distributors Ltd., filed as an Exhibit
                to
                NSM’s registration statement on Form SB-2/A filed on April 12, 2005,
                and
                incorporated herein by reference.
            Filed**3.5**
            Articles
                of Northern Star Distributors Ltd., filed as an Exhibit to NSM’s
                registration statement on Form SB-2/A filed on April 12, 2005, and
                incorporated herein by reference.
            Filed**10.1**
            Asset
                Purchase Agreement dated April 30, 2004, between Northern Star
                Distributors Ltd. and Hansa Capital Corp., filed as an Exhibit to
                NSM’s
                registration statement on Form SB-2/A filed on April 12, 2005, and
                incorporated herein by reference.
            Filed**10.2**
            Sublease
                dated April 1, 2004, between David Higano and Northern Star Distributors
                Ltd., filed as an Exhibit to NSM’s registration statement on Form SB-2/A
                filed on April 12, 2005, and incorporated herein by
                reference
            Filed**10.3**
            Lease
                dated October 1, 2005 between Officesuites At Airport Square and
                Northern
                Star Distributors Ltd.
            Included**31**
            Certifications
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
            Included**32**
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.
            Included**99.1**
            Code
                of Ethics
            Included





***Page
          - 21***




**ITEM
      14.   PRINCIPAL ACCOUNTING FEES AND SERVICES**






**(1)
        Audit Fees**






The
      aggregate fees billed for each of the last two fiscal years for professional
      services rendered by the principal accountant for NSM’s audit of annual
      financial statements and for review of financial statements included in NSM’s
      Form 10-QSB’s or services that are normally provided by the accountant in
      connection with statutory and regulatory filings or engagements for those fiscal
      years were:




2005
      -
      $10,200 - Manning Elliot, Chartered Accountants


2004
      -
      $nil - Manning Elliot, Chartered Accountants





**(2)
        Audit-Related Fees**




The
      aggregate fees billed in each of the last two fiscal years for assurance and
      related services by the principal accountants that are reasonably related to
      the
      performance of the audit or review of NSM’s financial statements and are not
      reported in the preceding paragraph were:




2005
      -
      $nil - Manning Elliot, Chartered Accountants


2004
      -
      $nil - Manning Elliot, Chartered Accountants





**(3)
        Tax Fees**




The
      aggregate fees billed in each of the last two fiscal years for professional
      services rendered by the principal accountant for tax compliance, tax advice,
      and tax planning were:




2005
      -
      $nil - Manning Elliot, Chartered Accountants


2004
      -
      $nil - Manning Elliot, Chartered Accountants





**(4)
        All Other Fees**




The
      aggregate fees billed in each of the last two fiscal years for the products
      and
      services provided by the principal accountant, other than the services reported
      in paragraphs (1), (2), and (3) above were:




2005
      -
      $nil - Manning Elliot, Chartered Accountants


2004
      -
      $nil - Manning Elliot, Chartered Accountants





(5)
        NSM’s audit committee’s pre-approval policies and procedures described in
      paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee
      pre-approve all accounting related activities prior to the performance of any
      services by any accountant or auditor.




(6)
        The percentage of hours expended on the principal accountant’s engagement
      to audit NSM’s financial statements for the most recent fiscal year that were
      attributed to work performed by persons other than the principal accountant’s
      full time, permanent employees was nil




***Page
          - 22***





**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Securities and Exchange Act of 1934,
      NSM Holdings, Inc. has caused this report to be signed on its behalf by the
      undersigned duly authorized person.








**NSM
      HOLDINGS, INC.**


By:*/s/ Zuber Jamal*


Name:  **Zuber
      Jamal**


Title **:**  **Director
      and CEO**


Dated:  **October
      13, 2005**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the following
      persons on behalf of NSM and in the capacities and on the dates indicated have
      signed this report below.








**Signature**
            **Title**
            **Date***/s/
                Zuber Jamal*
            President,
                Principal Executive Officer,
              Chief
                Executive Officer, Principal Financial Officer, Chief Financial Officer,
                Treasurer, Corporate Secretary and
              and
                the sole member of the Board of Directors
            13
                October 2005





***Page
          - 23***




NSM
        Holdings, Inc.
 (A
        Development Stage Company)
 
 May
        31,
        2005
 
 Index
 
 Report
        of Independent Registered Public Accounting
        Firm
 
 Consolidated
        Balance Sheets
 
 Consolidated
        Statements of Operations
 
 Consolidated
        Statements of Cash Flows
 
 Consolidated
        Statement of Stockholders’ Equity
        (Deficit)
 
 Notes
        to the Consolidated Financial Statements
 
 
   
 ***Page
            - 24***
  
 
 Report
        of Independent Registered Public Accounting Firm
 
 To
        the Board of Directors and Stockholders of
 NSM
        Holdings, Inc. (A Development Stage Company)
 
 We
        have
        audited the accompanying consolidated balance sheets of NSM Holdings, Inc.
        (A
        Development Stage Company) as of May 31, 2005 and May 31, 2004 and the related
        consolidated statements of operations, stockholders’ equity (deficit) and cash
        flows for the year ended May 31, 2005 and for the period from April 8, 2004
        (Date of Inception) to May 31, 2004 and accumulated for the period from April
        8,
        2004 (Date of Inception) to May 31, 2005. These consolidated financial
        statements are the responsibility of the Company’s management. Our
        responsibility is to express an opinion on these consolidated 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
        consolidated financial statements are free of material misstatement. 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 consolidated 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 NSM Holdings, Inc. (A
        Development Stage Company) as of May 31, 2005 and May 31, 2004, and the results
        of its operations and its cash flows for the year ended May 31, 2005 and
        for the
        period from April 8, 2004 (Date of Inception) to May 31, 2004 and
        accumulated for the period from April 8, 2004 (Date of Inception) to May
        31,
        2005, in conformity with accounting principles generally accepted in the
        United
        States.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        the
        Company will continue as a going concern. As discussed in Note 1 to the
        consolidated financial statements, the Company has not generated profitable
        operations since inception and will need additional equity financing to begin
        realizing its business plan. These factors raise substantial doubt about
        the
        Company’s ability to continue as a going concern. Management’s plans in regard
        to these matters are also discussed in Note 1. The consolidated financial
        statements do not include any adjustments that might result from the outcome
        of
        this uncertainty.
 
 
  /s/Manning
        Elliot  Manning Elliot
 
 CHARTERED
        ACCOUNTANTS
 Vancouver,
        Canada
 September
        12, 2005
 
  ***Page
            - 25***
   
 NSM
        Holdings, Inc.
 (A
        Development Stage Company)
 Consolidated
        Balance Sheets
 (Expressed
        in US dollars)
 
 May
                  31,
                2005
                $
              
              
              May
                  31,
                2004
                $ASSETSCurrent
                  AssetsCash
              
              27,321
              
              
              -Accounts
                  receivable
              
              554
              
              
              -Inventory
              
              8,106
              
              
              7,341Total
                  Current Assets
              
              35,981
              
              
              7,341Property
                  and Equipment (Note 3)
              
              570
              
              
              -Intangible
                  Assets (Note 4)
              
              1,102
              
              
              1,469Total
                  Assets
              
              37,653
              
              
              8,810LIABILITIES
                  AND STOCKHOLDERS’ EQUITY (DEFICIT)Current
                  LiabilitiesAccounts
                  payable
              
              30,297
              
              
              1,782Accrued
                  liabilities
              
              11,019
              
              
              12,565Due
                  to a related party (Note 5(a))
              
              1,194
              
              
              477Note
                  payable (Note 6)
              
              -
              
              
              7,342Total
                  Liabilities
              
              42,510
              
              
              22,166Contingencies
                  and Commitments (Notes 1 and 9)Stockholders’
                  Equity (Deficit)Preferred
                  Stock, 5,000 shares authorized, $0.001 par value
                None
                  issued and outstanding
              
              -
              
              
              -Common
                  Stock, 100,000,000 shares authorized, $0.001 par value
                3,445,000
                  and 3,000,000 shares issued and outstanding, respectively
              
              3,445
              
              
              3,000Additional
                  Paid in Capital
              
              60,933
              
              
              24,500Subscriptions
                  Receivable (Note 7(b))
              
              -
              
              
              (25,000
              )Deficit
                  Accumulated During the Development Stage
              
              (69,235
              )
              
              (15,856
              )Total
                  Stockholders’ Equity (Deficit)
              
              (4,857
              )
              
              (13,356
              )Total
                  Liabilities and Stockholders’ Equity (Deficit)
              
              37,653
              
              
              8,810
  (The
        accompanying notes are an integral part of the
        financial statements)
  ***Page
            - 26***
  NSM
        Holdings, Inc.
 (A
        Development Stage Company)
 Consolidated
        Statements of Operations
 (Expressed
        in US dollars)
 
