**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**







**FORM
      10-QSB**







|
      X
      | QUARTERLY REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      The
      Quarterly Period Ended March 31, 2007





|__| TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      The
      Transition Period from __________ To _________





Commission
      file number  **0-27159**








**National
      Realty and Mortgage, Inc.**


(Exact
      Name of Registrant as Specified in its Charter)





**Nevada**
              
              **65-0439467**(State
                  or Other Jurisdiction of
                  Incorporation)
              
              (I.R.S.
                  Employer Identification
                  Number)







**One
      NE First Avenue, Suite 306, Ocala, Florida 34470**





(Address
      of principal executive offices)





**(718)
      554-3652**





Issuer’s
      telephone number








(Former
      Name, former address and former fiscal year, if changed since last
      report)





Check
      whether the Registrant (1) has filed all reports required 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:
      Yes   | X | No  
|__|





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act) Yes |__| No | X |





APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
      YEARS





Check
      whether the registrant filed all documents and reports required by Section
      12,
      13, or 15(d) of the Exchange Act after the distribution of securities under
      a
      plan confirmed by a court


Yes |__| No
      |__|





APPLICABLE
      ONLY TO CORPORATE ISSUERS





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





As
      of May
      21, 2007, there there were 6,472,766 shares of the Registrant's Common Stock,
      $0.001 par value per share, outstanding and 666,667 shares of the Registrant’s
      Class A Common Stock, $0.001.





Transitional
      Small Business Disclosure Format Yes |__| No
      | X
      |







NATIONAL
      REALTY AND MORTGAGE, INC.


**FOR
      THE QUARTERLY PERIOD ENDED MARCH 31, 2007**





**TABLE
      OF CONTENTS**







**PART
                I - FINANCIAL INFORMATION**Item
              1.
            Financial
                Statements
            1Item
              2.
            Management's
                Discussion and Analysis or Plan of Operation
            18Item
              3.
            Controls
                and Procedures
            27**PART
                II - OTHER INFORMATION**Item
              1.
            Legal
                Proceedings
            28Item
              2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds.
            28Item
              3.
            Defaults
                upon Senior Securities
            28Item
              4.
            Submission
                of Matters to a Vote of Securities Holders
            28Item
                5.
            Other
              Information
            28Item
              6.
            Exhibits
            28






































THIS
      REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
      SUCH STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND
      PROJECTIONS ABOUT THE COMPANY AND ITS INDUSTRY. FORWARD-LOOKING STATEMENTS
      ARE
      SUBJECT TO KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY
      CAUSE ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE, ACHIEVEMENTS AND
      PROSPECTS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY SUCH
      FORWARD-LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE
      PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON EVEN IF NEW INFORMATION
      BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.








**PART
      I**


**FINANCIAL
      INFORMATION**





Item
      1.Financial
      Statements




**NATIONAL
        REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
        NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 **CONDENSED
        CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **MARCH
        31, 2007 AND 2006**
 
 
 
 
 
 
 
 
 **1**
  **NATIONAL
        REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
        NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 
 
 
 
 INDEX
        TO
        CONDENSEDCONSOLIDATED
        FINANCIAL STATEMENTS (UNAUDITED)
 
 
 PAGE(S)Condensed
                  Consolidated Financial Statements:Balance
                  Sheet as of March 31, 2007 (Unaudited)
              3Statements
                  of Operations for the Six Months and ThreeMonths
                  ended March 31, 2007 and 2006 (Unaudited)
              4Statements
                  of Cash Flows for the Six Months EndedMarch
                  31, 2007 and 2006 (Unaudited)
              5Notes
                  to Consolidated Financial Statements(Unaudited)
              6
                  -17
 
 
 
 
 
 
 **2**
 
 **NATIONAL
                    REALTY AND MORTGAGE INC. AND SUBSIDIARIES****(FORMERLY
                    NATIONAL RESIDENTIAL PROPERTIES, INC. AND
                    SUBSIDIARIES)****CONDENSED
                    CONSOLIDATED BALANCE SHEET (UNAUDITED)****MARCH
                    31, 2007****ASSETS****ASSETS**Cash
                    and cash equivalents
                
                $
                1,362**TOTAL
                    ASSETS**
                
                $
                1,362**LIABILITIES
                    AND STOCKHOLDERS' (DEFICIT)****LIABILITIES**Accounts
                    payable and accrued expenses
                
                $
                39,823Convertible
                    debentures payable
                
                
                199,202Note
                    payable
                
                
                786**Total
                    Liabilities**
                
                
                239,811**STOCKHOLDERS'
                    (DEFICIT)**Preferred
                    Stock, $.001 Par Value; 1,000,000shares
                    authorized and 0 shares issued and outstanding
                
                
                -Common
                    Stock, $.001 Par Value; 100,000,000 sharesauthorized
                    and 6,472,766 shares issued and outstanding
                
                
                6,743Common
                    Stock Class A Voting, $.001 Par Value; 1,000,000shares
                    authorized and 666,667 shares issued and outstanding
                
                
                667Additional
                    Paid-in Capital
                
                
                8,076,613Accumulated
                    Deficit
                
                
                (8,322,472
                )**Total
                    Stockholders' (Deficit)**
                
                
                (238,449
                )**TOTAL
                    LIABILITIES AND STOCKHOLDERS' (DEFICIT)**
                
                $
                1,362
 
 See
              notes
              to condensed consolidated finacial statements
 **3**
  **NATIONAL
                  REALTY AND MORTGAGE INC. AND SUBSIDIARIES****(FORMERLY
                  NATIONAL RESIDENTIAL PROPERTIES, INC. AND
                  SUBSIDIARIES)****CONDENSED
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                  (UNAUDITED)****FOR
                  THE SIX MONTHS AND THREE MONTHS ENDED MARCH 31, 2007 AND
                  2006****SIX
                  MONTHS ENDED**
              
              **THREE
                  MONTHS ENDED****March
                  31,**
              
              **March
                  31,**
              
              **March
                  31,**
              
              **March
                  31,****2007**
              
              **2006**
              
              **2007**
              
              **2006****OPERATING
                  REVENUES**Revenue
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -**COST
                  OF SALES**
              
              
              -
              
              
              -
              
              
              -
              
              
              -**GROSS
                  PROFIT**
              
              
              -
              
              
              -
              
              
              -
              
              
              -**OPERATING
                  EXPENSES**Professional
                  fees and compensation expenses
              
              
              49,976
              
              
              31,589
              
              
              -
              
              
              4,232Real
                  estate taxes and property maintenance
              
              
              -
              
              
              5,460
              
              
              -
              
              
              4,750Office
                  expenses
              
              
              -
              
              
              41,176
              
              
              -
              
              
              24,384Miscellaneous
              
              
              598
              
              
              5,598
              
              
              79
              
              
              27Depreciation
                  and amortization
              
              
              -
              
              
              12,562
              
              
              -
              
              
              3,669**Total
                  Operating Expenses**
              
              
              50,595
              
              
              96,385
              
              
              79
              
              
              37,062**LOSS
                  BEFORE OTHER INCOME (EXPENSE)**
              
              
              (50,595
              )
              
              (96,385
              )
              
              (79
              )
              
