UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549





AMENDMENT NO. 1


TO


FORM 10-Q





(Mark one)


x
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period endedSeptember 30, 2011o
TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______________ to _____________





Commission File No. 000-51731








NATIONAL HEALTH PARTNERS, INC.(Exact name of registrant as specified in its charter)





Indiana

04-3786176(State or other jurisdiction ofincorporation or organization)

(IRS EmployerIdentification No.)





120 Gibraltar Road


Suite 107


Horsham, PA  19044


(Address of Principal Executive Offices)





(215) 682-7114


(Issuer's Telephone Number, including Area Code)





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 1394 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  o





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x  No  o





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





Large accelerated filer o

Accelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)

Smaller reporting company x





Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).  Yes  o  No  x





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





Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes  o  No  o





APPLICABLE ONLY TO CORPORATE ISSUERS





Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:  There were 202,803,252 shares of the issuer’s common stock, $.001 par value per share, issued and outstanding on, November 8, 2011.











This Amendment No. 1 on Form 10-Q/A (“Amendment”) amends the Form 10-Q Quarterly report for National Health Partners, Inc. (“Company”) for the fiscal quarter ended September 30, 2011 (“Original Form 10-Q”).  This Amendment is being filed in response to SEC Staff comments and is being filed to include management’s conclusion that our disclosure controls and procedures were not effective as of September 30, 2011.  This Amendment may be relied on as the final Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2011, and should be read in conjunction with the Company’s other filings with the SEC.





TABLE OF CONTENTS





PagePART I – FINANCIAL INFORMATIONItem 1. Financial Statements
3Consolidated Balance Sheets at September 30, 2011 (Unaudited) and December 31, 2010
3Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2011 and 2010 (Unaudited)
4Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010 (Unaudited)
5Notes to Consolidated Financial Statements (Unaudited)
6Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
13Item 4. Controls and Procedures
19PART II – OTHER INFORMATIONItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
20Item 6. Exhibits
20








2





PART I – FINANCIAL INFORMATION





Item 1.  Financial Statements.


National Health Partners, Inc. and Subsidiaries
 Consolidated Balance Sheets







September 30,


December 31,2011


2010(Unaudited)AssetsCurrent assets:Cash

$
7,802


$
28,548Prepaid expense


321,028



5,138Deposits


--



25,000Total current assets


328,830



58,686Property and equipment, net


442



6,069Prepaid expense


77,254



--Deposits


19,000



19,000Total assets

$
425,526


$
83,755Liabilities and stockholders' equityCurrent liabilitiesAccounts payable

$
146,195


$
228,842Refunds payable


7,228



8,453Accrued expenses


7,461



308Deferred revenue


87,722



87,188Total current liabilities


248,606



324,791Total liabilities


248,606



324,791Commitments and contingenciesStockholders' equity:Common stock, $0.001 par value, 250,000,000 shares authorized,186,803,252 and 94,692,478 shares issued and outstandingon September 30, 2011 and December 31, 2010, respectively


186,803



94,692Additional paid-in capital


28,022,551



27,055,214Deferred compensation


--



(31,111
)Accumulated deficit


(28,032,434
)


(27,359,831
)Total stockholders' equity


176,920



(241,036
)Total liabilities and stockholders' equity

$
425,526


$
83,755










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







3




National Health Partners, Inc. and Subsidiaries


Consolidated Statements of Operations


(Unaudited)






For the Three Months Ended


For the Nine Months EndedSeptember 30,


September 30,2011


2010


2011


2010Net revenue

$
434,339


$
662,712


$
1,309,817


$
1,740,376Direct costs


197,998



337,458



725,335



1,026,667Gross profit


236,341



325,254



584,482



713,709Operating expenses:General and administrative


461,046



315,409



1,257,085



1,353,760Total operating expenses


461,046



315,409



1,257,085



1,353,760Loss from operations


(224,705
)


9,845



(672,603
)


(640,051
)Other income (expense):Interest income


--



--



--



1Total other income (expense)


--



--



--



1Net loss

$
(224,705
)

$
9,845


$
(672,603
)

$
(640,050
)Loss per share -- basic and diluted

$
(0.00
)

$
0.00


$
(0.00
)

$
(0.01
)Weighted average number of shares outstanding -- basic and diluted


171,561,132



87,349,000



140,765,331



83,030,591








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







4


National Health Partners, Inc. and Subsidiaries


Consolidated Statements of Cash Flows
 (Unaudited)


For the Nine Months EndedSeptember 30,2011


2010Cash flows from operating activitiesNet loss

$
(672,603
)

$
(640,050
)Adjustments to reconcile net loss to net cashused by operating activities:Common stock issued for services and amortization of prepaid services


468,753



124,622Options issued for services


4,297



109,794Depreciation


5,627



7,398Changes in operating assets and liabilities:Decrease in deposits


25,000



52,829Decrease in other current assets


213



9,300Increase (decrease) in accounts payable and accrued expenses


(75,493
)


51,482Decrease in refunds payable


(1,224
)


(257
)Increase in deferred revenue


534



802Net cash used by operating activities


(244,896
)


(284,080
)Cash flows from investing activitiesNet cash provided by investing activities


--



--Cash flows from financing activitiesProceeds from sale of stock and warrants


224,150



259,125Net cash provided by financing activities


224,150



259,125Net increase (decrease) in cash


(20,746
)


(24,955
)Cash at beginning of period


28,548



31,691Cash at end of period

$
7,802


$
6,736Supplemental disclosure of cash flow informationCash paid for interest

$
--


$
--Cash paid for taxes

$
--


$
--Schedule of non-cash financing activitiesCommon stock issued for stock offering costs

$
--


$
285








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







5





National Health Partners, Inc. and Subsidiaries


Notes to Consolidated Financial Statements


September 30, 2011


(Unaudited)








Note 1. Description of Business





National Health Partners, Inc. (the “Company”) was organized on March 10, 1989 as “Spectrum Vision Systems of Indiana, Inc.” under the laws of the State of Indiana.  The Company changed its name to “National Health Partners, Inc.” on March 13, 2001.





The Company sells membership programs that encompass all aspects of healthcare, including physicians, hospitals, ancillary services, dentists, prescription drugs and vision care through a national healthcare savings network called “CARExpress.”  The Company derives almost all of its revenue from the monthly membership fees it receives from its members.  It markets its programs through a direct sales force, brokers and agents, unions and associations, chambers of commerce, and a variety of other organizations.  The Company typically pays these organizations commissions on the sale price of the membership programs.  These organizations typically offer and sell the Company’s membership programs on a part-time basis and may engage in other related or unrelated business activities, including selling the products or services of the Company’s competitors.  The Company’s agreements with these organizations are generally for a term of one year and renew automatically for additional one-year terms unless written notice of termination is delivered by either party to the other at least 30 days prior to the then-current term.





