**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington,DC 20549**

**FORM10-QSB**
| **x**                                                                                                                                                       | **QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF  THE SECURITIES EXCHANGE ACT OF 1934** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|
| ** **                                                                                                                                                  | ** **                                                                             |
| **For the  quarterly period ended: March 31, 2007**                                                                                                         |
|                                                                                                                                                        |                                                                                   |   |
| **OR**                                                                                                                                                      |
|                                                                                                                                                        |                                                                                   |   |
| **o**                                                                                                                                                       | **TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF  THE EXCHANGE ACT OF 1934**           |
| ** **                                                                                                                                                  | ** **                                                                             |
| **For the  transition period from                       to** |
|                                                                                                                                                        |                                                                                   |   |
| **Commission  File No. 000-51731**                                                                                                                          |

 

**NATIONAL HEALTH PARTNERS, INC.**

(Exact Name ofSmall Business Issuer as Specified in Its Charter)

| **Indiana**                      |   | **04-3786176**       |
|----------------------------------|--------|----------------------|
| (State or Other  Jurisdiction of |   | (IRS Employer        |
| Incorporation or  Organization)  |   | Identification  No.) |

 

**120 Gibraltar Road**

**Suite 107**

**Horsham, PA  19044**

(Address ofPrincipal Executive Offices)

**(215) 682-7114**

(Issuer’sTelephone Number, including Area Code)

Check whether the issuer (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act during the past12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

Yes  x   No  o

**APPLICABLE ONLY TO ISSUERSINVOLVED IN**

**BANKRUPTCY PROCEEDINGS DURING THE**

**PRECEDINGFIVE YEARS**

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

Yes  o   No  o

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

Yes  o   No  x

**APPLICABLEONLY TO CORPORATE ISSUERS**

State the numberof shares outstanding of each of the issuer’s classes of common equity, as ofthe latest practicable date: There were 32,949,106 issued and outstandingshares of the issuer’s common stock, $.001 par value per share, on May 10,2007.

Transitional SmallBusiness Disclosure Format (checkone):                             Yes  o   No  x

 

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**TABLE OFCONTENTS**
|                       | ** ** | ** **                                                                                             | ** ** | ** ** |
|-----------------------|------------|--------------------------------------------------------------------------------------------------------|------------|------------|
| PART I                |
| FINANCIAL INFORMATION |
|                  |       |                                                                                                   |       |       |
| Item 1.               |       | Financial Statements                                                                                   |       |       |
|                  |       |                                                                                                   |       |       |
|                  |       | Consolidated  Balance Sheet at March 31, 2007 (Unaudited)                                              |       |       |
|                  |       |                                                                                                   |       |       |
|                  |       | Consolidated  Statements of Operations for the Three Months Ended March 31, 2007 and 2006  (Unaudited) |       |       |
|                  |       |                                                                                                   |       |       |
|                  |       | Consolidated  Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006  (Unaudited) |       |       |
|                  |       |                                                                                                   |       |       |
|                  |       | Notes to  Consolidated Financial Statements (Unaudited)                                                |       |       |
|                  |       |                                                                                                   |       |       |
| Item 2.               |       | Management’s  Discussion and Analysis                                                             |       |       |
|                  |       |                                                                                                   |       |       |
| Item 3.               |       | Controls and  Procedures                                                                               |       |       |
|                  |       |                                                                                                   |       |       |
| PART II               |
| OTHER INFORMATION     |
|                  |       |                                                                                                   |       |       |
| Item 2.               |       | Recent Sales  of Unregistered Securities and Use of Proceeds                                           |       |       |
| Item  6.              |       | Exhibits                                                                                               |       |       |

 

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**PART I**

**FINANCIALINFORMATION**

**Item 1.   FinancialStatements.**

**National Health Partners, Inc.and Subsidiary**

Consolidated Balance Sheet (Unaudited)
| ** **                                                                                                | ** ** | **March 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|--------------------|------------|
| ** **                                                                                                | ** ** | **2007**           | ** ** |
|                                                                                                      |       |               |       |
| **Assets**                                                                                                | ** ** | ** **         | ** ** |
|                                                                                                      |       |               |       |
| Current assets:                                                                                           |       |               |       |
| Cash and cash  equivalents                                                                                |       | $                  | 1,170,590  |   |
| Prepaid expense                                                                                           |       | 319,232            |       |
| Deposits                                                                                                  |       | 126,022            |       |
|                                                                                                      |       |               |       |
| Total current  assets                                                                                     |       | 1,615,844          |       |
|                                                                                                      |       |               |       |
| Property and equipment,  net                                                                              |       | 124,942            |       |
| Prepaid expense                                                                                           |       | 149,941            |       |
|                                                                                                      |       |               |       |
| Total assets                                                                                              |       | $                  | 1,890,727  |   |
|                                                                                                      |       |               |       |
| **Liabilities and stockholders’  equity**                                                            | ** ** | ** **         | ** ** |
|                                                                                                      |       |               |       |
| Current liabilities                                                                                       |       |               |       |
| Accounts payable                                                                                          |       | $                  | 55,563     |   |
| Accrued expenses                                                                                          |       | 25,440             |       |
| Deferred revenue                                                                                          |       | 270,712            |       |
|                                                                                                      |       |               |       |
| Total current  liabilities                                                                                |       | 351,715            |       |
|                                                                                                      |       |               |       |
| Total  liabilities                                                                                        |       | 351,715            |       |
|                                                                                                      |       |               |       |
| Commitments and  contingencies                                                                            |       |               |       |
|                                                                                                      |       |               |       |
| Stockholders’ equity:                                                                                |       |               |       |
| Common stock, $0.001  par value, 100,000,000 shares authorized, 32,949,106 shares issued and  outstanding |       | 32,949             |       |
| Additional paid-in  capital                                                                               |       | 20,240,714         |       |
| Deferred compensation                                                                                     |       | (226,253           | )          |
| Accumulated deficit                                                                                       |       | (18,508,398        | )          |
|                                                                                                      |       |               |       |
| Total  stockholders’ equity                                                                          |       | 1,539,012          |       |
|                                                                                                      |       |               |       |
| Total libilities and  shareholder’s equity                                                           |       | $                  | 1,890,727  |   |

 

The accompanyingnotes are an integral part of these consolidated financial statements

1

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**National Health Partners, Inc.and Subsidiary**