              (37,062
              )**OTHER
                  INCOME (EXPENSE)**Other
                  income - forgiveness of debt
              
              
              -
              
              
              102,953
              
              
              -
              
              
              102,953Bad
                  debt
              
              
              -
              
              
              (114,600
              )
              
              -
              
              
              (114,600
              )Other
                  income
              
              
              300
              
              
              -
              
              
              100
              
              
              -**Total
                  Other Income (Expense)**
              
              
              300
              
              
              (11,647
              )
              
              100
              
              
              (11,647
              )**INCOME
                  (LOSS) BEFORE PROVISION FOR INCOME TAXES**
              
              
              (50,295
              )
              
              (108,032
              )
              
              21
              
              
              (48,709
              )Provision
                  for Income Taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -**NET
                  INCOME (LOSS) APPLICABLE TO COMMON SHARES**
              
              $
              (50,295
              )
              $
              (108,032
              )
              $
              21
              
              $
              (48,709
              )**NET
                  INCOME (LOSS) PER BASIC AND DILUTED SHARES**
              
              $
              (0.01
              )
              $
              (0.02
              )
              $
              0.00
              
              $
              (0.01
              )**WEIGHTED
                  AVERAGE NUMBER OF COMMON****SHARES
                  OUTSTANDING**
              
              
              6,472,766
              
              
              6,472,766
              
              
              6,472,766
              
              
              6,472,766
   See
              notes
              to condensed consolidated finacial statements
 **4**
 **NATIONAL
                    REALTY AND MORTGAGE INC. AND SUBSIDIARIES****(FORMERLY
                    NATIONAL RESIDENTIAL PROPERTIES, INC. AND
                    SUBSIDIARIES)****CONDENSED
                    CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)****FOR
                    THE SIX MONTHS ENDED MARCH 31, 2007 AND 2006********2007**
                
                **2006****CASH
                    FLOWS FROM OPERATING ACTIVITIES**Net
                    (Loss)
                
                $
                (50,295
                )
                $
                (108,032
                )**Adjustments
                    to reconcile net (loss) to net cash****(used
                    in) operating activities:**Depreciation
                    and amortization
                
                
                -
                
                
                12,562Bad
                    debt
                
                
                -
                
                
                114,600Forgiveness
                    of debt
                
                
                -
                
                
                (102,953
                )Common
                    stock issued for compensation
                
                
                -
                
                
                20,000**Changes
                    in assets and liabilities:**Increase
                    in accounts payable and accrued expenses
                
                
                -
                
                
                (126,703
                )Decrease
                    in investment securities
                
                
                -
                
                
                32,047Total
                    adjustments
                
                
                -
                
                
                (50,447
                )**Net
                    cash (used in) operating activities**
                
                
                (50,295
                )
                
                (158,479
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES**Increase
                    in mortgages and advances
                
                
                -
                
                
                (61,821
                )**Net
                    cash (used in) investing activities**
                
                
                -
                
                
                (61,821
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES**Capital
                    contribution by affliated party
                
                
                49,976
                
                
                -**Net
                    cash provided by financing activities**
                
                
                49,976
                
                
                -**NET
                    DECREASE IN CASH****AND
                    CASH EQUIVALENTS**
                
                
                (319
                )
                
                (220,300
                )**CASH
                    AND CASH EQUIVALENTS -****BEGINNING
                    OF PERIOD**
                
                
                1,681
                
                
                241,248**CASH
                    AND CASH EQUIVALENTS - END OF PERIOD**
                
                $
                1,362
                
                $
                20,948**SUPPLEMENTAL
                    DISCLOSURE OF CASH FLOW****INFORMATION:**Compensation
                    expense to officer
                
                
                -
                
                
                20,000**CASH
                    PAID DURING THE PERIOD FOR:**Interest
                    expense
                
                $
                -
                
                $
                -
 
 See
              notes
              to condensed consolidated finacial statements
 **5**
 **NATIONAL
        REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
          NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
          31, 2007 AND 2006 (UNAUDITED)**
 **NOTE
        1 -**  **ORGANIZATION
        AND BASIS OF PRESENTATION**
 
 The
        condensed consolidated unaudited interim financial statements included herein
        have been prepared, without audit, pursuant to the rules and regulations
        of the
        Securities and Exchange Commission. The condensed consolidated unaudited
        financial statements and notes are presented as permitted on Form 10-QSB
        and do
        not contain information included in the Company’s annual consolidated unaudited
        statements and notes. Certain information and footnote disclosures normally
        included in financial statements prepared in accordance with accounting
        principles generally accepted in the United States of America have been
        condensed or omitted pursuant to such rules and regulations, although the
        Company believes that the disclosures are adequate to make the information
        presented not misleading. It is suggested that these condensed consolidated
        unaudited financial statements be read in conjunction with the September
        30,
        2006 audited consolidated financial statements and the accompanying notes
        thereto. While management believes the procedures followed in preparing these
        condensed consolidated financial statements are reasonable, the accuracy
        of the
        amounts are in some respects dependent upon the facts that will exist, and
        procedures that will be accomplished by the Company later in the
        year.
 
 These
        condensed consolidated unaudited financial statements reflect all adjustments,
        including normal recurring adjustments which, in the opinion of management,
        are
        necessary to present fairly the consolidated operations, changes in permanent
        stockholders equity (deficit), changes in temporary equity and cash flows
        for
        the periods presented.
 
 National
        Realty & Mortgage Inc. and Subsidiaries (Formerly National Residential
        Properties, Inc. and Subsidiaries) (the “Company”) was originally incorporated
        in the State of Nevada on October 18, 1971 under the name of Mister Las Vegas,
        Inc. On December 15, 1994, the Company merged with a privately owned company,
        National Rehab Properties, Inc., a Florida corporation formed on October
        1,
        1993. The surviving Nevada corporation changed its name to National Rehab
        Properties, Inc. and became authorized to conduct business in the State of
        Florida on August 17, 1995. On October 10, 2000, the Company changed its
        name to
        National Residential Properties, Inc.
 
 The
        Company’s business was residential real estate development and building
        construction services. From 1993 to 1999 the Company’s business concentrated in
        investing in and revitalizing single family homes in established older
        residential neighborhoods in urban areas. The Company bought either single
        unit
        vacant properties and built single family homes or it bought abandoned homes
        and
        completed all renovations to the home followed by a sale of the home. During
        1999, while retaining its efforts in the renovation of urban single family
        homes
        as one aspect of the business, the Company entered a second phase of business,
        the development, construction and ownership of multifamily housing
        projects.
 
 **6**
 **NATIONAL
          REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
          NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
          31, 2007 AND 2006 (UNAUDITED)**
   **NOTE
        1 -**  **ORGANIZATION
        AND BASIS OF PRESENTATION (CONTINUED)**
 
 Beginning
        in the fiscal year ending September 30, 1999, the Company initiated a program
        of
        acquisition of properties suitable for development as multifamily housing
        or
        multiple unit single-family development tracts. Since 1999, the Company has
        purchased four tracts with the intention of building from 60 to 72 apartment
        units on each tract and one twenty acre citrus grove for single family home
        development. In April 2000, the Company acquired Encore Services, Inc. (“Encore
        Services”).
 
