**Table            of Contents**

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**U.S.            SECURITIES AND EXCHANGE COMMISSION**

**Washington,            D.C. 20549**

**FORM            10-QSB**

**March            31, 2006**

**000-28745**

**NATIONAL            SCIENTIFIC CORPORATION**

| **Texas**                                                           |   | **86-0837077**                                            |
|---------------------------------------------------------------------|--------|-----------------------------------------------------------|
| (State                      of Incorporation)                       |   | (I.R.S.                      Employer Identification No.) |
|                                                                |   |                                                      |
|  **14505                      North Hayden Road, Suite 305**   |   |                                                      |
| **Scottsdale,                      AZ**                             |   | **85260-6951**                                       |
|  (Address                      of Principal Executive Offices) |   | (Zip                      Code)                      |

**(480)            948-8324**

**Preferred            Stock, $0.10 par value**

**Common            Stock, $0.01 par value**

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**Table              of Contents**

**NATIONAL          SCIENTIFIC CORPORATION**

**FORM          10-QSB**

**INDEX**

|                                                                                                       |                                                                                                                                                                                                                                                                                       |  **Page** |
|------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|
|                                                                                                       |                                                                                                                                                                                                                                                                                       |           |
| Part                I                                                                                      | Financial                Information                                                                                                                                                                                                                                                       |  3        |
|                                                                                                       |                                                                                                                                                                                                                                                                                       |           |
| Item                1.                                                                                     | Financial                Statements (unaudited)                                                                                                                                                                                                                                            |  3        |
|                                                                                                       |                                                                                                                                                                                                                                                                                       |           |
|                                                                                                       | Unaudited                    Condensed Balance Sheets - March 31, 2006 and                    September 30, 2005                                                                                                                                                                           |  3        |
|                                                                                                       | Unaudited                      Condensed Statements of Operations - Three and Six Months ended                      March 31,                      2006, 2005, and                      Cumulative from October 1, 1997 (Inception) through March 31,                      2006       |  4        |
|                                                                                                       | Unaudited                      Condensed Statements of Cash Flows - Six Months ended March                      31, 2006,                      2005,                      and Cumulative from October 1, 1997 (Inception) through March                      31,                      2006 |  5        |
|                                                                                                       | Unaudited                      Condensed Statement of Changes in Shareholders’ Equity (Deficit) -                      Six                      Months Ended March 31, 2006 and Development                      Stage                                                               |  7        |
|                                                                                                       | Notes                  to Financial Statements                                                                                                                                                                                                                                             |  8        |
|                                                                                                       |                                                                                                                                                                                                                                                                                       |           |
| Item                2.                                                                                     | Management’s                  Discussion and Analysis of Financial Condition                  and Results of Operations                                                                                                                                                              |  17       |
| Item                3.                                                                                     | Controls                and Procedures                                                                                                                                                                                                                                                     |  21       |
|                                                                                                       |                                                                                                                                                                                                                                                                                       |           |
| Part                II                                                                                     | Other                Information                                                                                                                                                                                                                                                           |  22       |
|                                                                                                       |                                                                                                                                                                                                                                                                                       |           |
| Item                1.                                                                                     | Legal                Proceedings                                                                                                                                                                                                                                                           |  22       |
| Item                2.                                                                                     | Changes                  in Securities and Use of Proceeds                                                                                                                                                                                                                                 |  22       |
| Item                3.                                                                                     | Defaults                Upon Senior Securities                                                                                                                                                                                                                                             |  22       |
| Item                4.                                                                                     | Submission                  of Matters to a Vote of Security                  Holders                                                                                                                                                                                                      |  22       |
| Item                5.                                                                                     | Other                Information                                                                                                                                                                                                                                                           |  22       |
| Item                6.                                                                                     | Exhibits                and Reports on Form 8-K                                                                                                                                                                                                                                            |  22       |
|                                                                                                       |                                                                                                                                                                                                                                                                                       |           |
| Signatures                                                                                                 |  23                                                                                                                                                                                                                                                                                   |
|                                                                                                       |                                                                                                                                                                                                                                                                                       |
| Exhibit                31 - Certification Pursuant to Section 302 of the Sarbanes-Oxley                Act |                                                                                                                                                                                                                                                                                       |
| Exhibit                32 - Certification Pursuant to Section 906 of the Sarbanes-Oxley                Act |                                                                                                                                                                                                                                                                                       |

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**Table          of Contents**

**PART      1 - FINANCIAL INFORMATION**

| **Item              1.** | **Financial                Statements** |
|--------------------------|-----------------------------------------|