The Company contracts with preferred provider organizations and other provider networks for access to the discounted rates they have negotiated with their healthcare providers.  The principal suppliers of the healthcare providers that comprise CARExpress are CareMark, Aetna, Optum, Outlook Vision, Integrated Health, Three Rivers and HealthFi.  The Company selects and utilizes only those provider networks that it believes can deliver adequate savings to its members while providing adequate support for its membership programs with the healthcare providers.  It typically pays a per member per month fee for use of the provider networks that is determined in part based on the number of providers participating in the network, the number of members accessing the network, and the particular products or services offered by the providers.  The Company’s agreements with the provider networks are generally for a term of between one and two years, may be terminated by either party on between 45 and 180 days’ prior written notice, and renew automatically for additional terms unless so terminated.  Most of these agreements are non-exclusive and contain confidentiality provisions.





Note 2. Basis of Presentation





The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and in conformity with the instructions to Form 10-Q and Article 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (the “SEC”).  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the disclosures included in these financial statements are adequate to make the information presented not misleading.




The unaudited consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements and in management’s opinion, reflect all adjustments, including normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K.  The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the results that the Company will have for any subsequent quarter or full fiscal year.





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 amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.  The financial statements include the balances of National Health Partners, Inc. and its wholly-owned subsidiaries.  All material inter-company balances and transactions have been eliminated in consolidation.





6


National Health Partners, Inc. and Subsidiaries


Notes to Consolidated Financial Statements


September 30, 2011


(Unaudited)








Note 2. Basis of Presentation (Continued)





The Company’s financial statements have been prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has historically incurred significant losses, which raises substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.





Certain amounts in the 2010 financial statements have been reclassified to conform to the 2011 presentation. These reclassifications did not result in any change to the previously reported total assets, net loss or stockholder’s equity.





As of September 30, 2011, the Company’s significant accounting policies and estimates, which are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, have not changed materially.





Note 3. Stock Compensation Expense





The Company records employee stock-based compensation using the fair value recognition provisions of Accounting Standards Codification (“ASC”) Topic 718 (“ASC 718”) using the modified prospective transition method, and records non-employee stock-based compensation expense in accordance with ASC Topic 505.  In accordance therewith, the Company recognized stock compensation expense of $0 and $18,891 for the three months ended September 30, 2011 and 2010, respectively, and $31,111 and $62,113 for the nine months ended September 30, 2011 and 2010, respectively.





Note 4. Loss Per Share





Basic loss per share is based on the weighted average number of shares of the Company’s common stock outstanding during the applicable period, and is calculated by dividing the reported net loss for the applicable period by the weighted average number of shares of common stock outstanding during the applicable period.  The Company calculates diluted loss per share by dividing the reported net loss for the applicable period by the weighted average number of shares of common stock outstanding during the applicable period as adjusted to give effect to the exercise of all potentially dilutive options and warrants outstanding at the end of the period.  A total of 4,125,000 and 5,163,250 shares of common stock underlying options and warrants that were outstanding on September 30, 2011 and 2010, respectively, have been excluded from the computation of diluted earnings per share because they are anti-dilutive.  As a result, basic loss per share was equal to diluted loss per share for each period.




For the Three Months Ended

September 30,


For the Nine Months Ended

September 30,2011


2010


2011


2010Net profit (loss) as reported

$
(224,705
)

$
9,845


$
(672,603
)

$
(640,050
)Weighted average number of shares outstanding – basic and diluted


171,561,132



87,349,000



140,765,331



83,030,591Loss per share – basic and diluted

$
(0.00
)

$
(0.00
)

$
(0.00
)

$
(0.01
)





7


National Health Partners, Inc. and Subsidiaries


Notes to Consolidated Financial Statements


September 30, 2011


(Unaudited)








Note 5. Property and Equipment





Property and equipment consisted of the following at September 30, 2011:





Asset


AmountComputers

$
60,708Software

6,109Furniture

27,968Telephone

80,780Website

106,477Less: accumulated depreciation

(281,600
)Net property and equipment

$
442





Depreciation expense was $1,234 and $2,277 for the three months ended September 30, 2011 and 2010, respectively, and $5,627 and $7,398 for the nine months ended September 30, 2011 and 2010, respectively.





Note 6. Deposits





Deposits consist of cash reserves held by merchant processors that the Company uses to process credit card transactions and the security deposit held by the lessor of the Company’s office space.  Each agreement that the Company has entered into with merchant processors contains a standard provision that gives the merchant processors the right to withhold funds from the proceeds generated by the Company through the sale of its membership programs through credit card transactions.  The amount of the reserves may be increased or decreased by each merchant processor at any time based on the perceived risk exposure of the merchant processor.  The merchant processors are required to return the amount of funds that they withhold from the proceeds within no less than six months and no more than nine months of the date such funds were originally withheld.  As a result, the Company expects to receive all such funds within six to nine months of the date such funds were originally withheld by the merchant processors.





As of September 30, 2011, the Company had a total of $19,000 in deposits.  The $19,000 is being held by the lessor of the Company’s office space.





Note 7. Commitments and Contingencies





The Company’s material commitments and contingencies consist of an operating lease for its office space in Pennsylvania and employment agreements with its executive officers.




Operating Leases




The Company is a party to a lease for its office facility located in Horsham, Pennsylvania which was most recently amended on November 13, 2009.  The amendment extended the term of the lease from May 31, 2010 to May 31, 2013.  The amendment provides for an initial monthly rent payment of $7,214 and an initial monthly operating expense payment of approximately $6,160.  The Company will be required to make minimum annual rent payments of approximately $86,500, $90,000 and $93,500, respectively, and estimated annual operating expense payments of approximately $74,000 (subject to periodic increases) during the three-year term of the amendment.




Future minimum lease payments under this facility lease are as follows:





Fiscal Year


Amount2011

$
40,1222012

163,8052013

68,865$
272,792





8


National Health Partners, Inc. and Subsidiaries


Notes to Consolidated Financial Statements


September 30, 2011


(Unaudited)





Employment Agreements





The Company is a party to an employment agreement with its current executive officer.  At the request of the executive officer, the Company resolved to decrease the annual salary in the employment agreement to $168,000, effective February 1, 2010.  Future minimum payments under this employment agreement are as follows:





Fiscal Year


Amount2011

$
42,000Thereafter

--$
42,000





Note 8. 2006 Stock Incentive Plan





On February 2, 2006, the Company adopted the National Health Partners, Inc. 2006 Stock Incentive Plan.  Under the plan, 4,500,000 shares of common stock may be granted to employees, officers and directors of, and consultants and advisors to, the Company under awards that may be made in the form of stock options, warrants, stock appreciation rights, restricted stock, restricted units, unrestricted stock and other equity-based or equity-related awards.  As of September 30, 2011, all shares of common stock had been issued under the plan.  The plan terminates on February 1, 2016.  On February 6, 2006, the Company filed a registration statement on Form S-8, File No. 333-131589, with the SEC covering the public sale of the 4,500,000 shares of common stock available for issuance under the plan.