 On
        May 4,
        2001, the Company’s wholly-owned subsidiary, Connecticut Acquisition Corp. No.
        1, (“Connecticut Acquisition”) entered into a joint venture to develop a parcel
        of land located in Hebron, Connecticut, (the “Hebron Parcel”) as a senior adult
        community pursuant to a land development agreement with Mr. Nathan Kahn and
        various entities controlled by Mr. Nathan Kahn. The objective of this
        development was to either sell developed lots to builders, or erect dwellings
        themselves.
 
 Mr.
        Kahn’s entities had obtained options to purchase and develop other properties,
        and the Kahn entities advised that they would need additional funding to
        pay for
        the expenses in connection with the obtaining and maintenance of these
        options.
 
 The
        land
        development agreement called for Connecticut Acquisition to fund the initial
        costs of acquisition and development, and, after deduction of expenses from
        gross revenues, profits would be divided 50-50 between the parties.
 
 In
        contemplation of the financing of this project, on April 12, 2001, Connecticut
        Acquisition, obtained a loan from accredited investors evidenced by its 8%
        Series A Senior Subordinated Convertible Redeemable Debentures due April
        13,
        2003 (the “Connecticut Acquisition Debentures”), which were convertible from
        time to time into shares of Connecticut Acquisition’s Class A Common Stock. On
        May 8, 2001, following the acquisition of the Hebron Parcel, Connecticut
        Acquisition was merged into the Company. As a result, all rights and obligations
        of Connecticut Acquisition inured to the benefit of and became binding upon
        the
        Company. Pursuant to the merger, the Connecticut Acquisition Debentures were
        surrendered and canceled, and new debentures, identical to the Connecticut
        Acquisition Debentures, together with accompanying conversion rights into
        authorized but unissued shares of the Company’s common stock, par value $.001
        per share (“NRES Common Stock”), were issued by the Company to the holders of
        the Connecticut Acquisition Debentures.
 
 Pursuant
        to an agreement executed on December 26, 2001, made effective as of October
        31,
        2001 and a Statutory Warranty Deed- dated October 31, 2001, the Company sold
        to
        Senior Adult Lifestyle, Inc (“Senior Adult Lifestyle”) a related entity through
        common corporate officers, all of the rights, title and interest in (i) the
        Hebron Parcel; and (ii) contracts to purchase certain parcels of real property
        in
 **7**
 **NATIONAL
            REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
            NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
            31, 2007 AND 2006 (UNAUDITED)**
 
 **NOTE
        1 -**  **ORGANIZATION
        AND BASIS OF PRESENTATION (CONTINUED)**
 
 Watertown,
        New Milford, Granby and East Windsor, Connecticut. As additional consideration
        for the conveyance to Senior Adult Lifestyle, the Company received on February
        1, 2002, 20 million shares of common stock of Genesis Capital Corporation
        of
        Nevada (“Genesis”), the parent of Senior Adult Lifestyles. These shares were
        based on a value of $0.10 per share, the value the stock was trading for
        in
        December 2001, for an agreed consideration of $2 million. Should the value
        at
        the earlier of (a) the time the Company sells these shares or (b) the expiration
        of three years from the date of the conveyance fall below $2 million, Genesis
        will be required to issue to the Company, additional shares of Genesis Common
        Stock to make up the difference in value. The value of the Genesis Common
        Stock
        was $.009 ($180,000) on February 1, 2002.
 
 On
        October 17, 2001, the Company’s other wholly-owned subsidiary, DC Power Products
        Acquisition Corp, (“DC Power”), obtained a loan from accredited investors
        evidenced by its 8% Series A Senior Subordinated Convertible Redeemable
        Debentures due October 17, 2003 (the “DC Power Debentures”), which were
        convertible from time to time into shares of DC Power’s common stock. DC Power
        was merged into the Company on November 1, 2001.
 
 As
        a
        result, all rights and obligations inured to the benefit of and became binding
        upon the Company. Pursuant to the merger, the DC Power Debentures were
        surrendered and canceled, and new debentures, identical to the DC Power
        Debentures, together with accompanying conversion rights into authorized
        but
        unissued shares of NRES Common Stock, were issued by the Company to the holders
        of the DC Power Debentures.
 
 In
        October 2003, the Company began lending money to individuals in the form
        of
        mortgage notes. The Company acts as a broker on some of these transactions
        and
        receives loan origination fees for its services.
 
 In
        November 2005, the Company changed its name to National Realty & Mortgage
        Inc. The Company with its name change in fiscal year 2006 changed its trading
        symbol from NRES to NRMG.
 
 **NOTE
        2 -**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Principles
        of Consolidation**
 
 The
        condensed consolidated financial statements include the accounts of the Company
        and all of its wholly owned subsidiaries. All significant intercompany accounts
        and transactions have been eliminated in consolidation.
 **8**
 **NATIONAL
            REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
            NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
            31, 2007 AND 2006 (UNAUDITED)**
 
 **NOTE
        2 -**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**
 
 **Use
        of Estimates**
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosures 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.
 
 **Revenue
        and Cost Recognition**
 
 Sales
        of
        real estate are generally recognized under the full accrual method. Under
        that
        method, gain is not recognized until the collectibility of the sales price
        is
        reasonably assured and the earnings process is virtually complete. When a
        sale
        does not meet the requirements for income recognition a gain is deferred
        until
        those requirements are met.
 
 The
        Company recorded the sale of property to Genesis Capital Corporation of Nevada
        under the cost recovery method. When this method is used, no profit is
        recognized on the sales transaction until the cost of the property sold is
        recovered (See Note 1).
 
 Acquisition
        and other direct costs, interest, and other indirect costs related to
        acquisition and development of lots are capitalized. Capitalized costs are
        allocated based on the relative sales value of each lot. The capitalized
        costs
        are charged to earnings when the relative revenue is recognized.
 
 The
        Company follows SFAS 91, whereby loan origination fees are deferred and
        recognized over the life of the loan as an adjustment of yield (interest
        income).
 
 **Cash
        and Cash Equivalents**
 
 The
        Company considers all highly liquid debt instruments and other short-term
        investments with an initial maturity of six months or less to be cash
        equivalents.
 
 The
        Company maintains cash and cash equivalent balances at several financial
        institutions, which are insured by the Federal Deposit Insurance Corporation
        up
        to $100,000.
 **9**
 **NATIONAL
            REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
            NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
            31, 2007 AND 2006 (UNAUDITED)**
 
 **NOTE
            2 -** **SUMMARY
            OF SIGNIFICANT ACCOUNTING POLICIES
            (CONTINUED)**
 
 **Income
        Taxes**
 
 The
        income tax benefit is computed on the pretax loss based on the current tax
        law.
        Deferred income taxes are recognized for the tax consequences in future years
        of
        differences between the tax basis of assets and liabilities and their financial
        reporting amounts at each year-end based on enacted tax laws and statutory
        tax
        rates.
 
 **Earnings
        (Loss) Per Share of Common Stock**
 
 Historical
        net (loss) per common share is computed using the weighted average number
        of
        common shares outstanding. Diluted earnings per share (EPS) includes additional
        dilution from common stock equivalents, such as stock issuable pursuant to
        the
        exercise of stock options and warrants. Common stock equivalents were not
        included in the computation of diluted earnings per share when the Company
        reported a loss because to do so would be antidilutive for periods
        presented.
 
