**UNITED
          STATES**
 **SECURITIES
          AND EXCHANGE COMMISSION**
 **WASHINGTON,
          D.C. 20549**
 
 **FORM
          10-Q**
 
 (Mark
          One)
  **xQUARTERLY
          REPORT
          PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
          1934**
  For
          the quarterly
          period ended March 31, 2007
 or
  **o TRANSITION
          REPORT
          PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
          1934**
 
 For
          the transition period from _____ to _____
 
 Commission
          File Number:  000-50587
 
 **NATIONAL
          PATENT DEVELOPMENT CORPORATION**
 (Exact
          Name of Registrant as Specified in its Charter)
 
 **Delaware**
                    
                    **13-4005439**(State
                        or other jurisdiction of
                      incorporation
                        or organization
                    
                    (I.R.S.
                        Employer
                      Identification
                        No.)
 **10
                        East 40th Street, Suite 3110, New York, NY**
                    **10016**(Address
                        of principal executive offices)
                    (Zip
                        code)
 **(646)
                        742-1600**(Registrant’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 1934 during
          the
          preceding 12 months (or for such shorter period that the registrant was
          required
          to file such reports), and (2) has been subject to such filing requirements
          for
          the past 90 days. Yes x No
o
 
 Indicate
          by check mark whether the registrant is a large accelerated filer, an
          accelerated filer, or a non-accelerated filer. See definition of accelerated
          filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
          one):
  Large
          accelerated filer  o Accelerated
          filer o 
Non-accelerated
          filer  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
  As
          of May
          10, 2007, there were 17,881,062 shares of the registrant’s common stock, $0.01
          par value, outstanding.
   
  **NATIONAL
          PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES**
 
 **TABLE
          OF CONTENTS**
  Part
                        I.Financial
                        Information
                    Page No.Item
                        1.
                    Financial
                        StatementsCondensed
                        Consolidated Statements of Operations-Three
                        Months Ended March 31, 2007 and 2006 (Unaudited)
                    1Condensed
                        Consolidated Statements of Comprehensive Income (Loss)-Three
                        Months Ended March 31, 2007 and 2006 (Unaudited)
                    2Condensed
                        Consolidated Balance Sheets -March
                        31, 2007 (Unaudited) and December 31, 2006
                    3Condensed
                        Consolidated Statements of Cash Flows -Three
                        Months Ended March 31, 2007 and 2006 (Unaudited)
                    4Notes
                        to Condensed Consolidated Financial Statements
                    5Item
                        2.
                    Management's
                        Discussion and Analysis of FinancialCondition
                        and Results of Operations
                    19Item
                        3.
                    Quantitative
                        and Qualitative Disclosure about Market Risk
                    29Item
                        4.
                    Controls
                        and Procedures
                    
                    29Part
                        II. Other InformationItem
                        6.
                    Exhibits
                    
                    30Signatures
                    32
 
 **PART
          I. FINANCIAL INFORMATION**
 
 **Item
          1. Financial Statements**
 
 **NATIONAL
          PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(Unaudited)**
 **(in
          thousands, except per share data)**
 
 **Three
                    Months Ended****March
                    31,****2007**
                
                **2006**Sales
                
                **$**
                **31,931**
                
                $
                31,205Cost
                    of sales
                
                
                **(26,841**
                **)**
                
                (25,992
                )Gross
                    margin
                
                
                **5,090**
                
                
                5,213Selling,
                    general and administrative expenses
                
                
                **(4,702**
                **)**
                
                (4,722
                )Operating
                    profit
                
                
                **388**
                
                
                491Interest
                    expense
                
                
                **(326**
                **)**
                
                (379
                )Investment
                    and other income (loss)
                
                
                **66**
                
                
                (237
                )Income
                    (loss) before income taxes and minority interest
                
                
                **128**
                
                
                (125
                )Income
                    tax expense
                
                
                **(360**
                **)**
                
                (221
                )Loss
                    before minority interest
                
                
                **(232**
                **)**
                
                (346
                )Minority
                    interest
                
                
                **(195**
                **)**
                
                (91
                )Net
                    loss
                
                **$**
                **(427**
                **)**
                $
                (437
                )Net
                    loss per shareBasic
                    and diluted
                
                **$**
                **(0.02**
                **)**
                $
                (0.02
                )
 
 See
          accompanying notes to condensed consolidated financial
          statements.
  1
  **NATIONAL
          PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME** **(LOSS)**
 **(Unaudited)**
 **(in
          thousands)**
 
 **Three
                    Months Ended****March
                    31,****2007**
                
                2006Net
                    loss
                
                **$**
                **(427**
                **)**
                $
                (437
                )Other
                    comprehensive (loss) income, before tax:Net
                    unrealized gain on available-for-sale-securities
                
                
                **178**
                
                
                4,296Net
                    unrealized (loss) gain on interest rate swap, net of minority
                    interest
                
                
                **(48**
                **)**
                
                45Comprehensive
                    (loss) income before tax
                
                
                **(297**
                **)**
                
                3,904Income
                    tax benefit (expense) related to items of other comprehensive
                    income
                
                
                **15**
                
                
                (18
                )Comprehensive
                    income (loss)
                
                **$**
                **(282**
                **)**
                $
                3,886
 
 See
          accompanying notes to condensed consolidated financial
          statements.
  2
  **NATIONAL
          PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED BALANCE SHEETS**
 **(in
          thousands)**
 
 **March
                    31,**
                
                **December
                    31,****2007**
                
                **2006****(unaudited)****Assets****Current
                    assets**Cash
                    and cash equivalents
                
                **$**
                **4,094**
                
                $
                4,485Accounts
                    receivable, less allowancefor
                    doubtful accounts of $355 and $480
                
                
                **19,515**
                
                
                11,939Receivable
                    from GP Strategies Corporation
                
                
                **66**
                
                
                251Inventories
                
                
                **25,566**
                
                
                22,535Prepaid
                    expenses and other current assets
                
                
                **1,322**
                
                
                724Deferred
                    tax asset
                
                
                **842**
                
                
                791**Total
                    current assets**
                
                
                **51,405**
                
                
                40,725Marketable
                    securities available for sale
                
                
                **354**
                
                
                343Property,
                    plant and equipment, net
                
                
                **3,580**
                
                
                2,925Investment
                    in Valera, including available for sale securities of $4,989
                    and $4,823 in
                    2007 and 2006
                
                
                **6,122**
                
                
                5,955Other
                    assets
                
                
                **3,926**
                
                
                3,286**Total
                    assets**
                
                **$**
                **65,387**
                
                $
                53,234**Liabilities
                    and stockholders’ equity****Current
                    liabilities**Current
                    maturities of long-term debt
                
                **$**
                **187**
                
                $
                151Short
                    term borrowings
                
                
                **19,598**
                
                
                18,414Accounts
                    payable and accrued expenses
                
                
                **19,885**
                
                
                9,978**Total
                    current liabilities**
                
                
                **39,670**
                
                
                28,543Long-term
                    debt less current maturities
                
                
                **1,544**
                
                
                1,332Deferred
                    tax liability
                
                
                **279**
                
                
                279Other
                    liabilities
                
                
                **259**
                
                
                247Minority
                    interest
                
                
                **2,488**
                
                
                1,696Common
                    stock subject to exchange rights
                
                
                **431****Stockholders’
                    equity**Common
                    stock
                
                
                **180**
                
                
                178Additional
                    paid-in capital
                
                
                **26,069**
                
                
                25,990Accumulated
                    deficit
                
                
                **(9,604**
                **)**
                
                (9,177
                )Treasury
                    stock, at cost
                
                
                **(408**
                **)**
                
                (188
                )Accumulated
                    other comprehensive income
                
                
                **4,479**
                
                
                4,334**Total
                    stockholders’ equity**
                
                
                **20,716**
                
                
                21,137**Total
                    liabilities and stockholders’ equity**
                
                **$**
                **65,387**
                
                $
                53,234
 See
          accompanying notes to condensed consolidated financial
          statements.
  3
  **NATIONAL
          PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(Unaudited)**
 **(in
          thousands)**
 
 **Three
                    Months Ended****March
                    31,****2007**
                
                2006**Cash
                    flows from operations:**Net
                    loss
                
                **$**
                **(427**
                **)**
                $
                (437
                )Adjustments
                    to reconcile net loss tonet cash used in operating activities:Depreciation
                    and amortization
                
                
                **190**
                
                
                186Minority
                    interest
                
                
                **195**
                
                
                91Gain
                    on issuance of stock by a subsidiary
                
                
                **(1**
                **)**Expenses
                    paid in common stock
                
                
                **13**
                
                
                26Deferred
                    income taxes
                
                
                **(51**
                **)**
                
                27Stock
                    based compensation
                
                
                **62**Changes
                    in other operating items
                
                
                **(1,298**
                **)**
                
                (1,240
                )**Net
                    cash used in operations**
                
                
                **(1,317**
                **)**
                
                (1,347
                )**Cash
                    flows from investing activities:**Additions
                    to property, plant and equipment, net
                
                
                **(845**
                **)**
                
                (131
                )Acquisition
                    of additional interest in Five Star
                
                
                **(106**
                **)**Repayment
                    of receivable from GP Strategies
                
                
                **185**
                
                
                196**Net
                    cash (used in) provided by investing activities**
                
                
                **(766**
                **)**
                
                65**Cash
                    flows from financing activities:**Proceeds
                    from sale of common stock
                
                
                **480**Purchases
                    of treasury stock
                
                
                **(220**
                **)**Proceeds
                    from short-term borrowings
                
                
                **1,184**
                
                
                1,331Proceeds
                    from long-term debt
                
                
                **273**Repayment
                    of long-term debt
                
                
                **(25**
                **)**
                
                (92
                )**Net
                    cash provided by financing activities**
                
                
                **1,692**
                
                
                1,239Net
                    increase (decrease) in cash and cash equivalents
                
                
                **(391**
                **)**
                
                (43
                )Cash
                    and cash equivalents at beginning of period
                
                
                **4,485**
                
                
                5,115**Cash
                    and cash equivalents at end of period**
                
                **$**
                **4,094**
                
                $
                5,072
 
 See
          accompanying notes to the condensed consolidated financial
          statements.
 