 Accumulated
                From
                April
                  8, 2004
              
              For
                  the Year
              
              From
                April
                  8, 2004(Date
                  of Inception)
              
              Ended
              
              (Date
                  of Inception)to
                  May 31,
              
              May
                  31,
              
              To
                  May 31,2005
              
              
              2005
              
              
              2004$
              
              
              $
              
              
              $Revenue
              
              20,590
              
              
              20,590
              
              
              -Cost
                  of Sales
              
              (14,049
              )
              
              (14,049
              )
              
              -Gross
                  Profit
              
              6,541
              
              
              6,541
              
              
              -ExpensesAmortization
              
              634
              
              
              634
              
              
              -Consulting
                  fees
              
              8,458
              
              
              8,275
              
              
              183General
                  and administrative
              
              4,511
              
              
              4,483
              
              
              28Management
                  services (Note 5)
              
              6,406
              
              
              3,429
              
              
              2,977Professional
                  fees
              
              52,288
              
              
              40,353
              
              
              11,935Rent
              
              3,479
              
              
              2,746
              
              
              733Total
                  Expenses
              
              75,776
              
              
              59,920
              
              
              15,856Net
                  Loss
              
              (69,235
              )
              
              (53,379
              )
              
              (15,856
              )Net
                  Loss Per Share - Basic and Diluted
              
              
              
              
              (0.02
              )
              
              (0.05
              )Weighted
                  Average Shares Outstanding
              
              
              
              
              3,296,000
              
              
              308,000
 
 (The
        accompanying notes are an integral part of the
        financial statements)
  ***Page
            - 27***
  NSM
        Holdings Inc.
 (A
        Development Stage Company)
 Consolidated
        Statements of Cash Flows
 (Expressed
        in US dollars)
 
 
 Accumulated
                From
                April
                  8, 2004
                (Date
                  of Inception)
                to
                  May 31,
                2005
                $
              
              For
                  the Year
                Ended
                May
                  31,
                2005
                $
              
              From
                April
                  8, 2004
                (Date
                  of Inception)
                to
                  May 31,
                2004
                $Cash
                  Flows Provided By Operating ActivitiesNet
                  loss for the period
              
              (69,235
              )
              
              (53,379
              )
              
              (15,856
              )Adjustments
                  to reconcile net loss to cash:Amortization
              
              634
              
              
              634
              
              
              -Issue
                  of shares for services
              
              2,500
              
              
              -
              
              
              2,500Change
                  in operating assets and liabilities:(Increase)
                  in accounts receivable
              
              (554
              )
              
              (554
              )
              
              -(Increase)
                  in inventory
              
              (765
              )
              
              (765
              )
              
              -(Decrease)
                  in note payable
              
              (7,342
              )
              
              (7,342
              )
              
              -Increase
                  in accounts payable and accrued liabilities
              
              41,316
              
              
              26,969
              
              
              14,347Increase
                  in due to related party
              
              1,194
              
              
              717
              
              
              477Net
                  Cash (Used in) Provided By Operating Activities
              
              (32,252
              )
              
              (33,720
              )
              
              1,468Cash
                  Flows Used In Investing ActivitiesPurchase
                  of property and equipment
              
              (837
              )
              
              (837
              )
              
              -Web
                  site development costs
              
              (1,468
              )
              
              -
              
              
              (1,468
              )Net
                  Cash Flows Used In Investing Activities
              
              (2,305
              )
              
              (837
              )
              
              (1,468
              )Cash
                  Flows Used In Financing ActivitiesProceeds
                  from issue of common stock, net of offering costs
              
              61,878
              
              
              61,878
              
              
              -Net
                  Cash Flows Provided By Financing Activities
              
              61,878
              
              
              61,878
              
              
              -Increase
                  in Cash
              
              27,321
              
              
              27,321
              
              
              -Cash
                  - Beginning of Period
              
              -
              
              
              -
              
              
              -Cash
                  - End of Period
              
              27,321
              
              
              27,321
              
              
              -Non-Cash
                  Financing ActivitiesPurchase
                  of assets by issue of note payable
              
              7,342
              
              
              -
              
              
              7,342Issue
                  of common shares for services
              
              2,500
              
              
              -
              
              
              2,500Supplemental
                  DisclosuresInterest
                  paid
              
              442
              
              
              442
              
              
              -Income
                  taxes paid
              
              -
              
              
              -
              
              
              -
  (The
        accompanying notes are an integral part of the
        financial statements)
  ***Page
            - 28***
  NSM
        Holdings, Inc.
 (A
        Development Stage Company)
 Consolidated
        Statement of Stockholders’ Equity
        (Deficit)
 From
        April 8, 2004 (Date of Inception) to May 31, 2005
 (Expressed
        in US dollars)
 
 
 DeficitAccumulatedAdditional
              
              
              
              During
                  theCommon
                  Stock
              
              Paid-in
              
              Subscriptions
              
              DevelopmentShares
              
              Amount
              
              Capital
              
              Receivable
              
              Stage
              
              Total#
              
              
              
              $$
              
              
              
              $$
              
              $Balance
                  - April 8, 2004 (Date of Inception)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Common
                  shares issued for services at $0.001 per share
              
              2,500,000
              
              
              2,500
              
              
              -
              
              
              -
              
              
              -
              
              
              2,500Common
                  shares issued for cash at $0.05 per share
              
              500,000
              
              
              500
              
              
              24,500
              
              
              (25,000
              )
              
              -
              
              
              -Net
                  loss for the period
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (15,856
              )
              
              (15,856
              )Balance
                  - May 31, 2004
              
              3,000,000
              
              
              3,000
              
              
              24,500
              
              
              (25,000
              )
              
              (15,856
              )
              
              (13,356
              )Common
                  shares issued for cash at $0.10 per share
              
              445,000
              
              
              445
              
              
              44,055
              
              
              -
              
              
              -
              
              
              44,500Share
                  issue costs
              
              -
              
              
              -
              
              
              (7,622
              )
              
              -
              
              
              -
              
              
              (7,622
              )Proceeds
                  from share subscriptions
              
              -
              
              
              -
              
              
              -
              
              
              25,000
              
              
              -
              
              
              25,000Net
                  loss for the year
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (53,379
              )
              
              (53,379
              )Balance
                  - May 31, 2005
              
              3,445,000
              
              
              3,445
              
              
              60,933
              
              
              -
              
              
              (69,235
              )
              
              (4,857
              )
 
 (The
        accompanying notes are an integral part of the
        financial statements)
  ***Page
            - 29***
  NSM
        Holdings, Inc.
 (A
        Development Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 May
        31,
        2005
 (Expressed
        in US dollars)
  1.  Development
        Stage Company
  The
        Company was incorporated in the State of Delaware on April 8, 2004. The Company
        is a Development Stage Company, as defined by Statement of Financial Accounting
        Standard (“SFAS”) No.7 “ *Accounting
        and Reporting by Development Stage Enterprises* ”.
        The
        Company’s principal business is the sale of marine hobby products through its
        website “northernstarmall.com”.
  These
        consolidated financial statements have been prepared on a going concern basis,
        which implies the Company will continue to realize its assets and discharge
        its
        liabilities in the normal course of business. The Company has incurred operating
        losses since inception and is unlikely to generate earnings in the immediate
        or
        foreseeable future. The continuation of the Company as a going concern is
        dependent upon the continued financial support from its shareholders, the
        ability of the Company to obtain necessary equity financing to continue
        operations and the attainment of profitable operations. As at May
        31,
        2005 ,
        t he
        Company has a working capital deficiency of $6,529 and accumulated losses
        of
        $69,235 since inception. These
        financial statements do not include any adjustments to the recoverability
        and
        classification of recorded asset amounts and classification of liabilities
        that
        might be necessary should the Company be unable to continue as a going concern. These
        factors raise substantial doubt regarding the Company’s ability to continue as a
        going concern.
  In
        September 2004, the Company issued 445,000 common shares at a price of $0.10
        per
        share for net proceeds of $36,878 after issuance costs of $7,622, pursuant
        to a
        private placement.
  On
        July
        8, 2005, the Company filed an amended Form SB-2 Registration Statement (“SB-2”)
        with the United States Securities and Exchange Commission to register 945,000
        shares of common stock held by existing shareholders. The SB-2 was declared
        effective on July 13, 2005 and registered the common shares issued in the
        private placement discussed above, for resale at a price of $0.10 per share.
        Also pursuant to the SB-2, the Company is offering up to 2,500,000 common
        shares
        at a price of $0.10 per share for maximum proceeds of $250,000 to the
        Company.
 