**NATIONAL      SCIENTIFIC CORPORATION**

**(A        Development Stage Company)**

**Unaudited        Condensed Balance Sheets**

**March        31, 2006 and September 30, 2005**

|                                                                                                                                                                                                                                                                  |   | **March                  31,****2006** |        | **September                  30, 2005** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|-------------|-----------------------------------------|--------|
| **ASSETS**                                                                                                                                                                                                                                                            |   | **(Unaudited)**                        |        | **(Audited)**                           |   |
| Current                  Assets:                                                                                                                                                                                                                                      |   |                                   |        |                               |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                            |   | $                                      | 218         |                                    | $      | 1,616 |   |
| Trade                  receivables, net                                                                                                                                                                                                                               |   |                                   | 1,266       |                                    |   | 9,968 |   |
| Inventory,                  net                                                                                                                                                                                                                                       |   |                                   | 17,827      |                                    |   | 23,735 |   |
| Other                  assets                                                                                                                                                                                                                                         |   |                                   | 19,296      |                                    |   | 68 |   |
| Total                  current assets                                                                                                                                                                                                                                 |   |                                   | 38,607      |                                    |   | 35,387 |   |
|                                                                                                                                                                                                                                                                  |   |                                   |             |                                    |   |   |   |
| Property                  and equipment, net                                                                                                                                                                                                                          |   |                                   | 4,359       |                                    |   | 7,680 |   |
| Deposits                                                                                                                                                                                                                                                              |   |                                   | 2,000       |                                    |   | 2,000 |   |
| Deferred                  offering costs, net                                                                                                                                                                                                                         |   |                                   | 22,000      |                                    |   | — |   |
| Investment                                                                                                                                                                                                                                                            |   |                                   | 289,100     |                                    |   | 289,100 |   |
|                                                                                                                                                                                                                                                                  |   | $                                      | 356,066     |                                    | $      | 334,167 |   |
|                                                                                                                                                                                                                                                                  |   |                                   |             |                                    |   |  |   |
| **LIABILITIES                  AND SHAREHOLDERS’ EQUITY (DEFICIT)**                                                                                                                                                                                             |   |                                   |             |                                    |   |   |   |
| Current                  Liabilities:                                                                                                                                                                                                                                 |   |                                   |             |                                    |   |   |   |
| Accounts                  payable - related parties                                                                                                                                                                                                                   |   | $                                      | 89,442      |                                    | $      | 72,914 |   |
| Accounts                  payable - other                                                                                                                                                                                                                             |   |                                   | 172,569     |                                    |   | 183,664 |   |
| Accrued                  expenses                                                                                                                                                                                                                                     |   |                                   | 696,267     |                                    |   | 519,132 |   |
| Notes                  payable - related party                                                                                                                                                                                                                        |   |                                   | 159,000     |                                    |   | 159,000 |   |
| Notes                  payable - other                                                                                                                                                                                                                                |   |                                   | 45,750      |                                    |   | 60,150 |   |
| Total                  current liabilities                                                                                                                                                                                                                            |   |                                   | 1,163,028   |                                    |   | 994,860 |   |
|                                                                                                                                                                                                                                                                  |   |                                   |             |                                    |   |   |   |
| Notes                  payable, net of current portion                                                                                                                                                                                                                |   |                                   | 118,595     |                                    |   | — |   |
| Total                  liabilities                                                                                                                                                                                                                                    |   |                                   | 1,281,623   |                                    |   | 994,860 |   |
|                                                                                                                                                                                                                                                                  |   |                                   |             |                                    |   |   |   |
| Commitments                  and contingencies                                                                                                                                                                                                                        |   |                                   | —     |                                    |   | — |   |
|                                                                                                                                                                                                                                                                  |   |                                   |             |                                    |   |  |   |
| Shareholders’                  equity (deficit):                                                                                                                                                                                                                |   |                                   |             |                                    |   |   |   |
| Preferred                  stock, par value $0.10; 4,000,000 shares authorized, and no shares                  issued                  and outstanding                                                                                                                |   |                                   | —     |                                    |   | — |   |
| Common                  stock, par value $0.01; 187,000,000 shares authorized, and shares                  issued                  and outstanding 96,225,459 and 94,095,459 at March 31, 2006 and                  September                  30, 2005, respectively |   |                                   | 962,255     |                                    |   | 940,955 |   |
| Additional                  paid-in capital                                                                                                                                                                                                                           |   |                                   | 22,322,097  |                                    |   | 22,248,814 |   |
| Accumulated                  deficit prior to the development stage                                                                                                                                                                                                   |   |                                   | (2,394,680  | )                                       |   | (2,394,680 | ) |
| Accumulated                  deficit during the development stage                                                                                                                                                                                                     |   |                                   | (21,815,229 | )                                       |   | (21,455,782 | ) |
| Total                  shareholders’ equity (deficit)                                                                                                                                                                                                           |   |                                   | (925,557    | )                                       |   | (660,693 | ) |
|                                                                                                                                                                                                                                                                  |   |                                   |             |                                    |   |  |   |
|                                                                                                                                                                                                                                                                  |   | $                                      | 356,066     |                                    | $      | 334,167 |   |
|                                                                                                                                                                                                                                                                  |   |                                   |             |                                    |   |  |   |

*See        accompanying notes to financial statements, which are an integral part of        the        financial statements.*

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**Table          of Contents**