 4
  **NATIONAL
          PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 
 **1.**  **Basis
          of presentation and summary of significant accounting
          policies**
 
 *Basis
          of presentation*
 
 The
          accompanying Condensed Consolidated Balance Sheet as of March 31, 2007
          and the
          Condensed Consolidated Statements of Operations and Cash Flows for the
          three
          months ended March 31, 2007 and 2006 have not been audited, but have been
          prepared in conformity with accounting principles generally accepted in
          the
          United States for interim financial information and with the instructions
          to
          Form 10-Q and Article 10 of Regulation S-X. These financial statements
          should be
          read in conjunction with the audited consolidated financial statements
          and notes
          thereto for the year ended December 31, 2006 as presented in our Annual
          Report
          on Form 10-K. In the opinion of management, this interim information includes
          all material adjustments, which are of a normal and recurring nature, necessary
          for a fair presentation. The results for the 2007 interim period are not
          necessarily indicative of results to be expected for the entire
          year.
 
 *Description
          of business.*National
          Patent Development Corporation (the “Company” or “National Patent Development”
“), through its wholly owned subsidiary, MXL Industries, Inc. (“MXL”),
          manufactures polycarbonate parts requiring strict adherence to optical
          quality
          specifications, and in the application of abrasion and fog resistant coating
          to
          these parts. Products include shields and face masks and non-optical plastic
          products. The Company’s 58% owned subsidiary, Five Star Products, Inc. (“Five
          Star”), is engaged in the wholesale distribution of home decorating, hardware
          and finishing products. It serves over 3,500 independent retail dealers
          in
          twelve states in the Northeast. Products distributed include paint sundry
          items,
          interior and exterior stains, brushes, rollers, caulking compounds and
          hardware
          products. In January 2007, the Company purchased 305,137 shares of Five
          Star
          common stock, which represented 2% of the then outstanding Five Star common
          stock, for $106,000
 
 *Revenue
          recognition.* Revenue
          on product sales is recognized at the point in time when the product has
          been
          shipped, title and risk of loss has been transferred to the customer, and
          the
          following conditions are met: persuasive evidence of an arrangement exists,
          the
          price is fixed and determinable, and collectibility of the resulting receivable
          is reasonably assured. Allowances for estimated returns and allowances
          are
          recognized when sales are recorded.
 
 *Shipping
          and handling costs.* Shipping
          and handling costs are included as a part of selling, general and administrative
          expense. These costs amounted to $1,310,000 and $1,244,000, for the three
          months
          ended March 31, 2007 and 2006, respectively.
 
 *Inventories.* Inventories are valued at the lower of cost or market, using the first-in,
          first-out method.
  5
  *Derivatives
          and hedging activities.* The
          interest rate swap and interest rate collar entered into by Five Star in
          connection with its Loan and Security Agreement (see Note 7) is being accounted
          for under SFAS No. 133, as amended, "Accounting for Derivative Instruments
          and
          Hedging Activities." SFAS No. 133 requires all derivatives to be recognized
          in
          the balance sheet at fair value. Derivatives that are not hedges must be
          adjusted to fair value through earnings. If the derivative is a cash flow
          hedge,
          changes in the fair value of the derivative are recognized in other
          comprehensive income until the hedged item is recognized in earnings. The
          ineffective portion of a derivative's change in fair value is immediately
          recognized in earnings. Changes in the fair value of the interest rate
          swap,
          which has been designated as a cash flow hedge, are recognized in other
          comprehensive income. Changes in the fair value of the interest rate collar
          are
          recognized in earnings. For the three months ended March 31, 2007 and 2006
          the
          Company recognized losses of $5,000 and $5,000, respectively, as part of
          other
          income for the changes in the fair value of the interest rate
          collar.
  **2.**
              **Accounting
                  for uncertainty in income taxes**-***FASB
                  Interpretation No. 48*** 
 In
          June
          2006, the Financial Accounting Standards Board issued FASB Interpretation
          No.
          48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB
          Statement No. 109” (hereinafter “FIN 48”), which prescribes a recognition
          threshold and measurement attribute for the financial statement recognition
          and
          measurement of a tax position taken or expected to be taken in a tax return.
          FIN
          48 also provides guidance on de-recognition, classification, interest and
          penalties, accounting in interim periods, disclosure and transition. FIN
          48 is
          effective for fiscal years beginning after December 15, 2006. The adoption
          of
          FIN 48 in the first quarter of 2007 did not have any effect on the consolidated
          financial statements. The
          Company files income tax returns in the U.S. federal jurisdiction and various
          state jurisdictions. The statute of limitations for assessment of federal,
          state
& local income taxes by the taxing authorities is open for years 2004 to
          2006.
 
 **3.**  **Per
          share data**
 
 Basic
          and
          diluted net loss per share for the three months ended March 31, 2007 and
          2006 is
          based upon the weighted average number of the Company’s shares outstanding
          during the periods. Outstanding warrants to acquire 1,423,887 common shares
          issued in December 2004 were not included in the 2007 and 2006 diluted
          computation and options to acquire 800,000 common shares issued by the
          Company
          in March 2007 were not included in the 2007 calculation, as their effect
          would
          be anti-dilutive. In addition, the effect on the diluted computation of
          outstanding options and the convertible note of Five Star (see Note 12(d))
          was
          anti-dilutive and accordingly did not affect such computation.
  6
  Loss per share for the three months ended March 31,
          2007 and
          2006 are as follows (in thousands, except per share amounts):
 **Three
                    months ended****March
                    31,****2007**
                
                2006Basic
                    and Diluted EPSNet
                    loss
                
                **$**
                **(427**
                **)**
                $
                (437
                )Weighted
                    average sharesoutstanding, basic and diluted
                
                
                **17,758**
                
                
                17,825Basic
                    and diluted loss per share
                
                **$**
                **(.02**
                **)**
                $
                (.02
                )
  **4.**  **Treasury
          Stock**
 
 On
          December 15, 2006, the Company’s Board of Directors authorized the Company to
          repurchase up to 2,000,000 shares, or approximately 11%, of its outstanding
          shares of common stock from time to time either in open market or privately
          negotiated transactions. At March 31, 2007, the Company had repurchased
          192,450
          shares of its common stock for $408,000.
 
 **5.**  **Incentive
          stock plans and stock based compensation**
 
 The
          Company and Five Star have stock-based compensation plans for employees
          and
          non-employee members of the Board of Directors. The plans provide for
          discretionary grants of stock options, restricted stock shares, and other
          stock-based awards. The Company’s plan is administered by the Compensation
          Committee of the Board of Directors, consisting of non-employee directors,
          and
          the Five Star plan is administered by Five Star’s entire Board of Directors.
  On
          November 3, 2003, GP Strategies Corporation (“GPS”), which at the time was the
          Company’s parent, adopted an Incentive Stock Plan (the “2003 Plan”) under which
          1,750,000 shares of common stock are available for grant to employees,
          directors
          and outside service providers. The plan permits awards of incentive stock
          options, nonqualified stock options, restricted stock, stock units, performance
          shares, performance units and other incentives payable in cash or in shares
          of
          the Company’s common stock. The term of any option granted under the 2003 Plan
          will not exceed ten years from the date of grant and, in the case of incentive
          stock options granted to a 10% or greater holder in the total voting stock
          of
          the Company, three years from the date of grant. The exercise price of
          any
          option will not be less than the fair market value of the Common Stock
          on the
          date of grant or, in the case of incentive stock options granted to a 10%
          or
          greater holder in the total voting stock, 110% of such fair market value.
 
 In
          March
          2007, the Company granted an aggregate of 3,200,000 nonqualified stock
          options
          (including the options referred to in Note 12(a)), of which 800,000 were
          issued
          under the existing plan and the remainder were issued subject to shareholder
          approval of the amendment to the plan to increase the number of shares
          available
          for grant. The Company determined the estimated aggregate
          fair value of the 800,000 options on the date of grant to be $850,000 based
          on
          the Black-Scholes valuation model using
          the
          following assumptions: expected volatility of 49.27%, dividend yield of
          0%, risk
          free interest of 4.5% and
   7
  an
          expected life of 4 years. The Company recognized a compensation expense
          of
          $19,000 for the three months ended March 31, 2007. Upon shareholder approval
          (see below), the Company will determine the estimated aggregate fair value
          of
          the remaining 2,400,000 options based upon the closing price of the Company’s
          common stock on that date using the Black-Scholes valuation model.
  On
          March
          1, 2007  the
          Company’s Board of Directors approved and adopted an amendment, subject to
          stockholder approval, (the “Amendment”) to the 2003 Plan increasing the
          aggregate number of shares of Company common stock issuable under the 2003
          Plan
          from 1,750,000 shares to 3,500,000 shares (subject to adjustment as provided
          in
          the 2003 Plan), and increasing the per person limitation in the 2003 Plan
          from
          250,000 shares to 2,500,000 shares.  The Company expects to submit the
          Amendment to the Company's stockholders for approval at the Company's 2007
          Annual Stockholders Meeting.
  *Five
          Star Stock Option Plan*
 
 On
          January 1, 1994, Five Star's Board of Directors adopted the Five Star Products,
          Inc. 1994 Stock Option Plan (the "Five Star Plan"), which became effective
          August 5, 1994. On January 1, 2002, the Board of Directors amended the
          Five Star
          Plan increasing the total number of shares of common stock to 4,000,000
          shares
          reserved for issuance, subject to adjustment in the event of stock splits,
          stock
          dividends, recapitalizations, reclassifications or other capital adjustments.
          Unless designated as "incentive stock options" intended to qualify under
          Section
          422 of the Internal Revenue Code, options granted under the Five Star Plan
          are
          intended to be nonqualified options. Options may be granted to any director,
          officer or other key employee of Five Star and its subsidiaries, and to
          consultants and other individuals providing services to Five Star.
 