 
 2.  Summary
        of Significant Accounting Policies
  a)
              Basis
                  of Presentation and Fiscal Year
  These
        consolidated financial statements include the accounts of the Company and
        it’s
        wholly owned subsidiary, Northern Star Distributors Ltd., a private company
        incorporated in the Province of British Columbia, Canada. These consolidated
        financial statements and related notes are presented in accordance with
        accounting principles generally accepted in the United States, and are expressed
        in US dollars. The Company’s fiscal year-end is May 31.
  b)
              Cash
                  and Cash Equivalents
  The
        Company considers all highly liquid instruments with maturity of three months
        or
        less at the time of issuance to be cash equivalents.
  c)
              Use
                  of Estimates
  The
        preparation of financial statements in conformity with U.S. generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities and disclosure of
        contingent assets and liabilities at the date of the financial statements
        and
        the reported amounts of revenues and expenses during the reporting period.
        Actual results could differ from those estimates.
  d)
              Basic
                  and Diluted Net Income (Loss) Per
                  Share
  The
        Company computes net income (loss) per share in accordance with Financial
        Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards
        (“SFAS”) No. 128, " *Earnings
        per Share* "
        which
        requires presentation of both basic and diluted earnings per share (EPS)
        on the
        face of the income statement. Basic EPS is computed by dividing net income
        (loss) available to common shareholders (numerator) by the weighted average
        number of shares outstanding (denominator) during the period. Diluted EPS
        gives
        effect to all dilutive potential common shares outstanding during the period
        using the treasury stock method and convertible preferred stock using the
        if-converted method. In computing Diluted EPS, the average stock price for
        the
        period is used in determining the number of shares assumed to be purchased
        from
        the exercise of stock options or warrants. Diluted EPS excludes all dilutive
        potential shares if their effect is anti dilutive.
  ***Page
            - 30***
 NSM
              Holdings, Inc.
 (A
              Development Stage Company)
 Notes
              to
              the Consolidated Financial Statements
 May
              31,
              2005
 (Expressed
              in US dollars)
  2.  Summary
        of Significant Accounting Policies (continued)
  e)
              Share
                  Offering Costs
  Costs
        incurred related to share offerings are deducted from the proceeds of the
        related offerings. Costs incurred related to the registration of common stock
        held by existing shareholders of the Company are expensed as incurred. As
        the
        Company is uncertain as to the amount of shares the Company will eventually
        issue under the proposed SB-2, all related costs have been expensed as
        incurred.
  f)
              Comprehensive
                  Loss
 SFAS
        No.
        130, “ *Reporting
        Comprehensive Income* ,”
        establishes standards for the reporting and display of comprehensive loss
        and
        its components in the financial statements. As at May
        31,
        2005 and 2004 ,
        the
        Company has no items that represent a comprehensive loss and, therefore,
        has not
        included a schedule of comprehensive loss in the financial
        statements .
  g)
              Inventory
  Inventory
        is determined on a first-in, first-out basis and is stated at the lower of
        cost
        or market. Market is determined based on the net realizable value, with
        appropriate consideration given to obsolescence, excessive levels, deterioration
        and other factors.
  h)
              Property
                  and Equipment
  Property
        and equipment consists of computer hardware, is recorded at cost and is being
        amortized on a straight-line basis over their estimated lives of three
        years.
  i)
              Website
                  Development Costs
  The
        Company recognizes the costs associated with developing a website in accordance
        with the American Institute of Certified Public Accountants (“AICPA”) Statement
        of Position (“SOP”) No. 98-1, “ *Accounting
        for the Costs of Computer Software Developed or Obtained for Internal
        Use* ”.
        Relating to website development costs the Company follows the guidance pursuant
        to the Emerging Issues Task Force (EITF) No. 00-2, “ *Accounting
        for Website Development Costs* ”.
  Costs
        associated with the website consist primarily of a domain name purchased
        from a
        third party, and web site design costs. These capitalized costs are amortized
        based on their estimated useful life over four years. Payroll and related
        costs
        have not been capitalized, as the amounts principally relate to maintenance.
        Internal costs related to the development of website content will be charged
        to
        operations as incurred.
  j)
              Long-Lived
                  Assets
  In
        accordance with SFAS No. 144, “ *Accounting
        for the Impairment or Disposal of Long-Lived Assets* ”,
        the
        carrying value of intangible assets and other long-lived assets is reviewed
        on a
        regular basis for the existence of facts or circumstances that may suggest
        impairment. The Company recognizes impairment when the sum of the expected
        undiscounted future cash flows is less than the carrying amount of the asset.
        Impairment losses, if any, are measured as the excess of the carrying amount
        of
        the asset over its estimated fair value.
  k)
              Financial
                  Instruments and Concentrations
  Financial
        instruments, which include accounts payable, accrued liabilities, and due
        to a
        related party were estimated to approximate their carrying values due to
        the
        immediate or short-term maturity of these financial instruments. The Company’s
        operations are in Canada resulting in exposure to market risks from changes
        in
        foreign currency rates. The financial risk is the risk to the Company’s
        operations that arise from fluctuations in foreign exchange rates and the
        degree
        of volatility of these rates. Currently, the Company does not use derivative
        instruments to reduce its exposure to foreign currency risk.
  For
        the
        year ended May 31, 2005, accounts receivable from a single unaffiliated customer
        represented 90% of total accounts receivable, and sales to a single unaffiliated
        customer represented 64% of total sales.
  l)
              Income
                  Taxes
  Potential
        benefits of income tax losses are not recognized in the accounts until
        realization is more likely than not. The Company has adopted SFAS No. 109
        “ *Accounting
        for Income Taxes* ”
        as of
        its inception. Pursuant to SFAS No. 109 the Company is required to compute
        tax
        asset benefits for net operating losses carried forward. Potential benefit
        of
        net operating losses have not been recognized in these financial statements
        because the Company cannot be assured it is more likely than not it will
        utilize
        the net operating losses carried forward in future years.
  ***Page
            - 31***
 NSM
              Holdings, Inc.
 (A
              Development Stage Company)
 Notes
              to
              the Consolidated Financial Statements
 May
              31,
              2005
 (Expressed
              in US dollars)
  2.  Summary
        of Significant Accounting Policies (continued)
  m)
              Foreign
                  Currency Translation
  The
        functional and reporting currency of the Company and its subsidiary is the
        United States dollar. Monetary assets and liabilities denominated in foreign
        currencies are translated to United States dollars in accordance with SFAS
        No.
        52 “ *Foreign
        Currency Translation* ”
        using
        the exchange rate prevailing at the balance sheet date. Gains and losses
        arising
        on translation or settlement of foreign currency denominated transactions
        or
        balances are included in the determination of income. Foreign currency
        transactions are primarily undertaken in Canadian dollars. The Company has
        not,
        to the date of these financials statements, entered into derivative instruments
        to offset the impact of foreign currency fluctuations.
  n)
              Revenue
                  Recognition
  The
        Company recognizes revenue from the online sale of marine hobby products
        in
        accordance with Securities and Exchange Commission Staff Accounting Bulletin
        No.
        104 (“SAB 104”), “ *Revenue
        Recognition in Financial Statements* .”
        Revenue consists of the sale of marine hobby products and is recognized only
        when the price is fixed or determinable, persuasive evidence of an arrangement
        exists, the product is shipped, and collectibility
        is reasonably assured .
  Trade
        accounts receivable relate to the sale of marine hobby products. The Company
        sells to customers based on standard credit policies and regularly reviews
        accounts receivable for any bad debts. As of May 31, 2005, no allowance for
        doubtful accounts is considered necessary.
  o)
              Stock
                  - Based Compensation
  The
        Company records stock-based compensation in accordance with SFAS No. 123,
        “ *Accounting
        for Stock-Based Compensation* ”.
        All
        transactions in which goods or services are provided to the Company in exchange
        for the issuance of equity instruments are accounted for based on the fair
        value
        of the consideration received or the fair value of the equity instrument
        issued,
        whichever is more reliably measurable. Equity instruments issued to employees
        and the cost of the services received as consideration are measured and
        recognized based on the fair value of the equity instruments issued. The
        Company
        does not currently have a stock option plan.
  p)
              Recent
                  Accounting Pronouncement
  In
        May
        2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154,
        “Accounting Changes and Error Corrections - A Replacement of APB Opinion No.
        20
        and SFAS No. 3”. SFAS 154 changes the requirements for the accounting for and
        reporting of a change in accounting principle and applies to all voluntary
        changes in accounting principle. It also applies to changes required by an
        accounting pronouncement in the unusual instance that the pronouncement does
        not
        include specific transition provisions. SFAS 154 requires retrospective
        application to prior periods’ financial statements of changes in accounting
        principle, unless it is impracticable to determine either the period-specific
        effects or the cumulative effect of the change. The provisions of SFAS No.
        154
        are effective for accounting changes and correction of errors made in fiscal
        years beginning after December 15, 2005. The adoption of this standard is
        not
        expected to have a material effect on the Company’s results of operations or
        financial position
  In
        December 2004, the FASB issued SFAS No. 153, “ *Exchanges
        of Nonmonetary Assets - An Amendment of APB Opinion No. 29* ”.
        The
        guidance in APB Opinion No. 29, “ *Accounting
        for Nonmonetary Transactions* ”,
        is
        based on the principle that exchanges of nonmonetary assets should be measured
        based on the fair value of the assets exchanged. The guidance in that Opinion,
        however, included certain exceptions to that principle. SFAS No. 153 amends
        Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar
        productive assets and replaces it with a general exception for exchanges
        of
        nonmonetary assets that do not have commercial substance. A nonmonetary exchange
        has commercial substance if the future cash flows of the entity are expected
        to
        change significantly as a result of the exchange. The provisions of SFAS
        No. 153
        are effective for nonmonetary asset exchanges occurring in fiscal periods
        beginning after June 15, 2005. Early application is permitted and companies
        must
        apply the standard prospectively. The adoption of this standard is not expected
        to have a material effect on the Company’s results of operations or financial
        position.
  ***Page
            - 32***
 NSM
              Holdings, Inc.
 (A
              Development Stage Company)
 Notes
              to
              the Consolidated Financial Statements
 May
              31,
              2005
 (Expressed
              in US dollars)
   2.  Summary
        of Significant Accounting Policies (continued)
  p)
              Recent
                  Accounting Pronouncements
                  (continued)
  In
        December 2004, FASB issued SFAS No. 123R, “Share Based Payment”. SFAS 123R is a
        revision of SFAS No. 123 “Accounting for Stock-Based Compensation”, and
        supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” and
        its related implementation guidance. SFAS 123R establishes standards for
        the
        accounting for transactions in which an entity exchanges its equity instruments
        for goods or services. It also addresses transactions in which an entity
        incurs
        liabilities in exchange for goods or services that are based on the fair
        value
        of the entity’s equity instruments or that may be settled by the issuance of
        those equity instruments. SFAS 123R focuses primarily on accounting for
        transactions in which an entity obtains employee services in share-based
        payment
        transactions. SFAS 123R requires a public entity to measure the cost of employee
        services received in exchange for an award of equity instruments based on
        the
        grant-date fair value of the award (with limited exceptions). That cost will
        be
        recognized over the period during which an employee is required to provide
        service in exchange for the award - the requisite service period (usually
        the
        vesting period). SFAS 123R requires that the compensation cost relating to
        share-based payment transactions be recognized in financial statements. That
        cost will be measured based on the fair value of the equity or liability
        instruments issued. Public entities that file as small business issuers will
        be
        required to apply SFAS 123R in the first interim or annual reporting period
        that
        begins after December 15, 2005. The adoption of this standard is not expected
        to
        have a material effect on the Company’s results of operations or financial
        position.
  In
        March
        2005, the SEC staff issued Staff Accounting Bulletin No. 107 (“SAB 107”) to give
        guidance on the implementation of SFAS 123R. The Company will consider SAB
        107
        during implementation of SFAS 123R.
  The
        FASB
        has also issued SFAS No. 151 and 152, but they will not have relationship
        to the
        operations of the Company. Therefore a description and its impact for each
        on
        the Company’s operations and financial position have not been
        disclosed.
 
