NSM 10QSB 2007 Q2 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

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

For the quarterly period ended November 30, 2006

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

For the transition period from _______________to _______________

Commission file number 000-51571

NSM HOLDINGS, INC.

(Exact name of small business issuer as specified in its charter)

Incorporated in the State of Delaware	98-0425713
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Suite 1106, 1200 West 73rd Avenue, Vancouver, British Columbia, V6P 6G5, Canada
(Address of principal executive offices)
604-671-8780
(Issuer’s telephone number)
n/a
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[ X ] Yes [   ] No

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

[   ] Yes [ X ] No

APPLICABLE ONLY TO CORPORATE ISSUERS

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 January 12, 2007
Shares of common stock - $0.001 par value	4,175,000

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

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PART I - FINANCIAL INFORMATION

Item 1.Financial Statements.

NSM HOLDINGS, INC.

(a development stage company)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2006

(Unaudited)

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NSM Holdings, Inc.

(A Development Stage Company)

Consolidated Balance Sheets

(Expressed in US dollars)

(unaudited)

	November 30, 2006 $		May 31, 2006 $
ASSETS
Current Assets
Cash	5,446		14,097
Accounts receivable	-		14,425
Inventory	7,282		7,282
Prepaid and deposits	2,821		497
Total Current Assets	15,549		36,301
Property and Equipment (Note 3)	151		291
Intangible Assets (Note 4)	552		735
Total Assets	16,252		37,327
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities
Accounts payable	36,158		21,668
Accrued liabilities	3,807		1,210
Due to a related party (Note 5(a))	10,000		1,634
Total Liabilities	49,965		24,512
Commitments (Notes 1 and 6)
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 4,175,000 shares issued and outstanding	4,175		4,175
Additional Paid-in Capital	119,521		119,521
Stock Subscriptions Receivable	-		(1,000	)
Deficit Accumulated During the Development Stage	(157,409	)	(109,881	)
Total Stockholders’ Equity (Deficit)	(33,713	)	12,815
Total Liabilities and Stockholders’ Equity (Deficit)	16,252		37,327

(The accompanying notes are an integral part of these consolidated financial statements)

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NSM Holdings, Inc.

(A Development Stage Company)

Consolidated Statements of Operations

(Expressed in US dollars)

(unaudited)

	Accumulated From April 8, 2004			For the Three Months			For the Three Months			For the Six Months			For the Six Months
	(Date of Inception)			Ended			Ended			Ended			Ended
	to November 30,			November 30,			November 30,			November 30,			November 30,
	2006			2006			2005			2006			2005
	$			$			$			$			$
Revenue		68,899			-			2,312			-			6,900
Cost of Sales		(54,019	)		-			(1,592	)		-			(3,048	)
Gross Profit		14,880			-			720			-			3,852
Expenses
Amortization		1,603			161			161			323			323
Consulting fees		23,819			5,698			793			8,535			2,099
General and administrative		30,546			13,337			1,928			14,503			3,391
Management services (Note 5(b))		12,887			1,344			1,276			2,691			2,493
Professional fees		103,434			13,128			11,441			21,476			30,860
Total Expenses		172,289			33,668			15,599			47,528			39,166
Net Loss		(157,409	)		(33,668	)		(14,879	)		(47,528	)		(35,314	)
Net Loss Per Share - Basic and Diluted					(0.01	)		(0.01	)		(0.01	)		(0.01	)
Weighted Average Shares Outstanding					4,175,000			3,445,000			4,175,000			3,445,000

(The accompanying notes are an integral part of these consolidated financial statements)

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NSM Holdings Inc.

(A Development Stage Company)

Consolidated Statements of Cash Flows

(Expressed in US dollars)

(unaudited)

	For the			For the
		Three Months			Three Months
		Ended			Ended
		November 30,			November 30,
		2006			2005
		$			$
Operating Activities
Net loss		(47,528	)		(35,314	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization		323			323
Bad Debt Expense		11,813			-
Change in operating assets and liabilities:
Accounts receivable		2,612			554
Prepaid and deposits		(2,324	)		(497	)
Inventory		-			(2,563	)
Accounts payable and accrued liabilities		17,087			15,199
Due to related party		8,366			(1,194	)
Net Cash Used By Operating Activities		(9,651	)		(23,492	)
Financing Activities
Stock subscriptions received		1,000			-
Net Cash Provided By Financing Activities		1,000			-
Decrease in Cash		(8,651	)		(23,492	)
Cash - Beginning of Period		14,097			27,321
Cash - End of Period		5,446			3,829
Supplemental Disclosures
Interest paid		-			-
Income taxes paid		-			-

(The accompanying notes are an integral part of these consolidated financial statements)

Page - 5

NSM Holdings, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

November 30, 2006

(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 November 30, 2006, the Company has a working capital deficiency of $34,416 and accumulated losses of $157,409 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.