 The
          term
          of any option granted under the Five Star Plan will not exceed ten years
          from
          the date of grant and, in the case of incentive stock options granted to
          a 10%
          or greater holder in the total voting stock of Five Star, three years from
          the
          date of grant. The exercise price of any option will not be less than the
          fair
          market value of the Common Stock on the date of grant or, in the case of
          incentive stock options granted to a 10% or greater holder in the total
          voting
          stock, 110% of such fair market value. Options granted vest 20% on date
          of grant
          with the balance vesting in equal annual installments over four years.
  On
          March
          1, 2007, the Board of Directors of Five Star adopted the Five Star Products,
          Inc. 2007 Incentive Stock Plan (the “2007 Plan”), subject to the approval of the
          shareholders of Five Star. Five Star may grant awards of non-qualified
          stock
          options, incentive stock options (if the 2007 Plan is submitted to and
          approved
          by stockholders of Five Star prior to February 28, 2008), restricted stock,
          stock units, performance shares, performance units, and other incentives
          payable
          in cash or in shares of Five Star’s common stock to officers, employees or
          members of the Board of Directors of Five Star and its subsidiaries. Five
          Star
          is authorized to grant an aggregate of 2,500,000 shares of Five Star Common
          Stock under the 2007 Plan. Five Star may issue new shares or use shares
          held in
          treasury to deliver shares for equity grants or upon exercise of non-qualified
          stock options.
   8
  On
          March
          2, 2007, Five Star granted options to purchase 250,000 shares of Five Star’s
          common stock to two employees and increased the exercise price and EBITDA
          target
          of 400,000 options granted to an employee on October 18, 2006. The exercise
          price of the 650,000 options was  equal to $0.38, the average of the
          closing bid and asked prices of the common stock on March 2, 2007. The
          options
          will vest if Five Star meets certain EBITDA targets over the next three
          years
          and upon the employees’ continued employment as well as shareholder approval of
          the 2007 Plan. Such approval is deemed to be essentially a formality as
          NPDC is
          the majority shareholder and controls Five Star’s Board of Directors, which
          adopted the 2007 Plan. Five Star determined the estimated aggregate fair
          value
          of these options on the date of grant to be $185,000 based on the Black-Scholes
          valuation model. Achievement of performance
          criteria was determined as probable at March 31, 2007 and therefore compensation
          expense of $5,000 was recognized during the three months ended March 31,
          2007.
 
 On
          March
          2, 2007, Five Star granted 1,000,000 shares of restricted stock to its
          Chief
          Executive officer (see Note12(b)) valued at $.38 per share, which will
          vest if
          Five Star meets certain EBITDA targets over the next three years and upon
          his
          continued employment with Five Star or the Company. At March 31, 2007,
          Five Star
          determined that achievement of the performance criteria was probable and
          therefore a compensation expense of $11,000 was recognized during the three
          months ended March 31, 2007.
 
  9
  **6.**  **Long-term
          debt**
 
 *Long-term
          debt*
 
 Long-term
          debt is comprised of the following (in thousands):
 
 **March
                    31,**
                
                **December
                    31,****2007**
                
                **2006**MXL
                    Pennsylvania Mortgage (a)
                
                **$**
                **1,080**
                
                $
                1,105MXL
                    Term loan (b)
                
                
                **651**
                
                
                377Capital
                    lease obligations
                
                
                
                
                
                1**1,731**
                
                
                1,483Less
                    current maturities
                
                
                **(187**
                **)**
                
                (151
                )**$**
                **1,544**
                
                $
                1,332
 
 a)
              The
                  loan, which is collateralized by real estate and fixtures, requires
                  monthly repayments of $8,333 plus interest at 2.5% above the one
                  month
                  LIBOR rate and matures on March 8, 2011, when the remaining amount
                  outstanding of approximately $680,000 is due in full. The loan
                  is
                  guaranteed by GP Strategies Corporation
                  (“GPS”). b)
              On
                  November 27, 2006, MXL entered into a 5 year $785,000 Term Loan
                  for the
                  financing of machinery and equipment at 2.5% above the one month
                  LIBOR
                  rate, or .25% above the bank’s prime lending rate, as applicable. From
                  November 2006 through May 2007 the Bank may disburse funds to MXL,
                  and MXL
                  will pay on a monthly basis, all accrued interest due the bank.
                  In May
                  2007 the balance borrowed will convert to a five year Term Loan,
                  with
                  monthly payments of principal and accrued interest through May
                  2012. The
                  Term Loan is guaranteed by the Company and collateralized by MXL’s
                  Lancaster, PA property. At March 31, 2007 $651,000 was outstanding
                  under
                  the Term Loan and $99,000 was available to be
                  borrowed. 
 **7.**  **Short-term
          borrowings**
 
 *Five
          Star short-term borrowings*
 
 In
          2003,
          Five Star obtained a Loan and Security Agreement (the “Loan Agreement”) with
          Bank of America Business Capital (formerly Fleet Capital Corporation) (the
          “Lender”). The Loan Agreement has a five-year term, with a maturity date of June
          30, 2008. The Loan Agreement, as amended in August 1, 2005, provides for
          a
          $35,000,000 revolving credit facility, which allows Five Star to borrow
          based
          upon a formula up to 65% of eligible inventory and 85% of eligible accounts
          receivable, as defined therein. The interest rates under the Loan Agreement
          consist of LIBOR plus a credit spread of 1.5% (6.85% at March 31, 2007)
          for
          borrowings not to exceed $15,000,000 and the prime rate (8.25% at March
          31,
          2007) for borrowings in excess of the above-mentioned LIBOR-based borrowings.
          The credit spreads can be reduced in the event that Five Star achieves
          and
          maintains certain performance benchmarks. At March 31, 2007 and December
          31,
          2006, approximately $18,848,000 and $17,664,000 was outstanding under the
          Loan
          Agreement and approximately $8,303,000 and $2,929,000 was available to
          be
          borrowed, respectively. Substantially all of Five Star’s assets are pledged as
          collateral for these borrowings. Under the Loan Agreement Five Star is
          subject
          to covenants requiring minimum net worth, limitations on losses, if any,
          and
          minimum or maximum values for certain financial ratios. As of March 31,
          2007
          Five Star was in compliance with all required covenants.
  10
  In
          connection with the Loan Agreement, Five Star also entered into a derivative
          transaction with the Lender. The derivative transaction is an interest
          rate swap
          and has been designated as a cash flow hedge. Effective July 1, 2004 through
          June 30, 2008, Five Star will pay a fixed interest rate of 3.38% to the
          Lender
          on notional principal of $12,000,000. In return, the Lender will pay to
          Five
          Star a floating rate, namely, LIBOR, on the same notional principal amount.
          The
          credit spread under the new Loan Agreement is not included in, and will
          be paid
          in addition to this fixed interest rate of 3.38%. The fair value of the
          interest
          rate swap amounted to $260,000 and $320,000 at March 31, 2007 and December
          31,
          2006, respectively and is included in other assets in the accompanying
          balance
          sheets.
 
 On
          June
          17, 2004, Five Star also entered into a derivative interest rate collar
          transaction during the period from July 1, 2004 through June 30, 2008 on
          notional principal of $12,000,000. The transaction consists of an interest
          rate
          floor of 2.25%, whereby if LIBOR is below 2.25%, the Lender will pay to
          Five
          Star the difference between LIBOR and 2.25%, on the same notional principal
          amount. The transaction also consists of an interest rate cap of 5.75%,
          whereby
          if LIBOR is above 5.75%, Five Star will pay to the Lender the difference
          between
          LIBOR and 5.75%, on the same notional principal amount.
 
 ***MXL*** ** ***short-term
          borrowings***
 
 On
          March
          1, 2005, MXL obtained a Line of Credit Loan (the “MXL Line”) from M&T Bank
          with a one year term, maturing on March 1, 2006, which has been extended
          to June
          30, 2007 on the same terms. The MXL Line provides for a $1,000,000 revolving
          credit facility, which is secured by MXL’s eligible accounts receivable,
          inventory and a secondary claim on the Lancaster, PA property. On
          November 27, 2006 the MXL Line was amended to a $900,000 line of credit.
          The
          interest rates under the MXL Line consist of LIBOR plus a credit spread
          of 2.5%
          or the prime rate. The MXL Line is subject to an unused commitment fee
          of 0.125%
          of the average daily unused balance of the line payable quarterly. The
          Company has guaranteed the MXL Line up to $785,000. At March 31, 2007 and
          December 31, 2006, $750,000 was outstanding under the MXL Line and $150,000
          was
          available to be borrowed. The MXL Line contains certain financial covenants
          which are calculated on an annual basis at December 31. As of December
          31, 2006,
          MXL was in compliance with its covenants.
 
  11
  **8.**  **Inventories**
 
 Inventories
          are comprised of the following (in thousands):
 
 **March
                    31, 2007**
                
                December
                    31, 2006Raw
                    materials
                
                **$**
                **413**
                
                $
                393Work
                    in process
                
                
                **227**
                
                
                149Finished
                    goods
                
                
                **24,926**
                
                
                21,993**$**
                **25,566**
                
                $
                22,535
  **9.**
              **Investment
                  in Valera Pharmaceuticals, Inc.
                  (“Valera”)** 
 Valera
          is
          a specialty pharmaceutical company engaged in the development and
          commercialization of prescription pharmaceuticals principally utilizing
          Valera’s
          patented Hydron drug delivery technology.
 