 
 3.  Property
        and Equipment
 May
                  31, 2005
              
              May
                  31, 2004Accumulated
              
              Net
                  Book
              
              Net
                  BookCost
              
              Amortization
              
              Value
              
              Value$$
              
              
              
              $$Computer
                  hardware
              
              
              837
              
              
              (267
              )
              
              570
              
              
              -
 
 
 4.  Intangible
        Assets
 May
                  31, 2005
              
              May
                  31, 2004Accumulated
              
              Net
                  Book
              
              Net
                  BookCost
              
              Amortization
              
              Value
              
              Value$$
              
              
              
              $$Website
                  domain name
              
              
              1
              
              
              -
              
              
              1
              
              
              1Website
                  development costs
              
              
              1,468
              
              
              (367
              )
              
              1,101
              
              
              1,4681,469
              
              
              (367
              )
              
              1,102
              
              
              1,469
 
 
 5.  Related
        Party Balances/Transactions
  a)
              The
                  amount due to a related party of $1,194 (May 31, 2004 - $477) is
                  non-interest bearing, unsecured and has no specific terms of repayment.
  b)
              During
                  the year ended May 31, 2005, the Company paid $3,429 (May 31, 2004
                  - $477)
                  to the President of the Company for management services
                  rendered.
  c)
              During
                  the year ended May 31, 2004, the Company issued 2,500,000 shares
                  of common
                  stock to the President of the Company for services valued at $2,500.
                  The
                  Company also issued 500,000 shares of common stock to the President
                  of the
                  Company for cash at $0.05 per share.
 
 
  ***Page
            - 33***
 NSM
              Holdings, Inc.
 (A
              Development Stage Company)
 Notes
              to
              the Consolidated Financial Statements
 May
              31,
              2005
 (Expressed
              in US dollars)
  6.  Acquisition
        of Assets
  The
        Company entered into an Agreement dated April 30, 2004, to acquire a 100%
        interest in the domain name “northernstarmall.com” and inventory in
        consideration for a promissory note of CDN$10,000. The note was unsecured
        bearing interest at 4% per annum and was repaid in June 2004. The purchase
        price
        of $7,342 (CND$10,000) was allocated as follows:
  $Net
                  tangible assets acquired
              
              $7,341Intangible
                  assets acquired
              
              
              1Total
                  purchase price
              
              $
              7,342
  7.  Common
        Shares
  a)
              On
                  April 16, 2004, the Company issued 2,500,000 shares of common stock
                  to the
                  President of the Company at a price of $0.001 per share in consideration
                  for services valued at $2,500. These common shares were recorded
                  at
                  management’s estimate of a nominal fair value of $0.001 per share as they
                  were issued as founders shares.
  b)
              On
                  April 23, 2004, the Company issued 500,000 shares of common stock
                  to the
                  President of the Company at a price of $0.05 per share for cash
                  proceeds
                  of $25,000, which was received in full in June 2004. The price
                  was 50% of
                  the anticipated offering price of the Company’s
                  SB-2.
  c)
              On
                  October 1, 2004, the Company issued 445,000 shares of common stock
                  to
                  unrelated third parties at a price of $0.10 per share for net proceeds
                  of
                  $36,878 after issuance costs of $7,622, pursuant to a private placement.
                  The price was determined to be equal to the anticipated offering
                  price of
                  the Company’s SB-2.
  8.  Income
        Tax
  Potential
        benefits of income tax losses are not recognized in the accounts until
        realization is more likely than not. As of May 31, 2005, the Company has
        net
        operating losses carried forward totalling $51,000 for US tax purposes and
        $14,000 for Canadian tax purposes which expire starting in 2024 and 2011,
        respectively. Pursuant to SFAS No. 109 the Company is required to compute
        tax
        asset benefits for net operating losses carried forward. Potential benefit
        of
        net operating losses have not been recognized in these financial statements
        because the Company cannot be assured it is more likely than not to utilize
        the
        net operating losses carried forward in future years. For the periods ended
        May
        31, 2005 and 2004, the valuation allowance established against the deferred
        tax
        assets increased by $19,000 and $4,000 respectively.
  The
        components of the net deferred tax asset at May 31, 2005, the statutory tax
        rate, the effective tax rate and the amount of the valuation allowance are
        indicated below:
  May
                  31, 2005
                $
              May
                  31,
                2004
                $Net
                  Operating Losses
              65,000
              13,000Statutory
                  Tax Rate
              35%
              34%Effective
                  Tax Rate
              -
              -Deferred
                  Tax Asset
              23,000
              4,000Valuation
                  Allowance
              (23,000)
              (4,000)Net
                  Deferred Tax Asset
              -
              -
  9.  Commitment
  During
        the period ended May 31, 2004, the Company entered into a lease agreement
        for
        office premises at a rate of CDN$6,000 per annum, for a one year term expiring
        March 31, 2005. Upon signing the agreement, the landlord agreed to waive
        the
        first five months of rent. In accordance with FTB 85-3 “ *Accounting
        for Operating Leases with Scheduled Rent Increases* ”,
        the
        waiver of rent has been applied on a straight-line basis over the term of
        the
        lease.






***Page
          - 34***









**Exhibit
      31**












***Page
          - 35***




**NSM
      HOLDINGS, INC** **.**


**CERTIFICATIONS
      PURSUANT TO**


**SECTION
      302 OF THE SARBANES-OXLEY ACT OF 2002**






**CERTIFICATION**






I,
      Zuber
      Jamal, certify that:




1.
       
      I have reviewed this annual report on Form 10-KSB of NSM Holdings, Inc.;




2.
       
      Based on my knowledge, this annual report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were
      made, not misleading with respect to the period covered by this annual report;




3.
       
      Based on my knowledge, the financial statements, and other financial information
      included in this annual report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the registrant
      as
      of, and for, the periods presented in this annual report;




4.
       