Consolidated Statements of Operations (Unaudited)
| ** **                                                              | ** ** | **For the Three Months Ended** | ** ** |
|-------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                              | ** ** | **March 31,**                                 | ** ** |
| ** **                                                              | ** ** | **2007**                                           | ** ** | **2006** | ** ** |
|                                                                    |       |                                               |       |   |   |
| Net revenue                                                             |       | $                                                  | 1,044,508  |   | $ | 324,404 |   |
|                                                                    |       |                                               |       |   |   |
| Direct costs                                                            |       | 568,083                                            |       | 149,087 |   |
|                                                                    |       |                                               |       |   |   |
| Gross profit                                                            |       | 476,425                                            |       | 175,317 |   |
|                                                                    |       |                                               |       |   |   |
| Operating  expenses:                                                    |       |                                               |       |   |   |
| Selling and marketing                                                   |       | 71,938                                             |       | 102,337 |   |
| General and administrative                                              |       | 1,050,553                                          |       | 1,026,073 |   |
|                                                                    |       |                                               |       |   |   |
| Total operating  expenses                                               |       | 1,122,491                                          |       | 1,128,410 |   |
|                                                                    |       |                                               |       |   |   |
| Loss from  operations                                                   |       | (646,066                                           | )          | (953,093 | ) |
|                                                                    |       |                                               |       |   |   |
| Other income  (expense):                                                |       |                                               |       |   |   |
| Interest income (expense)                                               |       | 6,330                                              |       | (6,431 | ) |
| Gain on recovery of bad debt                                            |       | —                                             |       | 12,330 |   |
| Other income                                                            |       | —                                             |       | 22,724 |   |
|                                                                    |       |                                               |       |   |   |
| Total other  income (expense)                                           |       | 6,330                                              |       | 28,623 |   |
|                                                                    |       |                                               |       |   |   |
| Net loss                                                                |       | $                                                  | (639,736   | ) | $ | (924,470 | ) |
|                                                                    |       |                                               |       |   |   |
| Loss per share —  basic and diluted                                |       | $                                                  | (0.02      | ) | $ | (0.06 | ) |
|                                                                    |       |                                               |       |   |   |
| Weighted average number  of shares outstanding — basic and diluted |       | 30,757,384                                         |       | 15,713,668 |   |

 

The accompanying notesare an integral part of these consolidated financial statements

2

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**National Health Partners, Inc.andSubsidiary**

Consolidated Statements of Cash Flows (Unaudited)
| ** **                                                                   | ** ** | **For the Three Months Ended** | ** ** |
|------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                   | ** ** | **March 31,**                                 | ** ** |
| ** **                                                                   | ** ** | **2007**                                           | ** ** | **2006** | ** ** |
|                                                                         |       |                                               |       |   |   |
| **Cash  flows from operating activities**                                    | ** ** | ** **                                         | ** ** | ** ** | ** ** |
|                                                                         |       |                                               |       |   |   |
| Net loss                                                                     |       | $                                                  | (639,736   | ) | $ | (924,470 | ) |
| Adjustments to reconcile net loss to net cash used  by operating activities: |       |                                               |       |   |   |
| Common stock issued for services and amortization of  prepaid services       |       | 284,473                                            |       | 65,183 |   |
| Options issued for services                                                  |       | 5,014                                              |       | 442,490 |   |
| Depreciation                                                                 |       | 19,878                                             |       | 14,428 |   |
| Changes in operating assets and liabilities:                                 |       |                                               |       |   |   |
| Increase in deposits                                                         |       | (106,405                                           | )          | (5,909 | ) |
| Decrease (increase) in other current assets                                  |       | —                                             |       | 4,042 |   |
| Increase (decrease) in accounts payable and accrued expenses                 |       | (49,723                                            | )          | 12,857 |   |
| Increase in accounts payable — related party                            |       | —                                             |       | 25,580 |   |
| Increase (decrease) in deferred revenue                                      |       | 60,120                                             |       | 3,010 |   |
| Decrease in deferred compensation                                            |       | —                                             |       | (29,000 | ) |
|                                                                         |       |                                               |       |   |   |
| Net cash used by operating activities                                        |       | (426,379                                           | )          | (391,789 | ) |
|                                                                         |       |                                               |       |   |   |
| **Cash  flows from investing activities**                                    | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| ** **                                                                   | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Decrease in certificates of deposit                                          |       | —                                             |       | 35,717 |   |
|                                                                         |       |                                               |       |   |   |
| Net cash provided by investing activities                                    |       | —                                             |       | 35,717 |   |
|                                                                         |       |                                               |       |   |   |
| **Cash  flows from financing activities**                                    | ** ** | ** **                                         | ** ** | ** ** | ** ** |
|                                                                         |       |                                               |       |   |   |
| Proceeds from exercise of warrants                                           |       | —                                             |       | 509,375 |   |
| Proceeds from issuance of notes payable                                      |       | —                                             |       | 12,000 |   |
| Payments on notes payable                                                    |       | —                                             |       | (30,000 | ) |
|                                                                         |       |                                               |       |   |   |
| Net cash provided by financing activities                                    |       | —                                             |       | 491,375 |   |
|                                                                         |       |                                               |       |   |   |
| Net increase  (decrease) in cash                                             |       | (426,379                                           | )          | 135,303 |   |
| Cash at  beginning of quarter                                                |       | 1,596,969                                          |       | 109,807 |   |
|                                                                         |       |                                               |       |   |   |
| Cash at end of quarter                                                       |       | $                                                  | 1,170,590  |   | $ | 245,110 |   |

 

The accompanyingnotes are an integral part of these consolidated financial statements

3

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** **
| ** **                                            | ** ** | **For the Three Months Ended** | ** ** |
|-------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                            | ** ** | **March 31,**                                 | ** ** |
| ** **                                            | ** ** | **2007**                                           | ** ** | **2006** | ** ** |
| **Supplemental  disclosure of cash flow information** | ** ** | ** **                                         | ** ** | ** ** | ** ** |   |
|                                                  |       |                                               |       |   |   |   |
| Cash paid for taxes                                   |       | $                                                  | —     |   | $ | — |   |   |
| Cash received (paid) for interest                     |       | $                                                  | 6,330      |   | $ | (1,125 | ) |   |
|                                                  |       |                                               |       |   |   |   |
| **Schedule  of non-cash financing activities**        |       |                                               |       |   |   |   |
|                                                  |       |                                               |       |   |   |   |
| Common stock issued for services                      |       | $                                                  | 190,300    |   | $ | 53,128 |   |   |
| Warrants issued for services                          |       | $                                                  | —     |   | $ | 12,055 |   |   |
| Options issued  for services                          |       | $                                                  | 95,796     |   | $ | 442,490 |   |   |
|                                                       |            |                                                    |            |  |  |  |  |  |  |  |  |  |

 

The accompanyingnotes are an integral part of these consolidated financial statements

4

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**National Health Partners, Inc.and Subsidiary**

Notes toConsolidated Financial Statements (Unaudited)

March 31, 2007

**Note1.  Description of Business**

National Health Partners, Inc. (the “Company”) wasorganized on March 10, 1989 as Spectrum Vision Systems of Indiana, Inc. underthe laws of the State of Indiana.  TheCompany changed its name to “National Health Partners, Inc.” on March 13,2001.  On December 15, 2004, NationalHealth Brokerage Group, Inc. was organized as a wholly-owned subsidiary of theCompany.  The Company sells membershipprograms that encompass all aspects of healthcare, including physicians,hospitals, ancillary services, dentists, prescription drugs and vision carethrough a national healthcare savings network called “CARExpress.”  The Company markets its programs directlythrough infomercials, newspapers, publications and its website, and indirectlythrough marketing representatives, brokers and agents, retail chains andoutlets, small businesses and trade associates, and unions and associations.  The Company derives substantially all of itsrevenue from the monthly membership fees it receives from members of itsmembership programs.