Note 9. 2008 Stock Incentive Plan





On April 7, 2008, the Company adopted the National Health Partners, Inc. 2008 Stock Incentive Plan.  Under the plan, 3,000,000 shares of common stock may be granted to employees, officers and directors of, and consultants and advisors to, the Company under awards that may be made in the form of stock options, warrants, stock appreciation rights, restricted stock, restricted units, unrestricted stock and other equity-based or equity-related awards.  As of September 30, 2011, all shares of common stock had been issued under the plan.  The plan terminates on April 6, 2018.  On April 10, 2008, the Company filed a registration statement on Form S-8, File No. 333-150177, with the SEC covering the public sale of the 3,000,000 shares of common stock available for issuance under the plan.





Note 10. 2011 Stock Incentive Plan





On January 28, 2011, the Company adopted the National Health Partners, Inc. 2011 Stock Incentive Plan.  Under the plan, 12,000,000 shares of common stock may be granted to employees, officers and directors of, and consultants and advisors to, the Company under awards that may be made in the form of stock options, warrants, stock appreciation rights, restricted stock, restricted units, unrestricted stock and other equity-based or equity-related awards.  The plan terminates on January 27, 2021.  On January 31, 2011, the Company filed a registration statement on Form S-8, File No. 333-171956, with the Securities and Exchange Commission (“SEC”) covering the public sale of the 12,000,000 shares of common stock available for issuance under the plan.





On May 27, 2011, the Company amended the 2011 Stock Incentive Plan. As amended, the aggregate number of shares that may be issued under the Plan is 20,000,000 shares. On June 27, 2011, the Company filed a registration statement on Form S-8, File No. 333-175156, with the Securities and Exchange Commission (“SEC”) covering the additional 8,000,000 shares.





As of September 30, 2011, 19,800,000 shares of common stock had been issued under the plan.





Note 11. 2011 Stock Incentive Plan No. 2





On April 26, 2011, the Company adopted the National Health Partners, Inc. 2011 Stock Incentive Plan No. 2.  Under the plan, 12,000,000 shares of common stock may be granted to employees, officers and directors of, and consultants and advisors to, the Company under awards that may be made in the form of stock options, warrants, stock appreciation rights, restricted stock, restricted units, unrestricted stock and other equity-based or equity-related awards.  As of September 30, 2011, all shares of common stock had been issued under the plan.  The plan terminates on April 25, 2021.  On April 29, 2011, the Company filed a registration statement on Form S-8, File No. 333-173792, with the Securities and Exchange Commission (“SEC”) covering the public sale of the 12,000,000 shares of common stock available for issuance under the plan.





Note 12. 2011 Stock Incentive Plan No. 3





On September 23, 2011, the Company adopted the National Health Partners, Inc. 2011 Stock Incentive Plan No. 3.  Under the plan, 10,000,000 shares of common stock may be granted to employees, officers and directors of, and consultants and advisors to, the Company under awards that may be made in the form of stock options, warrants, stock appreciation rights, restricted stock, restricted units, unrestricted stock and other equity-based or equity-related awards.  As of September 30, 2011, no shares of common stock had been issued under the plan.  The plan terminates on September 22, 2021.  On September 28, 2011, the Company filed a registration statement on Form S-8, File No. 333-177047, with the Securities and Exchange Commission (“SEC”) covering the public sale of the 10,000,000 shares of common stock available for issuance under the plan.





Note 13. 401(k) Plan





On January 15, 2007, the Company adopted the National Health Partners, Inc. 401(k) Plan. Under the plan, eligible employees may elect to contribute up to 100% of their compensation to the plan each year, subject to certain limitations imposed by the Internal Revenue Service.  The Company contributes 100% of the first 3% of the employee’s contribution and 50% of the next 2% of the employee’s contribution. The Company contributed $0 and $0 to the plan during the three months ended September 30, 2011 and 2010, respectively, and $0 and $0 to the plan during the nine months ended September 30, 2011 and 2010, respectively.


9


National Health Partners, Inc. and Subsidiaries


Notes to Consolidated Financial Statements


September 30, 2011


(Unaudited)





Note 14. Common Stock and Warrants





The Company’s authorized capital consisted of 250,000,000 shares of common stock, $0.001 par value per share, of which 186,803,252 and 88,392,478 shares of common stock were outstanding at September 30, 2011 and 2010, respectively.  Warrants exercisable into an aggregate of 4,000,000 and 5,013,250 shares of the Company’s common stock were outstanding on September 30, 2011 and 2010, respectively.





Effective January 7, 2011 the Articles of Incorporation were amended as follows: The total number of shares of stock which this corporation shall have authority to issue is two hundred fifty million (250,000,000) with a par value of $.001 per share, all of which shall be shares of common stock.





Non Capital-Raising Transactions





In January 2011, the Company issued an aggregate of 7,500,000 shares of common stock, of which 3,300,000 shares were issued pursuant to the National Health Partners, Inc. 2011 Stock Incentive Plan, to four consultants, pursuant to individual agreements with two individuals.   The agreements relate to management consulting services and sales and marketing to be provided to the Company.  The shares were valued at the closing price of the Company’s common stock on the date the agreements were authorized for total consideration of $183,000, which will be recognized as expense during the years ended December 31, 2011 and December 31, 2012.




In February 2011, the Company issued an aggregate of 6,000,000 shares of common stock, of which 5,000,000 shares were issued pursuant to the National Health Partners, Inc. 2011 Stock Incentive Plan, to four consultants, pursuant to individual agreements with one entity and three individuals.   The agreements relate to management consulting, legal, sales and marketing services and media advertising to be provided to the Company.  The shares were valued at the closing price of the Company’s common stock on the date the agreements were authorized for total consideration of $146,000, which will be recognized as expense during the years ended December 31, 2011 and December 31, 2012.




In March 2011, the Company issued an aggregate of 3,300,000 shares of common stock, of which 2,500,000 shares were issued pursuant to the National Health Partners, Inc. 2011 Stock Incentive Plan, to two consultants, pursuant to individual agreements with two individuals.   The agreements relate to sales and marketing services to be provided to the Company.  The shares were valued at the closing price of the Company’s common stock on the date the agreements were authorized for total consideration of $82,500, which will be recognized as expense during the year ended December 31, 2011 and December 31, 2012.