      The registrant’s other certifying officer and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act
      Rules 13a-14 and 15d-14) for the registrant and we have:




a)
       
      designed such disclosure controls and procedures to ensure that material
      information relating to the registrant, including its consolidated subsidiaries,
      is made known to us by others within those entities, particularly during the
      period in which this annual report is being prepared;




b)
       
      evaluated the effectiveness of the registrant’s disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this annual
      report (the “Evaluation Date”); and




c)
       
      presented in this annual report our conclusions about the effectiveness of
      the
      disclosure controls and procedures based on our evaluation as of the Evaluation
      Date;




5.
       
      The registrant’s other certifying officers and I have disclosed, based on our
      most recent evaluation, to the registrant’s auditors and the audit committee of
      registrant’s board of directors (or persons performing the equivalent function):




a)
       
      all significant deficiencies in the design or operation of internal controls
      which could adversely affect the registrant’s ability to record, process,
      summarize and report financial data and have identified for the registrant’s
      auditors any material weaknesses in internal controls; and




b)
       
      any fraud, whether or not material, that involves management or other employees
      who have a significant role in the registrant’s internal controls; and




6.
       
      The registrant’s other certifying officers and I have indicated in this annual
      report whether or not there were significant changes in internal controls or
      in
      other factors that could significantly affect internal controls subsequent
      to
      the date of our most recent evaluation, including any corrective actions with
      regard to significant deficiencies and material weaknesses.






Date:
      13
      October 2005







***/s/
      Zuber Jamal*


Zuber
      Jamal


Chief
      Executive Officer





***Page
          - 36***




**NSM
      HOLDINGS, INC** **.**


**CERTIFICATIONS
      PURSUANT TO**


**SECTION
      302 OF THE SARBANES-OXLEY ACT OF 2002**






**CERTIFICATION**






I,
      Zuber
      Jamal, certify that:




1.
       
      I have reviewed this annual report on Form 10-KSB of NSM Holdings, Inc.;




2.
       
      Based on my knowledge, this annual report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were
      made, not misleading with respect to the period covered by this annual report;




3.
       
      Based on my knowledge, the financial statements, and other financial information
      included in this annual report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the registrant
      as
      of, and for, the periods presented in this annual report;




4.
       
      The registrant’s other certifying officer and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act
      Rules 13a-14 and 15d-14) for the registrant and we have:




a)
       
      designed such disclosure controls and procedures to ensure that material
      information relating to the registrant, including its consolidated subsidiaries,
      is made known to us by others within those entities, particularly during the
      period in which this annual report is being prepared;




b)
       
      evaluated the effectiveness of the registrant’s disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this annual
      report (the “Evaluation Date”); and




c)
       
      presented in this annual report our conclusions about the effectiveness of
      the
      disclosure controls and procedures based on our evaluation as of the Evaluation
      Date;




5.
       
      The registrant’s other certifying officers and I have disclosed, based on our
      most recent evaluation, to the registrant’s auditors and the audit committee of
      registrant’s board of directors (or persons performing the equivalent function):




a)
       
      all significant deficiencies in the design or operation of internal controls
      which could adversely affect the registrant’s ability to record, process,
      summarize and report financial data and have identified for the registrant’s
      auditors any material weaknesses in internal controls; and




b)
       
      any fraud, whether or not material, that involves management or other employees
      who have a significant role in the registrant’s internal controls; and




6.
       
      The registrant’s other certifying officers and I have indicated in this annual
      report whether or not there were significant changes in internal controls or
      in
      other factors that could significantly affect internal controls subsequent
      to
      the date of our most recent evaluation, including any corrective actions with
      regard to significant deficiencies and material weaknesses.






Date:
      13
      October 2005







***/s/
      Zuber Jamal*


Zuber
      Jamal


Chief
      Financial Officer










***Page
          - 37***












**Exhibit
      32**















***Page
          - 38***




**CERTIFICATION
      PURSUANT TO**


**18
      U.S.C. SECTION 1350,**


**AS
      ADOPTED PURSUANT TO**


**SECTION
      906 OF THE SARBANES-OXLEY ACT OF 2002**













In
      connection with the Annual Report of NSM Holdings, Inc. (“NSM”) on Form 10-KSB
      for the period ending May 31, 2005 as filed with the Securities and Exchange
      Commission on the date hereof (the “Report”), I, Zuber Jamal, President and
      Chief Executive Officer of NSM and the sole member of the Board of Directors,
      certify, pursuant to s.906 of the Sarbanes-Oxley Act of 2002, that:






(1)
        The Report fully complies with the requirements of section 13(a) or
      15(d)
      of the Securities Exchange Act of 1934; and




(2)
        The information contained in the Report fairly represents, the financial
      condition and result of operations of NSM.









***/s/
      Zuber Jamal*


Zuber
      Jamal


Chief
      Executive Officer






October
      13, 2005




***Page
          - 39***




**CERTIFICATION
      PURSUANT TO**


**18
      U.S.C. SECTION 1350,**


**AS
      ADOPTED PURSUANT TO**


**SECTION
      906 OF THE SARBANES-OXLEY ACT OF 2002**













In
      connection with the Annual Report of NSM Holdings, Inc. (“NSM”) on Form 10-KSB
      for the period ending May 31, 2005 as filed with the Securities and Exchange
      Commission on the date hereof (the “Report”), I, Zuber Jamal, Treasurer and
      Chief Financial Officer of NSM and the sole member of the Board of Directors,
      certify, pursuant to s.906 of the Sarbanes-Oxley Act of 2002, that:






(1)
        The Report fully complies with the requirements of section 13(a) or
      15(d)
      of the Securities Exchange Act of 1934; and




(2)
        The information contained in the Report fairly represents, the financial
      condition and result of operations of NSM.







***/s/
      Zuber Jamal*


Zuber
      Jamal


Chief
      Financial Officer






October
      13, 2005




***Page
          - 40***







**Exhibit
      10.3**















***Page
          - 41***
















**OFFICESUITES
      AT AIRPORT SQUARE**





**LICENCE
      AGREEMENT - PRIVATE OFFICE**








BETWEEN:   OFFICESUITES
      AT AIRPORT SQUARE


(The
      “Licensor”)   OF
      THE
      FIRST PART




AND:  NORTHERN
        STAR DISTRIBUTORS LTD.


(The
      “Licensee”)   OF
      THE
      SECOND PART








The
      Licensor hereby agrees to rent to the Licensee, (One year/Month to Month),
      office space # 1106 (the premises) at # 1100-1200 West 73 rd Avenue,
      Vancouver, B.C., at a rate of $500.00 per
      month. The term of this agreement shall commence October
      1 st ,
      2005 to September
      30 th ,
      2006 . **Beyond
      the above term** and
      subject to item 15 in Schedule “B”, this agreement may be terminated by either
      party providing **60** days
      written notice thereof to the other party, with the license fee due and payable
      on the first day of each month including the last month of this
      license.





Receipt
      is hereby acknowledged for the sum of $500.00 security
      deposit which will be refunded upon termination of this license and full payment
      of all outstanding accounts, including any damage to the Premises (Item 19,
      Schedule “B”), and $650.00 which is
      payable for the license period commencing October
      1 st ,
      2005.





This
      License includes:





-
            Complimentary
                telephone answering services for up to two people per office on one
                line
                per office.


-
            Complimentary
                reception services.


-
            Complimentary
                coffee and tea services.


-
            Two
                desks


-
            Two
                guest chairs


-
            One
                file cabinet


-
            Two
                executive chairs


-
            Ten
                hours complimentary in Boardroom/Meeting Room per
                month.


-
            One
                complimentary telephone set.


-
            Use
                of on site Fitness Centre (subject to head lease terms, and building
                rules
                and regulations, which may change without
                notice)


-
            One
                voice mail








***Page
          - 42***






-
            One
                time phone line installation fee- $110.00. Additional phone/fax lines
                installed for $100.00 each.


-
            One
                OfficeSuites at Airport Square phone line @ $40.00/month/each (includes
                voicemail box).


-
            Phone
                book directory listing and 411 listing (monthly)
                $4.25.


-
            Photocopies
                at 15¢ a copy


-
            Faxing
                at 90¢ a page


-
            Secretarial
                services $30/hour


-
            One
                half-duplex twenty meg internet connection at
                $50.00/month





The
      Licensee shall pay any GST and the additional charges set out in SCHEDULE “A”
      and the “RATE SCHEDULE” attached hereto.





All
      payment due under this License shall be made **payable
      to OfficeSuites at Airport Square.**





All
      charges for additional office services shall be paid within 5 days of billing
      or
      further services may be refused. The license fee is due on the first day of
      each
      month and 5 days default shall constitute surrender of the Premises by the
      Licensee without notice. In event of default, the entire balance of the license
      feel due to the end of the contract period shall become immediately due and
      payable, and any security deposit held shall be forfeited and the Licensor
      may
      without notice or delay enter and take possession of the Premises at such time
      without prejudice to the Licensor’s other rights and recourse, the balance due
      to the remaining portion of the license, shall become due and owing to the
      Licensor as liquidated damages.