**Note 2.  Basis of Presentation**

The accompanying unaudited consolidated financialstatements have been prepared in accordance with accounting principlesgenerally accepted in the United States of America and in conformity with theinstructions to Form 10-QSB and Article 10 of Regulation S-X and the relatedrules and regulations of the Securities and Exchange Commission.  Accordingly, they do not include all of theinformation and footnotes required by accounting principles generally acceptedin the United States of America for complete financial statements. In theopinion of management, the disclosures included in these financial statementsare adequate to make the information presented not misleading.

The unaudited consolidated financial statementsincluded in this document have been prepared on the same basis as the annualconsolidated financial statements and in management’s opinion, reflect alladjustments, including normal recurring adjustments, necessary to presentfairly the Company’s financial position, results of operations and cash flowsfor the interim periods presented. The unaudited consolidated financialstatements should be read in conjunction with the audited consolidatedfinancial statements and the notes thereto for the year ended December 31, 2006included in the Company’s Annual Report on Form 10-KSB.  The results of operations for the three monthsended March 31, 2007 are not necessarily indicative of the results that theCompany will have for any subsequent quarter or full fiscal year.

The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesof America requires management to make estimates and assumptions that affectthe amounts reported in the financial statements and accompanying notes.  Actual results could differ from thoseestimates.  The financial statementsinclude the balances of National Health Partners, Inc. and its wholly-ownedsubsidiary, National Health Brokerage Group, Inc. All material intercompanybalances and transactions have been eliminated in consolidation.  Certain amounts in the financial statementsfor 2006 have been reclassified to conform to the 2007 presentation.  These reclassifications did not result in anychange to the previously reported total assets, net loss or stockholders’equity.

As of March 31, 2007, the Company’s significant accounting policies andestimates, which are detailed in the Company’s Annual Report on Form 10-KSB forthe year ended December 31, 2006, have not changed materially.

5

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**Note3.  Stock Compensation Expense**

The Company records employee stock-basedcompensation using the fair value recognition provisions of Financial Statementof Financial Accounting Standards No. 123 (revised 2004), *“Share-BasedPayment”* (“SFAS 123R”), using the modified prospective transitionmethod, and records non-employee stock-based compensation expense in accordancewith Statement of Financial Accounting Standards No. 123, *“AccountingFor Stock-Based Compensation”*(“SFAS 123”) and Emerging Issues TaskForce No. 96-18 *“Accounting for Equity Instruments That AreIssued to Other Than Employees for Acquiring or in Conjunction with SellingGoods or Services”* (“EITF 96-18”). In accordance therewith, the Company recognized $289,487 of stockcompensation expense during the three months ended March 31, 2007.

**Note 4.  Loss per Share**

Basic loss per share is based on the weightedaverage number of shares of the Company’s common stock outstanding during theapplicable three-month period, and is calculated by dividing the reported netloss for the applicable three-month period by the weighted average number ofshares of common stock outstanding during the applicable three-monthperiod.   The Company calculates dilutedloss per share by dividing the reported net loss for the applicable three-monthperiod by the weighted average number of shares of common stock outstanding duringthe applicable three-month period as adjusted to give effect to the exercise ofall potentially dilutive options and warrants outstanding at the end of theapplicable three-month period.  Anaggregate of 20,732,686 and 24,529,629 shares of common stock underlyingoptions and warrants that were outstanding on March 31, 2007 and 2006,respectively, have been excluded from the computation of diluted earnings pershare because they are anti-dilutive.  Asa result, basic loss per share was equal to diluted loss per share for eachthree-month period.
|                                                                         | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|-------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                              | ** ** | **2007**                                                           | ** ** | **2006** | ** ** |
|                                                                    |       |                                                               |       |   |   |
| Net loss as  reported                                                   |       | $                                                                  | (639,736   | ) | $ | (924,470 | ) |
|                                                                    |       |                                                               |       |   |   |
| Weighted average  number of shares outstanding – basic and diluted |       | 30,757,384                                                         |       | 15,713,668 |   |
| Earnings (loss) per  share – basis and diluted                     |       | $                                                                  | (0.02      | ) | $ | (0.06 | ) |

 

6

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**Note 5.  Property and Equipment**

Propertyand equipment consisted of the following at March 31, 2007:
| Computers                      |   | $        | 60,707  |   |
|--------------------------------|--------|----------|---------|--------|
| Software                       |   | 6,109    |    |
| Furniture                      |   | 27,968   |    |
| Telephone                      |   | 80,780   |    |
| Website                        |   | 106,477  |    |
| Less: accumulated depreciation |   | (157,099 | )       |
|                           |   |     |    |
| Net property and  equipment    |   | $        | 124,942 |   |

 

Depreciationexpense for the three months ended March 31, 2007 and 2006 was $19,878 and$14,428, respectively.

**Note 6.  Accrued Expenses**

Accrued expenses consist primarily ofamounts owed to an unrelated third party for its payment of certain Companyliabilities in 2001 and 2002.  Inconnection with the Company’s execution of a note payable for a portion of theamount owed and the Company’s agreement to pay the remaining balance of theamount owed thereafter, the third party agreed to accept payments of $5,000 permonth until all amounts are paid in full. The note payable was paid off in full in 2006.  The balance of accrued expenses owed to thisthird party at March 31, 2007 was $25,009.

**Note7.  Commitments and Contingencies**

The Company’smaterial commitments and contingencies consist of an operating lease for itsoffice space in Pennsylvania and employment agreements with its current andformer executive officers.

**OperatingLeases**

The Company is a party to a lease for its office facility located inHorsham, Pennsylvania which was most recently amended on March 13, 2007.  The amendment extended the term of the leasefrom May 31, 2007 to May 31, 2010.  TheAmendment provides for an initial monthly rent payment of $7,803 and an initialmonthly operating expense payment of approximately $5,620.