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)   Interim Financial Statements

These unaudited interim financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

c)   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.

d)   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.

e)   Basic and Diluted Net Income (Loss) Per Share

The Company computes net income (loss) per share in accordance with Financial Accounting Standards Board (“FASB”) 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.

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NSM Holdings, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

November 30, 2006

(Expressed in US dollars)

2.Summary of Significant Accounting Policies (continued)

f)   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.

g)   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 November 30, 2006 and 2005, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

h)   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. At November 30, 2006 and May 31, 2006, inventory consisted of marine hobby products held for sale.

i)   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.

j)   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.

k)   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.

l)   Financial Instruments and Concentrations

The fair values of financial instruments, which include cash, accounts receivable, inventory, prepaid expenses, accounts payable, accrued liabilities, and due to related parties 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.

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NSM Holdings, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

November 30, 2006

(Expressed in US dollars)

2.Summary of Significant Accounting Policies (continued)

m)   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.

n)   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.

o)   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 at November 30, 2006 the Company recorded an allowance for bad debts of $11,813 (May 31, 2006 - $Nil).

p)   Stock-based Compensation

The Company records stock-based compensation in accordance with SFAS No. 123R “Share Based Payments”, using the fair value method. The Company has not issued any stock options since its inception.

q)   Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. This statement requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The provisions of SFAS No. 158 are effective for employers with publicly traded equity securities as of the end of the fiscal year ending after December 15, 2006. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.

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NSM Holdings, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

November 30, 2006

(Expressed in US dollars)

2.Summary of Significant Accounting Policies (continued)

q)   Recent Accounting Pronouncements (continued)

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statements No. 109”. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a two-step method of first evaluating whether a tax position has met a more likely than not recognition threshold and second, measuring that tax position to determine the amount of benefit to be recognized in the financial statements. FIN 48 provides guidance on the presentation of such positions within a classified statement of financial position as well as on derecognition, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This statement requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits for subsequent measurement using either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of Statement No. 140. The subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value eliminates the necessity for entities that manage the risks inherent in servicing assets and servicing liabilities with derivatives to qualify for hedge accounting treatment and eliminates the characterization of declines in fair value as impairments or direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year beginning after September 15, 2006. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140", to simplify and make more consistent the accounting for certain financial instruments. SFAS No. 155 amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", to permit fair value re-measurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, "Accounting for the Impairment or Disposal of Long-Lived Assets", to allow a qualifying special-purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006, with earlier application allowed. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.

3.Property and Equipment

	November 30, 2006			May 31, 2006
		Accumulated	Net Book	Net Book
	Cost	Amortization	Value	Value
	$	$	$	$
Computer hardware	837	686	151	291

4.Intangible Assets

	November 30, 2006			May 31, 2006
		Accumulated	Net Book	Net Book
	Cost	Amortization	Value	Value
	$	$	$	$
Website domain name	1	-	1	1
Website development costs	1,468	917	551	734
	1,469	825	552	735

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NSM Holdings, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

November 30, 2006

(Expressed in US dollars)

5.Related Party Balances/Transactions

a)   At November 30, 2006, the Company is indebted to a director of the Company in the amount of $10,000, representing expenses paid on behalf of the Company. This amount is non-interest bearing, unsecured and has no specific repayment terms.

b)   During the six months ended November 30, 2006, the Company paid $2,691 to the President of the Company for management services rendered.

6.Commitment

a)   The Company entered into a consulting agreement commencing August 1, 2006 for consulting services at a rate of CDN $2,120 per month.

Page - 10

Item 2. Management’s Discussion and Analysis or Plan of Operation.

THE FOLLOWING PRESENTATION OF MANAGEMENT’S DISCUSSION AND ANALYSIS OF NSM HOLDINGS, INC. SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION INCLUDED HEREIN.