All
      invoices are due and payable upon receipt. A service charge may be billed at
      2%
      per month on overdue accounts. The Licensee agrees to these terms.





The
      Licensee agrees to be bound by all Rules and Regulations as set out in SCHEDULE
      “B” attached hereto. The singular where used herein shall include the plural
      where applicable. Time shall be of the essence.





Dated
      this 26 th day of
      September, 2005.











NAME
      OF
      COMPANY   OFFICESUITES AT AIRPORT SQUARE





*/s/
      Zuber Jamal*     */s/
      Noreen Angus*


_________________________   __________________________________


ZUBER
      JAMAL      BRIAN
      BONNEY/ NOREEN
      ANGUS








***Page
          - 43***











**SCHEDULE
      “A”**














1.
            Sales
                Tax





“Sales
      Tax” shall mean any and all taxes, fees, levies, charges, assessments, rates,
      duties and excises (whether characterized as sales taxes, purchase tax,
      value-added taxes, goods and services taxes or which the Licensor is liable
      to
      pay) and which are levied, rated or assessed on the act of entering into this
      License or otherwise on account of this License, on the use of the occupancy
      of
      the Premises or any portion thereof, on the license fee payable under this
      License or any portion thereof or in connection with the business or licensing
      the Premises or any portion thereof, but excluding the Licensee’s taxes and also
      excluding income tax under Part 1 of the Income Tax Act of Canada as amended
      from time to time.





2.
            The
                Licensee hereby acknowledges receipt
                of:





0 Building
      access card(s)   #__ __   Name:
      ______________________


#____  Name:
      ______________________





2 Office
      Key(s)





1 Mail box
      key(s) to Mail box # ___________





Access
      code to


-
      Photocopiers/fax  #
      _________





-
      Bell
      long distance  #
      _________





Failure
      to surrender the building access card(s) and office keys upon termination of
      license services shall result in the Licensee forfeiting $100.00 of his/her
      security deposit.








Dated
      this 26 th day of
      September, 2005.





Licensee:





*/s/
      Zuber Jamal*


Per:__________________









***Page
          - 44***











**SCHEDULE
      “B”**


**RULES
      AND REGULATIONS**








The
      Licensee agrees to conduct only lawful activities permitted by all government
      agencies in Canada and British Columbia. Furthermore, the Licensee
      agrees:





1.
            That
                there is no relationship existing other than licensor and licensee.
                The
                Licensee agrees and acknowledges that the Licensor’s liability is limited
                to the cost of services provided and, without restricting the generality
                of the foregoing, the Licensor shall not be responsible for any business
                loss or property damage resulting from fire, power failure, ruptured
                pipes, water damage of any kind or failure in the heat and air
                conditioning systems;





2.
            All
                insurance requirements (which must meet the Licensor’s requirements from
                time to time) and business licenses of the Licensee are to be the
                responsibility of the Licensee;





3.
            The
                Licensee shall contract with OfficeSuites at Airport Square for telephone
                installation, and pay all charges arising there from; to take advantage
                of
                our switchboard services. Fax lines can be contracted with us or
                a
                provider of your choice.





4.
            Should
                the Licensee use a common line from the Licensor , they will be
                responsible for all long distance and other charges which they may
                incur,
                including directory assistance
                charges;





5.
            The
                Licensee shall indemnify and save harmless the Licensor from all
                claims
                whatsoever damages arising out the Licensee’s use of the
                Premises;





6.
            The
                Licensee shall operate its business in conformity with all Municipal,
                Provincial, and Federal laws and
                regulations;





7.
            The
                Licensee shall be responsible for all damage to the Licensor’s property
                through negligence and agrees to pay for the cost of repairing
                same.





8.
            No
                pets are permitted in the Premises;





9.
            No
                cooking or creation of odors or
                aromas;





10.
            No
                residential use of the Premises;





11.
            No
                copies of keys shall be made without written permission of Licensor
                and
                all keys and access cards shall be returned on termination of this
                license
                or a charge of$100.00shall
                be due;





12.
            No
                signs or other materials shall be attached to window or
                doors;





13.
            Licensees
                are not permitted to smoke in the premises, including common hall
                ways,
                corridors, or stairwells. Smoking is permitted only
                outside.






***Page
          - 45***





14.
            LICESEES
                ARE RESPONSIBLE FOR THE COSTS OF DAMAGES AND/OR MODIFICATIONS TO
                THEIR
                PREMISES INCLUDING DAMAGE TO WALLS, CARPETS, FURNITURE, EQUIPMENT
                AND
                HVAC.





15.
            If
                the Licensee surrenders the Premises for any reason within the first
                (3)
                months of a month to month or term license an**additional**fee of $300.00 shall be assessed as liquidated damages and not as
                a
                penalty.





16.
            This
                license in non-assignable and non-transferable and the Licensee shall
                not
                permit occupation of the Premises by any other third
                party.





17.
            Licensee
                is not to operate or allow to operate a business office on the Premises
                during the Term and any renewal term, for the purpose of competition
                with
                the Licensor and not to sublet to any such
                business.





18.
            Excessive
                noise levels (including voice or electronically produced) resulting
                in
                repeated co-tenant complaints could result in license
                termination.





19.
            “Damage
                to Premises” could mean any of the
                following:





-
            Painting
                walls and/or trim-
                Re-keying of lock(s)


-
            Painting
                of door(s)-
                Ceiling tile repair


-
            Repair
                to walls and/or trim-
                Blinds repair and/or cleaning


-
            Repair
                to door(s)-
                Communications jack repair


-
            Cleaning-
                Electrical jack repair


-
            Carpet
                repair and/or cleaning-
                Overhead light fixture repair


-
            Furniture
                repair and/or cleaning-
                Phone cleaning and/or repair


-
            Phone
                cord replacement-
                Removal of building directory sign in building
                lobby




20.
            The
                Licensee agrees to pay or perform painting and/or carpet cleaning
                to bring
                the office back to original
                condition.





21.
            QUIET
                ENJOYMENT: Tenants, tenant’s guests and/or associates and/or clients shall
                not be permitted to disturb other tenants due to loud noise or voice(s),
                use of profanity or any other conduct that could be considered disruptive
                to a regular professional business atmosphere. This clause is intended
                to
                ensure quite enjoyment of the premises by all
                tenants.





22.
            ADDITIONS:Arising
                from any government statute or law, implemented in the province of
                British
                Columbia, from time to time as the need arises, the Licensor may
                add
                and/or update Schedule “B” Rules and Regulation. Upon doing so,with
                reasonable cause,these additions and changes will form part of the original contract
                as if
                they were in existence when the License was signed. Both the Licensee
                and
                Licensor will be bound by and must adhere to the Rules and
                Regulations.