**NATIONAL      SCIENTIFIC CORPORATION**

**(A      Development Stage Company)**

**Unaudited      Condensed Statements of Operations**

**For      the Three and Six Months Ended March 31, 2006, 2005, and Development      Stage**

|                                                       |   | **Three                    Months****Ended****March                    31, 2006** |     | **Three                    Months****Ended****March                    31, 2005** |   | **Six                    Months****Ended****March                    31, 2006** |   | **Six                    Months****Ended****March                    31, 2005** |     |  **Development****Stage** |   |
|------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|----------|-----------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|----------|--------------------------------|--------|
|                                                       |   |                                                                              |     |                                                                              |   |                                                                            |   |                                                                            |     |                           |   |
| Revenues                                                   |   | $                                                                                 | 10,152   |                                                                              | $      | 3,609                                                                           |   | $                                                                               | 87,831   |                           | $      | 5,472 |   | $ | 1,188,259 |   |
|                                                       |   |                                                                              |          |                                                                              |   |                                                                                 |   |                                                                            |          |                           |   |  |   |   |  |   |
| Cost                    of Sales                           |   |                                                                              | 4,120    |                                                                              |   | 2,118                                                                           |   |                                                                            | 56,959   |                           |   | 3,231 |   |   | 1,058,823 |   |
|                                                       |   |                                                                              |     |                                                                              |   |                                                                            |   |                                                                            |     |                           |   |   |   |   |   |   |
| Gross                    profit                            |   |                                                                              | 6,032    |                                                                              |   | 1,491                                                                           |   |                                                                            | 30,872   |                           |   | 2,241 |   |   | 129,436 |   |
|                                                       |   |                                                                              |     |                                                                              |   |                                                                            |   |                                                                            |          |                           |   |   |   |   |   |   |
| Costs                    and expenses                      |   |                                                                              |     |                                                                              |   |                                                                            |   |                                                                            |          |                           |   |   |   |   |   |   |
| Salaries                    and benefits                   |   |                                                                              | 46,562   |                                                                              |   | 61,113                                                                          |   |                                                                            | 129,689  |                           |   | 164,914 |   |   | 3,037,501 |   |
| Research                    and development                |   |                                                                              | 46,465   |                                                                              |   | 124,051                                                                         |   |                                                                            | 134,543  |                           |   | 197,534 |   |   | 4,492,526 |   |
| Stock                    compensation                      |   |                                                                              | —  |                                                                              |   | —                                                                         |   |                                                                            | —  |                           |   | 4,437 |   |   | 3,142,288 |   |
| Consulting                    fees, related party          |   |                                                                              | —  |                                                                              |   | —                                                                         |   |                                                                            | —  |                           |   | — |   |   | 8,175,973 |   |
| Other                                                      |   |                                                                              | 44,369   |                                                                              |   | 60,694                                                                          |   |                                                                            | 87,187   |                           |   | 116,682 |   |   | 3,010,829 |   |
| Inventory                    obsolescence charge           |   |                                                                              | —  |                                                                              |   | —                                                                         |   |                                                                            | —  |                           |   | — |   |   | 46,775 |   |
| Total                    costs and expenses                |   |                                                                              | 137,396  |                                                                              |   | 245,858                                                                         |   |                                                                            | 351,419  |                           |   | 483,567 |   |   | 21,905,892 |   |
|                                                       |   |                                                                              |          |                                                                              |   |                                                                                 |   |                                                                            |          |                           |   |  |   |   |  |   |
| Loss                    from operations                    |   |                                                                              | (131,364 | )                                                                                 |   | (244,367                                                                        | )      |                                                                            | (320,547 | )                              |   | (481,326 | ) |   | (21,776,456 | ) |
|                                                       |   |                                                                              |          |                                                                              |   |                                                                                 |   |                                                                            |          |                           |   |  |   |   |  |   |
| Other                    income (expense)                  |   |                                                                              |          |                                                                              |   |                                                                                 |   |                                                                            |          |                           |   |  |   |   |  |   |
| Interest                    and other income               |   |                                                                              | —  |                                                                              |   | —                                                                         |   |                                                                            | —  |                           |   | — |   |   | 178,972 |   |
| Gain                    on settlement                      |   |                                                                              | —  |                                                                              |   | —                                                                         |   |                                                                            | —  |                           |   | — |   |   | 89,403 |   |
| Interest                    expense                        |   |                                                                              | (20,491  | )                                                                                 |   | (4,253                                                                          | )      |                                                                            | (36,900  | )                              |   | (7,970 | ) |   | (118,657 | ) |
| Amortization                    of deferred offering costs |   |                                                                              | (1,200   | )                                                                                 |   | —                                                                         |   |                                                                            | (2,000   | )                              |   | — |   |   | (2,000 | ) |
| Loss                    on disposal of assets              |   |                                                                              | —  |                                                                              |   | —                                                                         |   |                                                                            | —  |                           |   | — |   |   | (30,960 | ) |
| Loss                    on impairment of investment        |   |                                                                              | —  |                                                                              |   | —                                                                         |   |                                                                            | —  |                           |   | — |   |   | (91,344 | ) |
| Loss                    on impairment of equipment         |   |                                                                              | —  |                                                                              |   | —                                                                         |   |                                                                            | —  |                           |   | — |   |   | (64,187 | ) |
|                                                       |   |                                                                              | (21,691  | )                                                                                 |   | (4,253                                                                          | )      |                                                                            | (38,900  | )                              |   | (7,970 | ) |   | (38,773 | ) |
|                                                       |   |                                                                              |          |                                                                              |   |                                                                                 |   |                                                                            |          |                           |   |  |   |   |  |   |
| Loss                    before income taxes                |   |                                                                              | (153,055 | )                                                                                 |   | (248,620                                                                        | )      |                                                                            | (359,447 | )                              |   | (489,296 | ) |   | (21,815,229 | ) |
| Income                    tax expense                      |   |                                                                              | —  |                                                                              |   | —                                                                         |   |                                                                            | —  |                           |   | — |   |   | — |   |
| Net                    los Net loss                        |   | $                                                                                 | (153,055 | )                                                                                 | $      | (248,620                                                                        | )      | $                                                                               | (359,447 | )                              | $      | (489,296 | ) | $ | (21,815,229 | ) |

*See      accompanying notes to financial statements, which are an integral part of the      financial statements.*

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**Table            of Contents**