In April 2011, the Company issued 5,000,000 shares of common stock, of which 2,000,000 shares were issued pursuant to the National Health Partners, Inc. 2011 Stock Incentive Plan No. 2, to two consultants, pursuant to individual agreements.   These agreements relates to management consulting services to be provided to the Company.  The shares were valued at the closing price of the Company’s common stock on the date the agreements were authorized for total consideration of $101,000, which will be recognized as expense during the years ended December 31, 2011, December 31, 2012 and December 31, 2013.





In May 2011, the Company issued 10,500,000 shares of common stock, of which 10,000,000 shares were issued pursuant to the National Health Partners, Inc. 2011 Stock Incentive Plan No. 2, to four consultants, pursuant to individual agreements.   These agreements relates to management consulting services to be provided to the Company.  The shares were valued at the closing price of the Company’s common stock on the date the agreements were authorized for total consideration of $163,500, which will be recognized as expense during the years ended December 31, 2011 and December 31, 2012.





In July 2011, the Company issued 14,000,000 shares of common stock, of which 9,000,000 shares were issued pursuant to the National Health Partners, Inc. 2011 Stock Incentive Plan, to four consultants, pursuant to individual agreements.   These agreements relate to management consulting services to be provided to the Company.  The shares were valued at the closing price of the Company’s common stock on the date the agreements were authorized for total consideration of $155,000, which will be recognized as expense during the years ended December 31, 2011 and December 31, 2012.





The Company recognized $219,154 of expense for the three months ended September 30, 2011 and $437,642 for the nine months end September 30, 2011 in connection with issuance of these shares.





Capital-Raising Transactions





In January 2011, the Company completed a private offering of 8,000,000 Class A warrants of our common stock exercisable into 8,000,000 shares of our common stock to an accredited investor for aggregate gross proceeds of $800.  The Class A warrants have an exercise price of $0.005 per share, are exercisable during the period commencing on the date of grant and ending December 31, 2011, and expire at the end of the exercise period.   During January 2011, these warrants were exercised at a price of $.005 per share for aggregate cash consideration of $40,000.




In January 2011, the Company completed a private offering of 2,000,000 shares of our common stock and Class A warrants exercisable into 2,000,000 shares of our common stock to an accredited investor for aggregate gross proceeds of $20,000.  The Class A warrants have an exercise price of $0.01 per share, are exercisable during the period commencing on the date of grant and ending December 31, 2012, and expire at the end of the exercise period.


10


National Health Partners, Inc. and Subsidiaries


Notes to Consolidated Financial Statements


September 30, 2011


(Unaudited)





Note 14. Common Stock and Warrants (Continued)





In February 2011, the Company completed a private offering of 2,000,000 shares of our common stock and Class A warrants exercisable into 2,000,000 shares of our common stock to an accredited investor for aggregate gross proceeds of $20,000.  The Class A warrants have an exercise price of $0.015 per share, are exercisable during the period commencing on the date of grant and ending December 31, 2012, and expire at the end of the exercise period.





In May 2011, the Company completed a private offering of 8,000,000 Class A warrants of our common stock exercisable into 8,000,000 shares of our common stock to an accredited investor for aggregate gross proceeds of $500.  The Class A warrants have an exercise price of $0.006 per share, are exercisable during the period commencing on the date of grant and ending August 19, 2011, and expire at the end of the exercise period.





In May 2011, the Company completed a private offering of 10,333,333 shares of our common stock for aggregate gross proceeds of $62,000.





In June 2011, the Company received $16,850 as a deposit from an investor to exercise warrants in the future.





In August 2011, warrants were exercised resulting in the issuance of 3,475,000 shares of the Company’s common stock for aggregate cash consideration of $20,850, of which $16,850 was from the June 2011 deposit and an additional $4,000 of gross proceeds.





In August 2011, the Company completed a private offering of 20,000,000 shares of our common stock for aggregate gross proceeds of $60,000.





Note 15. Stock Options





Stock options exercisable into an aggregate of 125,000 and 150,000 shares of the Company’s common stock were outstanding on September 30, 2011and 2010, respectively, of which 100,000 and 85,000 shares were vested, respectively.  No options were exercised during the three months ended September 30, 2011 and 2010, respectively.  The Company estimates the fair value of its stock options on the date of grant by using the Black-Scholes pricing model in accordance with the provisions of Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.”  Under the Black-Scholes pricing model, the Company used the following weighted-average assumptions to determine the fair value of the stock options issued: a dividend yield of zero percent, an expected volatility of between 214% and 282%, a risk-free interest rate of between 2.25% and 4.76% and a remaining contractual life of between 9.15 and 9.95 years.





Note 16. Related Party Transactions





None





Note 17.  Subsequent Events





The Company has performed an evaluation of subsequent events in accordance with ASC Topic 855.  Other than the events noted below, the Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements.





In October 2011, the Company issued 16,000,000 shares of common stock, of which 2,000,000 shares were issued pursuant to the National Health Partners, Inc. 2011 Stock Incentive Plan No. 3, to three consultants, pursuant to individual agreements.   These agreements relate to management consulting services to be provided to the Company.  The shares were valued at the closing price of the Company’s common stock on the date the agreements were authorized for total consideration of $34,000, which will be recognized as expense during the years ended December 31, 2011 and December 31, 2012.





11


DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS





This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenue and costs, and plans and objectives of management for future operations, are forward-looking statements.  In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “projects,” “estimates,” “anticipates,” or “believes” or the negative thereof or any variation thereon or similar terminology or expressions.




These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from results proposed in such statements.  Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct.  Important factors that could cause actual results to differ materially from our expectations include, but are not limited to:





·
our ability to fund future growth and implement our business strategy;





·
our dependence on a limited number of preferred provider organizations (“PPOs”) and other healthcare provider networks;





·
our dependence on a single insurance company for the insurance benefits offered as part of our CARExpress PlusTM programs;





·
our dependence upon a limited number of marketing and distribution partners for substantially all of our revenue;





·
our ability to market our membership programs and develop and expand the market for our membership programs;





·
demand for and acceptance of our membership programs;





·
competition in the health discount membership market;





·
our ability to attract and retain qualified personnel;





·
legislative or regulatory changes in the healthcare industry;





·
the condition of the securities and capital markets;





·
general economic and business conditions, either nationally or internationally or in the jurisdictions in which we are doing business;





and statements of assumption underlying any of the foregoing, as well as any other factors set forth herein under “Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations” below. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing.  Except as required by law, we assume no duty to update or revise our forward-looking statements.





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





Unless otherwise indicated or the context otherwise requires, all references to the “Company,” the “registrant” “we,” “us” or “our” and similar terms in this report refer to National Health Partners, Inc. and its subsidiaries.




This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this report contain forward-looking statements that involve risks and uncertainties.  All forward-looking statements included in this report are based on information available to us on the date hereof, and, except as required by law, we assume no obligation to update any such forward-looking statements.  Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a number of factors.  The following should be read in conjunction with our consolidated financial statements included above in Item 1 of Part I of this report.