Future minimumlease payments under this facility lease are as follows:
| Fiscal Year | ** ** | **Amount** | ** ** |
|------------------|------------|------------|------------|
| 2007             |       | $          | 120,219    |   |
| 2008             |       | 163,138    |       |
| 2009             |       | 166,672    |       |
| 2010             |       | 70,060     |       |
|             |       | $          | 520,089    |   |

** **

7

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**EmploymentAgreements**

The Company is a party to employment agreements with each of itscurrent executive officers and one of its former executive officers.  Future minimum payments under theseemployment agreements are as follows:
| Fiscal Year | ** ** | ** ** | **Amount** | ** ** |
|------------------|------------|------------|------------|------------|
| 2007             |       |       | $          | 712,440    |   |
| 2008             |       |       | 1,044,912  |       |
| 2009             |       |       | 748,107    |       |
| 2010             |       |       | 56,315     |       |
|             |       |       | $          | 2,561,774  |   |

 

**Note 8.  2006 Stock IncentivePlan**

On February 2, 2006, the Company adopted theNational Health Partners, Inc. 2006 Stock Incentive Plan.  Under the plan, 4,500,000 shares of commonstock may be granted to employees, officers and directors of, and consultantsand advisors to, the Company under awards that may be made in the form of stockoptions, warrants, stock appreciation rights, restricted stock, restrictedunits, unrestricted stock and such other equity-based or equity-relatedawards.  As of March 31, 2007, awards foran aggregate of 4,466,575 shares of common stock had been issued under theplan.  The plan terminates on February 1,2016.  On February 6, 2006, the Companyfiled a registration statement on Form S-8, File No. 333-131589, with the SECcovering the public sale of the 4,500,000 shares of common stock available forissuance under the National Health Partners, Inc. 2006 Stock Incentive Plan.

**Note9.  Common Stock and Warrants**

TheCompany’s authorized capital consisted of 100,000,000 shares of common stock,$0.001 par value per share, at March 31, 2007 and 2006, respectively, of which32,949,106 and 21,928,825 shares of common stock were outstanding at March 31,2007 and 2006, respectively.  Warrantsexercisable into an aggregate of 11,437,686 and 16,484,629 shares of theCompany’s common stock were outstanding on March 31, 2007 and 2006,respectively.

The Company estimates the fair value of warrantsissued for services on the date of grant by using the Black-Scholes pricingmodel.  Under this model, the Company usedthe following weighted-average assumptions to determine the fair value of theoutstanding warrants that were issued for services: a dividend yield of zeropercent, an expected volatility of 276%, a risk-free interest rate of 3.5% anda remaining contractual term of 2 years. The Company follows Emerging Issues Task Force No. 96-18 to recognizethe fair value of warrants granted. Under EITF 96-18, the fair value of the warrants should be recognized asthe services are rendered.  The Companyis recognizing the cost of services evenly over the term of the agreementssince the services are being rendered on an ongoing basis during the term ofthe agreements.

8

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On March 14, 2007, the Company issued a restricted stock award for200,000 shares of common stock to a business partner.  The awards vests in four equal quarterlyinstallments commencing June 30, 2007 if certain performance criteria areachieved.  The shares were valued at $0.65per share for total consideration of $130,000. The Company recognized $5,770 of expense during the three months endedMarch 31, 2007 in connection with the issuance of these shares.

On March 16, 2007, the Company issued 30,000 sharesof common stock to each of three consultants pursuant to individual consultingagreements.  The shares were issued atthe closing price of the Company’s common stock on the date of issuance fortotal consideration of $60,300, all of which was recognized as expense duringthe three months ended March 31, 2007.

**Note 10.  Stock Options**

Stockoptions exercisable into an aggregate of 8,235,000 and 8,045,000 shares of theCompany’s common stock were outstanding on March 31, 2007 and 2006,respectively.  The weighted averageexercise price of the stock options outstanding on March 31, 2007 was $0.43.  No optionswere exercised during the three months ended March 31, 2007.

The Company estimates the fair value of its stockoptions on the date of grant by using the Black-Scholes pricing model inaccordance with the provisions of Statement of Financial Accounting StandardsNo. 148, *“Accounting for Stock-Based Compensation –Transition and Disclosure.”* Under the Black-Scholes pricing model, the Company used the followingweighted-average assumptions to determine the fair value of the stock optionsissued: a dividend yield of zero percent, an expected volatility of between257% and 282%, a risk-free interest rate of between 3.5 percent and 4.8%, and aremaining contractual life of 8.99 years.

In January 2007, the Company issued a stock optionto a new employee to acquire 100,000 shares of common stock.  The option has an exercise price of $0.69 pershare and vests as follows: 25% on the date of grant and 25% per yearcommencing January 22, 2008.  The optionhas a term of 10 years and was valued at $68,997 on the date of grant.  The Company recognized $4,281 of expenseduring the three months ended March 31, 2007 in connection with the issuance ofthis option.

In March 2007, the Company issued a stock option toa new employee to acquire 40,000 shares of common stock.  The option has an exercise price of $0.67 pershare and vests as follows: 25% on the date of grant and 25% per yearcommencing March 1, 2008.  The option hasa term of 10 years and was valued at $26,799 on the date of grant.  The Company recognized $734 of expense duringthe three months ended March 31, 2007 in connection with the issuance of thisoption.

**Note11.  Related-Party Transactions**

On March 15, 2007, the Company terminated theemployment of David A. Taylor, its Senior Vice President – National Sales.

9

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**CAUTIONARY STATEMENT REGARDINGFORWARD-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”).  Allstatements other than statements of historical fact included or incorporated byreference in this report, including, without limitation, statements regardingour future financial position, business strategy, budgets, projected revenueand costs, and plans and objectives of management for future operations, areforward-looking statements.  In addition,forward-looking statements generally can be identified by the use offorward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,”“projects,” “estimates,” “anticipates,” or “believes” or the negative thereofor any variation thereon or similar terminology or expressions.

These forward-looking statements are subject to risks and uncertaintiesthat could cause actual results to differ materially from results proposed insuch statements.  Although we believethat the expectations reflected in such forward-looking statements arereasonable, we can give no assurance that such expectations will prove to havebeen correct.  Important factors thatcould cause actual results to differ materially from our expectations include,but are not limited to:

·                  our ability to fund future growth andimplement our business strategy;

·                  demand for and acceptance of ourCARExpress membership programs;

·                  our dependence on a limited number ofpreferred provider organizations (“PPOs”) and other provider networks forhealthcare providers;

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

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

·                  growth and market acceptance of thehealth savings industry;

·                  competition in the health savingsindustry and our markets;

·                  our ability to attract and retainqualified personnel;

·                  legislative or regulatory changes in thehealthcare industry;

·                  the condition of the securities andcapital markets;

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

and statements ofassumption underlying any of the foregoing, as well as any other factors setforth under the captions *“Item 1.  Description of Business – Risks andUncertainties”* and *“Item 6.  Management’s Discussions and Analysis”*in our Annual Report on Form 10-KSB for the year ended December 31, 2006.