**NATIONAL          SCIENTIFIC CORPORATION**

**(A          Development Stage Company)**

**Unaudited          Condensed Statements of Cash Flows**

**For          the Six Months Ended March 31, 2006, 2005, and Development          Stage**

|                                                                                                              |   |  **Six                    Months****Ended****March                    31,****2006** |     |  **Six                    Months****Ended****March                    31,****2005** |   |  **Development** **Stage** |   |
|-------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|----------|------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|
| Cash                    flows from operating activities:                                                          |   |                                                                                |     |                                                                                |   |                            |   |
| Net                    loss                                                                                       |   | $                                                                                        | (359,447 | )                                                                                        | $      | (489,296                             | )      | $ | (21,815,229 | ) |
| Adjustments                    to reconcile net loss to net cash used in operating                    activities: |   |                                                                                     |          |                                                                                     |   |                                      |   |   |  |   |
| Depreciation                                                                                                      |   |                                                                                     | 3,321    |                                                                                     |   | 6,671                                |   |   | 94,992 |   |
| Loss                    on disposal of assets                                                                     |   |                                                                                     | —  |                                                                                     |   | —                              |   |   | 30,960 |   |
| Impairment                    loss on equipment                                                                   |   |                                                                                     | —  |                                                                                     |   | —                              |   |   | 64,187 |   |
| Stock                    and options issued for services, net                                                     |   |                                                                                     | —  |                                                                                     |   | 4,437                                |   |   | 11,639,616 |   |
| Impairment                    of inventory                                                                        |   |                                                                                     | —  |                                                                                     |   | —                              |   |   | 46,775 |   |
| Impairment                    of investment                                                                       |   |                                                                                     | —  |                                                                                     |   | —                              |   |   | 91,344 |   |
| Warrant                    expense                                                                                |   |                                                                                     | —  |                                                                                     |   | —                              |   |   | 4,691 |   |
| Amortization                    of deferred offering costs                                                        |   |                                                                                     | 2,000    |                                                                                     |   | —                              |   |   | 2,000 |   |
| Amortization                    of debt discount                                                                  |   |                                                                                     | 4,300    |                                                                                     |   | —                              |   |   | 4,300 |   |
| Amortization                    of beneficial conversion feature                                                  |   |                                                                                     | 828      |                                                                                     |   | —                              |   |   | 828 |   |
| Changes                    in assets and liabilities:                                                             |   |                                                                                     |          |                                                                                     |   |                                      |   |   |  |   |
| Decrease                    (increase) in inventory                                                               |   |                                                                                     | 5,908    |                                                                                     |   | 78                                   |   |   | (64,602 | ) |
| (Increase)                    decrease in deferred offering costs                                                 |   |                                                                                     | —  |                                                                                     |   | —                              |   |   | (85,171 | ) |
| Decrease                    (increase) in receivables                                                             |   |                                                                                     | 8,702    |                                                                                     |   | (31,115                              | )      |   | 130,365 |   |
| Decrease                    (increase) in other assets                                                            |   |                                                                                     | (19,228  | )                                                                                        |   | 11,647                               |   |   | (12,356) | ) |
| Increase                    (decrease) in accounts payable and accrued expenses                                   |   |                                                                                     | 215,618  |                                                                                     |   | 22,774                               |   |   | 1,297,974 |   |
| Net                    cash (used in) operating activities                                                        |   |                                                                                     | (137,998 | )                                                                                        |   | (474,804                             | )      |   | (8,569,326 | ) |
|                                                                                                              |   |                                                                                     |          |                                                                                     |   |                                      |   |   |  |   |
| Cash                    flows from investing activities:                                                          |   |                                                                                     |     |                                                                                     |   |                                 |   |   |   |   |
| Acquisition                    of property and equipment                                                          |   |                                                                                     | —  |                                                                                     |   | —                              |   |   | (155,766 | ) |
| Repayment                    of loans                                                                             |   |                                                                                     | —  |                                                                                     |   | —                              |   |   | 200,000 |   |
| Proceeds                    from the sale of furniture and equipment                                              |   |                                                                                     | —  |                                                                                     |   | —                              |   |   | 6,050 |   |
| Loans                    issued                                                                                   |   |                                                                                     | —  |                                                                                     |   | —                              |   |   | (400,000 | ) |
| Net                    cash (used in) provided by investing activities                                            |   |                                                                                     | —  |                                                                                     |   | —                              |   |   | (349,716 | ) |
|                                                                                                              |   |                                                                                     |          |                                                                                     |   |                                      |   |   |  |   |
| Cash                    flows from financing activities:                                                          |   |                                                                                     |     |                                                                                     |   |                                 |   |   |   |   |
| Proceeds                    from notes payable                                                                    |   |                                                                                     | 177,500  |                                                                                     |   | —                              |   |   | 442,000 |   |
| Loan                    from (to) officer , related party                                                         |   |                                                                                     | —  |                                                                                     |   | 100,000                              |   |   | 65,079 |   |
| Draws                    on the line of credit                                                                    |   |                                                                                     | —  |                                                                                     |   | —                              |   |   | 430,000 |   |
|                                                                                                              |   |                                                                                     |          |                                                                                     |   |                                      |   |   |  |   |
| **(Continued)**                                                                                                   |   |

*See          accompanying notes to financial statements, which are an integral part          of the          financial statements.*

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**Table          of Contents**

**NATIONAL        SCIENTIFIC CORPORATION**

**(A          Development Stage Company)**

**Unaudited          Condensed Statements of Cash Flows**

**For          the Six Months Ended March 31, 2006, 2005, and Development          Stage**

**(Continued)**

|                                                        |   |  **Six                      Months****Ended****March                      31,****2006** |    |  **Six                      Months****Ended****March                      31,****2005** |   |  **Development** **Stage** |   |
|-------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|---------|----------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                        |   |                                                                                         |    |                                                                                         |   |                                 |   |
| Repayment                      of notes payable             |   |                                                                                         | (16,900 | )                                                                                            |   | —                              |   |   | (225,500 | ) |
| Repayment                      of line of credit            |   |                                                                                         | — |                                                                                         |   | —                              |   |   | (430,000 | ) |
| Repayment                      of capital lease obligations |   |                                                                                         | — |                                                                                         |   | —                              |   |   | (1,819 | ) |

| Proceeds                      from the exercise of options         |   |   | — |   |   | — |   |   | 208,265   |   |
|--------------------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|
| Proceeds                      from the exercise of warrants        |   |   | — |   |   | — |   |   | 92,460    |   |
| Proceeds                      from equity line of credit           |   |   | — |   |   | — |   |   | 414,824   |   |
| Proceeds                      from the issuance of preferred stock |   |   | — |   |   | — |   |   | 482,500   |   |
| Payment                      of financing costs                    |   |   | (24,000 | )      |   | — |   |   | (24,000   | )      |
| Proceeds                      from securities exchange agreement   |   |   | — |   |   | 240,000 |   |   | 240,000   |   |
| Proceeds                      from issuance of common stock        |   |   | — |   |   | — |   |   | 7,221,833 |   |
| Net                      cash provided by financing activities     |   |   | 136,600 |   |   | 340,000 |   |   | 8,915,642 |   |