Overview




We are a national healthcare membership organization that was formed to address the need for affordable healthcare nationwide.  We create, market and sell membership programs to predominantly underserved markets in the healthcare industry through a national healthcare savings network called CARExpressTM.  CARExpressTM is a network of hospitals, doctors, dentists, pharmacists and other healthcare providers comprised of over 1,000,000 healthcare providers that render their services and products to CARExpressTM members at discounted prices.  CARExpressTM enables people to engage in point-of-service transactions directly with these healthcare providers and pay discounted prices to the providers.





Our membership programs offer savings on healthcare services to persons who are uninsured or underinsured by providing them with access to the same PPOs that are utilized by employers that self-fund at least a portion of their employees’ healthcare costs.  Our membership programs are also used to supplement benefit plans and fill in the gaps created by the need to reduce health benefits to keep the costs of health insurance reasonable.  We sell our membership programs directly through our sales force and indirectly through brokers and agents, unions and associations, small businesses and other organizations.





We are actively engaged in marketing our membership programs to the public.  Our primary objective is to generate increased sales of our membership programs while expanding our position as a provider of unique healthcare membership service programs.  The target market for our membership programs is comprised of individuals who have either limited health benefits or no health benefits.  Our share of this market is currently less than one percent and has been less than one percent since our inception.  Since we are not currently large enough to pursue and support the entire market, we intend to continue to pursue specific opportunities that we identify in this market through our various marketing and distribution channels.  Through product design, competitive membership pricing, and a variety of marketing and distribution partners, we are pursuing opportunities in the healthcare market that insurance companies have not addressed.





Operational Metrics





Our revenue consists almost exclusively of recurring monthly membership fees that we receive from members of our membership programs.  Our members pay us membership fees each month for the duration of their membership.  The average membership fee per member per month that we receive for our CARExpressTM health discount programs is approximately $35.  Approximately 95% of the CARExpressTM health discount programs that we have sold to our current members consist of our Comprehensive Care Program which is currently sold at a monthly retail price of $39.95.  The remaining CARExpressTM health discount programs that we have sold to our current members consist of a mix of our less expensive programs.  Approximately 90% of the CARExpress PlusTM membership programs that we have sold to our current members consist of our CARExpress PlusTM Gold Program which is currently sold at a monthly retail price of $137.  The remaining CARExpress PlusTM membership programs that we have sold to our current members consist of a mix of our other programs.





We receive each member’s initial monthly payment and billing information at the beginning of the first monthly membership period.  Monthly payments for subsequent periods are received at the beginning of the applicable period.  The monthly membership fees that we receive are recognized as revenue evenly over the applicable monthly membership period.  As a result, there is a delay of four weeks between the date we receive a monthly membership fee and the date we recognize the entire fee as revenue.


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A key metric that we use to evaluate our success is our member retention rates.  Member retention rates represent the percentage of new members that we acquire that we are able to retain for a specified period of time.  Since we incur a large portion of our costs up front and receive recurring membership fees throughout the term of the membership, the longer we are able to retain the members we acquire, the greater the revenue potential of the membership programs that we sell.  We believe that the key to obtaining a high member retention rate is to target our marketing campaigns towards those individuals and organizations that are most in need of our programs, most capable of paying for our programs, and most loyal to us and our programs.  Member retention rates can be influenced by a variety of factors, including:




·
the type of membership programs being sold;





·
the marketing campaign being used to sell our membership programs;





·
the financial condition and loyalty of our members;





·
the distribution channel selling our membership programs; and


·
the type and amount of compensation being paid to our marketing and distribution partners to sell our membership programs.





We have obtained valuable information regarding member demographics through the marketing and advertising campaigns that we have conducted and are focusing our marketing and advertising campaigns on members and member groups that we have identified as being most suitable for our membership programs.  As a result, we expect our retention rates to continue to improve over the next 12 months as we pursue these opportunities through our various marketing and distribution channels.





Financial Results and Outlook





Our strategy is to continue to expand our position as a provider of unique discount healthcare membership programs.  We have implemented several strategic growth initiatives during the past 12 months through which we achieved new contracts and strategic partnerships with a number of organizations, the most profound of which involved a shift in our sales strategy from sales through marketing companies to sales through employers and “affinity groups.”  An “affinity group” is a group of people who share interests, issues, and a common bond or background, and offer support for each other.  Examples of the types of affinity groups that we are working with include unions, associations, chambers of commerce and small business networks.  These organizations typically have a large number of members and thus, each one provides us with the opportunity to obtain a large number of sales.  In addition, it is far less costly for us to sell our CARExpressTM programs through these organizations than it is for us to engage in expensive, nation-wide marketing and advertising campaigns through marketing companies, and the members that we obtain through these sources tend to remain members for a much longer period of time.





We experienced a decrease in revenue for the three and nine months ended September 30, 2011 compared to the three and nine months ended September 30, 2010. Our gross profit margin for the three and nine months ended September 30, 2011 was lower than our gross profit margin for the three and nine months ended September 30, 2010.   Our net loss for the three and nine months ended Septmeber 30, 2011 was higher than our net loss for the three and nine months ended September 30, 2010.  Our cost-cutting initiatives resulted in a decrease in net cash used by operating activities during the nine months ended September 30, 2011 compared to the Nine months ended September 30, 2010.





We generated net revenue of $434,339 and $1,309,817 for the three and nine months ended September 30, 2011 compared to revenue of $662,712 and $1,740,376 for the three and nine months ended September 30, 2010.  We achieved a gross profit of $236,341 and $584,482 for the three and nine months ended September 30, 2011, compared to a gross profit of $325,254 and $713,709 for the three and nine months ended September 30, 2010.  We recognized a net loss of $224,705 and $672,603 ($0.00 and $0.00 per share) for the three and nine months ended September 30, 2011, respectively, compared to a net income of $9,845 and a net loss of $640,050, ($0.00 and ($0.01) per share) for the three and nine months ended September 30, 2010, respectively.  Net cash used by operating activities was $244,896 for the nine months ended September 30, 2011 compared to $284,080 for the nine months ended September 30, 2010, representing a decrease of 14%.


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We will generate future revenue and members primarily through sales of our CARExpressTM health discount programs and our CARExpress PlusTM membership programs to employees and members of affinity groups through our marketing and distribution partners, and various marketing and advertising campaigns.  We have entered into agreements with several affinity groups through which we are generating sales of our CARExpressTM membership programs and are currently in discussions with several other organizations regarding the sale of our CARExpressTM membership programs.  We intend to finance each of these projects through cash on hand, internally generated cash flows from operating activities and, if necessary, proceeds from the issuance of equity securities.  We will use any additional investments that we receive to accelerate the expansion of each of our advertising campaigns and programs and increase sales of our membership programs.