 Valera ’s
          lead
          product is a twelve-month implant that delivers histrelin, a synthetic
          nonapeptide agonist of luteinizing hormone-releasing hormone (LHRH). LHRH
          agonists have become a mainstay in treating locally advanced and metastatic
          prostate cancer. On October 13, 2004, Valera announced that the FDA approved
          the
          marketing of VantasTM, the name for Valera’s long-acting LHRH implant for
          treating prostate cancer. On February 7, 2006 Valera completed an initial
          public
          offering of 3,862,500 shares of common stock at $9.00 per share. All the
          convertible preferred stock outstanding at the time of the offering, including
          accrued dividends, automatically converted into common stock. In addition,
          Valera effected a 1 for 6 reverse split of common stock. Subsequent to
          the
          public offering after giving effect to the conversion of the Series B preferred
          stock and the reverse split, the Company owned 2,070,670 shares of Valera
          common
          stock, or approximately 14% of the outstanding shares of common stock.
          The
          Company entered into a lock-up agreement with the underwriters of the public
          offering which restricted the Company from selling or otherwise disposing
          of its
          shares of Valera common stock for a period of 180 days from February 1,
          2006.
  As
          a
          result of the initial public offering, the Company’s investment in Valera’s
          common stock became a marketable security and accordingly, the investment,
          to
          the extent of shares available to be sold within a year at any balance
          sheet
          date under Rule 144 or an effective Registration Statement (if greater),
          has
          been classified as available for sale securities and measured at fair value
          with
          the adjustment to fair value and changes therein recorded in other comprehensive
          income. The remainder of the investment is considered restricted and will
          continue to be carried at cost. The Valera shares estimated to be available
          for
          sale over the next 12 months at March 31, 2007 totaled 595,422 and resulted
          in
          an unrealized gain of $4,532,000 being included in accumulated other
          comprehensive income as of such date. Two related parties, Bedford Oak
          Partners
          and Mr. Jerome I. Feldman, are entitled to receive 50% of any profit received
          from the sale, on a pro-rata basis, of 404,004 shares of Valera common
          stock in
          excess of $3.94 per share (see Note 11(a)). The unrealized gain on Valera
          shares
          available for sale at March 31, 2007 which would be payable to the related
          parties upon sale totaled $258,000, which is included in Other liabilities
          on
          the March 31, 2007 Balance Sheet. The increase in the liability which was
          $16,000 for the three months ended March 31, 2007 is included in Investment
          and
          other income (loss) in the March 31, 2007 Statement of Operations.
  12
  On
          April
          17, 2007, all of the outstanding common stock of Valera was acquired by
          Indevus
          Pharmaceuticals, Inc., a Delaware corporation (“Indevus”), pursuant to the terms
          and conditions of an Agreement and Plan of Merger, dated as of December
          11, 2006
          (the “Merger Agreement”), by and among Indevus, Hayden Merger Sub, Inc., a
          Delaware corporation that is a direct, wholly-owned subsidiary of Indevus
          (“Merger Sub”), and Valera. The merger became effective on April 18, 2007 (the
“Effective Time”). Pursuant to the Merger Agreement, the Company, as a
          stockholder of Valera through MXL, received 1.1337 shares of Indevus common
          stock for each share of Valera common stock held by the Company immediately
          prior to the Effective Time. As a result, at the Effective Time, the 2,070,670
          shares of Valera common stock held by the Company prior to the Effective
          Time
          were converted into an aggregate of approximately 2,347,518 shares of Indevus
          common stock. In addition, for each share of Valera common stock held by
          the
          Company immediately prior to the Effective Time, the Company received one
          contingent stock right for each of three Valera product candidates in
          development - Supprelin-LA, a ureteral stent and VP003 (Octreotide implant)
          -
          that will become convertible into $1.00, $1.00 and $1.50, respectively,
          worth of
          Indevus common stock to the extent specific milestones with respect to
          each
          product candidate are achieved. Thus, if all contingent milestones are
          achieved,
          the Company will receive $2,070,670, $2,070,670 and $3,106,005, respectively,
          worth of Indevus common stock. In the second quarter ended June 30, 2007,
          the
          Company will recognize a pre-tax gain as a result of the merger of approximately
          $14,100,000. On May 3, 2007 Indevus announced that it had received FDA
          approval
          for Supprelin-LA. Therefore in May 2007, the Company will receive another
          $2,070,060 worth of Indevus common stock, and recognize an additional pre-tax
          gain of approximately $1,868,000 net of gain payable to related parties
          referred
          to above. In addition, the Indevus shares will be classified as available
          for
          sale securities and measured at fair value with the changes therein recorded
          in
          other comprehensive income. Any Indevus shares that are restricted from
          sale for
          more than a year from any balance sheet date will continue to be carried
          at their new cost valued in connection with the merger.
 
 **10.**  **Business
          segments**
 
 The
          operations of the Company currently consist of the following two business
          segments, by which the Company is managed.
 
 The
          MXL
          Segment manufactures precision coated and molded optical plastic products.
          MXL
          is a specialist in the manufacture of polycarbonate parts requiring adherence
          to
          strict optical quality specifications, and in the application of abrasion
          and
          fog resistant coatings to those parts.
 
 The
          Five
          Star Segment distributes paint sundry items, interior and exterior stains,
          brushes, rollers, caulking compounds and hardware products on a regional
          basis.
 
  13
  The
          following tables set forth the sales and operating income (loss) of each
          of the
          Company's operating segments (in thousands):
 
 **Three
                    months**
                  **ended
                    March 31,****2007**
                
                2006**Sales**Five
                    Star
                
                **$**
                **29,861**
                
                $
                28,952MXL
                
                
                **2,070**
                
                
                2,253**$**
                **31,931**
                
                $
                31,205
 
 **Three
                    months**
                  **ended
                    March 31,****2007**
                
                2006**Segment
                    operating income (loss)**Five
                    Star
                
                **$**
                **1,138**
                
                $
                877MXL
                
                
                **(129**
                **)**
                
                94**$**
                **1,009**
                
                $
                971
 
 A
          reconciliation of the segment operating income (loss) to loss before income
          taxes and minority interest in the condensed consolidated statements of
          operations is shown below (in thousands):
 
 **Three
                    months****ended
                    March 31,****2006**
                
                2005Segment
                    operating income (loss)
                
                **$**
                **1,009**
                
                $
                971Corporate
                    and other general and administrative expenses
                
                
                **(621**
                **)**
                
                (480
                )Interest
                    expense
                
                
                **(326**
                **)**
                
                (379
                )Investment
                    and other income (loss)
                
                
                **66**
                
                
                (237
                )Income
                    (loss) before income taxesand
                    minority interest
                
                **$**
                **128**
                
                $
                (125
                )
 
 **11.**  **Related
          party transactions**
  (a)  On
          November 12, 2004, the Company entered into an agreement to borrow approximately
          $1,022,000 from Bedford Oak Partners, which is controlled by Harvey P.
          Eisen, a
          director of the Company, and approximately $568,000 from Jerome I. Feldman,
          who
          is Chairman and Chief Executive Officer of the Company, to exercise an
          option to
          purchase Series B Convertible Preferred shares of Valera. The loans bore
          interest at 6% per annum, were scheduled to mature on October 31, 2009,
          and were
          secured by all shares of Valera owned by the Company, including the purchased
          shares. Bedford Oak Partners and Jerome I. Feldman are entitled to receive
          50%
          of any profit received by the Company from the sale on a pro-rata basis
          of the
          Valera shares purchased with the proceeds of such loans. On January 11,
          2005,
          the Company prepaid
          the loans, including accrued interest of approximately $16,000, to Bedford
          Oak
          Partners and Jerome I. Feldman.
  14
 
 (b)  Certain
          of the Company’s executive officers are also executive officers of GP Strategies
          and remain on GPS’ payroll. The executive officers do not receive any salary
          from the Company; however, they provide the Company with management services
          under a management agreement between GPS and the Company. Services under
          the
          agreement relate to corporate federal and state income taxes, corporate
          legal
          services, corporate secretarial administrative support, and executive management
          consulting. The term of the agreement extends for through November 24,
          2007, and
          may be terminated by either the Company or GPS on or after July 30, 2006
          with
          180 days prior written notice.
 
 Effective
          July 1, 2005 GPS and the Company amended the above management agreement.
          Pursuant to the amendment, the Company was to pay GPS an annual fee of
          not less
          than $970,000, subject to adjustment if the services provided change, as
          compensation for these services, payable in equal monthly installments.
          The fee
          includes $698,000 for the period July 1, 2005 through June 30, 2006,
          representing approximately 80% of the cost of the compensation and benefits
          required to be provided by GPS to Jerome Feldman, who serves as the Company’s
          Chief Executive Officer, and $666,000 for the period July 1, 2006 through
          May
          31, 2007, representing approximately 80% of the cost of the compensation
          and
          benefits required to be provided by GPS to Mr. Feldman. The Company incurred
          $201,000 and $216,000 for the quarters ended March 31, 2007 and 2006,
          respectively, as compensation for such services.
  The
          Company also occupies a portion of corporate office
          space leased by GPS. The Company compensates GPS approximately an additional
          $205,000 annually for use of this space. GPS and the Company vacated the
          corporate office space in April 2007.
  **12.**
              **Capital
                  transactions**  The
          following transactions occurred during the three-month period ended March
          31,
          2007:
 