|                                                                             |   |   |    |   |   |     |   |
|----------------------------------------------------------------------------------|--------|--------|---------|--------|--------|----------|--------|
| Net                    (decrease) increase in cash and cash equivalents          |   |   | (1,398  | )      |   | (134,804 | )      |   | (3,400 | ) |
| Cash                    and cash equivalents, beginning of period                |   |   | 1,616   |   |   | 160,214  |   |   | 3,618 |   |
|                                                                             |   |   |         |   |   |          |   |   |  |   |
| Cash                    and cash equivalents, end of period                      |   | $      | 218     |   | $      | 25,410   |   | $ | 218 |   |
|                                                                             |   |   |         |   |   |          |   |   |  |   |
| Supplementary                    Disclosure of Cash Flow Information             |   |   |    |   |   |     |   |   |   |   |
| Cash                    paid for interest                                        |   | $      | 625     |   | $      | 11       |   | $ | 37,338 |   |
| Cash                    paid for income taxes                                    |   | $      | — |   |   | —  |   | $ | 50 |   |
| Conversion                    of accounts payable and accrued expenses to equity |   | $      | 33,050  |   | $      | —  |   | $ | 115,240 |   |
| Common                    stock exchanged for investment                         |   |   | — |   |   | —  |   |   | 289,100 |   |
| Debt                    discount and beneficial conversion feature               |   | $      | 61,533  |   | $      | —  |   | $ | 61,533 |   |
|                                                                             |   |   |         |   |   |          |   |   |  |   |

*See        accompanying notes to financial statements, which are an integral part of        the        financial statements.*

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**Table            of Contents**

****NATIONAL      SCIENTIFIC      CORPORATION****

**(A          Development Stage Company)**

**Unaudited          Condensed Statement of Changes in Shareholders' Equity          (Deficit)**

**For          the Six Months Ended March 31, 2006 and Development Stage**

|                                                                                                                                                        |   | **Common                    Stock**     |       | **Preferred                    Stock** |   |                                    |   |                             |    |                                 |   |                                                                                        |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|----------------------------------------|--------|-----------------------------------------|--------|----------------------------------|---------|--------------------------------------|--------|---------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                        |   | **Number                    of Shares** |       | **Par                    Value**       |   | **Number                    of Shares** |   | **Par                    Value** |    | **Additional****Paid-In****Capital** |   | **Accumulated                    Deficit****Prior                    to Development Stage** |   | **Accumulated                    Deficit****During                    the Development Stage** |   | **Total** |   |
|                                                                                                                                                        |   |                                    |       |                                   |   |                                    |   |                             |    |                                 |   |                                                                                        |   |   |   |   |   |
| Balance,                    September 30, 2005                                                                                                              |   |                                    | 94,095,459 |                                   | $      | 940,955                                 |   |                             | — |                                 | $      | —                                                                                     |   | $ | 22,248,814 |   | $ | (2,394,680 | ) | $ | (21,455,782 | ) | $ | (660,693 | ) |
|                                                                                                                                                        |   |                                    |            |                                   |   |                                         |   |                             |         |                                 |   |                                                                                             |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Issuance                    of common stock as part of financing program                                                                                    |   |                                    | 1,200,000  |                                   |   | 12,000                                  |   |                             | — |                                 |   | —                                                                                     |   |   | 49,533 |   |   | — |   |   | — |   |   | 61,533 |   |
|                                                                                                                                                        |   |                                    |            |                                   |   |                                         |   |                             |         |                                 |   |                                                                                             |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Issuance                    of common stock in exchange for accounts payable and accrued                    expenses.                    Shares issued for: |   |                                    |       |                                   |   |                                    |   |                             |    |                                 |   |                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.036                                                                                                                                                      |   |                                    | 500,000    |                                   |   | 5,000                                   |   |                             | — |                                 |   | —                                                                                     |   |   | 13,000 |   |   | — |   |   | — |   |   | 18,000 |   |
| $0.035                                                                                                                                                      |   |                                    | 430,000    |                                   |   | 4,300                                   |   |                             | — |                                 |   | —                                                                                     |   |   | 10,750 |   |   | — |   |   | — |   |   | 15,050 |   |
|                                                                                                                                                        |   |                                    |            |                                   |   |                                         |   |                             |         |                                 |   |                                                                                             |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Net                    loss                                                                                                                                 |   |                                    | —    |                                   |   | —                                 |   |                             | — |                                 |   | —                                                                                     |   |   | — |   |   | — |   |   | (359,447 | ) |   | (359,447 | ) |
|                                                                                                                                                        |   |                                    |            |                                   |   |                                         |   |                             |         |                                 |   |                                                                                             |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Balance,                    March 31, 2006                                                                                                                  |   |                                    | 96,225,459 |                                   | $      | 962,255                                 |   |                             | — |                                 | $      | —                                                                                     |   | $ | 22,322,097 |   | $ | (2,394,680 | ) | $ | (21,815,229 | ) | $ | (925,557 | ) |
|                                                                                                                                                        |   |                                    |            |                                   |   |                                         |   |                             |         |                                 |   |                                                                                             |   |   |  |   |   |  |   |   |  |   |   |  |   |

*See      accompanying notes to *
*financial      statements, which are an integral part of the financial      statements.*

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**Table            of Contents**