We expect the number of CARExpressTM members generated each month to increase during the quarter ended December 31, 2011 as a number of deals that we have either recently closed or that we expect to close begin to generate members for us.  We also expect the number of CARExpressTM members generated each month to increase throughout the year and expect our retention rates to improve over the next 12 months since members generated through affinity groups have historically remained members of CARExpressTM for a much longer period of time than members generated through marketing companies.  As a result, we expect to generate an increasing amount of revenue during the year ended December 31, 2012.  We believe that this increase in revenue combined with the various cost-cutting initiatives that we implemented over the past few quarters will enable us to generate positive cash flows from operating activities during the year ended December 31, 2012 as the recurring membership fees from our increasing membership base overtake the costs associated with retaining existing members and obtaining new members.  We can provide no assurance, however, that our membership base will increase as projected, that our member retention rates will improve over the next 12 months, that we will generate the aforementioned projected revenue, or that we will generate positive cash flows from operating activities during the year ended December 31, 2012.





Critical Accounting Policies





For information regarding our critical accounting policies, please refer to the discussion provided in our Annual Report on Form 10-K for our fiscal year ended December 31, 2010 under the caption “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” and our Notes to Consolidated Financial Statements included therein.





Recent Accounting Pronouncements





For information regarding recent accounting pronouncements applicable to our business, please refer to the discussion provided in our Annual Report on Form 10-K for our fiscal year ended December 31, 2010 under the caption “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Accounting Pronouncements” and our Notes to Consolidated Financial Statements included therein.





Comparison of the Three-Month Periods Ended September 30, 2011 and 2010





Revenue





Revenue consists almost exclusively of the monthly membership fees that we receive from members of our membership programs.  Revenue decreased $228,373 to $434,339 for the three months ended September 30, 2011 from $662,712 for the three months ended September 30, 2010.





The decrease of $228,373 resulted primarily from a decrease in sales through employers and affinity groups in connection with the shift in our sales strategy from sales through marketing companies to sales through employers and affinity groups. The remainder of the revenue that we generated during these periods was derived from existing members.  We expect revenue to increase over the next 12 months as a result of increased sales to employees and members of affinity groups through our marketing and distribution partners and our various marketing and advertising campaigns.





15


Direct Costs





Direct costs consist of sales commissions that we pay to our marketing and distribution partners and fees that we pay to our PPOs and provider networks for access to their networks.  Direct costs decreased $139,460 to $197,998 for the three months ended September 30, 2011, from $337,458 for the three months ended September 30, 2010.  The decrease of $139,460 was due to decreases of $68,544 for sales commissions and $70,916 for PPO and provider network costs.  We expect cost of sales to increase over the next 12 months as increased sales of our membership programs result in higher overall sales commission expenses and provider network costs.




General and Administrative Expenses





General and administrative expenses consist primarily of employee compensation expense, professional fees and other general and administrative expenses.





Employee Compensation Expense.  Employee compensation expense consists of all salaries and other cash compensation, equity-based compensation, 401(k) contributions and other compensation that we pay to our employees and the related payroll taxes.  Employee compensation expense decreased $67,653 to $110,802 for the three months ended September 30, 2011, from $178,455 for the three months ended September 30, 2010.  The decrease of $67,653 was due primarily to decreases of $43,419 for salary expense, $2,140 for stock option expense, $3,203 for related payroll taxes and $18,891 for other employee compensation.  We expect employee compensation expense to increase over the next 12 months as we begin to hire additional employees to support the growth of our business.





Professional Fees.  Professional fees consist of fees paid to our independent accountants, lawyers, technology consultants and other professionals and consultants.  Professional fees increased $217,470 to $226,566 for the three months ended September 30, 2011 from $9,096 for the three months ended September 30, 2010.  The increase of $217,470 was due primarily to an increase of $219,154 for the amount of expense recognized in connection with equity-based compensation paid to service providers and consultants for various services, offset by a decrease of $1,486 for technology fees.  We expect professional fees to increase over the next 12 months as we incur additional legal, accounting and technology fees in connection with the general expansion of our business and operations.





Other General and Administrative Expenses.  Other general and administrative expenses consist of office supplies expense, computer hardware and system costs, bank service charges, filing fees and dues, non-employee customer service representative expense, rent expense, health insurance and other related benefit costs, financial printer costs, transfer agent costs, the costs of investor relations campaigns and activities, postage and delivery expenses, marketing, general business expenses and miscellaneous general and administrative expenses that are not associated with our employee compensation and professional fees.  Other general and administrative expenses decreased $4,180 to $123,678 for the three months ended September 30, 2011 from $127,858 for the three months ended September 30, 2010.  The decrease of $4,180 resulted primarily from decreases of $4,567 for telephone, $2,386 for health insurance, as well as decreases in other miscellaneous general and administrative expenses, offset by an increase in office supplies of $5,056.  We expect other general and administrative expenses to increase over the next 12 months as we continue to incur expenses for bank service charges, financial printer services, investor relations campaigns and activities, transfer agent fees, health insurance, rent, non-employee customer service representatives, supplies, computer hardware and systems, and other miscellaneous items associated with the general operation and growth of our business.





Net Loss





Our net loss was $224,705 for the three months ended September 30, 2011, compared to a net income of $9,845 for the three months ended September 30, 2010.  The difference of $234,550 was due to a decrease of $228,373 for revenue, an increase of $217,470 for professional fees, offset by decreases of $139,460 for direct costs incurred in connection with the sale of our membership programs, $67,653 for employee compensation expenses and $4,180 for other general and administrative expenses.





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Comparison of the Nine-Month Periods Ended September 30, 2011 and 2010





Revenue





Revenue consists almost exclusively of the monthly membership fees that we receive from members of our membership programs.  Revenue decreased $430,559 to $1,309,817 for the nine months ended September 30, 2011 from $1,740,376 for the nine months ended September 30, 2010.




The decrease of $430,559 resulted primarily from a decrease in sales through employers and affinity groups in connection with the shift in our sales strategy from sales through marketing companies to sales through employers and affinity groups. The remainder of the revenue that we generated during these periods was derived from existing members.  We expect revenue to increase over the next 12 months as a result of increased sales to employees and members of affinity groups through our marketing and distribution partners and our various marketing and advertising campaigns.





Direct Costs





Direct costs consist of sales commissions that we pay to our marketing and distribution partners and fees that we pay to our PPOs and provider networks for access to their networks.  Direct costs decreased $301,332 to $725,335 for the nine months ended September 30, 2011, from $1,026,667 for the nine months ended September 30, 2011.  The decrease of $301,332 was due to decreases of $176,121 for sales commissions and $125,211 for PPO and provider network costs.  We expect cost of sales to increase over the next 12 months as increased sales of our membership programs result in higher overall sales commission expenses and provider network costs.