 
 a.
              On
                  March 1, 2007, the Company’s Board of Directors determined that effective
                  upon the expiration of the employment agreement between the Company
                  and
                  Jerome Feldman, the Chairman of the Board and Chief Executive Officer
                  of
                  the Company, or upon his earlier resignation, Harvey P. Eisen,
                  who
                  currently serves as a director of the Company, will serve as Chairman
                  of
                  the Board and Chief Executive Officer of the Company, and that
                  effective
                  upon the commencement of his service as Chairman of the Board and
                  Chief
                  Executive Officer of the Company, Mr. Eisen will receive an annual
                  salary
                  of $100,000. Mr. Feldman's employment agreement will
                  expire on May 31, 2007 unless earlier terminated by mutual agreement
                  of
                  the parties. In addition, the Company’s Board of Directors granted to Mr.
                  Eisen options to purchase an aggregate of 2,500,000 shares of the
                  Company’s common stock, 2,250,000 of which are subject to shareholder
                  approval of an amendment to the Company’s 2003 Incentive Stock Plan, at an
                  exercise price equal to $2.45 per share, which was the average
                  of the
                  closing bid and asked prices of the Company’s common stock on March 1,
                  2007. The options are to vest in three equal annual installments,
                  commencing on March 1, 2008. At March 31, 2007, the Company recognized
                  250,000 shares as granted and 2,250,000 subject to shareholder
                  approval.  15
   b.
              On
                  March 2, 2007, John C. Belknap was elected as a director of Five
                  Star. Mr.
                  Belknap was also elected to serve as President and Chief Executive
                  Officer
                  of Five Star. Mr. Belknap has served as a director of the Company
                  since
                  October 20, 2006 and has been an employee of the Company and unpaid
                  consultant to Five Star since December 1,
                  2006.  Mr.
          Belknap was granted 1,000,000 restricted shares of Five Star Common Stock,
          valued at $.38 per share ($380,000), which will vest if Five Star meets
          certain
          EBITDA targets over the next three years and upon Mr. Belknap’s continued
          employment with Five Star or the Company. Five Star has granted Mr. Belknap
          certain demand and piggy-back registration rights beginning March 2, 2010.
          At
          March 31, 2007, Five Star determined that it was probable that it would
          meet the
          EBITDA targets and therefore recognized a charge of $11,000 of compensation
          expense during the quarter.
  In
          addition, Mr. Belknap was granted options to purchase an aggregate of 400,000
          shares of the Company’s common stock, 150,000 of which are subject to
          shareholder approval of an amendment to the Company’s 2003 Incentive Stock Plan,
          at an exercise price equal to $2.45 per share, which was the average of
          the
          closing bid and asked prices of the Company’s common stock on March 1, 2007.
          Contingent upon Mr. Belknap’s continued employment with the Company, the options
          will vest in three equal annual installments, commencing on December 1,
          2007. At
          March, 31, 2007, the Company recognized options to buy 250,000 shares as
          granted
          and recognized a charge of $7,000 during the quarter. Options to buy 150,000
          shares subject to shareholder approval will be valued on the day such approval
          is obtained.
 
 c.
              Mr.
                  S. Leslie Flegel was named a Director of the Company on March 2,
                  2007 and
                  was appointed as Chairman and elected as a director of Five Star.
                  Mr.
                  Flegel entered into a three-year agreement with Five Star ending
                  on March
                  1, 2010 (the "FS Agreement") which provides for an annual fee of
                  $100,000
                  and reimbursement (i) for all travel expenses incurred in connection
                  with
                  his performance of services for Five Star and (ii) beginning in
                  November
                  2007, for up to $125,000 per year of the cost of maintaining an
                  office. In
                  addition, pursuant to the FS Agreement, Mr. Flegel was
                  issued 2,000,000 shares of Five Star common stock, all of which
                  are fully
                  vested and not subject to forfeiture. The 2,000,000 shares were
                  valued at
                  $720,000 based on the closing price of Five Star’s common stock on March
                  2, 2007. Such amount is to be charged to compensation expense over
                  the
                  term of the FS Agreement, of which $20,000 was recognized for the
                  three
                  months ended March 31, 2007. In addition, the Company recognized
                  a gain of
                  $1,000 on the reduction in ownership interest of Five Star at the
                  time of
                  issuance. The issuance of the Five Star shares reduced the Company’s
                  ownership of Five Star from 66% to
                  58%.  16
  On
          March
          2, 2007, the Company and Mr. Flegel entered into an agreement pursuant
          to which
          the Company sold Mr. Flegel 200,000 shares of the Company’s common stock at a
          price of $2.40 per share or $480,000. Mr. Flegel has the right to exchange
          any
          or all of the 200,000 shares of the Company’s common stock into Five Star common
          stock held by the Company at the fixed rate of six shares of Five Star
          common
          stock for each share of the Company’s common stock. The value of the option to
          convert the Company’s stock held by Mr. Flegel into shares of Five Star has been
          valued using a Black Sholes formula and recognized as compensation expense
          by
          Five Star over the three year term of the FS Agreement. In addition, as
          the
          exchange rights if exercised would require the Company to effectively surrender
          net assets to redeem common stock, the Company accounted for the issuance
          of the
          200,000 shares as temporary equity at an amount equivalent to the carrying
          value
          of Five Star’s equity that could be acquired by the holder of such shares.
  d.
              On
                  March 2, 2007 the Company amended a $2,800,000 Promissory Note
                  due from
                  Five Star (eliminated in consolidation). Under the terms of the
                  amended
                  Promissory Note, the term of the Promissory Note has been extended
                  from
                  June 30, 2007 to June 30, 2009 at an interest rate of 9% per annum.
                  In
                  addition, the Promissory Note and any unpaid accrued interest is
                  convertible, in whole or in part, at the Company’s option into shares of
                  Five Star common stock at a price of $.40 per share, subject to
                  anti-dilution adjustment. Five Star does not have the right to
                  prepay the
                  Promissory Note prior to maturity. 
  17
  **13.**  **Subsequent
          event**
  On
          April
          5, 2007, Five Star acquired substantially all the assets of Right-Way Dealer
          Warehouse, Inc. ("Right-Way") for approximately $3,200,000 in cash and
          the
          assumption of liabilities of approximately $40,000. The assets primarily
          consisted of customers, accounts receivable and inventory. The acquisition
          included all of Right-Way's Brooklyn Cash & Carry business and operations,
          which sells paint sundries and hardware supplies to local retail
          stores.
   Upon
          closing of the transaction, Five Star leased a warehouse at which the Brooklyn
          Cash & Carry business is conducted from an affiliate of the principal of
          Right-Way, with an option to purchase the warehouse, and a wholly-owned
          subsidiary of Five Star also entered into an employment agreement with
          Ronald
          Kampner, the principal of Right-Way to serve as Senior Vice President of
          Sales
          for Five Star. The employment agreement provides for a three-year term
          (subject
          to earlier termination), the payment of a base salary of $200,000 per annum,
          and
          cash incentive compensation as described in the employment agreement. In
          addition, Mr. Kampner was granted an option for 200,000 shares of Five
          Star
          common stock. The options will vest if Five Star meets certain EBITDA targets
          over the next three years and upon employee’s continued employment.
   18
 
 **NATIONAL
          PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES**
 
 **Item
                    2.**
                
                **Management’s
                    Discussion and Analysis of Financial Condition and Results of
                    Operations**
  **Cautionary
          Statement Regarding Forward-Looking Statements**
  This
          report contains forward-looking statements within the meaning of Section
          27A of
          the Securities Act of 1933, as amended, and Section 21E of the Securities
          Exchange Act of 1934, as amended (the “Exchange Act”). The Private Securities
          Litigation Reform Act of 1995 provides a “safe harbor” for forward looking
          statements. Forward-looking statements are not statements of historical
          facts,
          but rather reflect our current expectations concerning future events and
          results. We use words such as “expects”, “intends”, “believes”, “may”, “will”
and “anticipates” to indicate forward-looking statements.
  Factors
          that may cause actual results to differ from those results expressed or
          implied,
          include, but are not limited to, those listed under “Risk Factors” in our Annual
          Reports on Form 10-K filed with the Securities and Exchange Commission
          (the
“SEC”); an unexpected decline in revenue and/or net income derived by the
          Company’s wholly-owned subsidiary, MXL Industries, Inc. (“MXL”), or by our
          majority-owned subsidiary, Five Star Products, Inc. (“Five Star”), due to the
          loss of business from significant customers or otherwise. In addition,
          MXL is
          dependant on the availability and pricing of plastic resin, principally
          polycarbonate, and Five Star is subject to the intense competition in the
          do-it
          -yourself industry.
  Because
          these forward-looking statements involve risks and uncertainties, there
          are
          important factors that could cause actual results to differ materially
          from
          those expressed or implied by these forward-looking statements, including,
          but
          not limited to, those factors set forth under “Risk Factors” in our Annual
          Reports on Form 10-K and those other risks and uncertainties detailed in
          other
          periodic reports and registration statements that we file with the SEC
          from time
          to time. We caution that these risk factors may not be exhaustive. We operate
          in
          a continually changing business environment, and new risk factors emerge
          from
          time to time. We cannot predict these new risk factors, nor can we assess
          the
          effect, if any, of the new risk factors on our business or the extent to
          which
          any factor or combination of factors may cause actual results to differ
          from
          those expressed or implied by these forward-looking statements.
  If
          any
          one or more of these expectations and assumptions proves incorrect, actual
          results will likely differ materially from those contemplated by the
          forward-looking statements. Even if all of the foregoing assumptions and
          expectations prove correct, actual results may still differ materially
          from
          those expressed in the forward-looking statements as a result of factors
          we may
          not anticipate or that may be beyond our control. While we cannot assess
          the
          future impact that any of these differences could have on our business,
          financial condition, results of operations and cash flows or the market
          price of
          shares of our common stock, the differences could be significant. We do
          not
          undertake to update any forward-looking statements made by us, whether
          as a
          result of new information, future events or otherwise. You are cautioned
          not to
          unduly rely on such forward-looking statements when evaluating the information
          presented in this report.
   19
  **General
          Overview**
  The
          Company was incorporated on March 10, 1998 as a wholly-owned subsidiary
          of GP
          Strategies Corporation. On February 12, 2004, the Company was recapitalized
          whereby the authorized capital was changed to 10,000,000 shares of preferred
          stock and 30,000,000 shares of common stock. On July 30, 2004 GP Strategies
          transferred to the Company its optical plastics business through its
          wholly-owned subsidiary, MXL; the home improvement distribution business
          through
          its partially owned subsidiary Five Star; and certain other non-core assets.
          The
          separation of these businesses was accomplished through a pro-rata distribution
          (the “Distribution” or “Spin-off”) of 100% of the outstanding common stock of
          the Company to the stockholders of GP Strategies on November 18, 2004,
          the
          record date for the Distribution. On November 24, 2004, holders of record
          received one share of the Company’s common stock for each share of GP Strategies
          common stock or Class B capital stock owned.
 