All subsequentwritten and oral forward-looking statements attributable to us, or personsacting on our behalf, are expressly qualified in their entirety by theforegoing.  Except as required by law, weassume no duty to update or revise our forward-looking statements based onchanges in internal estimates or expectations or otherwise.

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**Item 2.  Management’s Discussion andAnalysis.**

Unless otherwise indicated or the context otherwiserequires, all references to the “Company,” “we,” “us” or “our” and similarterms refer to National Health Partners, Inc. and its subsidiaries.

This Management’s Discussion and Analysis and otherparts of this report contain forward-looking statements that involve risks anduncertainties.  All forward-lookingstatements included in this report are based on information available to us onthe date hereof and, except as required by law, we assume no obligation toupdate any such forward-looking statements. Our actual results may differ materially from those anticipated in theseforward-looking statements as a result of a number of factors, including thoseset forth under the captions *“Item 1.  Description of Business – Risks andUncertainties”* and *“Item 6.  Management’s Discussion and Analysis”*in our Annual Report on Form 10-KSB for the year ended December 31, 2006.  The following should be read in conjunctionwith our consolidated financial statements included above in Item 1 of Part Iof this report.

**Overview**

Weare a national healthcare savings organization that was formed by healthcareprofessionals to address the need for affordable healthcare nationwide.  We create, market and sell discounthealthcare membership programs to predominantly underserved markets in thehealthcare industry through a national healthcare savings network calledCARExpress (“CARExpress”).  CARExpress isa network of hospitals, doctors, dentists, pharmacists and other healthcareproviders comprised of over 1,000,000 medical professionals that have agreed torender their services and products to CARExpress members at discountedprices.  CARExpress enables people toengage in point-of-service transactions directly with these providers and paydiscounted prices that are similar in amount to those paid by insurancecompanies on behalf of their insureds. Our programs offer savings on healthcare services to persons who areuninsured and underinsured and to those who purchase only high deductible orlimited benefit medical insurance policies by providing access to the same PPOsthat are utilized by employers that self-fund at least a portion of theiremployees’ healthcare costs.  Ourprograms are also used to supplement benefit plans and fill in the gaps createdby the need to reduce health benefits to keep the costs of health insurancereasonable.  We sell our programsdirectly and indirectly through resellers that privately label or co-brand ourprograms and employers that offer our programs to their employees.

Weare actively engaged in marketing our CARExpress membership programs to thepublic and our primary strategic objectives are to generate increased sales ofour CARExpress membership programs and sustain and expand our position as aprovider of unique healthcare membership service programs.  The target market for our programs iscomprised of individuals who have either limited health benefits or no healthbenefits.  Our market share of thismarket is currently less than one percent and has been less than one percentsince our inception.  Since we are notcurrently large enough to pursue and support the entire market, we intend tocontinue to pursue specific opportunities that we identify in this marketthrough our various marketing and distribution channels.  Through product design, competitivemembership pricing and a variety of marketing and distribution partners, we arepursuing opportunities in the healthcare market that insurance companies havenot addressed.

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**RecentDevelopments**

We haveexperienced a substantial increase in our revenue and membership base over thepast 12 months.  We achieved revenue of$1,044,508 for the three-month period ended March 31, 2007, compared to revenueof $324,404 for the three-month period ended March 31, 2006, an increase ofover 220%.  We have entered intoagreements with several marketing and distribution partners that are sellingour CARExpress membership programs to the public and are currently innegotiations with several other companies regarding the sale of our CARExpressmembership programs.

We arecurrently in the process of creating our first CARExpress “wrap-around”programs.  We plan to offer severalprograms that will consist of our CARExpress comprehensive discount healthprogram and various limited liability insurance benefits under the name “CARExpressPlus.”  Members of our CARExpress Plusprograms will be able to use the health discount component of the programs toobtain discounts on healthcare costs, then use the insurance component of theprograms to cover healthcare costs up to the amount of the coverage limit.  Each CARExpress Plus program will providecoverage for the member’s full family or, at the member’s option, coveragelimited exclusively to the primary insured. We intend to market and sell our CARExpress Plus programs initiallythrough brokers, agents and other independent third parties and, in the future,directly through National Health Brokerage Group.

**OperationalMetrics**

Ourrevenue consists exclusively of recurring monthly membership fees that wereceive from members of our CARExpress membership programs.  To generate revenue, we engage in marketingcampaigns offering money-back guarantees and free-trial periods as an incentivefor prospective members to try our CARExpress membership programs.  Upon becoming paying members, the members payus membership fees each month for the duration of their membership.  The average membership fee per member permonth that we receive is approximately $35. Approximately 95% of the CARExpress membership programs that we havesold to our current members consist of our Comprehensive Care Program which issold at a monthly retail price of $39.95. The remaining CARExpress membership programs that we have sold to ourcurrent members consist of a mix of our less expensive programs.

Wereceive each member’s initial monthly payment and billing information at thebeginning of the first monthly membership period.  Monthly payments for subsequent periods arereceived at the beginning of the applicable period.  For those memberships sold in connection withour free-trial offers, we receive the member’s billing information at thebeginning of the free-trial period. After the free-trial period has expired, the member is charged for thenext monthly membership period unless the member cancels the membership priorto the expiration of the free-trial period. The monthly membership fees that we receive are recognized as revenueevenly over the applicable monthly membership period.  As a result, there is a delay of four weeksbetween the date we receive a monthly membership fee and the date we recognizethe entire fee as revenue.

Akey metric that we use to evaluate our success is our member retentionrates.  Member retention rates representthe percentage of new members that we acquire that we are able to

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retain for a specifiedperiod of time.  Since we incur a largeportion of our costs up front and receive recurring membership fees throughoutthe term of the membership, the longer we are able to retain the members weacquire, the greater the revenue potential of the CARExpress membershipprograms that we sell.  We believe thatthe key to obtaining a high member retention rate is to target our marketingcampaigns towards those individuals and organizations that are most in need ofour programs, most capable of paying for our programs, and most loyal to us andour programs.  Member retention rates canbe influenced by a variety of factors, including:

·                  thetype of CARExpress membership programs being sold;

·                  themarketing campaign being used to sell our CARExpress membership programs;

·                  thefinancial condition and loyalty of our members;

·                  thedistribution channel selling our CARExpress membership programs; and

·                  thetype and amount of compensation being paid to our marketing and distributionpartners to sell our CARExpress membership programs.