General and Administrative Expenses





General and administrative expenses consist primarily of employee compensation expense, professional fees and other general and administrative expenses.





Employee Compensation Expense.  Employee compensation expense consists of all salaries and other cash compensation, equity-based compensation, 401(k) contributions and other compensation that we pay to our employees and the related payroll taxes that are not associated with our selling and marketing activities.  Employee compensation expense decreased $391,444 to $407,410 for the nine months ended September 30, 2011, from $798,854 for the nine months ended September 30, 2010.  The decrease of $391,444 was due primarily to decreases of $220,258 for salary expense, $85,497 for stock option expense, $18,808 for related payroll taxes and $66,881 for other employee compensation.  We expect employee compensation expense to increase over the next 12 months as we begin to hire additional employees to support the growth of our business.





Professional Fees.  Professional fees consist of fees paid to our independent accountants, lawyers, technology consultants and other professionals and consultants.  Professional fees increased $397,359 to $477,022 for the nine months ended September 30, 2011 from $79,663 for the nine months ended September 30, 2010.  The increase of $397,359 was due primarily to an increase of $431,586 for the amount of expense recognized in connection with equity-based compensation paid to service providers and consultants for various services, offset by a decrease of $31,920 for legal and accounting fees.  We expect professional fees to increase over the next 12 months as we incur additional legal, accounting and technology fees in connection with the general expansion of our business and operations.





Other General and Administrative Expenses.  Other general and administrative expenses consist of office supplies expense, computer hardware and system costs, bank service charges, filing fees and dues, non-employee customer service representative expense, rent expense, health insurance and other related benefit costs, financial printer costs, transfer agent costs, the costs of investor relations campaigns and activities, postage and delivery expenses, marketing, general business expenses and miscellaneous general and administrative expenses that are not associated with our employee compensation and professional fees.  Other general and administrative expenses decreased $102,590 to $372,653 for the nine months ended September 30, 2011 from $475,243 for the nine months ended September 30, 2010.  The decrease of $102,590 resulted primarily from decreases of $19,048 for bank service and credit card service charges associated with new and recurring member transactions, $15,371 for telephone, $9,355 for supplies, $4,541 for call center, $10,556 for health insurance, $14,874 for corporate filing fees, $5,360 for financial printing, as well as decrease in other miscellaneous general and administrative expenses.  We expect other general and administrative expenses to increase over the next 12 months as we continue to incur expenses for bank service charges, financial printer services, investor relations campaigns and activities, transfer agent fees, health insurance, rent, non-employee customer service representatives, supplies, computer hardware and systems, and other miscellaneous items associated with the general operation and growth of our business.


17


Net Loss





Our net loss increased $32,553 to $672,603 for the nine months ended September 30, 2011, from $640,050 for the nine months ended September 30, 2010.  The decrease of $32,553 was due to a decrease of $430,559 for revenue, an increase of $397,359 for professional fees, offset by decreases of $301,332 for direct costs incurred in connection with the sale of our membership programs, $391,444 for employee compensation expenses and $102,590 for other general and administrative expenses.





Liquidity and Capital Resources





Since our inception, we have funded our operations primarily through private sales of equity securities.  As of September 30, 2011, we had cash and cash equivalents of $7,802.





Net cash used by operating activities was $244,896 for the nine months ended September 30, 2011, compared to $284,080 for the nine months ended September 30, 2010.  The $39,184 decrease in cash used by operating activities was due primarily to an increase of $344,131 for common stock issued for services and amortization of prepaid services, offset by an increase of $32,553 for net loss and decreases of $105,497 for options issued for services, $126,975 for accounts payable and accrued expenses, $9,087 for other current assets, $27,829 for deposits .





We did not have any cash flows from investing activities for the nine months ended September 30, 2011 and 2010.





Net cash provided by financing activities was $224,150 for the six months ended September 30, 2011, compared to $259,125 for the nine months ended September 30, 2010.  The $34,975 decrease in cash provided by financing activities was due to the decrease in proceeds from the sale of stock and warrants.





Our primary sources of capital for the nine months ended September 30, 2011 are set forth below.





In January 2011, the Company completed a private offering of 8,000,000 Class A warrants of our common stock exercisable into 8,000,000 shares of our common stock to an accredited investor for aggregate gross proceeds of $800.  The Class A warrants have an exercise price of $0.005 per share, are exercisable during the period commencing on the date of grant and ending December 31, 2011, and expire at the end of the exercise period.   During January 2011, these warrants were exercised at a price of $.005 per share for aggregate cash consideration of $40,000.




In January 2011, the Company completed a private offering of 2,000,000 shares of our common stock and Class A warrants exercisable into 2,000,000 shares of our common stock to an accredited investor for aggregate gross proceeds of $20,000.  The Class A warrants have an exercise price of $0.01 per share, are exercisable during the period commencing on the date of grant and ending December 31, 2012, and expire at the end of the exercise period.





In February 2011, the Company completed a private offering of 2,000,000 shares of our common stock and Class A warrants exercisable into 2,000,000 shares of our common stock to an accredited investor for aggregate gross proceeds of $20,000.  The Class A warrants have an exercise price of $0.015 per share, are exercisable during the period commencing on the date of grant and ending December 31, 2012, and expire at the end of the exercise period.





In May 2011, the Company completed a private offering of 8,000,000 Class A warrants of our common stock exercisable into 8,000,000 shares of our common stock to an accredited investor for aggregate gross proceeds of $500.  The Class A warrants have an exercise price of $0.006 per share, are exercisable during the period commencing on the date of grant and ending August 19, 2011, and expire at the end of the exercise period.





In May 2011, the Company completed a private offering of 10,333,333 shares of our common stock for aggregate gross proceeds of $62,000.





In June 2011, the Company received $16,850 as a deposit from an investor to exercise warrants in the future.





In August 2011, warrants were exercised resulting in the issuance of 3,475,000 shares of the Company’s common stock for aggregate cash consideration of $20,850, of which $16,850 was from the June 2011 deposit and an additional $4,000 of gross proceeds.





In August 2011, the Company completed a private offering of 20,000,000 shares of our common stock for aggregate gross proceeds of $60,000.


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To date, our capital needs have been met primarily through sales of equity securities and proceeds received upon the exercise of warrants held by our security holders.   We do not currently maintain a line of credit or term loan with any commercial bank or other financial institution.  We have used the proceeds from the exercise of warrants and our private offerings of securities to pay virtually all of the costs and expenses we have incurred.  These costs and expenses were comprised of operating expenses, which consisted of the employee compensation expenses, professional fees and other general and administrative expenses discussed above, and the costs of sales discussed above to the extent such costs of sales exceeded our revenue.