 The
          Company operates in two segments: MXL and Five Star. The Company also owns
          certain other non-core assets, including an investment in a publicly held
          company, Millennium Cell;  an
          approximately 14% interest in a
          publicly held company , Valera
          Pharmaceuticals , which on April 17, 2007 was acquired by Indevus
          Pharmaceuticals, Inc.(see Note 9 to the Condensed Consolidated Financial
          Statements) ; and certain real estate. The Company monitors Millennium
          Cell for
          progress in the commercialization of Millennium Cell’s emerging technology and
          monitors Indevus for
          progress in achieving certain milestones and their marketing
          efforts.
  **MXL
          Overview**
  The
          primary business of MXL is the manufacture of polycarbonate parts requiring
          adherence to strict optical quality specifications, and the application
          of
          abrasion and fog resistant coatings to those parts. MXL also designs and
          constructs injection molds for a variety of applications. Some
          of
          the products that MXL produces include:
  ·
              facemasks
                  and shields for recreation purposes and industrial safety
                  companies,  ·
              precision
                  optical systems, including medical optics, military eye wear and
                  custom
                  molded and decorated products, and  ·
              tools,
                  including optical injection mold tools and standard injection mold
                  tools.  MXL’s
          manufactures and sells its products to various commercial and government
          customers, who utilize MXL’s parts to manufacture products that will be
          ultimately delivered to the end-user. MXL’s
          government customers include various offices of the Department of Defense,
          while
          MXL’s commercial customers are primarily in the recreation, safety, and security
          industries. Some of MXL’s consumer based products are considered to be at the
          high-end of their respective markets. As a result, sales of MXL’s products may
          decline together with a decline in discretionary consumer spending; therefore
          a
          key performance indicator that the Company’s management uses to manage the
          business is the level of discretionary spending in key markets, specifically
          the
          United States and Japan. Other key performance measures used by the Company’s
          management to run the business include:
  20
   ·
              consumer
                  confidence indices in key markets,  ·
              sales
                  levels of complementary items in the recreational vehicle market,
                  such as
                  motorcycles, RV’s and snowmobiles,  ·
              levels
                  of defense spending, and  ·
              new
                  OSHA safety standards.  MXL
          believes that the principal strengths of its business are its state-of-the-art
          injection molding equipment, advanced production technology, high quality
          standards, and on time deliveries. However, due to the focused nature of
          the
          market, MXL has a limited customer base and tends to be adversely affected
          by a
          loss in business from its significant customers. To further grow, MXL not
          only
          intends to expand its market share in its existing market, but to leverage
          its
          expertise as a molder and coater of optical quality products by expanding
          into
          other markets and products.
  **Five
          Star Overview**
  Five
          Star
          is a publicly held company that is a distributor in the United States of
          home
          decorating, hardware, and finishing products. Five Star offers products
          from
          leading manufacturers in the home improvement industry and distributes
          those
          products to retail dealers, which include lumber yards, “do-it yourself”
centers, hardware stores and paint stores. Five Star has grown to be one
          of the
          largest independent distributors in the Northeast United States by providing
          a
          complete line of competitively priced products, timely delivery and attractive
          pricing and financing terms to its customers.
 
 The
          following key factors affect Five Star’s financial and operational
          performance:
  ·
              its
                  ability to negotiate the lowest prices from its
                  suppliers,  ·
              its
                  ability to increase revenue by obtaining new customers, while maintaining
                  a level fixed cost structure by utilizing its existing
                  warehouses,  ·
              the
                  housing market in general,  ·
              consumers’
                  confidence in the economy,  ·
              consumers’
                  willingness to invest in their homes, and  ·
              weather
                  conditions that are conducive to home improvement
                  projects.  The
          following key performance measures are utilized by the Company’s management to
          run Five Star’s business:
  ·
              new
                  U.S. housing starts,  ·
              sales
                  of existing homes,  ·
              sales
                  of high margin products to its customers,  ·
              purchases
                  from each vendor, and  21
 ·
              performance
                  benchmarks used by Home Depot and Lowe’s, such as number of stores and
                  square footage, as well as financial
                  benchmarks.  Five
          Star
          operates in the Home Improvement market, which has grown in recent years
          and for
          which the National
          Retail Hardware Association  predicts
          average annual industry growth of approximately 5.7% for the next several
          years.
          Nonetheless, Five Star faces intense c ompetition
          from large national distributors, smaller regional distributors, and
          manufacturers that bypass the distributor and sell directly to the retail
          outlet. The principal means of competition for Five Star are its strategically
          placed distribution centers and its extensive inventory of quality, name-brand
          products. In addition, Five Star’s customers face stiff competition from Home
          Depot and Lowe’s, which purchase directly from manufacturers. In spite of this,
          the independent retailers that are Five Star’s customers remain a viable
          alternative to Home Depot and Lowe’s, due to the shopping preferences of and the
          retailer’s geographic convenience for some consumers.
 
 To
          further expand, Five Star will attempt to grow its revenue base in the
          Mid-Atlantic States, to acquire complementary distributors and to expand
          the
          distribution of its use of private-label products sold under the “Five Star”
name.
  On
          April
          5, 2007, Five Star acquired substantially all the assets (except "Excluded
          Assets" as defined) and assumed the Assumed Liabilities (as defined) of
          Right-Way Dealer Warehouse, Inc. ("Right-Way") pursuant to the terms of
          a
          definitive asset purchase agreement, dated as of March 13, 2007 (the
          "Agreement"), with Right-Way for approximately $3,200,000 in cash and the
          assumption of liabilities in the approximate amount of $40,000. The assets
          consisted primarily of customers, accounts receivable and inventory. The
          acquisition included all of Right-Way's Brooklyn Cash & Carry business and
          operations.
  Upon
          closing of the transaction, Five Star leased a warehouse at which the Brooklyn
          Cash & Carry business is conducted from an affiliate of the principal of
          Right-Way, with an option to purchase the warehouse, and a wholly-owned
          subsidiary of Five Star also entered into an employment agreement with
          Ronald
          Kampner, the principal of Right-Way to serve as Senior Vice President of
          Sales
          for Five Star. The employment agreement provides for a three-year term
          (subject
          to earlier termination), the payment of a base salary of $200,000 per annum,
          and
          cash incentive compensation as described in the employment agreement. In
          addition, Mr. Kampner was granted an option for 200,000 shares of Five
          Star
          Products, Inc. common stock. The options will vest if Five Star meets certain
          EBITDA targets over the next three years and upon employee’s continued
          employment.
  **Results
          of Operations**
 
 ***Three
          months ended March 31, 2007 compared to the three months ended March 31,
          2006***
  22
  **Income
          (loss) before income taxes and minority interest**
 
 For
          the
          three months ended March 31, 2007, the Company had income before income
          tax
          expense and minority interests of $128,000 compared to a loss before income
          tax
          expense and minority interests of $125,000 for the three months ended March
          31,
          2006. The increase in Income before income taxes and minority interest
          of
          $253,000 is primarily a result the following; (i) a loss of $271,000
          representing the unrealized profit which would be paid to related parties
          upon
          sale of Valera available for sale shares in 2006, compared to a gain of
          $16,000
          recognized in 2007, (ii) reduced gross margin of $123,000 primarily due
          to a
          $246,000 reduction in gross margin at MXL, partially offset by increased
          gross
          margin of $91,000 at Five Star and (iii) reduced interest expense
          $53,000.
 
 **Sales**
 
 **Three
                    months**
                  **ended
                    March 31,****2007**
                
                2006Five
                    Star
                
                **$**
                **29,861,000**
                
                $
                28,952,000MXL
                
                
                **2,070,000**
                
                
                2,253,000**$**
                **31,931,000**
                
                $
                31,205,000
 
 The
          increase in Five Star sales of $909,000 during the quarter ended March
          31, 2007,
          was the result of increased market share throughout its geographic
          area.
 
 The
          decrease in MXL sales of $183,000 was the result of reduced sales of
          approximately $200,000 resulting from the commencement of the closing of
          MXL’s
          tooling facility in Illinois during the quarter ended March 31, 2007. MXL
          decided to close the facility due to losses incurred at the facility and
          the
          decision to outsource its tooling operation. The facility closed in April
          2007.
 
 **Gross
          margin**
 
 **Three
                    months ended****March
                    31,**2007
                
                %
                
                2006
                
                %Five
                    Star
                
                **$**
                **4,728,000**
                
                
                **15.8**
                
                **$**
                4,605,000
                
                
                15.9MXL
                
                
                **362,000**
                
                
                **17.5**
                
                
                608,000
                
                
                27.0**$**
                **5,090,000**
                
                
                **15.9**
                
                **$**
                5,213,000
                
                
                16.7
 
 Five
          Star’s gross margin increased to $4,728,000, or 15.8% of net sales, for the
          quarter ended March 31, 2006, as compared to $4,605,000, or 15.9% of net
          sales,
          for the quarter ended March 31, 2006. The increase in gross margin dollars
          was
          the result of increased sales.
 