Wehave obtained valuable information regarding member demographics through themarketing and advertising campaigns that we have conducted over the last 12months and are focusing our marketing and advertising campaigns on members andmember groups that we have identified as being most suitable for our CARExpressmembership programs.  As a result, weexpect our retention rates to continue to improve over the next 12 months as wepursue these opportunities through our various marketing and distributionchannels.

**Outlook**

Ourstrategy is to continue to expand our position as a provider of uniquehealthcare membership service programs. We implemented several strategic growth initiatives during 2006 throughwhich we achieved new contracts and strategic partnerships with a number ofmarketing and distribution companies.  Wehave also initiated several measures in anticipation of our future growth,including hiring additional customer service staff and transitioning ourcurrent customer service staff from one shift to two shifts to ensure adequatecoverage for our members.  We expect togenerate future revenue and members primarily through our marketing and distributionpartners and our various marketing and advertising campaigns.  We expect to further increase revenue andmembers through the rollout of our CARExpress Plus programs to the public.  We intend to finance each of these projectsthrough cash on hand and internally generated cash flows from operatingactivities.  We will use any additionalinvestments that we receive to accelerate the expansion of each of ouradvertising campaigns and programs and increase sales of our membershipprograms.

Weexpect the number of CARExpress members generated each month to increase forthe foreseeable future.  We expect ourretention rates to improve over the next 12 months as we obtain additionalinformation regarding member demographics and target our marketing and advertisingcampaigns at prospective members and member groups that are most suitable forour membership programs.  As a result, weexpect our net losses from operations to decrease for the foreseeable futureand expect to begin generating positive cash flow from operations during thethird quarter of 2007 as the recurring membership fees from our increasingmembership base

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overtake the costsassociated with obtaining the new members we are generating.  We can provide no assurance, however, thatour membership base will increase as projected, that our member retention rateswill improve over the next 12 months, that our net losses from operations willdecrease during future periods, or that we will begin generating positive cashflow from operations during the third quarter of 2007.

**CriticalAccounting Policies**

Forinformation regarding our critical accounting policies, please refer to thediscussion provided in our Annual Report on Form 10-KSB for the year endedDecember 31, 2006 under the caption *“Item 6.  Management’s Discussion and Analysis –Critical Accounting Policies”* and our Notes to ConsolidatedFinancial Statements.

**RecentAccounting Pronouncements**

Forinformation regarding recent accounting pronouncements applicable to ourbusiness, please refer to the discussion provided in our Annual Report on Form10-KSB for the year ended December 31, 2006 under the caption *“Item 6.  Management’s Discussionand Analysis – Recent Accounting Pronouncements”* and our Notes toConsolidated Financial Statements.

**Comparisonof the Three-Month Periods Ended March 31, 2007 and 2006**

Revenue

Revenueconsists of the monthly membership fees that we receive from members of ourCARExpress membership programs and CARExpress Plus membership programs.  To date, revenue has consisted exclusively ofthe monthly membership fees we receive from members of our CARExpressmembership programs.  Revenue increased$720,104 to $1,044,508 for the three-month period ended March 31, 2007 from$324,404 for the three-month period ended March 31, 2006.  The increase of $720,104 resulted primarilyfrom sales of our CARExpress membership programs to new members.  Approximately 95% of the revenue that wegenerated during the three-month periods ended March 31, 2007 and 2006,respectively, was derived from sales of our CARExpress membership programs tofirst-time members.  The remainder of therevenue that we generated during these periods was derived from existingmembers.  We expect revenue to increaseover the next 12 months as a result of increased sales of our CARExpressmembership programs and initial sales of our CARExpress Plus membershipprograms by our marketing and distribution partners and through our variousmarketing and advertising campaigns.

Direct Costs

Directcosts consist of sales commissions that we pay to our marketing anddistribution partners and fees that we pay to our PPOs and provider networksfor access to their networks.  Directcosts increased $418,996 to $568,083 for the three-month period ended March 31,2007, from $149,087 for the three-month period ended March 31, 2006.  The increase of $418,996 was due primarily toan increase of $359,284 for sales commissions and $59,712 for PPO and networkprovider costs.  We expect cost of salesto increase over the next 12 months as increased

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sales of ourhealth membership programs result in higher overall sales commission expensesand provider networks costs.

Selling andMarketing Expenses

Sellingand marketing expenses consist of advertising expenses, marketing expenses,salaries and other compensation paid to employees selling and marketing ourhealth membership programs, rent expense allocated to our selling and marketingactivities, depreciation and amortization expense allocated to our selling andmarketing activities, and all other selling and marketing expenses incurred byus.  Selling and marketing expensesdecreased $30,399 to $71,938 for the three-month period ended March 31, 2007,from $102,337 for the three-month period ended March 31, 2006.  The decrease of $30,399 was due primarily toa decrease of $36,000 for sales-related cash and equity-based compensation,partially offset by increases in other selling and marketing expenses.  We expect selling and marketing expenses toremain constant during the next 12 months as we continue to engage in targetedand cost-efficient marketing and advertising campaigns and activities.

General andAdministrative Expenses

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

*Employee Compensation Expense*.  Employee compensation expense consists of allsalaries and related compensation that we pay to our employees and the relatedpayroll taxes that are not associated with our selling and marketingactivities.  Employee compensationexpense decreased $162,350 to $553,269 for the three-month period ended March31, 2007, from $715,619 for the three-month period ended March 31, 2006.  The decrease of $162,350 was due primarily toa decrease of $437,475 in stock option expense resulting primarily from ourdecision in December 2006 to accelerate the vesting of certain stock optionspreviously issued to our executive officers and employees and the accelerationof the vesting of the stock option previously granted to Roger H. Folts, ourformer Chief Financial Officer, upon the termination of his employment inFebruary 2006.  This decrease waspartially offset by increases of $97,563 in salary and payroll tax expenseassociated primarily with annual increases in the salaries payable to ourexecutive officers in 2006 under their respective employment agreements and$153,538 in expense associated with restricted stock awards granted to ourexecutive officers in 2006 and the acceleration of the vesting of therestricted stock award previously granted to David A. Taylor upon thetermination of his employment in March 2007. We are party to employment agreements with David M. Daniels, AlexSoufflas and Patricia S. Bathurst and David A. Taylor.  A summary of the material terms of theseemployment agreements and our financial obligations thereunder is provided inour Annual Report on Form 10-KSB for the year ended December 31, 2006 under thecaptions *“Item 6. Management’s Discussion and Analysis – Contractual Obligations” and “Item10.  Executive Compensation.”*  We expect to recognize less equity-basedcompensation expense in the future due to the accelerated vesting in 2006 ofmost of the issued and outstanding stock options held by our employees.  However, we intend to retain additionalexecutive management personnel and other employees in connection with theanticipated growth of our business.  As aresult, we expect employee compensation expense to decrease minimally over thenext 12 months.