***Page
          - 46***












**Exhibit
      99.1**

















***Page
          - 47***




**NSM
        Holdings, Inc.**
 
 **Code
        of Ethics**
 
 **Overview**
  NSM
        has
        adopted a code of ethics (the “ **Code** ”)
        that
        is applicable to every officer, director, employee and consultant of the
        company
        and its affiliates (collectively the “ **Employee** ”
        or
“ **Employees** ”).
        The
        Code reaffirms the high standards of business conduct required of all Employees.
        The Code is part of NSM’s continuing efforts to (1) ensure that it complies with
        all applicable laws, (2) have an effective program in place to prevent and
        detect violations of law, and (3) educate and train its Employees to be aware
        and understand ethical business practices. In most circumstances, the Code
        sets
        standards that are higher than the law requires.
   NSM
        has
        also adopted eight corporate values: Focus, Respect, Excellence, Accountability,
        Teamwork, Integrity, Open Communications and Positive Attitude. See Schedule
“A”
        for a statement on each value. The values have been adopted to provide a
        framework for all Employees in conducting themselves in their jobs. These
        values
        are not intended to substitute for the Code, but will serve as guidelines
        in
        helping the Employees to conduct NSM’s business in accordance with the Code.
   The
        Code
        is not intended to cover every possible situation in which an Employee may
        find
        himself or herself. It is meant to give each Employee the boundaries within
        which NSM expects each Employee to conduct himself or herself while representing
        NSM. An Employee may find himself or herself in a situation where there is
        no
        clear guidance given by the Code. If that occurs, return to the objective
        stated
        below: common sense, good judgment, high ethical standards and integrity,
        and
        refer to NSM‘s values. In addition, there are many resources upon which an
        Employee may rely, including the President and other NSM officers and
        management. Together all Employees can continue to make NSM a company that
        sets
        a standard for all e-commerce and hobby companies.
   **Objective**
  One
        of
        NSM’s objectives is to conduct all business operations in the utmost ethical
        manner utilizing common sense, good judgment, high ethical standards and
        integrity. NSM cares about its Employees, shareholders, clients, suppliers,
        and
        the communities in which it conducts its business operations. In the course
        of
        meeting its business objectives, NSM considers it essential that all Employees
        understand and comply with the Code and therefore share and participate in
        NSM’s
        way of conducting business.
  **Standard
        of Conduct**
  NSM
        insists that all aspects of its business operations are conducted with honesty,
        integrity and fairness, and with respect for the interests of those affected
        by
        its business and activities. NSM also expects the same in its relationships
        with
        all those with whom it does business.
  Each
        Employee must maintain and foster integrity and honesty in all dealings with
        clients and all business transactions. Each Employee must commit to act
        according to the highest ethical standards and is expected to apply ethical
        business practices in administrative and financial aspects of the business
        operations of NSM.
  ***Page
            - 48***
  No
        code
        of conduct can hope to lay down appropriate behavior for every situation,
        nor
        should it seek to do so. Each Employee is required to make a careful and
        considered judgment of what is right and proper in any particular
        situation.
  It
        is the
        obligation of every Employee in conducting the business operations of NSM
        to be
        responsible, honest, trustworthy, conscientious, and dedicated to the highest
        standards of ethical business practices. Accordingly, all Employees are required
        to avoid not only impropriety, but also the appearance of impropriety in
        conducting the business operations of NSM.
  **Obeying
        the Law**
  All
        Employees of NSM are required to comply with (1) the letter and the spirit
        of
        laws and regulations of the countries in which NSM conducts business operations,
        (2) the accepted business practices in commercial markets, and (3) any
        contractual terms and conditions applicable to any business
        transaction.
  It
        is
        expected that each Employee will use common sense, good judgment, high ethical
        standards and integrity in all the Employee’s business dealings.
  Each
        Employee must commit to know and abide by all applicable laws and regulations.
        Employees are expected to be familiar with the Code as it applies to their
        duties. Each Employee is required to follow and to comply with the Code.
        A
        refusal by any Employee to agree to be bound by the Code will be grounds
        for
        discipline up to and including dismissal.
  A
        breach
        of any law, regulation or ethical standard by any Employee will not be justified
        by the pursuit of profit or the departure from acceptable practice by
        competitors.
  **Enforcement
        of Code**
  The
        Code
        will be enforced at all levels fairly and without prejudice. Any breach of
        any
        standard of the Code may result in disciplinary action, up to and including
        termination.
  Zuber
        Jamal, NSM’s CEO and President, has been appointed as Compliance Officer of NSM,
        responsible for overseeing compliance with, and enforcement of, the Code.
        Zuber
        Jamal, NSM’s CFO, has been appointed as Assistant Compliance Officer. If an
        Employee encounters a situation that the Employee is not able to resolve
        by
        reference to the Code, the Employee should ask for help from the Compliance
        Officer or the Assistant Compliance Officer if they need assistance in
        understanding or interpreting any part of the Code.
  Any
        Employee who, in good faith, has reason to believe any operation or activity
        of
        NSM is in violation of the law or of the Code must call the matter to the
        attention of the Compliance Officer. See Schedule “B” for a non-exhaustive list
        of reportable violations.
  If
        the
        Employee has reason to believe that it would be inappropriate to report the
        operation or activity to the Compliance Officer, the Employee should report
        it
        to the Assistant Compliance Officer. All reports will be reviewed and
        investigated and as necessary under the circumstances, and the reporting
        Employee should provide sufficient information to enable a complete
        investigation to be undertaken.
  Any
        Employee who makes an allegation in good faith reasonably believing that
        a
        person has violated the law or the Code will be protected against
        retaliation.
  ***Page
            - 49***
  Violations
        of the law or the Code will subject Employees to disciplinary action, up
        to and
        including termination of employment. In addition, Employees involved may
        subject
        themselves and NSM to severe penalties, including fines and possible
        imprisonment. Compliance with the law and high ethical standards in the conduct
        of NSM’s business should be a top priority for each Employee.
  **Insider
        Trading, Securities Compliance and Public Statements**
  Securities
        laws prohibit anyone who is in possession of material, non-public information
        (“ **Insider
        Information** ”)
        about
        a company from purchasing or selling stock of that company, or communicating
        the
        information to others. Information is considered “ **material** ”
        if a
        reasonable investor would consider it to be important in making a decision
        to
        buy or sell that stock. Some examples include financial results and projections,
        new products, acquisitions, major new contracts or alliances prior to the
        time
        that they are publicly announced. Employees who become aware of such Inside
        Information about NSM must refrain from trading in the shares of NSM until
        the
        Inside Information is publicly announced.
  Employees
        must also refrain from disclosing the insider Information to persons who
        do not
        have a need to know, whether they are inside NSM or outside, such as spouses,
        relatives or friends.
  NSM
        makes
        regular formal disclosures of its financial performance and results of
        operations to the investment community. NSM also regularly issues press
        releases. Other than those public statements, which go through official
        channels, Employees are prohibited from communicating outside NSM about NSM’s
        business, financial performance or future prospects. Such communications
        include
        questions from securities analysts, reporters or other news media, but also
        include seemingly innocent discussions with family, friends, neighbors or
        acquaintances.
  **Financial
        Reporting**
  NSM
        is
        required to maintain a variety of records for purposes of reporting to the
        government. NSM requires all Employees to maintain full compliance with
        applicable laws and regulations requiring that its books of account and records
        be accurately maintained. Specifics of these requirements are available from
        the
        Compliance Officer.
  **Accuracy
        of Records**
  NSM’s
        accounting records and supporting documents must accurately describe and
        reflect
        the nature and result of NSM’s business operations. All activities and results
        of NSM’s business operations must be presented in a fair and balanced manner.
  All
        business transactions must be properly authorized as well as completely and
        accurately recorded on NSM ’s
        books.
        Procedures for doing so must comply with NSM ’s
        financial policy and follow NSM ’s
        policy
        for authorization and documentation, as well as follow generally accepted
        accounting practices. Budget proposals and other financial evaluations and
        forecasts must fairly represent all information relevant to the business
        transaction. In addition, no unrecorded cash funds or other asset accounts
        will
        be established or maintained for any purpose. Misapplication or improper
        use of
        corporate or property or false entry to records by any Employee or by others
        must be reported to NSM’s
        Board of Directors .
  ***Page
            - 50***
  **Record
        Keeping and Retention**
  To
        help
        maintain the integrity of NSM’s record-keeping and reporting systems, each
        Employee must know his or her area’s records retention procedures, including how
        data is stored and retrieved. It is that person’s responsibility to know how to
        document and transact any entries or records that he or she is responsible
        for.
        All Employees are expected to comply fully and accurately with all audits,
        including responding in a timely fashion to requests for records or other
        material from or on behalf of NSM’s auditors or management.
  **Communicating
        Accurate and Timely Information**
  In
        all
        interactions and communications, whether with shareholders, the public, clients,
        government agencies, or others inside or outside of NSM, each Employee is
        expected to be truthful and forthright. This includes making accurate
        statements, not misrepresentations or statements intended to mislead or
        misinform; and responding promptly, accurately, and with full disclosure
        to
        requests from governmental agencies for information or documents.
  **Confidentiality**
  Employees
        must respect the confidentiality of information received in the course of
        business dealings and must never use such information for personal gain.
        Information given by Employees in the course of business dealings must be
        true
        and fair and never designed to mislead.
  Confidential
        information can only be revealed upon written authorization of
        management.
  Employees
        must not use or disclose NSM’s trade secrets, proprietary, or confidential
        information, or any other confidential information gained in the performance
        of
        NSM as a means of making private profit, gain or benefit.
  Employees
        must not use Internet bulletin boards or chat rooms to discuss matters or
        opinions related to NSM or any of its industries, or to respond to comments
        about NSM. In today’s electronic age, posting information on Internet bulletin
        boards or even communicating in chat rooms is the same as “speaking to the
        media”.
  **Environmental,
        Health and Safety**
  NSM
        is
        committed to running its business in an environmentally sound and sustainable
        manner. NSM’s objective is to ensure that its business operations have the
        minimum adverse environmental impact commensurate with the legitimate needs
        of
        its business operations.
  NSM
        is
        committed to protecting the health and safety of its Employees, as well as
        the
        environment in general. NSM expects employees to obey all laws and regulations
        designed to protect the environment, and the health and safety of all Employees,
        and to obtain and fully observe all permits necessary to do
        business.
   ***Page
            - 51***
  At
        the
        very least, all Employees should be familiar with and comply with safety
        regulations applicable to their work areas. NSM will make, to the extent
        possible, reasonable accommodations for the known physical or mental limitations
        of its Employees. Employees who require a special accommodation should contact
        the Compliance Officer. NSM will then engage in an interactive process to
        determine what reasonable accommodations may exist.
  **Declaration
        of Interest**
  Each
        Employee is expected to avoid any activity, investment or association that
        interferes with the independent exercise of his or her judgment in NSM’s best
        interests (“ **Conflicts
        of Interest** ”).
        Conflicts of Interest can arise in many situations and occur most often in
        cases
        where the Employee or the Employee’s family obtains some personal benefit at the
        expense of NSM’s best interests.
  No
        Employee, or any member of Employee’s immediate family, is allowed to accept
        money, gifts of other than nominal value, unusual entertainment, loans, or
        any
        other preferential treatment from any customer or supplier of NSM where any
        obligation may be incurred or implied on the giver or the receiver or where
        the
        intent is to prejudice the recipient in favor of the provider. Likewise,
        no
        Employee is allowed to give money, gifts of other than nominal value, unusual
        entertainment or preferential treatment to any customer or supplier of NSM,
        or
        any employee or family members thereof, where any obligation might be incurred
        or implied, or where the intent is to prejudice the recipient in favor of
        NSM.
        No Employee is allowed to solicit or accept kickbacks, whether in the form
        of
        money, goods, services or otherwise, as a means of influencing or rewarding
        any
        decision or action taken by a foreign or domestic vendor, customer, business
        partner, government employee or other person whose position may affect NSM’s
        business.
  No
        Employee will use NSM’s property, services, equipment or business for personal
        gain or benefit.
  Each
        Employee is required to reveal any personal interest that may impinge or
        might
        reasonably be deemed by others to impinge on the Employee’s business dealings
        with any industry partners of NSM.
  Employees
        may not: (1) act on behalf of, or own a substantial interest in, any company
        or
        firm that does business, or competes, with NSM; (2) conduct business on behalf
        of NSM with any company or firm in which the Employee or a family member
        has a
        substantial interest or affiliation. Exceptions require advance written approval
        from NSM’s Board of Directors. ****
  Employees
        should not create the appearance that they are personally benefiting in any
        outside endeavor as a result of their employment by NSM, or that NSM is
        benefiting by reason of their outside interests. Any Employee who is not
        sure
        whether a proposed action would present a conflict of interest or appear
        unethical should consult with the Compliance Officer.
  NSM
        expects its Employees to avoid (1) personal activities and financial interests
        that could conflict with their responsibilities and obligations and (2) giving
        assistance to competitors, which could be in conflict with the interests
        of NSM
        or its clients. All Employees are required to seek the consent of NSM management
        if they intend to become partners or shareholders in companies outside NSM’s
        corporate structure.
  ***Page
            - 52***
   **Fair
        Competition**
  NSM’s
        policy is to comply fully with competition and antitrust laws throughout
        the
        world. NSM is committed to vigorous yet fair competition and supports the
        development of appropriate competition laws. Each Employee must avoid any
        business arrangement that might prevent the effective operation of fair
        competition. It is advised that each Employee consult with the Compliance
        Officer before attending a meeting with a party who may be viewed as a
        competitor.
  **International
        Trade**
  NSM
        must
        comply with a variety of laws around the world regarding its activities.
        In some
        cases, the law prohibits the disclosure of information, whether the disclosure
        occurs within the U.S. or elsewhere, and whether or not the disclosure is
        in
        writing.
  U.S.
        law
        and the Code prohibits giving, offering, or promising anything of value to
        any
        public official in the U.S. or any foreign country to influence any official
        act, or to cause an official to commit or omit any act in violation of his
        or
        her lawful duty. The Foreign Corrupt Practices Act precludes payments to
        non-U.S. government officials for the purpose of obtaining or retaining
        business, even if the payment is customary in that country. This law applies
        anywhere in the world to U.S. citizens, nationals, residents, businesses
        or
        employees of U.S. businesses. Because NSM is a U.S. company, this law applies
        to
        NSM and all of its subsidiaries. Any questions on this policy should be directed
        to the Compliance Officer.
  **Government
        Relations**
  NSM
        is
        prohibited by law from making any contributions or expenditures in connection
        with any U.S. national election. This includes virtually any activity that
        furnishes something of value to an election campaign for a federal office.
        Use
        of NSM’s name in supporting any political position or ballot measure, or in
        seeking the assistance of any elected representative, requires the specific
        approval of the President of NSM. Political contributions or expenditures
        are
        not to be made out of NSM’s funds in any foreign country, even if permitted by
        local law, without the consent of the President of NSM.
  **Vendors,
        Contractors, Consultants and Temporary Workers**
  Vendors,
        contractors, consultants or temporary workers who are acting on NSM’s behalf, or
        are on NSM’s property, are expected to follow the law, the Code, and honor NSM’s
        values. Violations will subject the person or firm to sanctions up to and
        including loss of the contract, the contracting or consulting agreement,
        or the
        discharge from temporary assignment.
  **Compliance
        with the Code**
  It
        is the
        responsibility of NSM’s Board of Directors to ensure that the standards embodied
        in the Code are communicated to, understood and observed by all Employees.
        NSM’s
        Board of Directors will not criticize management for any loss of business
        resulting from adherence to the Code. Equally, NSM’s Board of Directors
        undertakes that no Employee will suffer as a consequence of bringing to their
        attention, or that of senior management, a breach or suspected breach of
        the
        Code.
  ***Page
            - 53***
  The
        standards set out in the Code directly reflect NSM’s high ethical standards. NSM
        expects and requires each and every Employee, as a representative of NSM,
        to
        fulfill NSM’s ethical commitment in a way that is visible to the outside world
        with which NSM conducts its business operations.
  Each
        Employee is responsible for complying with the standards set out in the Code
        and
        must ensure that their personal conduct is above reproach.
  Each
        Employee has an obligation to assure that the conduct of others around him
        or
        her complies with the Code.
  All
        Employees have a legal, moral, and ethical duty to report to NSM’s Board of
        Directors and the appropriate authorities any known or suspected violations
        of
        law, regulations or corporate policy, including the Code.
  Breaches
        of law, regulations and the standards of conduct listed above may lead to
        serious consequences for the Employee concerned.
  **Annual
        Acknowledgement**
  Each
        Employee will be required to sign a statement annually that he or she has
        read
        and understands NSM’s Code of Ethics. This statement will also require that the
        Employee state that he or she is in full compliance with the Code. The form
        of
        statement is attached as Schedule “C”.
 