 The
        following is a reconciliation of the computation for basic and diluted
        EPS:
 
  2007
              
              2006Net
                  (Loss)
              
              $
              (50,295
              )
              $
              (108,032
              )Weighted-average
                  common sharesoutstanding
                  (Basic)
              
              
              6,472,766
              
              
              6,472,766Weighted-average
                  common stockequivalents:Stock
                  options
              
              
              -
              
              
              -Warrants
              
              
              -
              
              
              -Weighted-average
                  common sharesoutstanding
                  (Diluted)
              
              
              6,472,766
              
              
              6,472,766
  There
        are
        no options and warrants outstanding to purchase stock at March 31, 2007 and
        2006.
 
 **10**
 **NATIONAL
            REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
            NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
            31, 2007 AND 2006 (UNAUDITED)**
 
 **NOTE
            2 -** **SUMMARY
            OF SIGNIFICANT ACCOUNTING POLICIES
            (CONTINUED)**
 
 
 **Fair
        Value of Financial Instruments**
 
 The
        carrying amount reported in the consolidated balance sheets for cash and
        cash
        equivalents, loans receivable, accounts payable and accrued expenses approximate
        fair value because of the immediate or short-term maturity of these financial
        instruments. The carrying amount reported for notes and mortgages payable
        approximates fair value because, in general, the fair value of the notes
        and
        mortgages payable is estimated based on interest rates for the same or similar
        debt offered to the Company having the same or similar remaining maturities
        and
        collateral requirements.
 
 **Loan
        Origination Fees**
 
 Represent
        fees in connection with obtaining mortgages on the various properties. The
        loan
        origination fees are being amortized straight-line over a two-year period.
        Amortization expense for the six months ended March 31, 2007 and 2006 is
        $0 and
        $3,263 respectively.
 
 **Recent
        Accounting Pronouncement**
 
 In
        December 2004, the Financial Accounting Standards Board (“FASB”) issued
        Statement of Financial Accounting Standards (“SFAS”) No. 151, “Inventory
        Costs.” SFAS No. 151 requires abnormal amounts of inventory costs related
        to idle facility, freight handling and wasted material expenses to be recognized
        as current period charges. Additionally, SFAS No. 151 requires that
        allocation of fixed production overheads to the costs of conversion be based
        on
        the normal capacity of the production facilities. The standard is effective
        for
        fiscal years beginning after June 15, 2005. The adoption of SFAS
        No. 151 did not have a material impact on the Company’s financial position
        or results of operations.
  
 In
        May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
        Corrections.” SFAS No. 154 replaces Accounting Principles Board (“APB”)
        Opinion No. 20, “Accounting Changes” and SFAS No. 3, “Reporting
        Accounting Changes in Interim Financial Statements.” SFAS No. 154 requires
        retrospective application to prior periods’ financial statements of a voluntary
        change in accounting principle unless it is impracticable. APB No. 20
        previously required that most voluntary changes in accounting principle be
        recognized by including the cumulative effect of changing to the new accounting
        principle in net income
 **11**
 **NATIONAL
            REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
            NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
            31, 2007 AND 2006 (UNAUDITED)**
 
 
 **NOTE
            2 -** **SUMMARY
            OF SIGNIFICANT ACCOUNTING POLICIES
            (CONTINUED)**
 
 **Recent
        Accounting Pronouncement (Continued)**
 
 in
        the
        period of the change. SFAS No. 154 is effective for accounting changes
        and
 corrections
        of errors made in fiscal years beginning after December 15, 2005. The
        adoption of SFAS No. 154 did not have a material impact on the Company’s
        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.” SFAS No. 155 resolves issues addressed in SFAS No. 133
        Implementation Issue No. D1, “Application of Statement 133 to Beneficial
        Interests in Securitized Financial Assets,” and permits fair value remeasurement
        for any hybrid financial instrument that contains an embedded derivative
        that
        otherwise would require bifurcation, clarifies which interest-only strips
        and
        principal-only strips are not subject to the requirements of SFAS No. 133,
        establishes a requirement to evaluate interests in securitized financial
        assets
        to identify interests that are freestanding derivatives or that are hybrid
        financial instruments that contain an embedded derivative requiring bifurcation,
        clarifies that concentrations of credit risk in the form of subordination
        are
        not embedded derivatives and amends SFAS No. 140 to eliminate the
        prohibition on a qualifying special-purpose entity from holding a derivative
        financial instrument that pertains to a beneficial interest other than another
        derivative financial instrument. SFAS No. 155 is effective for all
        financial instruments acquired or issued after the beginning of the first
        fiscal
        year that begins after September 15, 2006. The adoption of SFAS
        No. 155 did not have material impact on the Company’s 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.” SFAS
        No. 156 requires an entity to recognize a servicing asset or liability each
        time it undertakes an obligation to service a financial asset by entering
        into a
        servicing contract under a transfer of the servicer’s financial assets that
        meets the requirements for sale accounting, a transfer of the servicer’s
        financial assets to a qualified special-purpose entity in a guaranteed mortgage
        securitization in which the transferor retains all of the resulting securities
        and classifies them as either available-for-sale or trading securities in
        accordance with SFAS No. 115, “Accounting for Certain Investments in Debt
        and Equity Securities” and an acquisition or assumption of an obligation to
        service a financial asset that does not relate to financial assets of the
        servicer or its consolidated affiliates. Additionally, SFAS No. 156
        requires all separately recognized servicing assets and servicing liabilities
        to
        be initially
  **12**
 **NATIONAL
            REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
            NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
            31, 2007 AND 2006 (UNAUDITED)**
  **NOTE
            2 -** **SUMMARY
            OF SIGNIFICANT ACCOUNTING POLICIES
            (CONTINUED)**
 
 **Recent
        Accounting Pronouncement (Continued)**
 
 measured
        at fair value, permits an entity to choose either the use of an amortization
        or
        fair value method for subsequent measurements, permits at initial
 adoption
        a one-time reclassification of available-for-sale securities to trading
        securities by entities with recognized servicing rights and requires separate
        presentation of servicing assets and liabilities subsequently measured at
        fair
        value and additional disclosures for all separately recognized servicing
        assets
        and liabilities. SFAS No. 156 is effective for transactions entered into
        after the beginning of the first fiscal year that begins after
        September 15, 2006. The adoption of SFAS No. 156 did not have material
        impact on the Company’s financial position or results of operations.
 
 In
        September 2006, The Financial Accounting Standards Board ("FASB") issued
        Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value
        Measurement" ("SFAS No. 157"). This standard provides guidance for using
        fair
        value to measure assets and liabilities. SFAS No. 157 applies whenever other
        standards require (or permit) assets or liabilities to be measured at fair
        value
        but does not expand the use of fair value in any new circumstances. Prior
        to
        SFAS No. 157, the methods for measuring fair value were diverse and
        inconsistent, especially for items that are not actively traded. The standard
        clarifies that for items that are not actively traded, such as certain kinds
        of
        derivatives, fair value should reflect the price in a transaction with a
        market
        participant, including an adjustment for risk, not just the company's
        mark-to-model value. SFAS No. 157 also requires expanded disclosure of the
        effect on earnings for items measured using unobservable data. SFAS No. 157
        is
        effective for financial statements issued for fiscal years beginning after
        November 15, 2007, and interim periods within those fiscal years. The Company
        is
        currently evaluating the impact of this statement on its financial statements
        and expects to adopt SFAS No.157 on December 31, 2007.
 