**NATIONAL      SCIENTIFIC CORPORATION**

**(A      Development Stage Company)**

**NOTES      TO FINANCIAL STATEMENTS**

**December      31, 2005**

**(Unaudited)**

| **1.** | **Basis                of Presentation** |
|--------|------------------------------------------|

| **2.** | **Issuance                of Common Stock** |
|--------|---------------------------------------------|

| **3.** | **Development                Stage Operations** |
|--------|-------------------------------------------------|

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**Table                of Contents**

| **4.** | **Stock                Options and Warrants** |
|--------|-----------------------------------------------|

**Stock      Options**

|                                                     |   |       |      | **Weighted** |   | **Weighted** |   |
|----------------------------------------------------------|--------|------------|-----------|--------------|--------|--------------|--------|
|                                                     |   | **Number** |      | **Average**  |   | **Average**  |   |
|                                                     |   | **of**     |      | **Exercise** |   | **Fair**     |   |
|                                                     |   | **Shares** |      | **Price**    |   | **Value**    |   |
|                                                     |   |       |      |         |   |         |   |
| Options                  Outstanding, September 30, 2005 |   |       | 3,789,257 |         | $      | 0.81         |   | $ | 0.02 |   |
| Granted                                                  |   |       | —   |         |   | —      |   |   | — |   |
| Exercised                                                |   |       | —   |         |   | —      |   |   | — |   |
| Canceled                                                 |   |       | —   |         |   | —      |   |   | — |   |
| Options                  Outstanding, March 31, 2006     |   |       | 3,789,257 |         | $      | 0.81         |   | $ | 0.02 |   |

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**Table              of Contents**

**Stock            Based Compensation**

*Accounting            for Stock Issued to Employees*
*“Accounting            for Stock-Based Compensation”*

|                                          |   | **Stock                  Options Outstanding** |      | **Stock                  Options Exercisable** |   |
|-----------------------------------------------|--------|------------------------------------------------|-----------|------------------------------------------------|--------|
|                                          |   |                                           |      | **Weighted**                                   |   |   |   |   |   |   |   |
|                                          |   |                                           |      | **Average**                                    |   |   |   |   |   |   |   |
|                                          |   |                                           |      | **Remaining**                                  |   | **Weighted** |   |   |   | **Weighted** |   |
|                                          |   |                                           |      | **Contractual**                                |   | **Average** |   |   |   | **Average** |   |
|                                          |   | **Number**                                     |      | **Life**                                       |   | **Exercise** |   | **Number** |   | **Exercise** |   |
| **Range                  of Exercise Prices** |   | **of                  Shares**                 |      | **(In                  Years)**                |   | **Price** |   | **of                  Shares** |   | **Price** |   |
|                                          |   |                                           |      |                                           |   |   |   |   |   |   |   |
| $0.05                  to $0.46               |   |                                           | 2,479,257 |                                           |   | 7.04 |   | $ | 0.18 |   |   | 2,479,257 |   | $ | 0.18 |   |
| $0.47                  to $1.84               |   |                                           | 1,000,000 |                                           |   | 4.67 |   | $ | 1.84 |   |   | 1,000,000 |   | $ | 1.84 |   |
| $1.85                  to $3.00               |   |                                           | 310,000   |                                           |   | 4.81 |   | $ | 2.49 |   |   | 310,000 |   | $ | 2.49 |   |
| Total                                         |   |                                           | 3,789,257 |                                           |   | 5.92 |   | $ | 0.81 |   |   | 3,789,257 |   | $ | 0.81 |   |

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**Table              of Contents**

|                                                                                                                                              |   |   | **Six                    Months Ended** |   |   | **Six                    Months Ended** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------|--------|--------|-----------------------------------------|--------|
|                                                                                                                                              |   |   | **March                    31, 2006**   |   |   | **March                    31, 2005**   |   |
|                                                                                                                                              |   |   |                                    |   |   |                                    |   |
| Net                    loss as reported                                                                                                           |   | $      | (359,447                                | )      | $      | (489,296                                | )      |
| Deduct:                    Total stock based compensation expense as determined under the                    fair value                    method |   |   | —                                 |   |   | (5,637                                  | )      |
| Add:                    Total stock based compensation recorded in the statement of                    operations                                 |   |   | —                                 |   |   | 4,437                                   |   |
|                                                                                                                                              |   |   |                                         |   |   |                                         |   |
| Pro                    forma net loss                                                                                                             |   | $      | (359,447                                | )      | $      | (490,496                                | )      |
|                                                                                                                                              |   |   |                                         |   |   |                                         |   |
| Loss                    per share as reported                                                                                                     |   |   | (0.00                                   | )      |   | (0.01                                   | )      |
|                                                                                                                                              |   |   |                                         |   |   |                                         |   |
| Loss                    per share, pro forma                                                                                                      |   |   | (0.00                                   | )      |   | (0.01                                   | )      |