  ***Page
            - 54***
  **Schedule
        “A”**
  **VALUES**
   ***FOCUS:*** We
        exist
        only because we are in the e-commerce and hobby business.
  ***RESPECT:*** We value
        all people, treating them with dignity at all times.
  ***EXCELLENCE:*** We
        strive for “Best in Class” in everything we do.
  ***ACCOUNTABILITY:*** We do
        what we say we will do and expect the same from others.
  ***TEAMWORK:*** We
        believe that cooperative action produces superior results.
  ***INTEGRITY:*** We are
        honest with each other, our customers, our partners, our shareholders and
        ourselves
  ***OPEN
        COMMUNICATION:*** We share
        information, ask for feedback, acknowledge good work, and encourage diverse
        ideas.
  ***POSITIVE
        ATTITUDE:*** We work
        hard, are rewarded for it, and maintain a positive attitude with a good sense
        of
        perspective, humor and enthusiasm.
   ***Page
            - 55***
  **Schedule
        “B”**
  **Reportable
        Violations - Anonymous Reporting Program**
   Accounting
        Error
 Accounting
        Omissions
 Accounting
        Misrepresentations
 Auditing
        Matters
 Compliance/Regulation
        Violations
 Corporate
        Scandal
 Domestic
        Violence
 Discrimination
 Embezzlement
 Environmental
        Damage
 Ethics
        Violation
 Fraud
 Harassment
 Industrial
        Accidents
 Misconduct
 Mistreatment
 Poor
        Customer Service
 Poor
        Housekeeping
 Sabotage
 Securities
        Violation
 Sexual
        Harassment
 Substance
        Abuse
 Theft
 Threat
        of
        Violence
 Unfair
        Labor Practice
 Unsafe
        Working Conditions
 Vandalism
 Waste
 Waste
        of
        Time and Resources
 Workplace
        Violence
   ***Page
            - 56***
  **Schedule
        “C”**
 
 **Acknowledgement
        and Certification Statement**
 
 
 I
        acknowledge and certify that I have read and understand the information set
        forth in the Code of Ethics of NSM Holdings, Inc. and will comply with these
        principles in my daily work activities. I am not aware of any violation of
        the
        standards of NSM’s Code of Ethics.
 
 
 Date:_________________________________________________________________________________________________________
 
 Name
        (print):___________________________________________________________________________________________________
  Position:______________________________________________________________________________________________________
 Address:______________________________________________________________________________________________________
  *Signature:_____________________________________________________________________________________________________*
   
 ***Page
            - 57***