 In
        September 2006, the 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 132R." This standard requires an employer
        to:
        (a) recognize in its statement of financial position an asset for a plan's
        overfunded status or a liability for a plan's underfunded status; (b) measure
        a
        plan's assets and its obligations that determine its funded status as of
        the end
        of the employer's fiscal year (with limited exceptions); and (c) recognize
        changes in the funded status of a defined benefit postretirement plan in
        the
        year in which the
 changes
        occur. Those changes will be reported in comprehensive income. The requirement
        to recognize the funded status of a benefit plan and the disclosure requirements
        are effective as of the end of the fiscal year ending after December 15,
        2006.
 
 **13**
 **NATIONAL
            REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
            NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
            31, 2007 AND 2006 (UNAUDITED)**
  **NOTE
            2 -** **SUMMARY
            OF SIGNIFICANT ACCOUNTING POLICIES
            (CONTINUED)**
 
 **Recent
        Accounting Pronouncement (Continued)**
 
 The
        requirement to measure plan assets and benefit obligations as of the date
        of the
        employer's fiscal year-end statement of financial position is effective for
        fiscal years ending after December 15, 2008. The Company is evaluating the
        impact of this statement on its financial statements and does not believe
        that
        it will have a material impact on the Company’s financial position or results of
        operations.
 
 **S** **ecurities
        Issued for Services**
 
 The
        Company accounts for common stock issued for compensation  services
        of Officers, Directors and employees  by
        reference to the fair market value of the Company’s stock on the date of stock
        issuance. Consulting services and commission expenses to non-employees are
        recorded at the fair market value of the Company’s stock on the date of stock
        issuance.
 
 **Reclassifications**
 
 Certain
        amounts for the six months ended March 31, 2006 have been reclassified to
        conform with the presentation of the March 31, 2007 amounts. The
        reclassifications have no effect on the net loss for the six months ended
        March
        31, 2006.
 
 **NOTE
        3-**  **MORTGAGES
        RECEIVABLE AND OTHER**
 
 Amount
        represent due from individuals who purchased property from the Company and
        other
        various amounts due the Company. Amounts due at March 31, 2007 and 2006 were
        $0
        and $5,435, respectively.
 
 **14**
 **NATIONAL
            REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
            NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
            31, 2007 AND 2006 (UNAUDITED)**
 
 **NOTE
        4-**  **FIXED
        ASSETS**
 
 Fixed
        assets consist of the following at March 31, 2007:
  **2007**Office
                    equipment and other
                
                $
                30,969Vehicles
                
                
                -30,969Less:
                    accumulated depreciation
                
                
                (30,969
                )Total
                
                $
                -
 Depreciation
        expense was $0 and $7,926 for the six months ended March 31, 2007 and 2006,
        respectively.
 
 
 
 **NOTE
        5-**  **NOTE
        PAYABLE**
 
 This
        account represents an advance payable on demand to an officer of the Company
        at
        6% interest per annum.
  The
        Company has a line of credit up to $50,000 available with the above institution
        expiring February 2008.
 
 
 **15**
 **NATIONAL
            REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
            NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
            31, 2007 AND 2006 (UNAUDITED)**
 
 **NOTE
        6-**  **CONVERTIBLE
        DEBENTURES PAYABLE**
 
 The
        Company has convertible debentures outstanding at March 31, 2007 and 2006
        in the
        amount of $199,202. These debentures mature along at November 2003. The
        debentures are convertible at the investors’ discretion pursuant to the
        convertible debenture agreement. As of September 30, 2005, these debentures
        were
        in default. The Company is negotiating an agreement whereby the investors
        would
        take control of the Company. The agreement has not been finalized.
 
 **NOTE
        7-**  **STOCKHOLDERS’
        (DEFICIT)**
 
 On
        October 17, 2006 the Company’s Board of Directors unanimously approved the
        amendment of its capital structure to increase the authorized shares of capital
        stock to 102,000,000 shares, of which 100,000,000 shares will be classified
        as
        Common Stock, $.001 par value, 1,000,000 shares will be classified as Class
        A
        Common Stock, $.001 par value and 1,000,000 shares will be classified as
        Preferred Stock, $.001 par value.
 
 As
        of
        March 31, 2007 and 2006, there were 1,000,000 shares authorized, and 0 shares
        issued and outstanding of the Company’s preferred stock with a par value of
        $.001.
 
 As
        of
        March 31, 2007 and 2006, there were 100,000,000 shares authorized, and 6,472,766
        shares issued and outstanding of the Company’s common stock with a par value of
        $.001.
 
 As
        of
        March 31, 2007 and 2006, there were 1,000,000 shares authorized 666,667 issued
        and outstanding of the Company’s Class A Voting common stock with a par value of
        $.001.
 
 The
        Company has retroactively restated its shares to account for a 1:300 reverse
        stock split for both classes of common stock effective December 19,
        2005.
 
 **16**
 **NATIONAL
            REALTY AND MORTGAGE INC. AND SUBSIDIARIES**
 **(FORMERLY
            NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
            31, 2007 AND 2006 (UNAUDITED)**
 
 **NOTE
        8-**  **INCOME
        TAXES**
 
 The
        net
        deferred tax assets in the accompanying consolidated balance sheets include
        the
        following components at March 31, 2007 and 2006.
  Due
        to
        the uncertainty of utilizing the approximate $8,322,472 and $8,254,394 in
        net
        operating losses, respectively, and recognizing the deferred tax assets,
        an
        offsetting valuation allowance has been established.
 
 
 **NOTE
        9-**  **GOING
        CONCERN**
 
 As
        shown
        in the accompanying financial statements, the Company incurred substantial
        net
        losses for the years ended September 30, 2006 and 2005and for the six months
        ended March 31, 2007. There is no guarantee that the Company will be able
        to
        generate enough revenue and/or raise enough capital to support those operations.
        This raises substantial doubt about the Company’s ability to continue as a going
        concern.
 
 The
        Company’s future success is dependent upon its ability to achieve profitable
        operations, and generate enough revenue and/or raise capital to support those
        operations. There is no guarantee that the Company will be able to raise
        enough
        capital or generate enough revenues to sustain its operations.
 
 Management
        believes they can raise the funds needed to support their business plan and
        acquire an operating, cash flow positive company.
 
 The
        financial statements do not include any adjustments relating to the
        recoverability or classification of recorded assets and liabilities that
        might
        result should the Company be unable to continue as a going concern.


**17**


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





THE
      FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S FINANCIAL
      STATEMENTS AND THE NOTES TO THOSE STATEMENTS AND OTHER FINANCIAL INFORMATION
      APPEARING ELSEWHERE IN THIS REPORT.