**Warrants**

|                                                      |   | **Warrants                  Outstanding**         |       |  **Warrants                  Exercisable**      |   |
|-----------------------------------------------------------|--------|---------------------------------------------------|------------|------------------------------------------------------|--------|
|   **Range                  of Exercise Prices** |   |   **Number                  of Shares** |       | **Weighted                  Average Exercise Price** |   | **Weighted                  Average Remaining Contractual Life (Years)** |   |   **Number                  of Shares** |   | **Weighted                  Average Exercise Price** |   |
|                                                      |   |                                              |       |                                                 |   |   |   |   |   |   |   |
| $0.062                  to $0.062                         |   |                                              | 135,000    |                                                 | $      | 0.062 |   |   | 2.24 |   |   | 135,000 |   | $ | 0.062 |   |
| $0.090                  to $0.090                         |   |                                              | 1,250,000  |                                                 | $      | 0.090 |   |   | 2.47 |   |   | 1,250,000 |   | $ | 0.090 |   |
| $0.100                  to $0.100                         |   |                                              | 3,108,497  |                                                 | $      | 0.100 |   |   | 4.60 |   |   | 3,108,497 |   | $ | 0.100 |   |
| $0.110                  to $0.110                         |   |                                              | 7,750,700  |                                                 | $      | 0.110 |   |   | 3.02 |   |   | 7,750,700 |   | $ | 0.110 |   |
| $0.130                  to $0.130                         |   |                                              | 640,000    |                                                 | $      | 0.130 |   |   | 0.77 |   |   | 640,000 |   | $ | 0.130 |   |
| $0.350                  to $0.350                         |   |                                              | 1,000,000  |                                                 | $      | 0.350 |   |   | 0.25 |   |   | 1,000,000 |   | $ | 0.350 |   |
| $0.500                  to $0.500                         |   |                                              | 1,275,000  |                                                 | $      | 0.500 |   |   | 0.25 |   |   | 1,275,000 |   | $ | 0.500 |   |
| $0.750                  to $0.750                         |   |                                              | 275,000    |                                                 | $      | 0.075 |   |   | 0.25 |   |   | 275,000 |   | $ | 0.075 |   |
|                                                      |   |                                              | 15,434,197 |                                                 |   |   |   |   |   |   |   | 15,434,197 |   |   |   |   |
|                                                      |   |                                              |       |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |

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**Table              of Contents**

| **5.** | **Notes                  payable and Long Term debt** |
|--------|-------------------------------------------------------|

|                                                                                 |   | **March                  31, 2006** |     | **September                  30, 2005** |   |
|--------------------------------------------------------------------------------------|--------|-------------------------------------|----------|-----------------------------------------|--------|
|                                                                                 |   | **(Unaudited)**                     |     | **(Audited)**                           |   |
|                                                                                 |   |                                |     |                                    |   |
| Note                  payable to shareholder; unsecured; non-interest                |   |                                |          |                                    |   |  |   |
| bearing;                  matures in June 2006; repayment may be made by the         |   |                                |          |                                    |   |  |   |
| Company                  with either cash or its restricted common stock             |   |                                |          |                                    |   |  |   |
| or                  a combination of cash and stock.                                 |   | $                                   | 43,250   |                                    | $      | 43,250 |   |
| Note                  payable to an Officer of the Company; interest                 |   |                                |          |                                    |   |  |   |
| at                  6%; principal and interest payable on demand; unsecured.         |   |                                | 159,000  |                                    |   | 159,000 |   |
| Note                  payable to shareholder; unsecured; non-interest bearing        |   |                                | —  |                                    |   | 3,000 |   |
| Note                  payable to shareholder; unsecured; interest at 6%              |   |                                | —  |                                    |   | 5,000 |   |
| Note                  payable to an employee; interest at 6%; principal and interest |   |                                |          |                                    |   |  |   |
| at                  6%; principal and interest payable on demand; unsecured.         |   |                                | —  |                                    |   | 8,900 |   |
| Note                  payable to shareholder; unsecured; non-interest bearing        |   |                                | 1,000    |                                    |   | — |   |
| Note                  payable to shareholder; unsecured; non-interest bearing        |   |                                | 1,500    |                                    |   | — |   |
| Note                  payable to an investment fund; payable in full in              |   |                                |          |                                    |   |  |   |
| November                  2010; interest at 8% payable semi-annually in May          |   |                                |          |                                    |   |  |   |
| and                  November; unsecured.                                            |   |                                | 175,000  |                                    |   | — |   |
|                                                                                 |   |                                | 379,750  |                                    |   | 219,150 |   |
| Less:                                                                                |   |                                |          |                                    |   |  |   |
| Current                  portion of long term debt                                   |   |                                | (204,750 | )                                       |   | (219,150 | ) |
| Discount                                                                             |   |                                | (47,300  | )                                       |   | — |   |
| Beneficial                  conversion feature                                       |   |                                | (9,105   | )                                       |   | — |   |
| Long-term                  debt, net of current portion                              |   | $                                   | 118,595  |                                    | $      | — |   |
|                                                                                 |   |                                |          |                                    |   |  |   |

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**Table              of Contents**

| 2006   |   | $      | 204,750 |   |
|--------|--------|--------|---------|--------|
| 2007   |   |   | — |   |
| 2008   |   |   | — |   |
| 2009   |   |   | — |   |
| 2010   |   |   | 175,000 |   |
|   |   | $      | 379,750 |   |

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**Table          of Contents**

| **6.** | **Investment** |
|--------|----------------|

| **7.** | **Inventory,                net** |
|--------|-----------------------------------|

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**Table              of Contents**

|                                            |   |   | **March                  31, 2006**  |   |   | **September                  30, 2005**  |   |
|-------------------------------------------------|--------|--------|-------------------------------------------|--------|--------|-----------------------------------------------|--------|
|                                            |   |   | **(Unaudited)**                      |   |   | **(Audited)**                            |   |
|                                            |   |   |                                      |   |   |                                          |   |
| Inventory,                  gross               |   | $      | 64,602                                    |   | $      | 70,510                                        |   |
| Less:                  reserve for obsolescence |   |   | (46,775                                   | )      |   | (46,775                                       | )      |
| Inventory,                  net                 |   | $      | 17,827                                    |   | $      | 23,735                                        |   |

| **8.** | **Accrued                    Expenses** |
|--------|-----------------------------------------|

|                                                                        |   |   | **March                  31, 2006**  |   |   | **September                  30, 2005**  |   |
|-----------------------------------------------------------------------------|--------|--------|-------------------------------------------|--------|--------|-----------------------------------------------|--------|
|                                                                        |   |   | **(Unaudited)**                      |   |   | **(Audited)**                            |   |
|                                                                        |   |   |                                      |   |   |                                          |   |
| Salaries                  & vacation pay - current management and staff |   | $      | 478,726                                   |   | $      | 332,391                                       |   |
| Salaries                  & vacation pay - former employee              |   |   | 29,375                                    |   |   | 29,375                                        |   |
| Payroll                  taxes for back pay                                 |   |   | 29,634                                    |   |   | 27,952                                        |   |
| Interest                                                                    |   |   | 78,887                                    |   |   | 48,189                                        |   |
| Employee                  stock retainage pool                              |   |   | 50,250                                    |   |   | 50,250                                        |   |
| Other                  liabilities                                          |   |   | 29,395                                    |   |   | 30,975                                        |   |
|                                                                        |   | $      | 696,267                                   |   | $      | 519,132                                       |   |