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*Professional Fees*.  Professional fees consist of fees paid to ourindependent accountants, lawyers and other professionals.  Professional fees increased $66,807 to$184,163 for the three-month period ended March 31, 2007 from $117,356 for thethree-month period ended March 31, 2006. The increase of $66,807 was due primarily to an increase of $41,360 inthe amount of cash and equity-based compensation paid to our service providersand consultants for various services and $24,948 in fees paid to our independentaccountants and lawyers.  We expectprofessional fees to decrease over the next 12 months as we recognize lessstock compensation expense associated with the equity-based compensationpreviously paid to our consultants and service providers.  We expect this to be partially offset byincreases in accounting and legal fees that we will incur in connection withthe general expansion of our business and operations.

*Other General and Administrative Expenses*.  Other general and administrative expensesconsist of costs for supplies, computer hardware and system costs, filing feesand dues, non-employee customer service representative expense, rent expense,health insurance costs, financial printer costs, transfer agent costs, thecosts of investor relations campaigns and activities, general businessexpenses, severance expense and miscellaneous general and administrativeexpenses that are not associated with our selling and marketingactivities.  Other general and administrativeexpenses increased $171,877 to $314,450 for the three-month period ended March31, 2007 from $142,573 for the three-month period ended March 31, 2006.  The increase of $171,877 resulted primarilyfrom increases of $51,858 for bank service charges associated with new andrecurring member transactions, $42,445 for supplies, $22,353 for postage and$29,316 for corporate filing fees, partially offset by a decrease of $49,575for financial printing costs.  We expectother general and administrative expenses to increase over the next 12 months aswe continue to incur expenses for financial printer services, investorrelations campaigns and activities, transfer agent fees, health insurance,rent, non-employee customer service representatives, supplies, computerhardware and systems, and other miscellaneous items associated with the generaloperation of and growth in our business.

Net Loss

Our net loss decreased $284,734 to $639,736 for the three-month periodended March 31, 2007, from $924,470 for the three-month period ended March 31,2006.  The decrease of $284,734 wasprimarily the result of an increase of $720,104 in revenue and a decrease of$162,350 for employee compensation expense, partially offset by increases of$418,996 for direct costs incurred in connection with the sale of ourmembership programs and $171,877 for other general and administrativeexpenses.  We expect our net losses fromoperations to decrease substantially during the remainder of 2007 as therecurring membership fees from our increasing membership base overtake thecosts associated with obtaining the new members we are generating and werecognize less stock compensation expense associated with the equity-basedcompensation previously paid to our employees, consultants and serviceproviders.

**Liquidityand Capital Resources**

Sinceour inception, we have funded our operations primarily through private sales ofequity securities and the use of short-term debt.  As of March 31, 2007, we had cash and cashequivalents of approximately $1,170,590 and working capital of approximately$1,264,129.

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Netcash used by operating activities was $426,379 for the three-month period endedMarch 31, 2007 compared to $391,789 for the three-month period ended March 31,2006.  The $34,590 increase in cash usedby operating activities was due primarily to decreases of $219,290 in stockcompensation expense, a difference of $88,160 in accounts payable and accruedexpenses, and an increase of $100,496 in deposits.  These changes were partially offset by adecrease of $284,734 in net loss and increases of $57,110 in deferred revenueand $29,000 in deferred compensation.

Wedid not have any cash flows from investing activities for the three-monthperiod ended March 31, 2007.  Net cashprovided by investing activities was $35,717 for the three-month period endedMarch 31, 2006.  The $35,717 differencein cash flows from investing activities was due to a decrease of $35,717 incertificates of deposit acquired in 2005 and disposed of in 2006.

Wedid not have any cash flows from financing activities for the three-monthperiod ended March 31, 2007.  Net cashprovided by financing activities was $491,375 for the three-month period endedMarch 31, 2006.  The $491,375 differencein cash flows from financing activities was due to decreases of $509,375 inproceeds received upon the exercise of outstanding warrants and $12,000 inproceeds from the issuance of notes payable, partially offset by a decrease of$30,000 in payments on notes payable.

Ourprimary sources of capital over the past 12 months are set forth below.

In May 2006, we completed a private offering of211,934 shares of common stock, Class A warrants to acquire 105,967 shares ofour common stock, and Class B warrants to acquire 105,967 shares of our commonstock for aggregate cash consideration of $127,160.  These securities were sold in units comprisedof two shares of common stock, one Class A warrant and one Class Bwarrant.  The units were sold at apurchase price of $1.20 per unit.  TheClass A warrants are initially exercisable into one share of our common stockat an exercise price of $0.60 per share, are exercisable for a period of 18months commencing on the date of issuance, and expire at the end of theexercise period.  The Class B warrantsare initially exercisable into one share of our common stock at an exerciseprice of $0.80 per share, are exercisable for a period of 36 months commencingon the date of issuance, and expire at the end of the exercise period.

In August 2006,we completed a private offering of 1,705,000 shares of common stock, Class Awarrants to acquire 1,705,000 shares of our common stock, and Class B warrantsto acquire 1,705,000 shares of our common stock for aggregate cashconsideration of $1,364,000.  Thesesecurities were sold in units comprised of one share of common stock, one ClassA warrant and one Class B warrant.  Theunits were sold at a purchase price of $0.80 per unit.  The Class A warrants were initiallyexercisable into one share of our common Stock at an exercise price of $0.80per share until August 31, 2006, and expired at the end of the exerciseperiod.  The Class B warrants wereinitially exercisable into one share of our common stock at an exercise priceof $1.00 per share, were exercisable until November 30, 2006, and expired atthe end of the exercise period.

In September2006, we completed a private offering of 710,000 shares of common stock, ClassA warrants to acquire 710,000 shares of our common stock, and Class B warrantsto

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acquire 710,000 shares ofour common stock for aggregate cash consideration of $355,000.  These securities were sold in units comprisedof one share of common stock, one Class A warrant and one Class B warrant.  The units were sold at a purchase price of$0.50 per unit.  The Class A warrantswere initially exercisable into one share of our common stock at an exerciseprice of $0.50 per share until October 16, 2006, and expired at the end of theexercise period.  The Class B warrantsare initially exercisable into one share of our common stock at an exerciseprice of $0.50 per share, are exercisable until August 31, 2007, and expire atthe end of the exercise period.