**Background**





National
      Realty and Mortgage, Inc. (“Company,” “we,” “our,” “ours” and “us”) was
      originally incorporated in the State of Nevada on October 18, 1971 under the
      name of Mister Las Vegas, Inc. On December 15, 1994, we merged with privately
      owned company, National Rehab Properties, Inc., a Florida corporation formed
      on
      October 1, 1993. The surviving Nevada corporation changed its name to National
      Rehab Properties, Inc. and became authorized to conduct business in the State
      of
      Florida on August 17, 1995. On October 10, 2000, we changed our name to National
      Residential Properties, Inc. and in November 2005 we changed our name to
      National Realty and Mortgage, Inc.





From
      1993
      until 1999, our business concentrated on investing in and revitalizing single
      family homes in established older residential neighborhoods in urban areas.
      We
      bought either single unit vacant properties and single family homes constructed
      on them, or bought abandoned homes which we then renovated and sold. During
      1999, while continuing to renovate urban single family homes as one aspect
      of
      our business, we entered a second phase of business; the development,
      construction and ownership of multifamily housing projects. In 2004, we
      commenced operations as a mortgage lender, which operations have been
      minimal.





**Background
      Capitalization Information**





Our
      original Articles of Incorporation authorized us to issue 1 million shares
      of
      common stock. After incorporation, the following events occurred:





(a)
      In
      December 1994, we attempted to effect a 2-for-1 stock split;





(b)
      In
      January 1999, we attempted to effect a 1-for-10 reverse stock
      split;





(c)
      Between the date of our incorporation and January 2001, we believed we increased
      the number of authorized shares of common stock from 1 million shares to 40
      million shares;





(d)
      In
      October 2000, we attempted to increase the number of authorized shares of common
      stock from 40 million to 250 million shares;





(e)
      In
      January 2001, we attempted to increase the number of authorized shares of common
      shares from 250 million to 750 million shares and effect a 3-for-1 stock split;
      and





(f)
      in
      June 2001, we attempted to increase the number of authorized shares of common
      stock from 750 million to 1.5 billion shares.





We
      have
      since determined that some or all of these capital changes were not validly
      adopted by our board of directors, approved by our shareholders or filed with
      the Nevada Secretary of State. As a result, it appears that we were not
      authorized to issue more than 1 million shares of Common Stock. Until November
      17, 2005, (as described in more detail below) all shares of Common Stock issued
      in excess of 1 million may have been issued in excess of the authorized
      amount.





**18**


Given
      the
      foregoing, we attempted to determine the majority owners of the validly issued
      shares of Common Stock. We discovered that Richard Astrom and Pamela Gay Astrom,
      tenants by the entireties, were issued a substantial block of shares shortly
      after we merged with National Rehab Properties, Inc. in 1995. These shares
      consisted of the majority of our validly issued outstanding shares. After their
      initial issuance, approximately 22% of these shares were transferred by Mr.
      and
      Mrs. Astrom to family members, and were then resold into the public market.
      While Mr. and Mrs. Astrom did transfer these shares, we assume that, because
      the
      shares are largely fungible, the shares transferred by Mr. and Mrs. Astrom
      were
      those issued in excess of our authorized amount and that the validly issued
      shares were still held by Mr. and Mrs. Astrom.





Our
      current transfer agent's records confirm that these shares can be traced from
      that time to the present, as they are still held by Richard and Pamela Astrom,
      as tenants by the entireties, and have not been sold or otherwise transferred.
      As such, Richard Astrom and Pamela Gay Astrom, as tenants by the entireties,
      appeared to hold a majority of the validly issued shares of Common
      Stock.





Based
      on
      advice of Nevada counsel and the assumption that the shares transferred to
      Mr.
      and Mrs. Astrom's family members described above included only those shares
      that
      were issued in excess of our authorized amount, we determined that Richard
      and
      Pamela Astrom could amend our articles of incorporation to increase our
      authorized shares of common stock. We also concluded that the issuance of Common
      Stock in excess of the authorized amount could be cured by our board of
      directors.





On
      September 20, 2005, we filed with the Securities and Exchange Commission (the
      "SEC") a revised information Statement on Schedule 14C relating to shareholder
      approval of the following proposals:





(a)
      To
      amend the Company's articles of incorporation to increase the number of
      authorized shares of common stock to 9 billion shares and accordingly increase
      the total number of authorized shares of all classes of stock the Company is
      authorized to issue.


(b)
      To
      amend the Company's articles of incorporation to create Class A common stock
      and
      to issue Class A common stock to Christopher Astrom.





(c)
      To
      amend the Company's articles of incorporation to change the par value of the
      Company's common stock to $.0000001 per share.





(d)
      To
      amend the Company's articles of incorporation to affect a 1 for 300 reverse
      split of the Company's capital stock.





(e)
      To
      ratify past changes of the Company's name and approve an amendment to the
      Company's articles of incorporation to change the name of the Company to
      "National Realty and Mortgage, Inc."





(f)
      To
      amend the Company's articles of incorporation to create a class of preferred
      stock, and to adopt and approve amended and restated articles of
      incorporation.





The
      shareholders owning a majority of the validly issued and then outstanding Common
      Stock adopted and approved these proposals. On October 17, 2005, we filed with
      the Nevada Secretary of State Amended and Restated Articles of Incorporation
      incorporating the aforementioned proposals. On November 19, 2005, our board
      of
      directors ratified these capital changes.





**19**


On
      November 15, 2005, we issued to Christopher Astrom 200 million shares of newly
      authorized Class A common stock, par value $.001 per share. These 200 million
      shares of Class A common stock were subsequently reversed to 666,667 shares
      as a
      result of the 1:300 stock split.





On
      December 19, 2005, we implemented a reverse stock split, whereby every 300
      shares of all classes of our capital stock were combined and converted into
      one
      share of that same class of capital stock and our common stock began to trade
      on
      a split adjusted basis. As of January 6, 2006, there were 6,472,766 shares
      of
      common stock issued and outstanding and 666,667 shares of Class A common stock
      issued and outstanding. The issued and outstanding shares of common stock and
      Class A common stock remained 6,472,766 and 666,667 respectively as of December
      31, 2006.





On
      October 23, 2006, we filed with the SEC a definitive Information Statement
      on
      Schedule 14C whereby we proposed to amend our Articles of Incorporation to
      reduce the number of authorized shares of Common Stock, Class A Common Stock
      and
      Preferred stock of the Company to 100,000,000; 1,000,000; and 1,000,000 shares,
      respectively. The amendment was filed with the State of Nevada on or near
      October 23, 2006 and accordingly since that date our authorized shares of Common
      Stock, Class A Common Stock and Preferred stock have been 100,000,000; 1,000,000
      and 1,000,000 shares, respectively.





**Current
      Operations**





In
      2004,
      we commenced operations as a direct mortgage lender. Although we plan to develop
      our mortgage lending business, we have not discontinued our real estate
      development business. We plan to continue our real estate development business
      in tandem with our mortgage lending business to the extent appropriate
      development opportunities present themselves and become available to us. We
      have
      not hired additional personnel to engage in the mortgage lending business.
      As of
      March 31, 2007, we had approximately $0 outstanding in credit extended to
      borrowers.





Our
      common stock is quoted on the OTC Bulletin Board under the trading symbol
      "NRMG".