 MXL
          gross
          profit of $362,000, or 17.5% of sales, for the quarter ended March 31,
          2007
          decreased by $246,000 when compared to gross profit of
  23
  $608,000,
          or 27% of sales, for the quarter ended March 31, 2006, mainly due to the
          following; (i) reduced margin dollars of approximately $167,000 and reduced
          gross margin percentage at the Illinois facility due to the increased costs
          incurred and reduced revenue generated during the quarter due to the
          commencement of closing of the facility during the quarter ended March
          31, 2007,
          (ii) reduced gross margin percentage due to change in product, (iii) increased
          costs for labor and the related benefits.
  **Selling,
          general, and administrative expenses**
 
 For
          the
          three months ended March 31, 2007, selling, general and administrative
          expenses
          decreased by $20,000 from $4,722,000 for the three months ended March 31,
          2006
          partially due to the following; (i) increased general and administrative
          expenses of $140,000 at the Company corporate level due to increased personnel
          costs and professional fees, (ii) reduced selling, general and administrative
          expenses at Five Star of $33,000 primarily, attributable to increased vendor
          marketing allowances in the period offset by a $175,000 recovery of bad
          debts
          written off in prior years in 2006, partially offset by increased delivery
          expenses due to rising fuel prices and increased professional fees (iii
          )
          reduced selling, general and administrative expenses of $23,000 at MXL.
 
 **Investment
          and other income (loss), net**
 
 The
          Company recognized investment and other income of $66,000 for the three
          months
          ended March 31, 2007 compared to a loss of ($237,000) for the three months
          ended
          March 31, 2006. The increased Investment and other income, is primarily
          attributable to a charge of $271,000 representing the unrealized profit
          which
          would be paid to related parties upon sale of Valera available for sale
          shares
          in 2006, compared to a gain of $16,000 in 2007.
 
 **Income
          taxes**
 
 For
          the
          three months ended March 31, 2007 and 2006, the Company recorded an income
          tax
          expense of $360,000 and an income tax expense of $221,000, respectively,
          which
          represents the Company’s applicable federal, state and local tax expense for the
          periods. The provision for income taxes differs from the tax computed at
          the
          federal statutory income tax rate due primarily to recording income tax
          expense
          on the income of Five Star, a 57% owned subsidiary, which is not included
          in the
          Company’s consolidated return and not recording income tax benefit for the
          losses of National Patent and MXL.
 
 **Liquidity
          and capital resources**
 
 At
          March
          31, 2007, the Company had cash and cash equivalents totaling of $4,094,000.
          The
          Company believes that cash, investments on hand and borrowing availability
          under
          existing credit agreements will be sufficient to fund the Company’s working
          capital requirements for at least the next twelve months.
  24
  For
          the
          three months ended March 31, 2007, the Company’s working capital decreased by
          $447,000 to $11,735,000 from $12,182,000 as of December 31, 2006. The working
          capital decrease was primarily a result of a net loss for the
          period.
 
 The
          decrease in cash and cash equivalents of $391,000 for the three months
          ended
          March 31, 2007 resulted from net cash used in operations of $1,317,000,
          due
          primarily to a net loss of $427,000, an increase in accounts receivable
          of
          $7,576,000, an increase in inventory of $3,031,000, partially offset by
          an
          increase in accounts payable and accrued expenses of $9,907,000; net cash
          used
          in investing activities of $766,000, primarily consisting of purchases
          of
          property, plant and equipment of $845,000; and net cash provided by financing
          activities of $1,692,000, consisting of proceeds of short term borrowings
          of
          $1,184,000, proceeds from long-term debt of $273,000, offset by purchases
          of
          treasury stock of $220,000 and repayments of long-term debt of $25,000.
          The
          significant changes in accounts receivables, inventory and accounts payable
          is
          primarily due to the particulars of Five Star’s business in the first quarter,
          including their trade show, spring dating programs and increased inventory
          levels for the spring.
  In
          2003,
          Five Star obtained a Loan and Security Agreement (the “Loan Agreement”) with
          Bank of America Business Capital (formerly Fleet Capital Corporation) (the
          “Lender”). The Loan Agreement has a five-year term, with a maturity date of June
          30, 2008. The Loan Agreement, as amended in August 1, 2005 provides for
          a
          $35,000,000 revolving credit facility, which allows Five Star to borrow
          based
          upon a formula of up to 65% of eligible inventory and 85% of eligible accounts
          receivable, as defined therein. The interest rates under the Loan Agreement
          consist of LIBOR plus a credit spread of 1.5% (6.85% at March 31, 2007)
          for
          borrowings not to exceed $15,000,000 and the prime rate (8.25% at March
          31,
          2007) for borrowings in excess of the above-mentioned LIBOR-based borrowings.
          The credit spreads can be reduced in the event that Five Star achieves
          and
          maintains certain performance benchmarks. At March 31, 2007 and December
          31,
          2006, approximately $18,848,000 and $17,664,000 was outstanding under the
          Loan
          Agreement and approximately $8,303,000 and $2,929,000 was available to
          be
          borrowed, respectively. Substantially all of Five Star’s assets are pledged as
          collateral for these borrowings.
 
 Under
          the
          Loan Agreement Five Star is subject to covenants requiring minimum net
          worth,
          limitations on losses, if any, and minimum or maximum values for certain
          financial ratios. As of March 31, 2007 Five Star was in compliance with
          all
          required covenants. The following table sets forth the significant debt
          covenants at March 31, 2007:
 **Covenant**
                
                **Required**
                
                **Calculated**Minimum
                    tangible net worth
                
                $6,000,000
                
                $8,532,000Debt
                    to tangible net worth
                
                <
                    6
                
                2.21Fixed
                    charge coverage
                
                >1.1
                
                1.56Quarterly
                    income
                
                No
                    loss in consecutive quarters
                
                $460,000
                    -first quarter income
 
 On
          March
          1, 2005, MXL obtained a Line of Credit Loan (the “MXL Line”) from M&T Bank
          with a one year term, maturing on March 1, 2006, which has been extended
          to June
          30, 2006 on the same terms. The MXL Line provides for a $1,000,000 revolving
          credit facility, which is secured by MXL’s eligible accounts receivable,
          inventory and a secondary claim on the Lancaster, PA property. The interest
          rates under the MXL Line consist of LIBOR plus a credit spread of 3% or
          the
          prime rate plus a credit spread of 0.25%. The MXL Line is subject to an
          unused
          commitment fee of 0.25% of the average daily unused balance of the line
          payable
          quarterly. The Company has guaranteed the MXL Line. At March 31, 2007,
          $950,000
          was outstanding under the MXL Line and $50,000 was available to be borrowed.
          The
          MXL Line contains certain financial covenants, most significant being a
          cash
          flow coverage ratio (as defined) of 1.25 to 1.00, which is calculated at
          December 31.
  25
  **Management
          discussion of critical accounting policies**
 
 The
          preparation of our financial statements in conformity with accounting principles
          generally accepted in the United States of America requires us to make
          estimates
          and assumptions that affect the reported amounts of assets and liabilities
          and
          disclosure of contingent assets and liabilities at the date of the financial
          statements and the reported amounts of revenues and expenses during the
          reporting period. Our estimates, judgments and assumptions are continually
          evaluated based on available information and experience. Because of the
          use of
          estimates inherent in the financial reporting process, actual results could
          differ from those estimates.
 
 Certain
          of our accounting policies require higher degrees of judgment than others
          in
          their application. These include valuation of accounts receivable, accounting
          for investments, and impairment of long-lived assets which are summarized
          below.
 
 *Revenue
          recognition*
 
 Revenue
          on product sales is recognized at the point in time when the product has
          been
          shipped, title and risk of loss has been transferred to the customer, and
          the
          following conditions are met: persuasive evidence of an arrangement exists,
          the
          price is fixed and determinable, and collectibility of the resulting receivable
          is reasonably assured. Allowances for estimated returns are recognized
          when
          sales are recorded.
 
 *Valuation
          of accounts receivable*
 
 Provisions
          for allowance for doubtful accounts are made based on historical loss experience
          adjusted for specific credit risks. Measurement of such losses requires
          consideration of National Patent Development’s historical loss experience,
          judgments about customer credit risk, and the need to adjust for current
          economic conditions. The allowance for doubtful accounts as a percentage
          of
          total gross trade receivables was 1.8% and 4.5% at March 31, 2007 and December
          31, 2006, respectively. The reduced percentage is due the historical increase
          in
          trade receivables during the quarter ended March 31, 2007 due to seasonal
          dating
          programs.
  26
  *Impairment
            of long-lived tangible assets*
 Impairment
          of long-lived tangible assets with finite lives results in a charge to
          operations whenever events or changes in circumstances indicate that the
          carrying amount of an asset may not be recoverable. Recoverability of long-lived
          tangible assets to be held and used is measured by a comparison of the
          carrying
          amount of the asset to future undiscounted net cash flows expected to be
          generated by the asset. If such assets are considered to be impaired, the
          impairment to be recognized is measured by determining the amount by which
          the
          carrying amount of the assets exceeds the fair value of the asset. Assets
          to be
          disposed of are reported at the lower of their carrying amount or fair
          value
          less cost of sale.
 
 The
          measurement of the future net cash flows to be generated is subject to
          management’s reasonable expectations with respect to National Patent
          Development’s future operations and future economic conditions which may affect
          those cash flows.
 
 As
          of
          March 31, 2007, National Patent Development holds undeveloped land in Pawling,
          New York with a carrying amount of approximately $2.5 million and in East
          Killingly, Connecticut with a carrying amount of approximately $0.4 million,
          which management believes is less than its fair value, less cost of sale.
 