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 three month period ended November 30, 2005 and for the three month period ended November 30, 2006 of $14,879 and $33,668 respectively.

To meet its need for cash, NSM will rely on the proceeds raised from its March 2006 sale of registered shares, its April 2006 private placement, 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. NSM has not made any other 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 quarterly 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.

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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. In September 2004, NSM completed a $44,500 financing through a private placement. Also, in March 2006, NSM sold $68,000 of registered shares under its Form SB -2 and in April 2006, NSM completed a $5,000 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

From inception on April 8, 2004 to November 30, 2006, NSM earned $68,899 in revenues. The concurrent cost of sales was $54,019, resulting in gross profit from operations of $14,880. During the same period, NSM incurred $172,289 in total expenses, as listed below under “Expenses”. As a result, since inception, NSM had total net loss of $157,409.

For the three month period ended November 30, 2006, NSM recorded no sales of its products. During the same period, NSM incurred $33,668 in total expenses, as listed below under “Expenses”. As a result, for the three month period ended November 30, 2006, NSM had total net loss of $33,668.

For the three month period ended November 30, 2005, NSM realized $2,312 in sales of its products. The concurrent cost of sales was $1,592, resulting in gross profit from operations of $720. During the same period, NSM incurred $15,599 in total expenses, as listed below under “Expenses”. Therefore, for the three month period ended November 30, 2005 NSM had total net loss of $14,879.

Expenses

NSM’s expenses increased by $18,069 or 115% from $15,599 for the three month period ended November 30, 2005 to $21,856 for the three month period ended November 30, 2006. The increase was primarily due to a $11,813 write-off of uncollectible accounts receivable, a $4,906 increase in consulting fees, and a $1,687 increase in professional fees, which was a result of a consulting agreement commencing August 1, 2006 for consulting, administration, and bookkeeping services and cost of preparation of income tax returns. .

NSM had cash of $5,446 at November 30, 2006. For the three month period ended November 30, 2006, NSM had a net loss of $33,668, including (a) general and administrative expenses of $13,337, which included a write-off of uncollectible accounts receivable of $11,813, rent of $1,538, and a net recovery of office and general expenses of $14; (b) professional fees of $13,128, which included legal fees of $2,513, accounting fees of $1,500 for preparation of the financial statements, auditor’s fees of $7,750, and income tax services of $1,365; (c) consulting fees of $5,698; (d) management service fees of $1,344; and (e) amortization of $161 for the accumulated amortization on the website.

NSM had cash of $3,829 at November 30, 2005. For the three month period ended November 30, 2005, NSM had a net loss of $14,879, including (a) office and general expenses of $1,928, which included rent of $1,525 and general administrative charges of $403; (b) professional fees of $11,441, which included legal fees of $6,691, accounting fees of $2,000 for preparation of the financial statements, and auditor’s fees of $2,750; (c) consulting fees of $793; (d) management service fees of $1,276; and (e) amortization of $161 for the accumulated amortization on the website.

Liquidity and Financial Condition

NSM had cash of $5,446 and working capital deficiency of $34,416 at November 30, 2006. During the period from inception on April 8, 2004 to November 30, 2006, NSM used $113,445 in cash for operating activities. Cash used in operations was financed by the sale of common stock of $120,196, net of offering cost of $21,305. NSM has accumulated a deficit of $152,409 since inception and has a stockholder’s deficit of $33,713.

Page - 12

There are no material defaults or past due amounts for the accounts payable or accrued liabilities. Accounts payable, accrued liabilities, and due to a related party have increased since May 31, 2006 due to costs associated with business operations, sale of products, and a loan from a director of NSM.

As of May 31, 2006, NSM’s total assets were $37,327 and its total liabilities were $24,512. As of November 30, 2006, NSM’s total assets were $16,252 and its total liabilities were $49,965. The decrease of $21,075 in the assets during the six month period ended November, 2006 was a direct result of a decrease of $8,651 in cash and a decrease of $14,425 in accounts receivable, and an increase of $2,324 in prepaid and deposits.

The increase of $25,453 in liabilities during the six month period ended November 30, 2006 was a direct result of an increase of $14,490 in accounts payable, an increase of $2,597 in accrued liabilities, and an increase of $8,366 in liabilities due to a related party. The increase in accrued liabilities for the six month period ended November 30, 2006 was for legal and accounting and the increase in due to a related party was due to a loan from a director.