The
      following presentation of management's discussion and analysis of the Company's
      financial condition and results of operations should be read in conjunction
      with
      the Company's consolidated financial statements, the accompanying notes thereto
      and other financial




**20**


**RESULTS
      OF OPERATIONS**





***THREE
      MONTHS ENDED MARCH 31, 2007 COMPARED TO***


***THREE
      MONTHS ENDED MARCH 31, 2006***





**Revenues**





Revenues
      were $0.00 for the three months ended March 31, 2007, as compared to $0.00
      for
      the three months ended March 31, 2006.





**Cost
      Of Revenues**





Cost
      of
      revenues was $0.00 for the three months ended March 31, 2007, as compared to
      $0.00 for the three months ended March 31, 2006.





**Operating
      Expenses**





Operating
      expenses for the three months ended March 31, 2007 were $79 compared to $37,062
      for the three months ended March 31, 2006.





**Other
      Income and Expenses**





The
      Company had other income of $100 for the three months ended March 31, 2007.
      The
      Company had other income in the amount of $102,953 consisting of debt
      forgiveness and other expenses of $114,600 resulting from the write off of
      a bad
      debt, for the three months ended March 31, 2006.





**Income
      (Loss) From Operations**





Income
      from operations for the three months ended March 31, 2007 was $21 compared
      to
      loss of ($48,709) for the three months ended March 31, 2006.





**Net
      Loss Applicable To Common Stock**





Net
      loss
      per share applicable to Common Stock was $0.00 for the three months ended March
      31, 2007, compared to $0.01 for the three months ended March 31,
      2006.





**21**


***SIX
      MONTHS ENDED MARCH 31, 2007 COMPARED TO***


***SIX
      MONTHS ENDED MARCH 31, 2006***





**Revenues**





Revenues
      were $0.00 for the six months ended March 31, 2007, as compared to $0.00 for
      the
      six months ended March 31, 2006.





**Cost
      Of Revenues**





Cost
      of
      revenues was $0.00 for the six months ended March 31, 2007, as compared to
      $0.00
      for the six months ended March 31, 2006.





**Operating
      Expenses**





Operating
      expenses for the six months ended March 31, 2007 were $50,595 compared to
      $96,385 for the six months ended March 31, 2006.





**Other
      Income and Expenses**





The
      Company had other income of $300 for the six months ended March 31, 2007. The
      Company had other income in the amount of $102,953 consisting of debt
      forgiveness and other expenses of $114,600 resulting from the write off of
      a bad
      debt, for the six months ended March 31, 2006.





**Loss
      From Operations**





Loss
      from
      operations for the six months ended March 31, 2007 was $50,295 compared to
      $108,032 for the six months ended March 31, 2006.





**Net
      Loss Applicable To Common Stock**





Net
      loss
      per share applicable to Common Stock was $0.01 for the six months ended March
      31, 2007, compared to $0.02 for the six months ended March 31,
      2006.





**22**


**LIQUIDITY
      AND CAPITAL RESOURCES**





To
      date,
      we have financed our operations primarily through mortgage debt and the issuance
      of the Debentures. The Debentures are discussed in further detail under
“Debentures” below. At March 31, 2007, we had $1,362 in cash and cash
      equivalents.





In
      the
      event that cash from operations is insufficient, we intend to satisfy our cash
      requirements for the next 12 months by borrowing from affiliated company's
      with
      common ownership or control and believe we can satisfy our cash requirements
      so
      long as we are able to obtain financing from these affiliated companies. We
      expect to continue to reduce operating expenses going forward. Further, there
      can be no assurance that such funds will actually be liquid and
      available.





We
      have
      invested substantial funds in previous real estate development projects but
      only
      realized material profits from these projects upon the sale of the real estate.
      With the completion of the sale of the Bay Harbor Property on August 3, 2005,
      we
      disposed of our last remaining property.





As
      of
      March 31, 2007, we had current assets consisting of cash and cash equivalents
      in
      the amount of $1,362. As of March 31, 2007, we had current liabilities
      consisting of accounts payable and short term notes payable in the amount of
      $40,609.





As
      of
      March 31, 2007 we had $199,202 in Debentures outstanding.





Our
      ability to meet our continuing operating expenses largely depends on our ability
      to continue to raise capital (i) through the sale of debt or equity, (ii)
      through construction and permanent mortgage financing, (iii) through the sale
      of
      land purchased, but not developed, by us and (iv) through operations as a
      mortgage lender. There can be no assurance that we will be able to raise
      additional capital on a debt or equity basis, or obtain mortgage financing,
      complete any of our projects under development, or sell any completed
      development projects (should they be completed) or land purchased for resale
      or
      development at a profit.





**OFF-BALANCE
      SHEET TRANSACTIONS**





We
      have
      no off-balance sheet arrangements and have not entered into any transactions
      involving unconsolidated, limited purpose entities.





**23**


**RISK
      FACTORS**





IN
      ADDITION TO OTHER INFORMATION IN THIS REPORT, YOU SHOULD CONSIDER THE FOLLOWING
      RISK FACTORS CAREFULLY. THESE RISKS MAY IMPAIR THE COMPANY'S OPERATING RESULTS
      AND BUSINESS PROSPECTS AS WELL AS THE MARKET PRICE OF THE COMPANY'S COMMON
      STOCK.





RISKS
      RELATED TO THE COMPANY'S


FINANCIAL
      CONDITION AND BUSINESS MODEL





OUR
      LIQUIDITY IS LIMITED AND WE MAY NOT BE


ABLE
      TO
      OBTAIN SUFFICIENT FUNDS TO FUND OUR BUSINESS





Our
      cash
      is currently very limited and may not be sufficient to fund future operations.
      These factors may make the timing, amount, terms and conditions of additional
      financing unattractive us. If we are unable to raise additional capital, any
      future operations could be impeded. If we obtain additional funding, the
      issuance of additional capital stock may be dilutive to our
      stockholders.





RISKS
      RELATED TO LEGAL UNCERTAINTIES


WE
      MAY
      HAVE VIOLATED NEVADA CORPORATE LAW





At
      the
      time of our incorporation, we had 1 million shares of common stock authorized.
      Since that time, we have amended our capital structure several times but we
      suspect that some or all of these amendments may not have validly implemented
      for failure to obtain proper board and shareholder approval. For a full
      explanation of these events, see “Background Capitalization
      Information”




We
      believe that out board of directors and shareholders had the authority to amend
      our capital structure by amending our articles of incorporation. Accordingly,
      on
      September 20, 2005, we filed with the SEC a revised Information Statement on
      Schedule 14C relating to shareholder approval of the aforementioned
      proposals.





As
      of
      November 17, 2005, our board of directors had cured and ratified the over
      issuances of stock. While it is unlikely that a shareholder would bring an
      action against us regarding the stock issuances, any such action could have
      a
      substantial impact on our liquidity and capital resources.





WE
      MAY
      HAVE VIOLATED SECTION 5 OF THE SECURITIES ACT.





In
      April
      and October of 2001 we issued certain convertible debentures (the “Debentures”).
      Section 5 of the Securities Act prohibits the public sale of securities absent
      an effective registration statement being filed with the SEC, unless an
      exemption from registration applies. All shares of Common Stock issued upon
      conversion of the Debentures were sold by holders of the Debentures following
      conversion. In October 2000, we issued to 2217 Acquisition Inc. certain
      debentures pursuant to a merger agreement. These debentures were also converted
      into our Common Stock. These transactions were performed in a manner thought
      to
      be exempt from the registration requirements of Section 5 of the Securities
      Act.
      However, the requirements of the exemptions relied on do not appear to have
      been
      satisfied.