 *Accounting
          for investments*
 
 The
          Company’s investment in marketable securities are classified as
          available-for-sale and recorded at their market value with unrealized gains
          and
          losses recorded as a separate component of stockholders’ equity. A decline in
          market value of any available-for-sale security below cost that is deemed
          to be
          other than temporary, results in an impairment loss, which is charged to
          earnings.
   Determination
          of whether an investment is impaired and whether an impairment is other
          than
          temporary requires management to evaluate evidence as to whether an investment’s
          carrying amount is recoverable within a reasonable period of time considering
          factors which include the length of time that an investment’s market value is
          below its carrying amount and the ability of the investee to sustain an
          earnings
          capacity that would justify the carrying amount of the investment.
  *Income
          taxes*
 
 To
          arrive
          at our income tax provision and other tax balances, significant judgment
          is
          required. In the ordinary course of our business, there are many transactions
          and calculations where the ultimate tax outcome is uncertain. Some of these
          uncertainties arise as a consequence of the treatment of capital assets,
          financing transactions and multistate taxation of operations. Although
          we
          believe that our estimates are reasonable, no assurance can be given that
          the
          final tax outcome of these matters will not be different than that which
          is
          reflected in our historical tax provisions and accruals. Such differences
          could
          have a material impact on our income tax provision, other tax accounts
          and net
          income in the period in which such determination is made.
  27
  
 The
          Company records a valuation allowance against deferred income tax assets
          when
          management believes it is more likely than not that some portion or all
          of the
          deferred income tax assets will not be realized. Management considers factors
          such as reversal of deferred income tax liabilities, projected future taxable
          income, tax planning strategies, changes in tax law and other factors.
          A change
          to these factors could impact the estimated valuation allowance and income
          tax
          expense.
 
 Under
          SFAS No. 109, “Accounting for Income Taxes,” deferred tax assets and
          liabilities are determined based on differences between the financial reporting
          and tax basis of assets and liabilities, and are measured using enacted
          tax
          rates and laws that will be in effect when the differences are expected
          to
          reverse. SFAS No. 109 provides for the recognition of deferred tax
          assets if realization of such assets is more likely than not. Based on
          the
          weight of available evidence, we have provided a valuation allowance against
          certain deferred tax assets. The valuation allowance was based on the historical
          earnings patterns within individual tax jurisdictions that make it uncertain
          that we will have sufficient income in the appropriate jurisdictions to
          realize
          the full value of the assets. We will continue to evaluate the realizability
          of
          the deferred tax assets on a quarterly basis.
 
 
 In
          June
          2006, the Financial Accounting Standards Board issued FASB Interpretation
          No.
          48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB
          Statement No. 109” (hereinafter “FIN 48”), which prescribes a recognition
          threshold and measurement attribute for the financial statement recognition
          and
          measurement of a tax position taken or expected to be taken in a tax return.
          FIN
          48 also provides guidance on de-recognition, classification, interest and
          penalties, accounting in interim periods, disclosure and transition. FIN
          48 is
          effective for fiscal years beginning after December 15, 2006. The adoption
          of
          FIN 48 in the first quarter of 2007 did not have any effect on the consolidated
          financial statements. The
          Company files income tax returns in the U.S. federal jurisdiction and various
          state jurisdictions. The statute of limitations for assessment of federal,
          state
& local income taxes by the taxing authorities is open for years 2004 to
          2006.
  28
  **Item
          3.**   **Quantitative
          and Qualitative Disclosure About Market Risk**
 
 We
          have
          no material changes to the disclosure on this matter made in our Annual
          Report
          on Form 10-K for the fiscal year ended December 31, 2006.
 
 **Item
          4.**   **Controls
          and Procedures**
 
 The
          Company’s Chief Executive Officer and Chief Financial Officer, with the
          assistance of other members of the Company’s management, have evaluated the
          effectiveness of the design and operation of the Company’s disclosure controls
          and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)
          under
          the Securities Exchange Act of 1934, as amended) as of the end of the period
          covered by this quarterly report. Based upon such evaluation, the Company’s
          Chief Executive Officer and Chief Financial Officer have concluded that
          the
          Company’s disclosure controls and procedures are effective as of the end of the
          period covered by this quarterly report.
 
 The
          Company’s Chief Executive Officer and Chief Financial Officer have also
          concluded that there was no change in the Company’s internal control over
          financial reporting (as such term is defined in Rule 13a-15(f) under the
          Securities Exchange Act of 1934, as amended) that occurred during the quarter
          ended March 31, 2007 that has materially affected, or is reasonably likely
          to
          materially affect, the Company’s internal control over financial
          reporting.
 
  29
  **PART
          II. OTHER INFORMATION**
  **Item
          6.**  **Exhibits**
 
 Exhibit
                    No.
                
                Description10.1
                
                Amended
                    and Restated Convertible Promissory Note of Five Star Products,
                    Inc.
                    (incorporated herein by reference to Exhibit 10.1 to the Registrant's
                    Current Report on Form 8-K filed with the SEC on March 7,
                    2007)10.2
                
                Registration
                    Rights Agreement, dated as of March 2, 2007, between Five Star
                    Products,
                    Inc. and JL Distributors, Inc. (incorporated herein by reference
                    to
                    Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed
                    with the
                    SEC on March 7, 2007)10.3
                
                Agreement,
                    dated as of March 2, 2007, between Five Star Products, Inc. and
                    Leslie
                    Flegel (incorporated herein by reference to Exhibit 10.3 to the
                    Registrant's Current Report on Form 8-K filed with the SEC on
                    March 7,
                    2007)10.4
                
                Registration
                    Rights Agreement, dated as of March 2, 2007, between Five Star
                    Products,
                    Inc. and Leslie Flegel (incorporated herein by reference to Exhibit
                    10.4
                    to the Registrant's Current Report on Form 8-K filed with the
                    SEC on March
                    7, 2007)10.5
                
                Purchase
                    Agreement, dated as of March 2, 2007, between National Patent
                    Development
                    Corporation and Leslie Flegel (incorporated herein by reference
                    to Exhibit
                    10.5 to the Registrant's Current Report on Form 8-K filed with
                    the SEC on
                    March 7, 2007)10.6
                
                Registration
                    Rights Agreement, dated as of March 2, 2007, between National
                    Patent
                    Development Corporation. and Leslie Flegel (incorporated herein
                    by
                    reference to Exhibit 10.6 to the Registrant's Current Report
                    on Form 8-K
                    filed with the SEC on March 7, 2007)10.7
                
                Restricted
                    Stock Agreement, dated as of March 2, 2007, between Five Star
                    Products,
                    Inc. and John Belknap (incorporated herein by reference to Exhibit
                    10.7 to
                    the Registrant's Current Report on Form 8-K filed with the SEC
                    on March 7,
                    2007)10.8
                
                Registration
                    Rights Agreement, dated as of March 2, 2007, between Five Star
                    Products,
                    Inc. and John Belknap (incorporated herein by reference to Exhibit
                    10.8 to
                    the Registrant's Current Report on Form 8-K filed with the SEC
                    on March 7,
                    2007)10.9
                
                Stock
                    Option Agreement, dated March 1, 2007, between National Patent
                    Development
                    Corporation and Harvey Eisen (incorporated herein by reference
                    to Exhibit
                    10.9 to the Registrant's Current Report on Form 8-K filed with
                    the SEC on
                    March 7, 2007)
 
  30
  10.10
              
              Stock
                  Option Agreement, dated March 1, 2007, between National Patent
                  Development
                  Corporation and John Belknap (incorporated herein by reference
                  to Exhibit
                  10.10 to the Registrant's Current Report on Form 8-K filed with
                  the SEC on
                  March 7, 2007)10.11
              
              Stock
                  Option Agreement, dated March 1, 2007, between National Patent
                  Development
                  Corporation and Talton Embry (incorporated herein by reference
                  to Exhibit
                  10.11 to the Registrant's Current Report on Form 8-K filed with
                  the SEC on
                  March 7, 2007)10.12
              
              Stock
                  Option Agreement, dated March 1, 2007, between National Patent
                  Development
                  Corporation and Scott Greenberg (incorporated herein by reference
                  to
                  Exhibit 10.12 to the Registrant's Current Report on Form 8-K filed
                  with
                  the SEC on March 7, 2007)10.13
              
              Stock
                  Option Agreement, dated March 1, 2007, between National Patent
                  Development
                  Corporation and Lawrence Schafran (incorporated herein by reference
                  to
                  Exhibit 10.13 to the Registrant's Current Report on Form 8-K filed
                  with
                  the SEC on March 7, 2007)10.14
              
              Asset
                  Purchase Agreement, dated as of March 13, 2007, by and between
                  Five Star
                  Products, Inc. and Right-Way Dealer Warehouse, Inc. (incorporated
                  herein
                  by reference to Exhibit 10 to the Registrant's Current Report on
                  Form 8-K
                  filed with the SEC on March 19, 2007)31.1
              *
              Certification
                  of Chief Executive Officer of the Company, pursuant to Securities
                  Exchange
                  Act Rule 13a-14(a)31.2
              *
              Certification
                  of Chief Financial Officer of the Company, pursuant to Securities
                  Exchange
                  Act Rule 13a-14(a)32.1
              *
              Certifications
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  The Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer
                  of
                  the Company and the Chief Financial Officer of the Company 
 ______________________
 *Filed
          herewith
  31
  
 **SIGNATURES**
 
 Pursuant
          to the requirements of the Securities Exchange Act of 1934, the registrant
          has
          duly caused this report to be signed in its behalf by the undersigned thereunto
          duly authorized.
  **NATIONAL PATENT DEVELOPMENTCORPORATION**Date: May
                  15,
                  2007
                
                /s/ JEROME
                  I.
                  FELDMANName:Jerome
                  I. FeldmanTitle:
                  Chairman of the Board and Chief
                  Executive Officer
  Date: May
                  15,
                  2007
                
                /s/ SCOTT
                  N.
                  GREENBERGName:
                  Scott N. GreenbergTitle:
                  Chief Financial Officer
 
  32