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**Table              of Contents**

| **9.** | **Earnings                  Per Share** |
|--------|-----------------------------------------|

|                                                                      |   | **March                  31,****2006** |       | **March                  31,****2005** |   |
|---------------------------------------------------------------------------|--------|----------------------------------------|------------|----------------------------------------|--------|
|                                                                      |   |                                   |       |                                   |   |
| Net                  (loss)                                               |   | $                                      | (359,447   | )                                      | $      | (489,296 | ) |
| Weighted                  average shares:                                 |   |                                   |       |                                   |   |   |   |
| Average                  shares outstanding                               |   |                                   | 95,479,030 |                                   |   | 86,665,878 |   |
| Effect                  of diluted shares                                 |   |                                   | —    |                                   |   | — |   |
|                                                                      |   |                                   |            |                                   |   |  |   |
| Average                  shares outstanding, adjusted for dilutive effect |   |                                   | 95,479,030 |                                   |   | 86,665,878 |   |
|                                                                      |   |                                   |            |                                   |   |  |   |
| (Loss)                  per share - basic                                 |   | $                                      | (0.00      | )                                      | $      | (0.01 | ) |
|                                                                      |   |                                   |            |                                   |   |  |   |
| (Loss)                  per share - diluted                               |   | $                                      | (0.00      | )                                      | $      | (0.01 | ) |
|                                                                      |   |                                   |            |                                   |   |  |   |

|                                          |   | **March                  31,****2006** |       | **March                  31,****2005** |   |
|-----------------------------------------------|--------|----------------------------------------|------------|----------------------------------------|--------|
|                                          |   |                                   |       |                                   |   |
| Options                                       |   |                                   | 3,789,257  |                                   |   | 3,749,257 |   |
| Warrants                                      |   |                                   | 15,434,197 |                                   |   | 14,049,197 |   |
| Potential                  common equivalents |   |                                   | 19,223,454 |                                   |   | 17,798,454 |   |
|                                          |   |                                   |            |                                   |   |  |   |

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**Table            of Contents**

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

**SAFE        HARBOR STATEMENT**

**Three        Months Ended March 31, 2006 Compared to Three Months Ended March 31,        2005**

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**Table                of Contents**

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**Table                    of Contents**

**Six        Months Ended March 31, 2006 Compared to Six Months Ended March 31,        2005**

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**Table                    of Contents**

**Liquidity            and Capital Resources**

**Other        Subsequent Events **

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**Table                of Contents**

| **Item              3.** | **Controls                and Procedures** |
|--------------------------|--------------------------------------------|

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**Table              of Contents**

**PART      II - OTHER INFORMATION**

| **Item              1.** | **Legal                Proceedings** |
|--------------------------|--------------------------------------|

| **Item              2.** | **Changes                in Securities and Use of                Proceeds** |
|--------------------------|-----------------------------------------------------------------------------|

| **Item              3.** | **Defaults                Upon Senior Securities.** |
|--------------------------|-----------------------------------------------------|

| **Item              4.** | **Submission                of Matters to a Vote of Security                Holders.** |
|--------------------------|----------------------------------------------------------------------------------------|

| **Item              5.** | **Other                Information.** |
|--------------------------|---------------------------------------|

| **Item              6.** | **Exhibits                and Reports on Form 8-K.** |
|--------------------------|------------------------------------------------------|

|  | **(a)** | **Exhibits** |
|--|---------|--------------|

| **Exhibit                Number** |   | **Description**                                                                               |
|-----------------------------------|--------|-----------------------------------------------------------------------------------------------|
|                              |   |                                                                                          |
| 31                                |   | Certification                Pursuant to Section 302 of the Sarbanes-Oxley Act                |
| 32                                |   | Certification                Pursuant to Section 906 of the Sarbanes-Oxley                Act |

|  | **(b)** | **Reports                on Form 8-K** |
|--|---------|----------------------------------------|

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**Table          of Contents**

**SIGNATURES**

|                                       |                                                                                                                                                                                       |                                                               |
|--------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------|
|                                       | **NATIONAL                    SCIENTIFIC CORPORATION**                                                                                                                                     |
|                                  |                                                                                                                                                                                  |                                                          |
| Date: May 22,                    2006 | By:                                                                                                                                                                              | /s/ Michael                    A.                    Grollman |
|                                       |                                                                                                                                                                                            |
|                                       | Michael                      A. GrollmanDirector,                      Chief Executive Officer, Acting                      Chief Financial                      Officer and Chairman |

|                     |                                                                                                                         |                                                               |
|--------------------------|------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------|
|                |                                                                                                                    |                                                          |
| Date:  May 22, 2006 | By:                                                                                                                | /s/ Graham                      L.                      Clark |
|                     |                                                                                                                              |
|                     | Graham                          L. ClarkDirector,                          President, and                          Secretary |

|                     |                                           |                                        |
|--------------------------|------------------------------------------------|---------------------------------------------|
|                |                                      |                                   |
| Date:  May 22, 2006 | By:                                  | /s/ Gregory                      Szabo |
|                     |                                                |
|                     | Gregory                          SzaboDirector |

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