In October 2006, we completed a private offering of510,000 shares of common stock, Class A warrants to acquire 510,000 shares ofour common stock, Class B warrants to acquire 510,000 shares of our commonstock, Class C warrants to acquire 510,000 shares of our common stock, andClass D warrants to acquire 510,000 shares of our common stock for aggregatecash consideration of $255,000.  Thesesecurities were sold in units comprised of one share of common stock, one ClassA warrant, one Class B warrant, one Class C warrant and one Class Dwarrant.  The units were sold at apurchase price of $0.50 per unit.  TheClass A warrants were initially exercisable into one share of our common Stockat an exercise price of $0.50 per share, were exercisable until October 16,2006, and expired at the end of the exercise period.  The Class B warrants were initiallyexercisable into one share of our common stock at an exercise price of $0.50per share, were exercisable until November 30, 2006 and expired at the end ofthe exercise period.  The Class Cwarrants are initially exercisable into one share of our common stock at anexercise price of $0.50 per share, are exercisable until August 31, 2007, andexpire at the end of the exercise period. The Class D warrants are initially exercisable into one share of ourcommon stock at an exercise price of $0.80 per share, are exercisable untilNovember 30, 2007, and expire at the end of the exercise period.

During the period beginning January 1, 2006 and endingMay 10, 2007, we issued 6,855,397 shares of common stock upon the exercise ofwarrants at exercise prices ranging between $0.50 and $2.00 per share foraggregate gross cash proceeds of $4,634,413.

To date, ourcapital needs have been met principally through the sales of our equity anddebt securities and proceeds received upon the exercise of outstanding warrantsby our security holders.   We do notcurrently maintain a line of credit or term loan with any commercial bank orother financial institution.  We haveused the proceeds from the exercise of warrants and our private offerings ofsecurities to pay virtually all of the costs and expenses we haveincurred.  These costs and expenses werecomprised of operating expenses, which consisted of the salary expenses,professional fees, rent expenses and other general and administrative expensesdiscussed above, and the costs of sales discussed above to the extent suchcosts of sales exceeded our revenue.

Although we believe that our current cash resourceswill be sufficient to sustain our current operations for the next 12 months, wemay need to obtain additional cash resources during the next 12 months if weexperience a substantial downturn in our business or incur substantial expensesin connection with unforeseen events.  Inthe event such funds are needed, we may engage in additional sales of debt or equitysecurities.  The sale of additionalequity or convertible debt securities would result in additional dilution toour shareholders.  The issuance ofadditional debt would result in increased expenses and could subject us tocovenants that may have the effect of restricting our operations.  We have not made arrangements to obtainadditional financing and we can provide no assurance that additional financingwill be available in an amount or on terms acceptable to us, if at all.  If we are unable to obtain

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additional funds whenthey 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 andexpenses as they are incurred, which could have a material, adverse effect onour business, financial condition and results of operations.

**Off-Balance Sheet Arrangements**

As of March 31, 2007, wedid not have any relationships with unconsolidated entities or financialpartners, such as entities often referred to as structured finance or specialpurpose entities, that had been established for the purpose of facilitatingoff-balance sheet arrangements or other contractually narrow or limitedpurposes.  As such, we are not materiallyexposed to any financing, liquidity, market or credit risk that could arise ifwe had engaged in such relationships.

**Item 3.  Controlsand Procedures.**

As of March 31, 2007, we carried out the evaluation of the effectiveness of our disclosure controls and procedures required 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 March 31, 2007, our disclosure controls and procedures were 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.  There has been no change in our internal control over financial reporting identified in connection with this evaluation that occurred during our fiscal quarter ended March 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

**PART II**

**OTHERINFORMATION**

**Item2.  Unregistered Sales of Equity Securities and Use of Proceeds.**

During the three monthsended March 31, 2007, we sold the following securities without registrationunder the Securities Act of 1933, as amended (the “Securities Act”):

In January 2007, we issued an option to acquire100,000 shares of common stock to a new employee.  The option has an initial exercise price of $0.69per share, vests in four equal annual installments commencing on the date ofissuance, and has a term of 10 years. The securities were issued to an accredited investor in a privateplacement transaction exempt from the registration requirements of theSecurities Act pursuant to Section 4(2) of the Securities Act directly by uswithout engaging in any advertising or general solicitation of any kind andwithout payment of underwriting discounts or commissions to any person.

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In March 2007, we issued an option to acquire 40,000shares of common stock to a new employee. The option has an initial exercise price of $0.67 per share, vests infour equal annual installments commencing on the date of issuance, and has aterm of 10 years.  The securities wereissued to an accredited investor in a private placement transaction exempt fromthe registration requirements of the Securities Act pursuant to Section 4(2) ofthe Securities Act directly by us without engaging in any advertising orgeneral solicitation of any kind and without payment of underwriting discountsor commissions to any person.

In March 2007, we issued a restricted stock award for200,000 shares of common stock to an accredited investor in exchange for salesand marketing services.  The award vestsin four equal quarterly installments commencing June 30, 2007 if certainperformance criteria are achieved.  Thesesecurities were issued to one accredited investor in a private placementtransaction exempt from the registration requirements of the Securities Actpursuant to Section 4(2) of the Securities Act directly by us without engagingin any advertising or general solicitation of any kind and without payment ofunderwriting discounts or commissions to any person.

**Item 6.  Exhibits.**

The following exhibitsare included herein: 
| Exhibit No. | ** ** | **Exhibit**                                                                                                                                                            |
|-------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |       |                                                                                                                                                                   |
| 31.1        |       | Certification of Chief Executive Officer of the  Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934,  as amended                             |
|        |       |                                                                                                                                                                   |
| 31.2        |       | Certification of Chief Financial Officer of the  Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934,  as amended                             |
|        |       |                                                                                                                                                                   |
| 32.1        |       | Certification of Chief Executive Officer and Chief  Financial Officer of the Company required by Rule 13a-14(b) under the  Securities Exchange Act of 1934, as amended |

 

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**SIGNATURES**

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theregistrant has duly caused this Report to be signed on its behalf by theundersigned, thereunto duly authorized.
|                    | NATIONAL  HEALTH PARTNERS, INC. |
|--------------------|---------------------------------|
|               |                            |
|               |                            |
| Date: May 11, 2007 | /s/ David M. Daniels            |   |
|               | David M. Daniels                |
|               | Chief Executive Officer         |

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**EXHIBITINDEX**
| Exhibit | ** ** | **Exhibit   Description**                                                                                                                                         |
|---------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |       |                                                                                                                                                                   |
| 31.1    |       | Certification of Chief Executive Officer of the  Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934,  as amended                             |
|    |       |                                                                                                                                                                   |
| 31.2    |       | Certification of Chief Financial Officer of the  Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934,  as amended                             |
|    |       |                                                                                                                                                                   |
| 32.1    |       | Certification of Chief Executive Officer and Chief  Financial Officer of the Company required by Rule 13a-14(b) under the  Securities Exchange Act of 1934, as amended |

 

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