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. Since inception on April 8, 2004 through to November 30, 2006, NSM has only generated $68,899 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 and operation 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.

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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.

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.

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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

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 Translation

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.

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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. On July 14, 2005, the Securities and Exchange Commission declared NSM’s Form SB-2 Registration Statement effective, file number 333-120993, permitting NSM to offer up to 2,500,000 shares of common stock at $0.10 per share. There was no underwriter involved in NSM’s public offering. On December 30, 2005, NSM filed a post-effective amendment to the Form SB-2 Registration Statement. On March 28, 2006, NSM sold 680,000 shares of common stock in the public offering. NSM did not sell any other shares under this public offering. The offering period for the public offering expired on March 31, 2006. NSM also raised another $5,000 USD under a private placement in April 2006.

Inflation

Zuber Jamal, the sole officer and director of NSM, does not believe that inflation will have a material impact on its future operations.

Uncertainties Relating To Forward-Looking Statements

This Form 10-QSB Quarterly 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.

Forward-looking statements in this Form 10-QSB include statements regarding (1) expectation that revenue will increase during fiscal 2007; (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 2007 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-QSB and NSM disclaims any duty to update such statements.

Certain parts of this Form 10-QSB 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.

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NSM may, from time to time, make oral forward-looking statements. NSM strongly advises that the above paragraph and the risk factors described in NSM’s 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 3. Controls and Procedures.

Disclosure Controls and Procedures

Zuber Jamal, NSM’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of NSM’s disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the “Exchange Act” )) as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on such evaluation, Mr. Jamal has concluded that, as of the Evaluation Date, NSM’s disclosure controls and procedures are effective in alerting NSM on a timely basis to material information required to be included in its reports filed or submitted under the Exchange Act.

Changes in Internal Controls

During the quarter of the fiscal year covered by this report, there were no changes in NSM’s internal controls or, to NSM’s knowledge, in other factors that have materially affected, or are reasonably likely to materially affect, these controls and procedures subsequent to the date NSM carried out this evaluation.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

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

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

During the quarter of the fiscal year covered by this report, (i) NSM did not modify the instruments defining the rights of its shareholders, (ii) no rights of any shareholders were limited or qualified by any other class of securities, and (iii) NSM did not sell any unregistered equity securities.

Item 3. Defaults Upon Senior Securities.

During the quarter of the fiscal year covered by this report, no material default has occurred with respect to any indebtedness of NSM. Also, during this quarter, no material arrearage in the payment of dividends has occurred.

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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 first quarter of the fiscal year covered by this report.

Item 5. Other Information.

During the quarter of the fiscal year covered by this report, NSM reported all information that was required to be disclosed in a report on Form 8-K.

Item 6. Exhibits

(a)   Index to and Description of Exhibits

All Exhibits required to be filed with the Form 10-QSB are incorporated by reference to NSM’s previously filed Form SB-2 and Form 10-KSB.

Exhibit	Description	Status
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., filed as an Exhibit to NSM’s Form 10-KSB filed on October 13, 2005, and incorporated herein by reference	Filed
14	Code of Ethics, filed as an Exhibit to NSM’s Form 10-KSB filed on October 13, 2005, and incorporated herein by reference.	Filed
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

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SIGNATURES

In accordance with the requirements of the Securities 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, CEO and CFO

Dated:January 15, 2007

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Exhibit 31

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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 quarterly report on Form 10-QSB of NSM Holdings, Inc.;

2. Based on my knowledge, this quarterly 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 report;

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

4. The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: January 15, 2007

/s/ Zuber Jamal

Zuber Jamal

Chief Executive Officer

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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 quarterly report on Form 10-QSB of NSM Holdings, Inc.;

2. Based on my knowledge, this quarterly 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 report;

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

4. The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: January 15, 2007

/s/ Zuber Jamal

Zuber Jamal

Chief Financial Officer

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Exhibit 32

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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 Quarterly Report of NSM Holdings, Inc. (“NSM”) on Form 10-QSB for the period ending November 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zuber Jamal, President, Chief Executive Officer of NSM and 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

January 15, 2007

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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 Quarterly Report of NSM Holdings, Inc. (“NSM”) on Form 10-QSB for the period ending November 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zuber Jamal, Chief Financial Officer of NSM and 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

January 15, 2007

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