**24**


While
      more than one year has passed from the initial placement of the Debentures,
      there has been no actions filed against us based upon a violation of Section
      5.
      Because the statute of limitations has run, it is unlikely that these holders
      of
      our Common Stock will file an action against us.





THE
      COMPANY IS IN DEFAULT OF THE NRMG DEBENTURES





The
      Company is in default under the terms of the NRMG Debentures because, among
      other things, the Company has no plans to register additional Common Stock
      to be
      issued upon conversion of the Debentures that are currently outstanding and
      has
      no plans to complete the issuance of the NRMG Debentures. Given the foregoing,
      the Company could face litigation by the holders of the NRMG Debentures seeking
      to enforce the Company's obligations thereunder. This would likely have a
      substantial negative effect on the Company's capital resources and would also
      negatively affect the Company's liquidity.





**OTHER
      RISKS**





OUR
      STOCK
      PRICE HAS DECLINED SIGNIFICANTLY AND MAY NOT RECOVER





The
      trading price of our Common Stock has declined significantly since approximately
      October 2001. The market for NRMG Common Stock is essentially nonexistent and
      there can be no assurance of a change in the immediate future.





WE
      MAY BE
      SUBJECT TO PENNY STOCK


REGULATIONS
      AND REQUIREMENTS FOR LOW PRICED STOCK





The
      SEC
      adopted regulations which generally define a "penny stock" to be any non Nasdaq
      equity security that has a market price of less than $5.00 per share, subject
      to
      certain exceptions. Based upon the price of our common stock as currently traded
      on the OTC Bulletin Board, our common stock is subject to Rule 15g9 under the
      Exchange Act which imposes additional sales practice requirements on
      broker-dealers which sell securities to persons other than established customers
      and "accredited investors." For transactions covered by this rule, a
      broker-dealer must make a special suitability determination for the purchaser
      and have received a purchaser's written consent to the transaction prior to
      sale. Consequently, this rule may have a negative effect on the ability of
      stockholders to sell common shares of the Company in the secondary
      market.





ADDITIONAL
      DEBT, CONVERTIBLE DEBT, OR EQUITY FINANCING


MAY
      EFFECT ABILITY OF INVESTORS TO SELL COMMON STOCK





Our
      common stock currently trades on the OTC Bulletin Board. Stocks trading on
      the
      OTC Bulletin Board generally attract a smaller number of market makers and
      a
      less active public market and may be subject to significant volatility. If
      we
      raise additional capital from the sale of common stock, the market price could
      drop and the ability of investors to sell our common stock could be
      diminished.





**25**


RISKS
      RELATED TO REAL ESTATE AND RELATED INVESTMENTS





Although
      we currently do not have any real estate holdings, we may acquire additional
      holdings and in such case we shall be subject to the risks associated with
      ownership, operation and financing of real estate. These risks include, but
      are
      not limited to, liability for environmental hazards, changes in general or
      local
      economic conditions, changes in interest rates and the availability of
      construction and permanent mortgage financing which may render the acquisition,
      sale or refinancing of a property difficult or unattractive and which may make
      debt service burdensome, changes in real estate and zoning laws, bonding
      requirements, permitting requirements, changes in income taxes, real estate
      taxes or federal or local economic or rent controls, floods, earthquakes and
      other acts of nature and other factors beyond the Company's control. The
      illiquidity of real estate investments generally may impair the Company's
      ability to respond promptly to changing circumstances.





Under
      federal, state and local environmental laws, ordinances and regulations, we
      may
      be liable for removal or remediation costs, as well as other costs (such as
      fines or injuries to persons and property) where its employees may have arranged
      for removal, disposal or treatment of hazardous or toxic substances. In
      addition, environmental laws impose liability for release of asbestos containing
      materials into the air, and third parties can seek recovery from us for personal
      injury associated with those materials.








**26**


**ITEM
      3. CONTROLS AND PROCEDURES**





**EVALUATION
      OF DISCLOSURE CONTROLS AND PROCEDURES**





The
      Company maintains a set of disclosure controls and procedures designed to ensure
      that information required to be disclosed by the Company in the reports filed
      under the Securities Exchange Act, is recorded, processed, summarized and
      reported within the time periods specified by the SEC’s rules and forms.
      Disclosure controls are also designed with the objective of ensuring that this
      information is accumulated and communicated to the Company’s management,
      including the Company’s chief executive officer and chief financial officer, as
      appropriate, to allow timely decisions regarding required
      disclosure.




Based
      upon their evaluation as of the end of the period covered by this report, the
      Company’s chief executive officer and chief financial officer concluded that,
      the Company’s disclosure controls and procedures are not effective to ensure
      that information required to be included in the Company’s periodic SEC filings
      is recorded, processed, summarized, and reported within the time periods
      specified in the SEC rules and forms.




The
      Company’s board of directors was advised by Bagell, Josephs, Levine &
Company, L.L.C., the Company’s independent registered public accounting firm,
      that during their performance of audit procedures for 2006 Bagell, Josephs,
      Levine & Company, L.L.C. identified a material weakness as defined in Public
      Company Accounting Oversight Board Standard No. 2 in the Company’s internal
      control over financial reporting.




This
      deficiency consisted primarily of inadequate staffing and supervision that
      could
      lead to the untimely identification and resolution of accounting and disclosure
      matters and failure to perform timely and effective reviews. However, the size
      of the Company prevents us from being able to employ sufficient resources to
      enable us to have adequate segregation of duties within our internal control
      system. Management is required to apply its judgment in evaluating the
      cost-benefit relationship of possible controls and procedures.





**CHANGES
      IN INTERNAL CONTROL OVER FINANCIAL REPORTING**





No
      changes in the Company's internal control over financial reporting have come
      to
      management's attention during the Company's last fiscal quarter that have
      materially affected, or are likely to materially affect, the Company's internal
      control over financial reporting





**27**


**Part
      II**


**OTHER
      INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





The
      Company is not a party to any pending legal proceedings nor is any of the
      Company's property the subject of any pending legal proceedings.





**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS.**





None





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





None





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS**





None





**ITEM
      5. OTHER INFORMATION**





None





**ITEM
      6. EXHIBITS**





(a)
      Exhibits:





EXHIBIT
              NUMBER
            DESCRIPTION





31.1
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes
                Oxley
                Act of 2002.


31.2
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes
                Oxley
                Act of 2002.


32.1
            Certification
                of Chief Executive Officer pursuant to Section 906 of the Sarbanes
                Oxley
                Act of 2002.


32.2
            Certification
                of Chief Financial Officer pursuant to Section 906 of the Sarbanes
                Oxley
                Act of 2002.






**28**


**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the Company has caused
      this report to be signed by the undersigned, thereunto duly
      authorized.








**National
      Realty and Mortgage, Inc.**





Date:
      May
      21, 2007





By:
      /s/
      RICHARD ASTROM


Richard
      Astrom


Chief
      Executive Officer, Director








By:
      /s/
      CHRISTOPHER ASTROM


Christopher
      Astrom


Chief
      Financial Officer, Secretary, Director




**29**