We believe that our current cash resources will not be sufficient to sustain our current operations for the next 12 months.  We will need to obtain additional cash resources within the next 12 months to enable us to pay our ongoing costs and expenses as they are incurred and finance the growth of our business.  We intend to obtain these funds through internally generated cash flows from operating activities and proceeds from the issuance of equity securities.  The issuance of additional equity would result in dilution to our existing shareholders.  We have not made arrangements to obtain additional financing and we can provide no assurance that additional financing will be available in an amount or on terms acceptable to us, if at all.  If we are unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms favorable to us, we may be unable to execute upon our business plan or pay our costs and expenses as they are incurred, which could have a material, adverse effect on our business, financial condition and results of operations.





The Company’s authorized capital consists of 250,000,000 shares of common stock, of which 186,803,252 shares of common stock were outstanding at September 30, 2011.  The total of warrants exercisable into an aggregate of 4,000,000 shares of the Company’s common stock and stock options exercisable into an aggregate of 125,000 shares of the Company’s common stock at September 30, 2011 equal a total 4,125,000 shares of common stock underlying options and warrants that were outstanding at September 30, 2011.  The combination of the 186,803,252 shares of common stock outstanding and the 4,125,000 shares of potentially dilutive options and warrants outstanding at September 30, 2011 gives effect to a potential outstanding total of 190,928,252 of the authorized capital of 250,000,000 shares of common stock.





Off-Balance Sheet Arrangements





As of September 30, 2011, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities that had been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.  As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.





Item 4. Controls and Procedures.





We maintain disclosure controls and procedures that are designed to ensure that  information  required  to be  disclosed  in our  Exchange  Act  reports is recorded,  processed,  summarized and reported within the time periods specified in the  SEC's  rules and forms and that such information is accumulated and communicated to our management,  including our Chief Executive Officer and Chief Financial  Officer,  as appropriate, to allow for timely decisions regarding required disclosure.  In designing and evaluating our disclosure controls and procedures, management  recognizes that any controls and procedures, no matter how well  designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet management's objectives.





As of September 30, 2011, we carried out the evaluation of the effectiveness of our disclosure controls and procedures as defined by Rule 13a-15(e) under the Exchange Act under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2011, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.




Our management used the framework set forth in the report entitled, “Internal Control — Integrated Framework”published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal control over financial reporting.  Based on this assessment, our management concluded that our internal control over financial reporting was not effective at December 31, 2010 due to the existence of material weaknesses in our internal controls.
  A material weakness is a control deficiency, or a combination of control deficiencies, that results in a more than remote likelihood that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.  Our management, in consultation with our independent registered public accounting firm, concluded that material weaknesses existed in the following areas as of December 31, 2010 in the areas described below. We have not remediated such material weaknesses through September 30, 2011.
 
 (1)
Our Chief Executive Officer also serves as the sole member of our board of directors.  As a result, there are no independent directors monitoring the actions of our senior management.  One of the responsibilities of a company’s board of directors is to act as an independent source for monitoring the actions of a company’s senior management.  The lack of independent directors on our board of directors constituted a material weakness in our internal controls.
   19
  (2)
Our Chief Executive Officer and sole member of our board of directors resides in the state of Florida and did not visit our sole business office located in Horsham, Pennsylvania during 2010 or in 2011.  Senior management has the responsibility to monitor the quality of a company’s internal controls.  This is most often performed through the regular management and supervisory activities of the company’s day-to-day operations.  The lack of monitoring by our Chief Executive Officer constituted a material weakness in the ability of top management to effectively monitor the quality of our internal controls.
 We are actively seeking to remediate these material weaknesses in the following manner:
  (1)
We are currently seeking additional, independent directors to join our board of directors.  The addition of such board members would provide us with independent directors who would be monitoring the actions of our top management.  Our efforts to do so have been hindered substantially by the fact that we do not have a directors and officers insurance policy in place.  Because such policies are very expensive, we believe it is in our best interest to forego the purchase of such a policy and instead focus the use of our financial resources on our development and growth.
  (2)
Our Chief Executive Officer is currently seeking to obtain a residence close in proximity to our Horsham, Pennsylvania business office.  This will enable him to engage in the regular management and supervisory activities of the company’s day-to-day operations and, accordingly, adequately monitor the quality of our internal controls.
 
 Notwithstanding the existence of these material weaknesses in internal controls, we believe that our consolidated financial statements fairly present, in all material respects, our consolidated balance sheets at September 30, 2011 and December 31, 2010, consolidated statements of operations and cash flows for the nine months ended September 30, 2011 and 2010 in conformity with GAAP.
  Changes in Internal Control over Financial Reporting
  There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


PART II – OTHER INFORMATION





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





During the three months ended September 30, 2011, we sold the following securities without registration under the Securities Act of 1933, as amended (the “Securities Act”):





In August 2011, warrants were exercised resulting in the issuance of 3,475,000 shares of the Company’s common stock for aggregate cash consideration of $20,850, of which $16,850 was from the June 2011 deposit and an additional $4,000 of gross proceeds.





In August 2011, the Company completed a private offering of 20,000,000 shares of our common stock for aggregate gross proceeds of $60,000.





Management believes the above shares of Common Stock and Class A warrants were issued pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. The certificates representing such shares bear the standard 1933 Act restrictive legend and the investors have executed documents representing that the shares were being acquired for investment purposes only and not with a view the distribution thereof.  No broker or underwriter was involved in any of the above transactions. The proceeds from the cash sales are being used for working capital.





Item 6. Exhibits.




The following exhibits are included herein:




Exhibit No.

Exhibit10.1 *

Sponsor Agreement, dated February 23, 2007, between Company and Outlook Vision Services, LLC10.2 *

Membership Agreement, dated May 16, 2007, between Company and American Advantage Association10.3 *

Securities Purchase Agreement, dated January 12, 2011, between Company and Pierre Besuchet10.4 *

Securities Purchase Agreement, dated January 12, 2011, between Company and Besamon Trade & Consulting LTD10.5 *

Securities Purchase Agreement, dated January 24, 2011, between Company and Cobalt Enterprises, LLC10.6 *

Securities Purchase Agreement, dated February 18, 2011, between Company and Jason Nelson10.7 *

Securities Purchase Agreement, dated May 5, 2011, between Company and Pierre Besuchet10.8 *

Securities Purchase Agreement, dated May 5, 2011, between Company and Besamon Trade & Consulting LTD31.1 **

Certification of Chief Executive Officer and Chief Financial Officer of the registrant required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended32.1 **

Certification of Chief Executive Officer and Chief Financial Officer of the registrant required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended











*  Previously filed.


** Filed herewith.





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SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amended report to be signed on its behalf by the undersigned thereunto duly authorized.








NATIONAL HEALTH PARTNERS, INC.Date: January 12, 2012
/s/ David M. DanielsDavid M. DanielsChief Executive Officer andChief Financial Officer





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